The Story of Stuff: Externalized Costs and the $4.99 Radio

A UN study has found that the cost of environmental damage by the 3,000 largest publicly held corporations in the world is $2.2 trillion, more than one-third of their profits if they were held financially accountable.
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Walking to work one day I wanted to listen to the news, so I popped into Radio Shack. I found a cute little green radio for $4.99. Pleased with my bargain, I stood in line to pay, but then started wondering: how could $4.99 cover the cost of extracting the raw materials, manufacturing the parts, assembling the radio, and getting it into my hands?

Whenever I go to buy something I get sidetracked, thinking of how it got here. It's an occupational hazard. I spent a decade traveling around the world, visiting the factories where our stuff is made and the dumps where it goes when we don't want it any more. What I learned makes it impossible for me to look at anything and not see the journey it made through the global take-make-waste system.

The metal in that $4.99 radio was probably mined in Africa. The petroleum that went into the plastic probably was pumped from Iraq, and the plastic itself produced in China. The packaging came from forests in Brazil or Canada. Maybe the parts were then shipped across the ocean to Mexico, where some 15-year-old in a maquiladora assembled the radio. There it was put on a truck or a train and shipped to a distribution center in Southern California, then 500 miles north to my local store.

Four-ninety-nine? That wouldn't pay for the shelf space it took up until I came along, let alone the salary for the guy who helped me pick it out.

That's when I realized: I didn't pay for the radio. So who did?

A study currently underway for the United Nations is calculating the cost of pollution and other environmental damage caused by the 3,000 largest publicly held corporations in the world. The study, which will be published this summer, has found that the cost of environmental damage by these companies is $2.2 trillion, or more than one-third of their profits if they were held financially accountable. This includes greenhouse gas emissions, other pollution, and water degradation. The final amount is likely to increase once additional costs -- like toxic waste -- are incorporated.

The Guardian newspaper wrote: "The report comes amid growing concern that no one is made to pay for most of the use, loss and damage of the environment, which is reaching crisis proportions in the form of pollution and the rapid loss of freshwater, fisheries and fertile soils." Economists call that externalizing costs, and it's how corporations hide the true cost of making and selling cheap stuff -- costs that are never recorded on the balance sheets and consumers never see. As David Korten writes in When Corporations Rule the World, "Externalized costs don't go away -- they are simply ignored by those who benefit from making the decisions that result in others incurring them."

What the UN report means is that a big chunk of the profits these big companies are making is due not paying the full cost of extraction, production, distribution and disposal. They are shoving a whole range of costs -- from pollution to climate change to water depletion -- onto us. Communities around the world are bearing the costs with degraded health, soil, water and climate change. That's just not fair.

Which takes us back to the original question: Who paid for that $4.99 radio? Some people paid with the loss of their natural resources. Some paid with the loss of clean air, with increased asthma and cancer rates. Some workers paid by having to cover their own health insurance. Kids in Africa paid with their future: a third of the school-age children in parts of the Congo now drop out to mine metals for electronics. All along the way, people pitched in, or were forced to, so I could buy a radio for $4.99 -- so cheap that if it broke I could just throw it away.

The UN report is a good first step at showing the global scale of externalized costs. If we're going to get our economy and environment back in order, a top priority must be forcing companies to pay the full costs of production. In economist-speak, this means internalizing externalities. That would be a strong motivator to get companies to invest in the cleaner, less polluting approaches and encourage all of us to avoid superfluous consumption.

If the true cost of that cotton t-shirt or iPod was included in the price tag, we might think twice before throwing it out and replacing it before we really need to. Think about that next time you look at those insanely low prices on so much consumer stuff -- who is really paying the full cost of producing all this? Not the companies that sell it.

Annie Leonard is author of The Story of Stuff: How Our Obsession With Stuff is Trashing the Planet, Our Communities and Our Health - and a Vision for Change, just published by Free Press, please see for more information.

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