Cost Externalization and Regulations

by: DaveJ

Fri Nov 27, 2009 at 15:20


It used to be that businesses were supposed to operate for the good of the public.  And we used to have regulations that made sure they did.

For example, there used to be a regulation limiting "commercialization" of broadcast media.  Broadcasters were required to serve the public interest by airing documentaries, providing our democracy with news, educational content, etc. and only then were allowed to commercialize a bit of the content to make themselves a profit.  BUT even then there were strict limits.  Even during the commercialized segments they couldn't air more than a few minutes of commercials, they had to be true, they couldn't be louder than the shows, etc.  Think of it as if we were hiring these companies to develop a resource that WE owned, and they were paid for their service by allowing them to commercialize of a small bit of it within strict limits.

That was back when We, the People were in charge here.  It's a pretty simple concept: why else would we allow businesses to operate, except that doing so benefits the public and the customer?  And we made rules that made sure this was the way things worked.

That, of course, has all changed with "deregulation."  Now it's the other way around.  Now the public exists for the benefit of the big corporations.  The big corporations are at the top of the food chain now -- and that makes us the food, to be harvested.

So for your Friday reading pleasure here is a small example of a benefit that could come from regulation:

DaveJ :: Cost Externalization and Regulations
Let's regulate phone support systems.

My wife is currently on the phone with B of A, because our debit cards stopped working with our current zip code when we buy gas.  (They reverted to the zip code where we used to live.)  She has been on the phone for about 15 minutes now, going through one phone tree option after another.  

There should be a regulation that requires support lines to immediately transfer you to a human if you request it.  This is an example of a regulation that benefits the public.

These support lines are an example of "externalizing" a cost.  The company buys a phone-tree support system and gets to fire a few more people.  (The consumer economy loses a few more consumers.)  The executives pocket what those employees were paid.  (Wealth concentration increases.)

But that cost didn't just go away, it was transferred to the public.  And it was not an equal transfer.  Previously, trained support people would assist the customer and help solve the problem right away.  This would take a few minutes of a person's time.  But now people have to spend big chunks of their own time navigating these phone systems, and rarely get a satisfactory result.  So, to save a cost these companies have transferred a much larger cost onto the public.

Cost externalization can mean vastly higher costs for the public than the savings to the company. The classic example is when a company saves on the cost of disposing of toxic chemicals.  Where it might have cost the company $500 to safely dispose of a truck full of waste, it costs the public hundreds of thousands or more of dollars to clean up the stream where the waste was dumped.

In the comments, pretend for a minute that you live in a country where the people are in charge, and the people want things done for OUR benefit.  If you can free your mind and get your head around such a strange concept, try to dream up some things you would like to see regulated and share them with us.


Tags: , , (All Tags)
Print Friendly View Send As Email
All about labor (4.00 / 1)
1099 "contractors": This seems to be the hip way for employers to get around employment regulations and overtime pay -- transfer any responsibility for meaningful organizational support into their hands, give them just enough freedom that you can call them independent contractors, pay them almost whatever you feel like, don't pay them for anything that isn't direct hands-on work production, and take responsibility for absolutely nothing.  Voila, a recipe for self-replicating wealth and socialized losses.

I'd love to see the Dickens regulated out of this (no pun intended).  Particularly, wage and hour regulations need to apply to such arrangements, the IRS regulations on it need to be tightened, and state payroll regulations ought to be applicable to such contracts.  For starters.

Heavy-handed fines for payroll violations: Hearing that many employees under wage and hour laws don't assert their rights when wronged disheartened me.  There should be stiff minimum penalties for employers and rewards for employees -- a minimum of two months full-time pay, payable to the employee, with no "look for work" strings attached, for ANY verified violation, with exactly one chance for the employer to remedy the problem before it goes to labor court.

Mandatory paid vacation: Yeah, this will upset the Calvinist nuts who think pain is just God's way of telling you you're alive.  They can spend their time off in church-sponsored torture camps if they must; the rest of us will take the time to recover sanity and do fun things with our lives.

While we're at it, how about establishing capital crimes for corporations and an effective corporate death penalty?


hmm. (0.00 / 0)
i am a 1099 contractor but no really i AM a contractor. i'm no employee of these people, they're just clients. i'd hate to get caught up in a whole mess of regulations that are aimed at companies like Microsoft that call de facto employees "contractors", which i think is what you're describing.

a similar scam is the way that everybody's in management these days. technically. which means, neat, no mandatory overtime pay, do what we tell you or you're canned. and no unions either.

of course, there already are laws and regulations about these things. as you say, they go unenforced because (i think) the burden is on the employee to complain. with no support, vs company lawyers, and frequently contracts that mandate "private arbitration".

i wonder if it would be possible to have some kind of contractors union or guild or such, to provide legal backup. it'd probably be a hell of a job to get people to sign up for it but isn't it always...

not everything worth doing is profitable. not everything profitable is worth doing.


[ Parent ]
Giving up rights (0.00 / 0)
You're giving up lots of rights, including unemployment benefits when you aren't working.

