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Cheaponomics: The High Cost of Low Prices

Michael Carolan

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Big Business is 'socialist' - they strive to make society pay for the costs while they keep the profits. And when you socialize costs, you necessitate higher taxes - bc someone has to pay for the cleanup.

Calif taxpayers pay $86m for healthcare, food stamps etc just for the state's 44,000 Walmart employees.

Cheap Food isn't: A 6 pack of Choc Fudge Pop Tarts (a mere 1200 calories) costs $4 - about the same as an orange or a couple of carrots (about 100 calories). Because people can't afford to buy the fresh fruit and veges they should be eating, their unhealthy diet leads toincr health costs, the retsricted lifestyle of obesity, and premature death. And that's not counting the cost of the stoop labour harvesting the crops.

Car prices are a fraction of the real cost: you need to consider cost of road accidents, the cost of sitting in traffic jams, the health of children growing up close to busy roads, the 'free' parking that really isn't.


People have always been suckers for a bargain, but the pressure to deliver cheap prices has become a key driving force of our consumer economy. The prices of many things, from clothes to household appliances, have consistently fallen in recent decades. More and more of us have been able to buy the things we want and fill our houses with consumer goods, often enriching our lives in the process.

The trouble is, the affordability of cheap goods and services is an illusion, says sociologist Michael Carolan. They're often very expensive - it's just that the full costs have been externalised and snipped from the price tag. That could be through paying low wages in a faraway country, running down a non-renewable resource, or polluting the atmosphere. The full costs of our cheap stuff will need to be paid. If we aren't paying, future generations will, or somebody in a poorer country.

It does cost us too, indirectly. Companies offering us cheap prices may be funding those deals by socialising the costs - passing them onto wider society. As I mentioned last month, if a company pays wages that are so low that their employees have to claim benefits, aren’t they are essentially using a taxpayer subsidy to keep prices low? We’re paying less on the ticket price of an item, but topping up that price through our taxes instead.

What's more, all those cheap prices offer a hollow form of happiness. The economic model that gives us cheap prices with the one hand takes away things we value with the other. Supermarkets offer cheap food, but depress wages and open to a net loss of local jobs. Affordable motoring brings freedom to travel, but erodes community and destabilizes the climate. It’s also a system that creates bigger rewards for a small section of society. Cheap has become a substitute for equality of income says Carolan. "Cheaponomics creates a false sense of hope, which makes large income inequalities tolerable."

Instead of pursuing low prices at all costs, Carolan suggests we focus on 'affordability'. That's in the broader and older sense of the word: "Just as the sun affords plants the energy to grow, we ought to want an economic and social system that affords people and nations the capabilities to develop and enhance their overall well-being." Drawing on the work of Amartya Sen, affordability is about enabling, about capabilities and holistic wellbeing rather than the shallow freedoms of consumer choice.

That doesn't mean higher prices, and the author wards off that obvious criticism early on and repeats the point often. To attempt to price in those damaging environmental or social practices implies that they can continue, if they can be priced at all. A much more fruitful approach is to forget about ‘more’ or ‘less’ consumption, or more or less government, and talk about ‘different’. Carolan is interesting in collaborative consumption and the circular economy, two concepts that will be familiar to regular readers. He talks about the sharing economy, peer to peer networks, and access rather than ownership. He's skeptical about GDP growth as our yardstick for progress, and suggests there are real benefits to a shorter work week. Again, familiar themes on the blog here.

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