The Price of Everything

Economists have this concept that they quite like called "opportunity cost." Only an economist could love such an unwieldy term. Most definitions textbooks give are rather complicated, so I'll provide the simplest one I can think of: the (non-monetary) cost of making a choice. It's the reason some asshole coined "Time is money," namely that his time is valuable because he could be making money at that very second if he wasn't talking to you. By choosing to converse rather than say, calling his broker, he has lost whatever benefit he might have gotten from that call.

The reason that the economists who deal with opportunity cost love it so much is because it is a very powerful explanatory tool. It explains price, for instance. If we could have whatever we wanted, what we wanted would far exceed what there is to go around (another beloved economic concept known as scarcity,) so we have to make decisions about what we actually want. Those who control the resources ration assign a price based on how much people value that resource.

Opportunity cost explains more than just price, though, which is why it's not a number. If it only explained price, you could say "Well I can have coke for $1.00 or water for $0.50, so the opportunity cost of drinking coke is $0.50." If it worked like that, you could also say "Well I can have water for $0.50, or nothing for free, so if I drink nothing I'll save $0.50." True, but you'll also die. Which leads me to my next point, that life is finite. We have a limited time on this planet, so every waking second is spent making decisions. Opportunity cost provides a rudimentary model for the choices we make, namely that we minimize the cost. This often fails in the short term when we do something like drink until we vomit, or in the extreme case that someone drinks until they die, but generally we choose the option that is the best for us.

Lord of War- The Arms Trade

There is a movie called Lord of War, starring Nicholas Cage. It's a good movie, I'd suggest you watch it. It follows a Ukrainian-American as he enters and then gains power in the business of selling weapons illegally. He and others like him make sure that wars run smoothly wherever wars can be fought. Smoothly in the sense that there won't be people who want to murder others going without the necessary assault rifle.

The problems with this kind of business are fairly obvious: the world doesn't actually want terrorists with AK-47s, RPGs, or whatever else they can get their hands on. This trade isn't likely to go away easily, since the US uses it to supply "freedom-fighters" when it wants to put pressure on a government it doesn't like, see Iran-Contra. Another problem is that black markets are notoriously hard to control, and this would require cooperation between governments on a global scale. Seeing how this doesn't even work with drugs, why would it work with guns? Still, a greater commitment to controlling arms would be a step in the right direction. There is a campaign calling governments, through the UN, to take greater measure to control the trade of arms called, appropriately, Control Arms, located at www.controlarms.org.

However, there is another, disturbing aspect to the arms trade, one that the Security Council would not like to admit its role in. And that is that the only reason there are weapons floating around to fall into the hand of militants is that they're produced in insanely huge quantities. After World War II the United States was faced with a dilemma. How was it going to maintain wartime levels of arms production, and protect this vital industry, without a war to fight? Well, at first it started giving away the surpluses it had to its allies. Its allies didn't really want more weaponry, though, as they wanted to produce their own.

So unable to sell to each other, America, France, Russia, and Britain started selling abroad. They sold so much that America and France are still the two largest producers of military goods and are still producing as if they were at war with someone. (Well, the US is at war with Iraq but it's not suffering from a lack of nukes or tanks, is it?) Russia produced so many of its highly effective AK-47 that it is truly the weapon of choice for militants and child soldiers worldwide. Britain has been replaced by China, since China soon realized this was a lucrative business indeed, and it had an impressive domestic market to start off with.

So thank you, Big Business. Thank you for fueling conflict around the globe, and thank you to the government for creating this monster of an industry to begin. As Matthew Good said it on Remembrance Day, "the very principles and freedoms that those individuals [i.e. soldiers] fought to protect have been either endangered or altogether lost by the sheer magnitude of our perpetual love affair with destruction." A love affair that has lined the pockets of the super-rich, created child soldiers, and aided conflict across the globe.

Walmart and Starbucks

Walmart and Starbucks are two very different companies with an interesting similarity. I don't like either of these companies, but seeing as how Walmart represents low price and little else, it's hardly a popular company. Starbucks, on the other hand, cares a great deal about image and presentation, so disliking it puts me in a minority- a minority that includes anarchists and too-serious coffee-drinkers. However, both Starbucks and Walmart saturate areas with their stores, often replacing the existing businesses.

