An Economics Lesson
I am subscribed or what you call it to the Sierra Club community here. I'm not entirely sure why. When I joined, I assumed that people used it to discuss various environmental issues or talk about Sierra Club activities. But mostly it is used for various people to post ill-conceived ideas about boycotts and online petitions that need to be signed. The latest one was someone's forwarding of the idea of 'googlebombing' a website that is critical of Coca-Cola, such that when a user searched for Coca-Cola, this website would appear near the top of the list. This website states allegations as facts (such as "Coca-Cola murdered union leaders in Colombia"). This idea was cross-posted "like crazy", and the user who posted it is also the moderator for a community called "Fuck Coke". I am intentionally not linking to any of this because, quite frankly, it is not worth your time.
A few months prior, the Sierra Club made a big stink about ExxonMobil (XOM), making a rather large and concerted effort to educate the populace about all of the bad stuff that this rather large petrochemicals company was doing to the environment, asking for donations with more frequency than normal (if that's possible), and suggesting that folks sign a petition that says the government should really enforce all of those things that the government says they should. Not coincidentally, they launched this campaign just after Katrina hit and gas prices were $3, at a time when they were likely to get the most support against the oil industry by folks who don't really know any better. They are a lobbyist group, and it's their job to do things like that, but it was rather amusing after they published case after case of when Bush signed off on things at times when they would be missed due to larger stories.
Really, I'm fine with all of this, except for one thing. Both of these campaigns suggested that a boycott was in order. The boycott is a very simple concept to understand: people dislike what a company is doing, so they get together and decide NOT to patronize a certain company. This company, facing a loss in profits, changes their business practice such that the boycotters demand is met. I am certain that this worked very well when companies were small and it did not take a mammoth group of boycotters to affect the bottom line. Here is where the economics lesson comes into play.
First, the suggestion that a boycott of XOM, in the form of refusing to buy their gasoline, would help encourage XOM to become environmentally friendly. Not only does this ignore the fact that XOM makes a significant amount of money from things other than gas... it ignores the fact that petroleum is a commodity, and as such is bought and sold between various oil companies to meet their needs. Put simply, if Bob doesn't want to buy gasoline from Company X, they'll sell it to Company Y, who will then sell it to Bob. Supply and demand doesn't just disappear. If the price of a commodity is to go down, the demand for it needs to go down as well, and that means Bob needs to buy less gasoline, period.
Onto the general topic of the boycott. People generally assume that they need to hurt a company's bottom line in order to affect change. This is incorrect. There's an interesting "equation" expounded upon in Fight Club by which auto companies decide on whether or not to issue a recall. I'm not sure if it's legitimate, but it makes sense. The boycott equation is similar: The Company makes a profit of $X. A group of concerned citizens is unhappy that The Company engages in Practice P. They stage a boycott, and expect that once The Company sees its profits sink from $X to $Y, they will stop engaging in Practice P and adopt Practice Q instead. This is untrue. If The Company adopts Practice Q, it stands to lose a significant amount of money (this is why it engages in Practice P in the first place), lowering their profits to $Z. It is only once $Y < $Z that the company will make the change. As with most economics, it is not quite as clear cut as this... for example, The Company may see the potential for $Y to become less than $Z. It may also settle on Practice R as another alternative. It may also spend $W in advertising and propaganda to convince the public that Practice P is really not all that bad in an attempt to end the boycott.
A common misconception that people have is that corporations care about their customers. Corporations DO NOT CARE about customers. They care about their shareholders and their profits, and while this often goes hand-in-hand with customer satisfaction, it should never be mistaken that money, not customer satisfaction, is the bottom line. So when an angry group of people get together and boycott Coke, the dudes in their leather chairs don't say, "Wow, we've got 10,000 people that want us to be responsible with the use of water in India. We'd better think this through... they're really unhappy." No. They see those people and say, "OK, this represents a $10M loss, and the thing that they're boycotting represents a $100M profit... uh, let's ignore them and they'll eventually start buying Fresca or PowerAde without even realizing we own that too."
So, anyway, that's my little economics lesson for anyone who happens upon this journal.