Consumers are beginning to care more about the origin of the goods they purchase. They want to ensure that whatever benefit they gain does not cause harm elsewhere, down the supply chain. However, there are two primary formalised ways of flexing this consumer autonomy. First is by boycotting, and second by purchasing Fair Trade.
Boycotts
When we hear of poor working practices, work-place cultures or just any behaviour from a company that we deem unacceptable, we have the ability to refrain from using their services. This is a boycott. Often boycotts are organised and involve marketing to raise awareness about a) the wrongdoing of the company at hand and b) the nature and goal of the boycott.
There are several potential goals of a boycott:
- Avoiding complicity: If you don’t wish to contribute to the poor working conditions of coffee workers, then you can stop buying coffee from that company.
- Act of speech: Share a message of disapproval or condemnation.
- Social punishment: By causing the company to lose money, you are punishing them.
- Social coercion: A mixture of the 2 and 3; the group may want to see the company change their practices in particular ways and can do so by boycotting until they see the change.
It should be noted that harm does not just occur to the company that is being boycotted. Often people who are not participants of the boycott can be ostracised and/or shamed for not participating. This is perhaps a welcome harm to the boycotters, but should be noted, nonetheless.
Fair Trade
The second method of exercising consumer autonomy explored here is to “correct” is Fair Trade. Fair Trade seeks to decrease the apparent negative impact international trade has on some developing nations in the production of particular goods. The movement seeks to label products that have been produced ethically as “fair trade” in order to give consumers a simple way of practicing consumer power against unethical work.
The goal of Fair Trade is to empower producers and workers in developing countries by providing them with more resource. However, the focus is first changing the actions of the consumer, which then ought to indirectly change the actions of producers. For example, let’s look at Fair Trade Coffee. If coffee bean growers wish to expand their market to audiences who look for ethically produced coffee beans, then they ought to adopt more ethical practices, such that they become illegible for the Fair Trade label. This is opposed to boycotts, where the goal is to change consumer behaviour to directly influence a specific company.
Is Boycotting Effective?
The answer is always “it depends”. Conclusions about the effectiveness of respective measures can be generalised and deduced empirically.
The first boycott that comes to my mind is the Montgomery bus boycott. Indubitably, the initial resistance of Rosa Parks, and later the whole civil rights movement’s boycott of the public buses was a success. They were able to have bus segregation labelled unconstitutional in the courts.
The major success that was the Montgomery bus boycott is actually a rare occurrence. Most boycotts get some media attention and that’s about it. They are unable to conjure a compelling enough image that drives consumers away from a product or service long enough for it to have real impact. The bus boycott was success because it was not just a compelling image, it was a compelling reality, that African Americans had to live every day.
“Monroe Friedman, emeritus professor of psychology at Eastern Michigan University, published a paper in 1985 in the Journal of Consumer Affairs examining 90 boycotts in the United States between 1970 and 1980. Friedman found that only 24 of the 90 boycotts were completely or partially successful in getting the target to change its behavior. Not surprisingly, the research found that the more organized and planned campaigns, including those that used picketing and other attention-grabbing techniques, had a greater degree of success.”
Knowledge @ Wharton
So, generally speaking, boycott’s aren’t effective. But when well-organised and sustained they can effect change.
Is Fair Trade Effective?
Fair trade is also not very effective. Let’s look at Fair Trade coffee, for example. After petroleum, coffee is the second most valuable commodity that developing countries export.
The problem with Fair Trade coffee is that the incentives are not economically well defined. Fair Trade sets a price floor, a minimum price coffee can be sold at, for commodity (non-speciality) coffee. This is anchored to the New York Coffee Exchange price. If the market price of commodity coffee increases, the Fair Trade price becomes locked at 20c above the commodity price.
“Fair Trade coffee can come in any quality grade, but the coffee is considered part of the specialty coffee market because of its special production requirements and pricing structure. It is these requirements and pricing structure that create a quality problem for Fair Trade coffee.”
“A simple example illustrates this point. A farmer has two bags of coffee to sell and there is a Fair Trade buyer for only one bag. The farmer knows bag A would be worth $1.70 per pound on the open market because the quality is high and bag B would be worth only $1.20 because the quality is lower. Which should he sell as Fair Trade coffee for the guaranteed price of $1.40? If he sells bag A as Fair Trade, he earns $1.40 (the Fair Trade price) and sells bag B for $1.20 (the market price), equaling $2.60. If he sells bag B as Fair Trade coffee he earns $1.40, and sells bag A at the market price for $1.70, he earns a total of $3.10. To maximize his income, therefore, he will choose to sell his lower quality coffee as Fair Trade coffee.”
Colleen Haight
Just Let the Market Be! – Hayek
This is just one example of how Fair Trade can fail. The root of the problem is that it interferes with the pure market signals, which creates suboptimal incentive structures and suboptimal prices for consumers and producers. You can imagine other ways in which artificial pricing structures may make matters worse. For example, producers may bribe auditors to sign them off as Fair Trade, so they make more money now for having the same bad practices. When the market is left to its own devices there is no room for these side quests having an impact on the core product. The core needs to be purchased (implying desired by the consumer) in order to survive.
Does “Ethical Consumerism” Have a Place?
As a consumer you should be mindful of what you buy. You should know that when you buy meat, you pay for that meat to be replaced, and therefore an animal to be killed. You should know that buying some brands of coffee means you’re giving money to people in poor working conditions. But for scenarios like the latter, it’s difficult to know where your money actually ends up.
However, perhaps there is no need to worry about buying “Fair Trade” or boycotting brands In fact, there may be no good reason to intervene at all.
Paul Krugman argues that “global poverty is not something recently invented for the benefit of multinational corporations.” It just happens that in the interconnected world that we live in, the living conditions of developing nations are more visible.
“Low wages allowed developing countries to break into world markets.” By opening up the labour market to developed nations, workers in Third World nations now have a wage. It is important to note that if no one has forced a worker to work in a sweatshop then economics would suggest this is a rational decision. What is the alternative to working in a sweatshop for these people?
Paul Krugman
Concluding Remarks
The advantages of developed nations are huge. The infrastructure, the expertise, and when expertise is not available, living conditions are good enough to attract expertise. If we intervene with the developing labour markets by demanding higher wages or working conditions similar to Australia, there is no way to compete. Developing nations would be just removed from the international market, creating far more brutal living conditions than exist now. Currently, they can compete because of the competitively priced labour. They should be allowed to continue competing and not thrown out of the market entirely as a solution to feeling bad about having the products you use produced in a sweatshop.
What do you think? Are you boycotting something? Do you try to buy fair trade?
