The Hidden Costs of Cheap Goods

The recent FDA debacle over the discovery of the toxic chemical melamine in pet food from China should remind us all that cheap goods, whether animal feed, denim jeans or the latest electronic gadgets, have a price attached. There's a problem, though - the price tag isn't always visible. As consumers, we may save a few dollars or cents, but what are the costs to our health, our environment and our economy? Do we ever stop to consider the effect of low prices on producers, workers, and even our own wages? As consumers, it's easy for us to buy products without thinking about their origins, and good intentions to support local farmers' markets or buy fair trade certified goods don't always work in harmony with our busy lives.

We live in an era of excessive fear of inflation, where low prices are viewed as universally beneficent. But the consequences of a low cost product can surface elsewhere, as inferior ingredients in food, as sweatshops that produce cheap clothes, or in the environmental damage caused by rapid economic expansion. Markets aren't perfect, and they don't always deliver the right good at the right price. Governments are supposed to fix this. We are reliant on government regulation to prevent us from ingesting toxic food, plugging in dangerous goods, or breathing polluted air. In the FDA case, budget cuts and an imbalance in the emphasis placed on regulating prescription drugs versus food imports allowed the current organization to fail where a funded and focused FDA may have succeeded. The increasing complexity of trade relations and the surge in Chinese imports certainly did not help matters. Countries that are less developed face an even tougher uphill struggle - to impose standards for export on sectors of the economy that are often fragmented and distant.

Bilateral trade between the US and China amounts to about $350 billion - that's quite a lot of leverage. Our responsibility is to provide the right incentives within our own economy for countries like China to grow in a sustainable way, whether by improving the frequency of import inspections, placing environmental and labor standards at the heart of trade agreements, or providing aid to develop trade infrastructure. An economically successful China benefits us all, but an economically, environmentally and socially sound China benefits us even more.

But before we get carried away trying to prescribe improvements in foreign infrastructure, let's take a good look at our own capacity. The nation's security is not just endangered by terrorist plots. This administration's emphasis on 'homeland security' seems to leave little room for tackling preventable, less high-profile threats to our way of life. We need a system that is equally capable of defending us against the spread of bird flu and tackling the causes and consequences of climate change as it is against acts of terror. In debating the future of the FDA, Congress has a long awaited opportunity for reform, but this reform should not be limited to the monitoring of prescription drugs. It's time to give the agency the tools and resources that it needs to deal effectively with food safety, as the first step towards reducing the hidden costs of cheap goods.

Holly is the John Kenneth Galbraith Fellow at the Americans for Democratic Action Education Fund.