Swine Flu and Agribusiness — Who Bears the Costs of the Market Externalities?

swineflu.jpgBy Scott Cooney, M.S., M.B.A.
The Health Department is taking all the necessary steps in case the swine flu virus develops into a full-blown pandemic. Will American agribusinesses, who moved their swine operations to Mexico to avoid higher labor costs and environmental standards here in the U.S., have to pay the bill? My guess would be no. My guess is that they’ll use the economic convenience of externalities to dismiss their responsibility.
Here, I argue that as long as we continue to subsidize concentrated animal feedlot operations (CAFO’s) not just directly (which we do in a very real and substantial sense), but indirectly, as in this case, we cannot hope for a sustainable agriculture system.
Externalities are the economic costs of an operation that do not show up on the bottom line of the company or country that produces them. In other words, a company that produces widgets has costs like the material required to produce a widget, the labor, and the electricity needed. But the widget itself also produces waste at the end of its life because it needs to be disposed of. This is a classic externality: a cost of doing business that is not borne by the business itself, but rather externalized and borne by others. Pollution is a classic example of an externality. Companies are allowed to pollute the air and the water at a cost much higher than they directly pay.
The externalities of a business like a CAFO include the air and water pollution, public health problems associated not just with their industrial waste but also in antibiotic resistance, obesity caused by meats laden with chemicals and grown in conditions that produce weight in the fastest manner possible, and other health problems arising from their unhealthy products. And, of course, creating an environment in which disease like the swine flu can flourish, mutate, and multiply.

The flu outbreak that killed millions (commonly called the Spanish flu) in 1918-19 was perhaps the worst public health crisis in modern history, and started much the same way as this one has: slowly. The response of public health agencies, by necessity, to these types of outbreaks is overly cautious. If they don’t respond cautiously and aggressively, and things get worse, their jobs and likely their careers would be finished. Besides, politicians and public health agency employees don’t have to pay the bills personally for all the programs, quarantines, treatment, vaccinations, overtime pay for researchers, and advertisements; all of which the governments of the world need to do in order to simultaneously treat patients, isolate the virus if possible, educate the populace, and perhaps as importantly as anything else, calm peoples’ nerves. There is no other way. The governments of the world HAVE to respond the way they have.
With one confirmed death in the U.S. as of this morning, the hysteria over the swine flu does seem a little overblown. Consider the facts: over 30,000 Americans will die from the regular flu this year. 55,000 will die in auto crashes. More Americans have died in auto crashes in the time it took me to write this article than have died from the swine flu.
But the fact remains that the public response is a good and necessary precaution. The fact also remains that it costs a lot of taxpayer money. We can look to the recent SARS epidemic, which killed roughly a thousand people worldwide and caused a similar widespread panic, as a case study.
One report pegged the cost of SARS at $945,000 for the Ontario municipal health care costs alone. The total global cost to taxpayers may lie in the billions. And while SARS has not been eradicated and may reemerge, the death toll was paltry in comparison to the annual carnage at the hands of the common flu.
The difference here is that no one company or industry caused SARS or the common flu. Instead, for the swine flu, as with the bird flu scare of a couple of years ago, the costs of externalities of doing business for agribusiness are borne by us, the taxpayer.
What will the final public cost of the swine flu be for the governments of the world? There is no way to tell at this point. The only number I’m fairly certain of is the percentage of that cost that agribusiness will willingly pony up because it would be the right thing to do: 0.
As individuals, we can stop eating meat from factory farms. In fact, there is no single greater reduction in our ecological footprint that we can make as individuals than to go vegetarian, according to David Suzuki’s Green Guide. But above and beyond that, meat from factory farms is a whole different animal (ahem), and should not just be avoided, but actively lobbied against by everyone. We lament the loss of small family farms while we subsidize factory farms–directly and indirectly.

Scott Cooney is the author of Build a Green Small Business: Profitable Ways to Become an Ecopreneur (McGraw-Hill) and has not eaten factory farmed meat in 17 years.

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Scott Cooney, Principal of GreenBusinessOwner.com and author of Build a Green Small Business: Profitable Ways to Become an Ecopreneur (McGraw-Hill, November 2008), is also a serial ecopreneur who has started and grown several green businesses and consulted several other green startups. He co-founded the ReDirect Guide, a green business directory, in Salt Lake City, UT. He greened his home in Salt Lake City, including xeriscaping, an organic orchard, extra natural fiber insulation, a 1.8kW solar PV array, on-demand hot water, energy star appliances, and natural paints. He is a vegetarian, an avid cyclist, ultimate frisbee player, and surfer, and currently lives in the sunny Mission district of San Francisco. Scott is working on his second book, a look at microeconomics in the green sector.In June 2010, Scott launched GreenBusinessOwner.com, a sustainability consulting firm dedicated to providing solutions to common business problems by leveraging the power of the triple bottom line. Focused exclusively on small business, GBO's mission is to facilitate the creation and success of small, green businesses.

2 responses

  1. Flu pandemics have been happening regularly for three hundred years, and probably longer. New viruses are usually created in the sustainable polyculture of the chinese rice paddy, where humans, swine, domestic and wild fowl all mingle. The migratory wild fowl are a key link- they spread new bird flu variants globally. Confinemant agriculture isolates hogs from chickens, and both from migratory birds.
    Of course, once a virus enters a CAFO it is sure to spread throughout it. The new flu may have arisen in a CAFO, but the mix of human, swine and bird genetics is more likely in a situation where all three hosts are in close proximity.
    Factory animal farms breed antibiotic resistant bacteria and poison the water. There is no evidence that they spread the flu.

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