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October 24, 2006

Gerard Baker on Red

I think the great man is missing a trick or two here in his analysis of Bono's Red company.

My problem here is with what this does for the very idea of capitalism, for companies pursuing their real and entirely wholesome responsibility of making money. Free market capitalism, untrammelled by marketing people in alliance with special interest groups on a mission to save the world, has done more to alleviate poverty than any well-intentioned anti-poverty campaign in the history of the globe.

By concentrating on selling quality, low-priced goods, some of them made with labour that would otherwise lie idle (and dying) in the developing world, Gap saves lives.

Absolutely true, of course, but that doesn't mean that Red, any more than Fair Trade, (and yes, we all know that free trade is indeed fair trade but let that slip for a moment) is a bad idea.

By appeasing people who regard globalisation as a process of exploitation companies such as Gap are making the world worse for all of us. They are implicitly acknowledging that their main business — selling things that people want for a profit — is inherently immoral and needs to be expiated by an occasional show of real goodness.

Rather than resisting it, they are nurturing and feeding an anti-business sentiment that will impoverish us all.

Ah, there's the problem. They are not appeasing. They are taking advantage of consumer ignorance (or preferences, if you, umm, prefer).

That there are people out there so deluded as to refuse to purchase goods manufactured by the poor of the world, thus making said poor richer, is obviously true. So, create a new brand which mollifies these people's (entirely misguided) concerns. Take the money off them and use it to purchase goods from the poor of the world and thus make said poor richer.

Those of us who know the truth, are aware of reality, won't pay the premium for these goods, we'll simply carry on purchasing sweatshop goods as we already do and carry on, as we have been for decades, making the poor of the world richer by our actions.

In the standard business textbooks this would be a form of branding, of product differentiation, no different from the same companies making both cheap and expensive soap powders that are exactly the same except for their packaging. Consumers get an increase in their utility by buying something that more accords with their self-image of themselves, companies get greater profits because they are able to price discriminate between those with those different self-images.

Contrary, I'm afraid, to Baker's thinking, this isn't a negation of capitalism or the profit motive at all. Very much the opposite, it's a cunning plan to extract more profit from those who claim to be anti-capitalist.

Such branding and product differentiation benefits everyone: the poor get jobs and money with which to continue to get less poor, consumers (however misguided) get to have more of what they want and companies doing the organizing inbetween get greater profits. In what way can this be said to be not capitalism?

And by taking said money off those who would be horrified if it were pointed out that they are indeed feeding the free market beast: well, isn't that just the most delicious part of it?

October 24, 2006 in Economics | Permalink

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[Free market capitalism, untrammelled by marketing people in alliance with special interest groups on a mission to save the world, has done more to alleviate poverty than any well-intentioned anti-poverty campaign in the history of the globe. ]

more than mass vaccination? Also note that "free market capitalism" would almost certainly have to include things like "the transatlantic slave trade" and "The Irish potato famine" unless Baker is going to start getting into exactly the sort of "well you see, that wasn't *true* capitalism" apologetics that correctly got communists such a bad name.

Posted by: dsquared | Oct 24, 2006 12:06:18 PM

Also the number of rapes and murders in sweatshops. Good for the poor? Not so much.

Posted by: sanbikinoraion | Oct 24, 2006 6:30:39 PM

Odd sort of comments you get Tim. People just coming up with any old stuff and then protecting themselves by referring to some strange idea that dishonest arguments got the communists a bad name.

What got the communists a bad name was the millions of people murdered, tortured, imprisoned, countries and cultures destroyed. For starters.

Moving right along: the Irish potato famine was the result of a series of political decisions, which were against the free market. What do you think the Repeal of the Corn Laws was about? Is transatlantic slavery somehow worse than other kinds of slavery, say, within the African continent or the Middle East? There is a difference, of course. The transatlantic one was started later than the other kind and abolished a lot earlier.

There are undoubtedly some rapes and murders in sweatshops, though the figures are not very reliable. So, let make sure they get closed down, our own producers protected and the people who are no longer employed have to go into prostitution where the market will continue operating.

Posted by: Helen | Oct 26, 2006 3:12:10 PM

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