Message to Davos

How about a new economic paradigm?


The global business elite have arrived in Davos, Switzerland for the annual World Economic Forum — a "global platform for global issues," where politicians, economists, bankers, academics, and celebrities gather to deliberate solutions to the world's problems, out of an avowed "committment to improving the state of the world." Meanwhile, between the private helicopters and charter planes required to get there (and the carbon they emit), the WEF membership fees and lodging/meal costs once you arrive, a week at the WEF averages $40,000. This year's theme is “resilient dynamism,” a philosophy that the WEF’s founder Klaus Schwab described as looking “at the future in a much more positive way.” Of course, while attendees speak eloquently about "economic dynamism" and "sustainable growth," Davos is still operating within and perpetuating the very socio-economic paradigm that caused the mess we're in in the first place.

Here's a more heterodox way of looking at the problem: We calculate the hidden prices associated with products — what the economists nonchalantly refer to as externalities — and incorporate them . . . We create an across the board global market regime in which the price of every product tells the ecological truth!

Read more below about True Cost Economics from the recently released book Meme Wars - The Creative Destruction of Neoclassical Economics.

. . .

What is the real cost of 
shipping a container load of toys from Hong Kong to Los Angeles? Or a case of apples grown in New Zealand to markets in North America? And what is the true cost of that fridge humming 24/7 in your kitchen ... that steak sizzling on your grill ... that car sitting 
in your garage?

Practically every one of the products we buy in the 
global marketplace is grossly undervalued. This is primarily because the environmental and corresponding social costs haven’t been taken into account. Mass production drives per unit cost down well enough, but the cost of a sane and sustainable future is going up. Every one of the billions of purchases we make every day in the global marketplace pushes us a little deeper into the cosmic red.

But what if we were to implement this simple idea: True Cost.

We calculate the hidden price associated with products — what the economists nonchalantly refer to as externalities — and incorporate them. We force the cost of every product in the global marketplace to tell the ecological truth.

We start with the little things: Plastic bags, coffee cups, paper napkins. Economists calculate these eco costs — say it’s five cents per plastic bag, ten cents per cup and one cent per napkin — then we just tack that on. We’re already doing that with the various eco-fees and eco-taxes included in the price of tires, cans of paint and other products. But now we abandon the concept of ancillary fees and taxes and implement straight true-cost pricing.

Over a ten-year period, we phase in true-cost eating. We raise the price of avocados from Mexico and shrimp from China to reflect the true cost of transporting them long distances. And we estimate and add on all the hidden costs of our industrial farming and food processing systems. That burger at McDonald’s will cost you more — so will most meats, produce and processed foods. You can eat whatever you want, but you’ll have to pay the true cost. Inevitably, your palate will submit to your wallet. Processed, mega-farmed and imported foods become more expensive as the cost of organic and locally produced food goes down. Bit by bit, purchase by purchase, the global food system heaves toward sustainability.

Then we phase in the true cost of driving. We add on the environmental cost of the carbon our cars emit, the cost of building and maintaining roads, the medical costs of accidents, the noise and the aesthetic degradation caused by urban sprawl and maybe even the military cost of protecting those crucial oil fields and oil tanker supply lines. Your private automobile will cost you around $100,000 and a tank of gas $250. You’re still free to drive all you want, but instead of passing the costs on to future generations or innocent people halfway across the globe, you pay upfront.

This is not a world where only the über-rich enjoy the spoils of elite products — quite the opposite. With such little demand for inefficient and polluting transport, we’re forced to reinvent the way we get around. Demand for monorails, bullet trains, subways and streetcars would surge. We would demand more bike lanes and pedestrian paths and car-free urban centers. And gradually a paradigm shift in urban planning would transform urban life. Suddenly cities are built for people, not for automobiles. Parking lots disappear. Community gardens rise.

True-cost pricing is fraught with daunting, seemingly insurmountable problems. For conventional economists, it’s a frightening, heretical concept that would slow growth, reduce the flow of world trade and curb consumption. It’s so true that it must be false. It would force us to rethink just about every economic axiom we’ve taken for granted since the dawn of the industrial age. It could turn out to be one of the most traumatic economic/social/cultural projects that humanity has ever undertaken. And yet … and yet … the idea of a global marketplace in which the price of every product tells the ecological truth has a simple, almost magical ring to it.

It makes sense, it feels right and it’s totally nonpolitical. It’s the one big idea that — if we are able to agree on it, implement it and muster the collective self-discipline to sustain it — could pull us out of the ecological tailspin we’re in and nudge this failing experiment of ours on Planet Earth back onto the rails.