Permitted to shrug off the true costs of industrial production and heavily protected from financial risk, the multinational corporations that are the coddled offspring of economic globalization are dangerously vulnerable to failure, writes Resilience.org.
“Externalities” is the term for the myriad environmental and social costs—from pollution of all kinds, to the mental health of a child labourer—that are not factored into the consumer price of industrially-produced goods. Author Daniel Chris Wahl says externalities and subsidies work together to “heavily skew market prices in favour of large-scale industrial goods and services, and against small-scale and locally-based economies.”
A 2011 study of “network connections” between 43,000 transnational corporations “found that a relatively small number of them (147 corporations) form a highly-connected ‘super-entity’ that controls almost 40% of the total wealth in the network,” Wahl writes. With such wealth concentration come corporate lobbyists working overtime to ensure that government policies do nothing to trouble the corporate bottom line. A key objective: to ensure that “externalities” remain external, in other words, unaccounted for.
“Were externalities to be internalized — that is, were the true social and ecological costs associated with industrial products to be included in the price charged to the consumer — there would be a sharp increase in the costs of these products,” writes Wahl.
Meanwhile, many of the same large-scale industrial systems “benefit from truly enormous subsidies,” with the world’s taxpayers providing an estimated $700 billion for “environmentally destructive activities, such as fossil fuel burning, overpumping aquifers, clearcutting forests, and overfishing.” Particularly fortunate beneficiaries of this government largesse are the fossil, agricultural, and nuclear industries.
While some subsidies take the form of direct payments to industry, Wahl lists other, more indirect forms of support, like research grants to universities and think tanks, tax breaks and other incentives when large companies are locating new plants, or “investment in education systems that are geared to supply trained workers for large industries.”
Wahl sees some signs that the scene is shifting. “Even the International Monetary Fund has woken up to the disastrous environmental and social impacts of the vast subsidies that are currently supporting the fossil fuel industry,” he notes, citing an IMF report that estimated post-tax global energy subsidies at US$5.3 trillion in 2015. “Environmental damages from energy subsidies are large, and energy subsidy reform through efficient energy pricing is urgently needed,” it concluded.
In the end, Wahl says the combination of externalities and subsidies makes the world’s biggest businesses too big not to fail. But that institutional bias, in turn, makes it “very difficult to create the vibrant bioregional economies that would drive widespread regeneration, while serving diverse regenerative cultures and their thriving communities.”