Forum Post: Using market pressure for social justice

The Occupy movement originated as a response to corporate greed and social irresponsibility. So far the movement has succeeded in creating an awareness within society at large about concepts like “The 1%” and “The 99%” and it has produced lots of good dialog about how to solve our problems.

My suggestion is that we look for and then attack the root of the problem. We need to apply market pressure that will force companies to be “good” as well as efficient.

I believe that most corporations and most people don’t often decide to “be evil”. I think that there are only a few corporations and a few people (or perhaps a lot of people who once in a while) willfully do things that they know are wrong for personal gain. However the nature of the free market is that it rewards these bad choices and then forces the competitors to make similar choices in order to stay competitive. For example, if Company A and Company B both make the same product and then Company B figures out it can save money by getting rid of some emission controls, Company A will be forced to find equivalent cost savings or be driven out of business.

The same story plays itself out over and over in regard to many of the corporate evils: reducing worker salaries and benefits, moving jobs to low cost (and low regulation) countries, producing devices that break right after the warranty expires… The reason for staggeringly high CEO pay is also the effect of competition. CEOs are not paid ridiculous sums of money because they would refuse to work for less money. Instead they are paid ridiculous sums, because if your company isn’t paying them something outrageous then the competition will. Given that good management has a large impact on profitability, and good CEOs are scarce, it’s understandable that shareholders don’t want to hold back when it comes to compensating them. The same reasoning goes to why we pay athletes so much.

The answer isn’t to eliminate competition. That has been tried before and hasn’t worked out the way anyone wanted it to. The fact is that competition has many positive aspects. It drives innovation, reduces waste, and improves productivity.

Similarly the answer isn’t to add regulation (although some regulation is probably good). This has also been tried, but inevitably the competitive evolutionary pressures of the market find a loop hole in every regulation and the cost to keep patching and updating the regulations continues to grow and become unwieldy. For example, just recently, in an effort to improve childhood nutrition, San Francisco passed a law disallowing companies to give away toys with foods that don’t meet nutritional guidelines. McDonald’s immediately skirted the regulation by charging an additional $0.10 for happy meal toys.

I propose that the Occupy movement employ alternative competitive market pressure to get corporations to clean up their act. In this new information age, it should be easy to provide a product comparison that takes into account social factors as well as cost.

As a typical member of the 99%, I am busy and mostly apathetic towards social causes. I don’t want to move all my money to a credit union with only a couple branches. I don’t want to bicycle to a farmers market to buy my vegetables, I don’t want to knit my own socks, and I don’t want to picket things. However I would be willing to drive an extra 4 blocks to HEB instead of Kroger if I knew that HEB gave its employees better wages and its CEO less compensation. I would also be willing to switch from Bank of America to Chase if I believed they were dealing less in shady derivatives. I would go to Lowes instead of Home Depot if they moved fewer jobs to China, etc.

I don’t think there are too many differences between companies like Lowes and Home Depot, but as long as the one that is even slightly better is rewarded, this should apply the necessary competitive pressure for the other one to clean up their act. Then the game will change from being a race to be the cheapest to a race to be cheapest and most responsible.

There is already a Corporate Social Responsibility Index. We need the Occupy movement to endorse this strategy and perhaps provide official recommendations of which competitors are better. In the case that two competitors are equally bad, then we can just pick a recommendation arbitrarily. This at least will force the un-chosen to do something responsible in order to get back to the top of list. As long as there is one official list then we can act with one voice. We can even make an “app” for doing quick comparisons.

For this to work properly however, we need to vigilant against corruption. The whole rating process should be done transparently, otherwise this could quickly become another tool for evil.