Capitalism as a force for good:
Supply chains and libertarianism

Case study #1 – Modern Day Slavery Supply Chains

On the topic of slave labour, David Cameron is right: companies should sort out their supply chains. But is there scope for an increase in authoritative government intervention in the affairs of private business, when a gradual evolution to cleaner supply chains is already visibly occurring?

A case is to be made that, whilst governments have a role in tackling modern slavery, the solution to tackling the $150 billion illegal industry is not to be found exclusively in government – rather we should begin to recognise and champion swift movement emerging in the private sector. Only a quick look into actions businesses have taken independently, and the practicable incentives driving them, is required to offer excitement (for all good libertarians, anyway) about the existence of self-regulation in capitalism, in this case in the battle against modern slavery.

The Issue At Hand

With David Cameron’s recent visit to Vietnam, the depressing global issue of forced labour was rightly addressed. Forced labour, which entails the threat of violence from criminal gangs, is common in a vast array of countries, from Sudan to North Korea to the Philippines. However, the issue is not confined to countries in which the practice most abundantly occurs.

With the equally disturbing growth in human trafficking, the United Kingdom itself is estimated to have seen some 3000 Vietnamese child and adult slave labourers reach its shores in recent years and, needless to say, this is only one source among a crowd of prolific offenders, such as Albania, Nigeria, Romania and Slovakia. Indeed, authorities identified 2,340 potential trafficking victims from 96 countries in the UK in 2014 alone. This is in contrast to 1,746 cases identified in 2013, according to the US 2015 Trafficking in Persons Report – hence incidence is alarming.

Before any conflation regretfully occurs, the distinction between genuine slave labour, as aforementioned, and what is often decried as slave labour must be noted. Whereas there is a strong case for supporting sweatshops in developing countries – not only as the preferable option to a plethora of dire alternatives, but also as a simple mechanism of economic progress as argued by almost any credible economist, the issue of slave labour is beyond varying degrees of poor working conditions.

In other words, let’s not allow hysterical anti-capitalist forces to undermine the term and put libertarianism off discussing genuine slave labour. Modern slavery is a problem, and a big one, against which action must be taken. To substantiate this need, a meaningful 11% of British business leaders recently declared that it is likely that modern slavery already plays a role in their supply chains.

The Private Sector Hits Back

Along with absolute poverty, sex trafficking and disease, slave labour is one of humanity’s greatest challenges to fight with patience and perseverance. Thankfully, companies are beginning to do their bit to address supply chains consisting of slavery and unethical elements. Likewise, the benefits of doing so are being observed.

Capitalism and the free market are often denounced for an abject failure to account for immoral and/or unethical practices when it comes to profit-maximisation. Is it not then wonderful to discover that the combined forces of modern societal pressures and long-term business approaches are proving the opposite? That is, that cleaning up supply chains is a newly renowned money maker.

You read that correctly: there is a clear profit incentive to eradicating unpleasant components of your supply chain. A recent study from Accenture highlighted that among retail supply chains, using ethical sources is not only motivated by PR purposes (they found that brand value increases by 30% with clean supply chains), but profits are revitalised in the long-term. In other words, such research has estimated that costs are cut by 16% and revenue is increased by 20%. Therefore, rather ironically for your cliché anti-capitalist, some companies still disregarding appalling practices within their supply chains are actually  impeding their own profitability.

Further promise with respect to the private sector going out of its way to address slave labour is offered in a mid-year report of International Justice Mission (IJM). With large numbers of men enslaved on fishing boats off the coast of Thailand, gruelling, often 20-hour days, are to be expected. Not only this, reported beatings, torture and execution-style killings are no irregularity. Fortunately, this is where a multinational corporation has detected an opportunity to further clear retail supply chains of such brutality. Indeed, a grant from the Walmart Foundation is to cue extensive IJM assessment of slave labour in the Gulf of Thailand this year. Such productive steps as this seem to increasingly appeal not only to decency, but big business itself.

The Inevitable Statist Panacea

All good libertarians are well acquainted with the idea that private solutions are the finest mechanism through which both societal and economic sub-optimality are tackled. Highlighting and advocating private action when it comes to microeconomic scrutiny is important if we are to promote and champion liberty fully – and nullify the government when clambering public opinion drives it to its inevitable attempt to ‘solve’ a complex and undesirable problem (and end up making it worse).

David Cameron’s request, for a simple statement to be published by firms with £36 million turnover, who can influence real change, is acceptable as transparency measures go – and certainly adds value to the cause of societal pressure. Such measures, coming into effect in October, are of course in accordance with the government’s Modern Slavery Act.

On the other hand, calls for closure of all loopholes alongside excessive regulation, if carried out in the near future, will only have negative side effects and will, moreover, be arguably unnecessary given other incentives. With talk of expanding the transparency measures and pressure to uninfluential and irrelevant small to medium (SME) sized firms, it would become clear that priorities had been relegated by government, as we come to anticipate.

As suggested by Oxford professor Dr Steve New, any regulations on businesses on this matter should be targeted prudently, with caution regarding firm size. For example, whereas large corporations hold commercial power and influence over their suppliers, the “vast majority of firms in the economy are not in this position”, and thus New states that imposing “unrealistic demands on firms with very little commercial power and highly constrained resources” is not only foolish economically, in terms of deadweight regulatory cost, but is actually also potentially counter-productive in terms of tackling modern slavery. Demanding statements of vague intent from all companies arguably misses the point and lets larger organisations off the hook.

Conclusion

To bring this mini case study to a final point: A refreshed wariness is required, regarding governments putting their universal foot into yet another complex and important global issue, to the extent that economic freedom may begin to deteriorate.

Forcing businesses, regardless of guilt and/or influence, to suffer from what is a noble crackdown on slave labour, should not become another unintended consequence of governments acting exclusively. Private incentives, apart from the government and insusceptible to government failure, do exist.

And so, disregarding that regular pedestrian statement you hear of capitalism’s evil, consider Mises’ wise words as reinforced by the world of their abundant examples:

 “Capitalism needs neither propaganda nor apostles. Its achievements speak for themselves.”

Elena is a proponent of the free market, enthusiastic about a much smaller role for the state that will facilitate liberty and economic freedom. She is currently an undergraduate university student of Economic, Politics and German and joined the Conservative Party at the age of 15. Spending most of her time fixated on macroeconomic news, she holds some optimism regarding the future of economic liberalism in the world.

Follow @con4lib on Twitter!

Like Conservatives for Liberty on Facebook