TOO MUCH OF A GOOD THING: The Social, Economic, Environmental and Health Costs of Cheap Food

what is true cost accounting?

Determining the Real Cost of Cheap Food

In 1833, a British economist named William Forster Lloyd introduced a principle: if a community shared a common resource like a pasture, and if farmers were motivated by self-interest, they’d put their short-term needs ahead of any associated long-term effects, grazing their animals as much as possible to get the maximum benefit from this shared resource until no grass was left.

Nearly 150 years later, Dr. Garret Hardin further popularized the concept, which he termed the “Tragedy of the Commons”, to explain this conundrum.

“An unmanaged commons in a world of limited material wealth and unlimited desires inevitably ends in ruin.”

Garrett Hardin
American Ecologist and Philosopher
1915 – 2003

The same can be said for the marketplace; consumers who make purchases solely based on the lowest price may do more harm than good. When they fail to realize that cheap food isn’t really “cheap,” it’s nothing less than a Tragedy of the Supermarket. The costs removed from these cheap foods’ actual price haven’t gone away. They’ve simply been externalized, becoming the trigger for long-term effects consumers ultimately pay somewhere else: to clean up of waterways polluted by factories and agricultural runoff, for higher healthcare costs to treat uninsured workers, or taxes that support welfare and social services for workers who don’t make enough money to raise a family. When you add these health, social and environmental costs back into the price of cheap food … it suddenly isn’t so cheap after all.

“At some point, we have to recognize that what we pay for food at the supermarket counter is not the true cost, but determining the true cost of cheap food will be difficult given the food industry’s lack of transparency.”

Fred Kirschenmann
Distinguished Fellow
Leopold Center for Sustainable Agriculture
Ames, IA (USA)

If we had greater visibility into every disruption in the food chain—the cost of cleaning up polluted water, the health of farmworkers working in dangerous conditions, or simply the loss of rural communities triggered by consolidation in the agricultural industry—lifecycle assessments would let us “internalize” these external costs, thereby making it possible to compare and contrast the true cost of every product in our food system and help us avoid the Tragedy of the Supermarket.

It would also make clear that we live in a world where two economies operate in parallel. The first economy is extractive. It depletes our natural resources for the sake of production, taking without putting back. Conventional agriculture would be an example of an extractive industry. Farmers who grow single-commodity crops often depend on fertilizers and pesticides while using practices that deplete topsoil.

The second type of economy is generative. In this economy people work together to conserve and even generate new resources. They create, restore, and sustain. They build community.

“That’s the future we’re moving toward,” Kirschenmann predicts. “We’ll probably go through a painful transition—some of us will continue to insist on using the extractive economy to enhance our own personal wealth—but when the ecosystem services of our natural communities and the social services of our communities can no longer support us, it’s going to become increasingly dysfunctional.”

TRUE COST ACCOUNTING

A practice that accounts for all external costs-including environmental, social and economic-generated by the creation of a product.

It wasn’t too long ago that people spent nearly 30% of their disposable incomes on food. Now that number is under 10%. We’re grown accustomed to cheap food, but is that a good thing? The UK’s Sustainable Food Trust tackles this conundrum by examining the principle of true cost accounting, which attempts to determine the real price of our food. When SFT asked The Lexicon to join them in exploring the subject we began by first asking ourselves a simple question:

How is it possible that chicken is now cheaper, pound for pound, than bread?

The answer has everything to do with how most chickens are now raised. In fact, the ubiquity of chicken as a relatively inexpensive global source of protein serves as an apt metaphor for the challenges created by an industrial food system.

Pasture-raised chickens lead healthy lives, with much of spent it outside, and when their organic, their feed is grown without the use of synthetic pesticides. This isn’t the case with factory-farmed poultry. They’re raised in intensely crowded conditions, usually inside warehouses, and their feed comes from crops that depend on industrial farming practices whose pesticides and fertilizers degrade our biodiversity, soil and water.

Waste from factory-farmed poultry operations often pollute waterways and create dead zones for fish. They can also emit huge amounts of ammonia into the atmosphere, which affects the air we breathe, and contributes to climate change.

The intense crowding of poultry in these environments also increases the likelihood of sickness and infection, and often requires the use of preventive antibiotics. When humans eat these chickens, they can develop infections resistant to these very same antibiotics, which can lead to serious health problems.

And it’s your taxes that help support many of these farming practices through agricultural subsidies. When you add up all these hidden costs, cheaper chicken isn’t so cheap after all.

Yet it isn’t so simple to place blame.

Food producers are stuck in an economic system that only rewards those who provide us food at the cheapest price. Walk down the aisle in any supermarket and you’ll find that this story repeats, from carrots to peas, milk to cheese. Even with breakfast cereal. Our food system has two prices: the one you pay now, and the one we all pay later. At some point we need to ask ourselves … Why do we support such a destructive system?

“The food we eat is mostly cheap because it’s a commodity grown in a completely rigged economic system. If you grow food in a way which exploits natural capital, diminishes soil fertility, causes emissions that lead to climate change, pulverize biodiversity and causes rain forest destruction, you don’t pay for any of that damage. However, farmers who deliver positive benefits to health and the environment, who create jobs, who reduce emissions while building soil carbon, who produce food which coexisting with biodiversity, get no financial reward.”

