Gustavo Montes de Oca ( @goldengus )

In cash we trust

In Uncategorized on February 20, 2011 at 6:36 pm

In cash we trust. We trust that price tags reflect all the costs we are expected to bear (bar the VAT, “optional service charge”, booking charge, luggage).

There are other costs associated with our purchases which don’t get included in the price though. These are reffered to as “externalities”. Some of these we do pay for – though not at the till – others are incurred in distant hinterlands.

Externalities are those costs, such as environmental or social impact, which are not passed on to the buyer and are generally not incurred by the vendor. This might be the cost to communities of being forcibly evicted from land to make way for rubber plantations in Cambodia. It could be the cost in lost lives as workers commit suicide rather than bear the conditions in which iPhones are made. It could be the cost of the loss of biodiversity to an ecosystem, contaminated water basins, erosion of soil as rainforests are felled to make way for cattle.

Some of these do end up becoming costs to businesses: Apple’s manufacturer Foxconn has had to install “suicide nets”, commercial cattle farmers degrade the land to the point where they have to pay to clear more land. A business case for sustainability is that negative externalities will eventually manifest as a cost to business which can be more cheaply paid now.

Our transactions largely ignore these externalities, though there are legislative and voluntary attempts to include them in the price. Carbon trading or taxing places a cost on greenhouse gas emission which companies have to pay. Certification schemes such as FairTrade, FSC and MSC invite consumers to pay a little bit more to guarantee fair wage distribution, sustainable forest and fisheries management.

But there is great difficulty in factoring in all externalities and there are many we are not even aware of yet. Ultimately this is because of the needs of transaction.

Transaction cuts out externalities on both sides. When I hand over my cash, it isn’t dripping in sweat, it doesn’t carry my hopes that this will finally be the year I get healthy, it isn’t burdened with my anxiety at buying into a product whose sustainability I am doubtful of. Cash is cash, unburdened and unattached.

So here is a suggestion. Rather than have a point of transaction which ignores externalities, we could try to blur that point of transaction, stretching it in both directions; closer to production and further into the consumer’s life.

This could be achieved by more common ownership.

Imagine a dairy farm which had shares in Tescos. At the moment the externality associated with the low cost of milk (21p to produce, farmers paid 17p) is that small dairies are going out of business, affecting livelihoods in towns and villages around the country.  The dairy could use its voice as a shareholder to argue for a fairer purchasing policy. The producer is in this way moving closer to the consumer.

Imagine now that I also have some stake in the dairy, whether financial or I visit the area occasionally for walks and have “adopted a cow”. I might be more willing to pay a bit more for my milk as I will have a better idea of the costs and needs and externalities involved in running a dairy.*

Instead of a single point of transaction, at the till, I am in a more regular relationship with the milk. I am part of the equation again not simply a cash dispenser. I am an advocate, a supporter, a campaigner, a stakeholder, whatever the actual relationship is, me and my customer externalities are part of the transaction.

In me we trust.

In us we trust.

* As supermarkets drive small dairies out of business, it seems that proposed superdairies will produce too much pollution and that the supermarkets themselves will not buy from them.

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  1. Great post – where can people adopt a cow?

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