Walmart's business plan is highly successful. Starting in Arkansas, Walmart creeped across the country. Its popularity stemmed from one thing- lower prices. To acheive this, it made full use of what are called "economies of scale." These are the costs that decrease as a company grows larger. By building many large stores in one area, Walmart could buy products in larger volume (and therefore at a lower price,) distribute these products cheaply (by building stores near distribution centers,) and could save on building costs (by buying large tracts of land outside of urban areas.) Armed with lower costs than its competitors could achieve, Walmart spread across the land, eventually invading Canada as well. And to make the most profit it could, it saturated one area with Walmarts before moving on to the next.

Starbucks is also a highly successful company. It doesn't rely on economies of scale to make profit, but it does use the same technique of saturation that Walmart does. Profit doesn't come from lower prices, but rather from a desirable product that people will be willing to pay high prices for. And the reason there's a Starbucks at almost every street corner? They keep building them in one area until each one is barely making profit, so that together they're making the most profit possible.

If you've made it this far you're probably wondering "So what? Aren't companies supposed to be profitable? Isn't establishing a new company as the leader of its industry admirable?" Well, Walmart seems quite willing to turn a blind eye to the source of its profits (sweatshop labor, environmental abuses,) which is why I dislike Walmart. Starbucks, on the other hand, as a (probably?) green and ethical company should be entitled to make profit. But my problem is that by cutting its own profit margin thin, it cuts into independent coffee shops profit margins, often making them go out of business. And I'm not content to consume Starbucks' overpriced homogenity, so I'll take my money elsewhere. (Walmart has the same effect, but the businesses it's replacing are hardly and better than Walmart.)

Credit given where it's due: my knowledge of these two companies comes largely from the book No Logo by Naomi Klein. Noticing their similarity was all my doing, though. I would recommend No Logo to anyone who's interested in this sort of thing (*cough* Daniel *cough* Nick.)

The Corporation

The Corporation, by Joel Bakan, is probably my favourite political book. As the name implies, it has to do with corporations. And the reason I like it so much is because I think its message is hugely important. So I'm going to explain the book, and maybe you'll agree. Maybe you'll even read it.

Corporations are publicly-traded companies that have no owner, they have shareholders and a CEO that runs the company. Their legal responsibility is to produce profit for the shareholders- if the CEO does anything to reduce profit, he may be fired or sued. Bakan's argument is that corporations are psychopaths, acting only in their own interest. In the movie, The Corporation, they keep an actual checklist of actions that corporations take that correspond to the FBI's list of psychopathic actions.

And it's true. The only time they care about the environment, or their employees, or any of the problems they cause, is when it could damage their sales. If you take a company like The Body Shop, whose whole business practice is based on not using animal-testing and being ethical, and it becomes incorporated, then that company will start to cut corners and maybe test on animals a little. Which it was found guilty of doing. And quite often they don't break their code of ethics, they break the law, for the simple reason is that by doing so, the profit they earn will be greater than the fine.

This is obviously a huge problem as corporations are immensely powerful (more than half of the world's 100 largest economies are corporations) and have a huge, often damaging effect on our lives. Bakan offers a few solutions to this problem. There are two sources of change: consumers, and voters. Yes, it's true that consumers can elect not to buy from companies unless they behave ethically, but not only are corporations still likely to break the law and act damagingly when they can get away with it, but this style of voting with your dollar is flawed. This is because it means that richer people have a greater voice than the poor, and also excludes the companies that we don't buy from (mining, anyone?) or can't stop buying from. The other way is to convince politicians to enact harsher fees on breaking the law and to rephrase the roles of corporations so that profit is not their only goal. This has the problem that lobbyists are an effective and legal way to raise profits, so anti-corporation legislation is hard to pass.

In any case, I feel that if corporations had to bear responsibility for the environmental and social damage they cause, the world would have many less problems than it currently does. So long as corporations destroy the environment, coerce weaker governments into allowing corporations to have their way, and deal with dictatorships (legitimizing those corrupt governments), creating any kind of positive change will be a challenge indeed.

(Oh, and I didn't go to that STAND meeting. Oh well, I'll do my own research.)