PATRICK HOLDEN
Chief Executive Officer/Founding Director
Sustainable Food Trust
Bristol, UK

How can consumers and producers break up a “rigged” food system? To start, consumers can become more aware of what things really cost, and how making purchases solely based on the cheapest price can lead to a series of negative outcomes. With that in mind, the Sustainable Food System has defined six straightforward ways both consumers and producers can help make a more equitable, sustainable food system.

six things you can do to change our food system

THE NATION’S FIRST INDUSTRIAL PARK, BUILT AT THE GREAT FALLS OF NEW JERSEY’S PASSAIC RIVER, IS NOW AN EPA SUPER FUND SITE.

In 1792, Alexander Hamilton helped found the Society for Establishing Useful Manufactures. It constructed the nation’s first industrial park at the Great Falls of New Jersey’s Passaic River. A succession of industries utilized the river’s embedded energy to build everything from textiles to steel, Colt pistols to locomotives. These companies capitalized on nature. They depended on energy generated by the Passaic and saved money by dumping waste directly into the river. Externalizing these costs led to lower prices and greater profits, at least for a time.

Those companies have since vanished, but the external costs associated with the production of their goods have left a lasting legacy; the river is now one of the most polluted in America, transformed from a symbol of American entrepreneurial spirit into a Superfund site.

EXTERNAL COSTS

Costs created in the production of a good that are not reflected in its price, but are instead passed onto an otherwise uninvolved party who did not choose to incur them.

The price of cheap goods is an illusion. Many Americans now buy their food from the same store that sells them tube socks and lawn chairs. These consumers are loyal to familiar brands and make purchases based on price. But cheap food comes at a cost, one that’s hidden from most consumers. Getting them to understand the consequences of their purchases is perhaps the greatest obstacle to fixing our food system. Everything costs money. You pay at the checkout stand or you pay in other, more oblique ways. These external costs are hard to see. In fact, sometimes they’re only visible to future generations. Just ask anyone living in central New Jersey.

what happens when consumers discover what's really in their milk?

The USA is the lone remaining country in the developed world which still permits the sale and use of rBST, a synthetic growth hormone used to increased milk production by dairy cows. A number of well-documented consequences of its use (ranging from increases in clinical mastitis to infertility in dairy cows exposed to the hormones) has led a host of nations to ban its use, including Canada, New Zealand, Australia, Japan, and all 27 member countries of the European community.

While the FDA maintains that “no significant difference has been shown between milk derived from rbST-treated and non-rbST-treated cows, consumers have already learned about rBST. They read about it on the Internet, notices it on a milk carton, or overheard a conversation about it at a farmers’ market. In short, they became educated, upped their food literacy, and reached their own conclusions about which milk to buy.

Retailers across the United States have also taken notice. Want proof? Scan the refrigerated case at Costco, Safeway, Walmart, Kroger, Publix, and a hundred other supermarkets: You won’t find any milk here made using rBST. Consumers learned a simple term, paid a little extra at the cash register, and changed an entire industry. Again. All because of the power of words.

If consumers have the information to compare the benefits between different foods, for example, the marketplace will respond, just as we’ve seen with CAGE-FREE eggs and rBST milk. Consumers, when provided with tools and knowledge that make the food industry more transparent, make choices more closely aligned with their values and force industries to shift their practices. This greater transparency can also erode another aspect of the traditional consumer shopping experience:

“For decades consumers walked down the supermarket aisle, encountering brand after brand, only seeking out the ones they were loyal to. What we’re seeing now is a different kind of habit-forming among consumers; they’re starting to ask questions. They don’t necessarily seek out their favorite brand. Instead, they ask themselves, ‘Didn’t I read somewhere that this food might lead to concerns about allergies in my family?’ ‘Didn’t I read somewhere that if I buy this food I’m going to be contributing to environmental pollution?”

KEN COOK
Founder and President
Environmental Working Group
San Francisco, CA (USA)

If consumers shift their buying habits away from their traditional allegiances to food companies, those same companies will be forced to respond by creating food with less additives, food may even be organic, local, fresher, and simpler. These changes will happen even faster if consumers can actually witness resulting after having made more value-driven purchasing decisions. As for getting people to engage, it may be simpler than you realize:

“People are craving for a way to connect. We need to capitalize on that craving to be involved, to feel like you’re part of something in a world where you hear all these terrible things, where you read about climate change and conflict and famine and obesity epidemics. Here’s a way that you, you personally, by your choices, can really make a difference. There’s a real need to think of agriculture not as an industry and not think of food as a commodity, but to think of it as a holistic landscape. The more consumers feel that connection, that they’re part of a food system, that they’re not separate from it, they make a real difference.”

DANIELLE NIERENBERG
President and Co-Founder
Food Tank
Chicago, IL (USA)

 

KNOW YOUR FOOD: Another LOOK AT TRUE COST ACCOUNTING