Monday, 5 August 2013

The Truth About Greed, Coercion & Exploitation

We haven't talked about greed, exploitation and coercion yet, have we?  Let's do it now.  I’ll come to greed in a moment – but, first off, the archetypal example of 'exploitation' or 'coercion' usually given is one of a rich company setting up a factory in a third world country and hiring impoverished workers to work for meagre wages, and in conditions in which virtually no Westerner would consider working. The other popular example is of a big supermarket franchise coming into town and taking customers away from local businesses. Now I'm the first to admit that (particularly in the first case) these conditions are not ideal, and that labour is being bought at a cheaper rate than I'd wish to see in an ideal world.  Nor would I deny that in a lot of cases the conditions under which such work is taking place in third world countries are of a far less good standard than we'd put up with in the developed world.  Finally, I'd also concur with the view that anything we can do to help improve the situation in any of these places is most welcome.

But despite those admissions, it is simply inaccurate to say that what's going on is 'coercion' or 'exploitation'.  To suggest anything to the contrary is to confuse 'coercion' or 'exploitation' with 'imperfect’ or ‘not ideal’ conditions. The upshot is; although it is true that workers in third world countries do long hours for little pay, and that small businesses often collapse due to larger and more competitive corporations, in most cases no one is being exploited or coerced.  When a new Tesco's store opens up in a market town, nobody forces the residents to switch grocery suppliers.  When a business hires workers in underdeveloped countries their situation is usually better than the alternative of not-working.  It may still not be as good as we'd like, but to call it exploitation or coercion is often a spurious and misjudged attack on success.

Imagine a man in Bangladesh working 65 hours per week to provide himself with just enough resources to survive.  A new clothes factory opens in his town offering him the 60 hours per week with a wage that enables him to not just survive, but live relatively comfortably.  Not only will he take the job, he will do it voluntarily, and benefit in doing so.  Typically, if the factory was started up by an indigenous young Bangladeshi businessman there would be positive vibes, but if it was brought to the town in the shape a rich American company, there would be lots of claims of exploitation.  Of course, I'd like the American company to pay the workers a better wage, but paying workers more than you have to is generally speaking not a good model for business, and the chances are that that clothes factory wouldn't exist if its shareholders had started off by trying to pay workers more they have to, because they would have been out-competed in the price market by the businesses that maximised their profits by paying workers as little as they had to.  

The truth is, in a free market economy where supply and demand are the driving forces, and monopolies scarce, the only way to exploit or coerce someone is to get them to act involuntarily by preventing them from buying the goods they desire at the most competitive prices.  In other words, coercion isn't occurring when Tesco's opens up a store in a market town and takes away business from local shops - coercion is occurring when pressure groups are preventing people from using Tesco's because they want them to pay more at local stores (again, I would prefer it if the locals paid that little bit extra to support their local businesses, but that's a different issue).

Here's a way to make it even clearer – let’s use an example of dating, which just about everyone agrees is voluntary.  Gary is the university hunk whose looks and intelligence gets him all the prettiest and most intelligent girls. Then along comes Mike, with better looks and even more intelligence than Gary.  Now all the prettiest and most intelligent girls want to date Mike instead of Gary.  Gary is put out, but he has no grounds for complaint because the girls have switched their attention Mike voluntarily.  To force them to ignore Mike and stick with Gary would be to prevent them from doing something they'd chose to do voluntarily.  There is no real difference between the dating illustration and the situation between the supermarket and the local businesses. In the shop model, Tesco's is to Mike as the local grocery stores are to Gary, and the customers are the girls who've shown their preference. 

So greed isn't always bad for the majority of beneficiaries, and coercion isn't very often seen in the places anti-capitalists claim it is?
That’s right. Even though there has been a lot of noise made about what people (usually on the left) refer to as corporate greed – it is erroneous to talk about greed as though it has the same effects as coercion or exploitation. It doesn’t. What I will say is, there's no denying that a greedy individual does a degree of harm both to his own psychology, and to his interpersonal relationships, as such people are often very self-centred, parochial and relatively disinterested in the emotional needs of others.  But the kind of aversion to greed that is peddled by academics in disgust directed at the corporate world, with accusations of multi-national companies 'exploiting' their workers and 'forcing' smaller companies out of business is, at best, only sometimes partially right, and at worst, completely spurious.  The real irony is that the arguments against corporate greed are usually made as an attack against unfettered capitalism - which is about as wrong as you can get.  Exploitation and worker coercion does occur in the world, but only usually when companies wield totalising and monopolising power.  If there's one place it happens in a much less damaging way it is in free markets where supply and demand drives the global economy.

Here's the real truth about the benefits of greed in a market economy.  Consider Greedy George - never has a man been so avaricious, and so voraciously hungry to obtain wealth.  But Greedy George can't force anyone to give him money, so he must earn it - and to earn it he must find someone willing to pay him, either for goods or services.  George's greed isn't necessarily detrimental to everyone else because if George wants lots of money he needs to produce goods or acquire skills for which others are willing to pay him big money.  To do this he must be innovative; and to be innovative in a competitive market he must come up with something valuable and beneficial to a lot of people, otherwise George won't satisfy his greed.  If he becomes one of the world's most popular comedians he'll entertain a lot of people; if he invents something that millions of consumers buy he'll sell a lot of something that people desire; but he won't force anybody to make him rich, so there's no exploitation or coercion. 

Greed can be destructive for the few – but when it engenders multinational success it has benefits for the many, because people won’t just hand over their money unless there’s something more valuable than that money in return.  Similarly, what can seem like coercion and exploitation to the untrained eye is usually nothing of the kind – it is usually consumers and workers voluntarily choosing a cheaper product and a more efficient method of obtaining it (supermarkets enable consumers to buy all their groceries in one place, as well as at a cheaper rate), or a job that even with low wages is an improvement on not having that job. 

* Photo courtesy of