Pro-Globalism, Anti-Corruption: Why Libertarians Shouldn't Be (Too) Worried About NoLogo.org
A piece I wrote, about the often-touted negative effects of globalization, and my Libertarian thoughts about it.
Pro-Globalization, Anti-Corruption: Why Libertarians Shouldn't Be (Too) Upset About NoLogo.org
The anti-globalist website www.nologo.org, which promotes the works of journalist and author Naomi Klein, is probably not a favorite of most libertarians. It has an expressly anti-capitalist agenda and a narrowly zero-sum interpretation of "the profit motive", which is supposedly contrary to "human dignity and solidarity". We, more economically informed, know better. Yet, Klein's writings, however jaundiced in outlook, also contain objective material about corporate behavior that would make Ayn Rand's slimy villains, Wesley Mouche and Orren Boyle, drool with glee.
Unfortunately, many of these things are true. And Libertarians should be concerned about them -- because they're not only bad for ethics, freedom and justice, they're also bad for capitalism.
Corporate malfeasance is in the news almost constantly nowadays. For some, this is an indictment of the capitalist system itself. What the leftists leave out is that corporations aren't doing this on their own -- indeed, they wouldn't be able to do the worst of it without the cooperation of government. Government and business with their hands in each other's pockets is a recipe for corruption, and the greatest socioeconomic plague that our world now faces. A small plutocracy profits, along with the corporate bigwigs, while the rest of the country gets shafted.
I'm not talking here about the simple fact of corporations building plants in areas where cheaper labour is available. I'm talking about collusion with government to obtain subsidies and monopolistic conditions. When a government grants special privileges to one company and forbids workers to unionize, wages cease to be competitive. This is not a free market, but the obstruction of the free market.
Yet, the corporations themselves benefit only in the short run -- not the long run. Indeed, Third World exploitation is a classic example of short term thinking. To illustrate what I mean, let's look at what happens when a multinational company gives payola to greedy local officials in exchange for "cheap" labour:
An unjust political system and poor system of law result in a less efficient economy (as Hernando de Soto has documented.) The more government officials are on the take, too, the more graft the company has to pay to stay in business. Corrupt governments foster disordered social conditions -- from high crime levels up to and including revolution. Social disorder means that corporations need to spend more on security, repair, and insurance. The NoLogo site, in fact, describes "caged factories... in the Philippines and Indonesia that are all surrounded by gates, watchtowers and soldiers." Plus, poorly developed countries also tend to have dirty environments. High levels of smog, soot and grime result in more money spent on cleaning and maintenance of equipment and premises (a hidden cost that is rarely mentioned.)
Unethical practices not only lower a company's reputation (resulting in the kind of reaction shown on places like NoLogo), they also leave the company open to lawsuits and blackmail. The more "dirt" the government has on a corporation, the more graft it can charge to conceal it. Hence, pay-offs and deception become a vicious circle.
High poverty levels and bad working conditions lead to a less-healthy workforce, resulting in more sick time, absenteeism and poor performance. Pigsty-like work environments increase the risk of epidemics, posing a threat to local workers and foreign managers alike. Through a combination of factors like poor nutrition and education, poverty also tends to keep IQ low, which means workers who are harder to train and more prone to mistakes. (If companies were simply to provide free vitamins for the children of employees, the next generation's IQs could likely be raised substantially -- a significant investment in the future.)
Moreover, gouging Third World countries interferes with their own capacity to industrialize and develop themselves, meaning that resources and human capital remain underutilized. As long as these lands remain underdeveloped, they also consume less, and remain out of the market for the very products that the corporations wish to sell. The overall result -- less efficiency, more waste, and less long-term profits.
As Ayn Rand and others have made clear, bad ethics is bad business.
So, why do companies continue these unethical, inefficient and ultimately unprofitable activities? First, it's still cheaper overall to operate in these countries because of the low wages, even taking into account the additional costs. Plus, almost everybody else is doing it the same way, so using these methods remains competitive. There's little incentive to do better. That's where critique groups like NoLogo can play a beneficial role.
One thing I find amusing is that anti-market advocates sometimes complain that the market has co-opted the anti-market movement, by providing venues for such activists to advertise, promote their wares and become fashionable. I see it more as enabling a "loyal opposition" which creates checks and balances. Folks like nologo.org, by bringing the ethics violations to public notice, are often successful in getting corporations to change their policies. Since ethical policies are, in the long run, beneficial both to the economy and to the corporations themselves, the anti-capitalists are actually aiding the market.
