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CORPORATE RESPONSIBILITY MUST END! I've given Democracy (a journal of ideas!) a bit of a hard time in recent months, but their latest issue is genuinely fantastic. It contains a couple of articles I want to talk about, but the most important is Aaron Chatterji and Siona Listokin's ferocious critique of the corporate social responsibility (CSR) movement. As they argue, liberals have largely abandoned attempts to change the economy through government regulation and action and begun seeking instead to convince individual corporations, by way of PR campaigns and lobbying efforts, to become better economic citizens. This is foolish, in addition to being ineffective.As Chatterji and Listokin document, corporations have become scarily adept at using the atmospherics of CSR to escape real regulation or public outrage. Here's how it works:
Imagine a world with one voluntary code of conduct governing the operation of apparel factories. Let�s call it the Golden Code of Conduct (GCC). This is a strong code that calls for the provision of a living wage, recognition of unions, and limits on working hours. Now suppose another set of companies who do not want to abide by the code, but still care about consumer perceptions, creates their own code, called the Super Code of Conduct (SCC). Their code lacks many of detailed provisions of the GCC, but it has some vague language about treating workers with respect. Companies must decide which code to adopt, and the SCC is clearly cheaper to institute. For high-minded companies that want to live by the more stringent code, the high costs could make them uncompetitive in supplying retailers. Meanwhile, the benefits are only significant if consumers can tell the difference between the two codes. If a company can retain the benefits of an improved image but not incur the cost of improved working conditions, there is no reason to expect them to choose the less stringent code.Meanwhile, the willingness of progressives to accept corporate self-policing diminishes demand for government action that could impose standards not just on a few individual businesses, but on whole industries. That's a far more sustainable strategy. CSR, after all, means that those who choose virtue will become almost instantly less competitive, while their competitors will see no similar change. Indeed, part of Wal-Mart's rise was exploiting the higher labor costs of older retailers who'd emerged at a moment when they were expected to compensate employees fairly and generously. By ignoring such voluntary restrictions, Wal-Mart undercut, and out-competed, an array of retailers who'd made the mistake of demonstrating some CSR. And if the shaming campaigns of Wal-Mart Watch and Wake Up Wal-Mart miraculously succeed at forcing a similar moral epiphany in Bentonville, some currently unknown retailer will emerge in a few years to start the process all over again.The essential problem here is that liberals are trying to fix market failures by asking market creatures to ignore, well, the market. Corporations are damn good at making profits. The market is damn good at encouraging profits. If society decides, however, that the drive for profit is creating unwelcome externalities, or somehow harming the common good, it has government to step in and set limits on the market. And that's the right order of things. Corporations should do what they do best -- seek profit -- and society should set, if needed, universal and fair limits across industries, enabling useful competition, ensuring a floor of wages and labor standards, and safeguarding the environment. The progressive insistence on CSR promises a whack-a-mole future, where one battle necessitates the next, as other corporations seek to take advantage of the self-imposed standards of their competitors. Government regulation, which is both more effective and far-reaching, is a much better way to go, and progressives should rediscover that.--Ezra Klein