--

Seeing The Forest -- Who is our economy FOR, anyway? Twitter: dcjohnson


[ Parent ]
The myth (0.00 / 0)
The myth, repeated endlessly over and over is that "businesses create jobs."  The fact in our present economy is that it is far more likely that consumers create the jobs and businesses work like crazy to try to eliminate or externalize those jobs or outsource them.

Businesses seem to be "in business" for other reasons than they were just a short time ago.  They are no longer about their customers.  Or their product.  Or their workers.  Or their suppliers.  Or their communities.  They are about lining the pockets of their high muckety mucks and perhaps the stockholders.

Stockholders, for the most part, did not provide the seed money or the capital but are just speculators in it for a very short term ride.

The social contract has been shot to he**.  Making businesses responsible for the costs they generate is a big first step towards rstoring things to the way they should be.

The Constitution says we should promote the general welfare.  That is way over and above promoting the welfare of the top 1/100 of 1% or corporate "persons."  Forget "sountry first", "constitution first."


Nailed it (4.00 / 1)
You nailed it.

And the corollary, "Rich people create jobs."

DEMAND for a product or service creates jobs.  Period.  If people are asking for something, a business will appear

Another corollary, raising the minimum wage or taxes or whatever causes employers to lay people off.  Businesses have as many employees as they need to meet demand.  They don't have extra employees sitting around on a bench, to be laid off if they have to pay a few cents more...  When there are customers coming in the door employers want them served.

PS Why did you put asterisks in "shot to heck"?

--

Seeing The Forest -- Who is our economy FOR, anyway? Twitter: dcjohnson


[ Parent ]
Its not really a myth (0.00 / 0)
The reality is that most businesses do create jobs. Proof? Most people work for businesses in the USA anyways. Yes consumers create jobs, but they create jobs through businesses. When you, the consumer, buy something, most likely you're going to buy it from a business who hires someone to make the thing you buy. You're right that businesses don't create jobs that produce something that no consumer desire, but who would want to do something that nobody wants to consume? Businesses create jobs in that they capitalize on consumer demands and service those consumer demands and create jobs in the process.

And yes, businesses try to reduce costs. But isn't that reasonable? If you're needing something copied, would you hire a person to copy it by hand or use a copy machine? Keep in mind you're possibly eliminating a potential job. If you need your house remodeled, would you hire 5 people to do the job when it could be done with 2 and doing it with 5 produces only a slightly better job than doing it 2?


[ Parent ]
I've Been Writing About This Subject For Years (4.00 / 1)
primarily in the form of air pollution around the ports of LA & Long Beach.  The externalized costs--if one includes outlying impacts--run somewhere from $10 to $20 billion per year.  Traffic congestion (a bigger time-suck than customer non-support) and asthma are amongst the most widespread impacts, but premature deaths are far and away the most costly.

These costs can only be virtually eliminated by conversion to electric power, among other things, which no amount of money could accomplish overnight.  But dramatic reductions in externalized costs could be gained just by spending on the order of $5 billion or so--25% to 50% of just one year's externalized costs.  And a 2005 plan called for total expenditures through 2020 of just around $13 billion, with the substantial majority of that in the out years.

The biggest problem we face in the grand scheme of things is that--unless a major change in environmental laws is accomplished--grandfathered technology will be left in place for decades, racking up enormous externalized costs far in excess of what it would cost to replace said equipment.

Speaking with an economist about this situation back in 2004 or so, he put it simply: the problem, he said, was that the folks benefiting from externalizing the costs were a small well-organized minority, while the people paying the costs were stuck in traffic wasting millions of hours of their lives.

Of course traffic congestion wouldn't vanish if the ports were made as efficient as they could be--this is LA, after all.  But certain routes have been dramatically less congested with port traffic down 15-25% this past year.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


Wrong assumption (0.00 / 0)
Businesses were never for the good of the public. Businesses are there for money. Regulations are just there to prevent businesses from stomping over the public in the quest for money. It has always been this way, its part of human nature.

And the relationship is symbiotic with regards to most businesses. In your case, if you don't like B of A's debit card support system, cancel your card. There are plenty of banks out there. When you sign up, make sure you ask if there's an automated or guaranteed live support.


Nope. (4.00 / 2)
"Businesses were never for the good of the public."

There is one and only one reason that We, the People created the laws that allow corporations to exist and that is because we decided that pooling resources and distributing risk is a good way to accomplish large-scale, capital-intensive projects.  THAT is why we enable corporations to exist.  Not to make money, but to use the possibility of making money to attract the capital, because doing so SERVES US.

And We, the People have the right and the power to demand that businesses act in ways that WE want them to act.

And if they do not we have the right to close them down and hand the charter to businesses that will.

--

Seeing The Forest -- Who is our economy FOR, anyway? Twitter: dcjohnson


[ Parent ]
USER MENU

Open Left Campaigns

SEARCH

   

Advanced Search

QUICK HITS
STATE BLOGS
Powered by: SoapBlox