Libertarians, too, need to take a stand against the Orren Boyles of the international world. If we do, we'll likely win a lot of the leftists over to our side.
Pro-Globalization, Anti-Corruption: Why Libertarians Shouldn't Be (Too) Upset About NoLogo.org
The anti-globalist website www.nologo.org, which promotes the works of journalist and author Naomi Klein, is probably not a favorite of most libertarians. It has an expressly anti-capitalist agenda and a narrowly zero-sum interpretation of "the profit motive", which is supposedly contrary to "human dignity and solidarity". We, more economically informed, know better. Yet, Klein's writings, however jaundiced in outlook, also contain objective material about corporate behavior that would make Ayn Rand's slimy villains, Wesley Mouche and Orren Boyle, drool with glee.
Unfortunately, many of these things are true. And Libertarians should be concerned about them -- because they're not only bad for ethics, freedom and justice, they're also bad for capitalism.
Corporate malfeasance is in the news almost constantly nowadays. For some, this is an indictment of the capitalist system itself. What the leftists leave out is that corporations aren't doing this on their own -- indeed, they wouldn't be able to do the worst of it without the cooperation of government. Government and business with their hands in each other's pockets is a recipe for corruption, and the greatest socioeconomic plague that our world now faces. A small plutocracy profits, along with the corporate bigwigs, while the rest of the country gets shafted.
I'm not talking here about the simple fact of corporations building plants in areas where cheaper labour is available. I'm talking about collusion with government to obtain subsidies and monopolistic conditions. When a government grants special privileges to one company and forbids workers to unionize, wages cease to be competitive. This is not a free market, but the obstruction of the free market.
Yet, the corporations themselves benefit only in the short run -- not the long run. Indeed, Third World exploitation is a classic example of short term thinking. To illustrate what I mean, let's look at what happens when a multinational company gives payola to greedy local officials in exchange for "cheap" labour:
An unjust political system and poor system of law result in a less efficient economy (as Hernando de Soto has documented.) The more government officials are on the take, too, the more graft the company has to pay to stay in business. Corrupt governments foster disordered social conditions -- from high crime levels up to and including revolution. Social disorder means that corporations need to spend more on security, repair, and insurance. The NoLogo site, in fact, describes "caged factories... in the Philippines and Indonesia that are all surrounded by gates, watchtowers and soldiers." Plus, poorly developed countries also tend to have dirty environments. High levels of smog, soot and grime result in more money spent on cleaning and maintenance of equipment and premises (a hidden cost that is rarely mentioned.)
Unethical practices not only lower a company's reputation (resulting in the kind of reaction shown on places like NoLogo), they also leave the company open to lawsuits and blackmail. The more "dirt" the government has on a corporation, the more graft it can charge to conceal it. Hence, pay-offs and deception become a vicious circle.
High poverty levels and bad working conditions lead to a less-healthy workforce, resulting in more sick time, absenteeism and poor performance. Pigsty-like work environments increase the risk of epidemics, posing a threat to local workers and foreign managers alike. Through a combination of factors like poor nutrition and education, poverty also tends to keep IQ low, which means workers who are harder to train and more prone to mistakes. (If companies were simply to provide free vitamins for the children of employees, the next generation's IQs could likely be raised substantially -- a significant investment in the future.)
Moreover, gouging Third World countries interferes with their own capacity to industrialize and develop themselves, meaning that resources and human capital remain underutilized. As long as these lands remain underdeveloped, they also consume less, and remain out of the market for the very products that the corporations wish to sell. The overall result -- less efficiency, more waste, and less long-term profits.
As Ayn Rand and others have made clear, bad ethics is bad business.
So, why do companies continue these unethical, inefficient and ultimately unprofitable activities? First, it's still cheaper overall to operate in these countries because of the low wages, even taking into account the additional costs. Plus, almost everybody else is doing it the same way, so using these methods remains competitive. There's little incentive to do better. That's where critique groups like NoLogo can play a beneficial role.
One thing I find amusing is that anti-market advocates sometimes complain that the market has co-opted the anti-market movement, by providing venues for such activists to advertise, promote their wares and become fashionable. I see it more as enabling a "loyal opposition" which creates checks and balances. Folks like nologo.org, by bringing the ethics violations to public notice, are often successful in getting corporations to change their policies. Since ethical policies are, in the long run, beneficial both to the economy and to the corporations themselves, the anti-capitalists are actually aiding the market.
Libertarians, too, need to take a stand against the Orren Boyles of the international world. If we do, we'll likely win a lot of the leftists over to our side.