Why do we buy stuff? The quick answer is: because we want it. We enter into business transactions to satisfy our own needs and we tend to disregard the seller. A good part of our life- perhaps the most important part of it- is about surrounding ourselves with people we like and appreciate. With these people, we typically entertain relationships that are not akin to market transactions. But, as good ol’ Adam Smith would say, “in civilized society” we stand “at all times in need of the co-operation and assistance of great multitudes,” but our “whole life is scarce sufficient to gain the friendship of a few persons.”
Hence the need to resort to relationships regulated by monetary exchanges and predicated upon the mutual understanding that each of the parts is pursuing her own self-interest:
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages.
For this reason, I am rather suspicious of boycotts and similar forms of putting pressure on businesses. For one thing, most of the time collateral damage is not considered by those advancing such strategies. A few years ago many suggested we should boycott the local franchises of evil multinational companies, for whatever kind of objectionable business practices they engaged in developing countries. The most immediate result of such strategies, when successful, was to cause those franchises to go bankrupt, with many locals losing their jobs. You can argue that the salary of a Milanese is not more important than social justice for Nigerians, but I wonder if you were actually lowering the living standards of the first but increasing the living standards of the latter. Perhaps there were better ways to do something for them (like opening borders and allowing them to search for better jobs elsewhere).
I am also very suspicious of articles such as this by Dana Milbank. He claims that there are “33 companies (as of Wednesday afternoon) that form a “hall of shame,” defying demands that they exit Russia or reduce their activities there.” Hence, “Those who want to stop Russia’s murderous attack against Ukraine should stop investing in or buying the products of these companies.” And then comes a list, from Koch Industries to Subway (“it’s giving Ukrainians the Cold-Cock Combo by refusing to cut loose its 446 Russian franchises.”)
In a free market, to be sure, we are happily free to buy what we want where we prefer for whatever reason we favor. Yet I find the logic behind Milbank’s piece hopelessly flawed. For one thing, why does the fact that these companies are active in Russia mean that they are somehow financing Putin’s war? Among the reprobates, you can find French retailers Decathlon and Leroy Merlin. I wonder how employing Russian cashiers to sell windbreakers in St Petersburg or bricolage items in Moscow is “supporting the war”.
But what I fear the most is the slippery slope. The theme is an old one: you apply the logic of the little group, of the face-to-face society, to larger groups, in this case even to international trade. It is one thing to surround yourself with people you like, quite another to think that you should trade only with people you like and because you like them. Potentially, this is a slippery slope. What about the political preferences of my grocer? What if he is a Trumpian? Should I search for another grocery store? What about the presence of companies in countries that, though they haven’t invaded Ukraine, are equally controversial as Russia? Shall we stop buying at stores of companies that sell to Venezuelans or Iranians, because we do not like their regimes? Is it going to help Venezuelans and Iranians in any possible way?
Or is it a version of secular atonement, a kind of political Lent that we impose upon ourselves, renouncing to stuff that we would otherwise like?
The logic of market transactions is the one so beautifully outlined in those succinct lines by Adam Smith. I understand that people can be very passionate about some causes or strongly dislike some people, hence they do not want to buy stuff from them. There are authors I do not want to profit from me purchasing their books. But most of our transactions are not made of books or movies, that we can somehow neatly associate with their makers, but rather with artifacts which are in itself the result of a complex division of labor. Our market transactions depend on us liking the product and not the producer, and happily so.
READER COMMENTS
Andy G
Mar 21 2022 at 12:41pm
Economic sanctions against Russia are not just virtue signaling. Putin’s war of aggression will not end with appeasement. Putin’s war will end with the end of Putin — either in an extended bloody war or via an internal coup. Economic pressure favors a coup. Using free market arguments to defend businesses that prop up totalitarian regimes in early war looks like smart contrarianism. However, with time, advocating for the welfare of Russian consumers and American billionaires versus the respect for national borders, peaceful co-existence of nations, and the death of allied servicemen and Ukrainian women and children will be recognized as treason. Any true friend and admirer of Koch would ask him to reconsider his position.
Jon Murphy
Mar 21 2022 at 12:46pm
Do they? I am unaware of any sanctions that have led, either directly or indirectly, to coups. Indeed, it appears more that sanctions strengthen the authoritarian regime’s political control over the country by providing a convenient scapegoat on which to blame national problems.
David Henderson
Mar 21 2022 at 2:13pm
I agree with Jon Murphy.
I’ve never found a case where sanctions against country X led to a successful coup against the government of country X. And it’s not as if they haven’t been tried.
Jim Glass
Mar 21 2022 at 8:44pm
I’ve never found a case where sanctions against country X led to a successful coup.
False argument. The purpose of the sanctions is to shrink the Russian economy so Putin is incapable of maintaining and repeating such aggression, deter other nations from such actions, and pressure long-term regime change in Russia — not a coup, but a shift to different policies.
Say: South Africa. When Nelson Mandela was asked if sanctions worked and furthered the regime change that ended apartheid in South Africa he said, “Oh, there is no doubt”.
Jon Murphy
Mar 21 2022 at 9:17pm
No, it’s literally the argument Andy G is making. I’m responding to him. Do you have evidence, even a single example, of sanctions leading to coups or regime changes?
Jon Murphy
Mar 21 2022 at 4:01pm
I think this is a good way of putting it. In my observations (which, admittedly, are very limited and biased Leftward), support for sanctions on Russia take on an almost religious aspect to it. Sort of like “we must sacrifice and through sacrifice we will be absolved!” Whether or not the sacrifice actually achieves its end goal is irrelevant: it is the sacrifice that matters.
Alberto Mingardi
Mar 21 2022 at 5:11pm
Thank you Jon. I think in part this is a consequence of Covid-19 and lockdowns. Austerity is an anticipated consequence of some of these measures and it is endorsed by some as the equivalent of a prolonged lockdown. There is a lot of emphasis on “sacrifice” as a correct response to this (dreadful) state of affairs.
Alan Goldhammer
Mar 21 2022 at 5:03pm
BTW, the Washington Post reporter is Dana Milbank, not Millibank. One of the moderators might want to fix this.
Alberto Mingardi
Mar 21 2022 at 5:12pm
Thanks
Jim Glass
Mar 21 2022 at 11:49pm
I read four paragraphs about the great superiority of free markets, and the ills of petty domestic tribalism that distort them, and agree with it all! But isn’t there a war going on?
Ah, finally that’s noted in the dubious challenge to Milbank: “Why does the fact that these companies are active in Russia mean that they are somehow financing Putin’s war?”
Dubious because a credible argument must accurately describe the position it is arguing against. And the purpose of sanctions is to (1) reduce the size of the Russian economy so it can’t continue this war over the long run or start another one later, (2) deter other nations from such aggression, (3) over the long run, provide strong incentives towards regime change in the direction of peaceful behavior. Incentives matter, right? So those are the three tests by which sanctions, including private ones, should be measured.
I don’t see any of these purposes considered. Just the purposely silly likes of, “I wonder how employing Russian cashiers to sell windbreakers…”
How about a more meaningful example? As Russia has a GDP smaller than New York State’s, it is not independent in many industries. Take, say, aircraft. Near all of Russia’s aircraft are either western imports or have western engines. Spare parts and online maintenance manuals have been cut off by western firms, so near all Russian civil aircraft look to be grounded in about a month. In a country with 11 time zones. That pretty clearly passes all three tests.
But from a free trade point of view, is grounding these aircraft a good thing? Or not? Because this situation is multiplied by *many* industries. If it is a good thing to do to counter Putin, where does one draw the line?
As for the retail examples, I personally don’t care much if Starbucks et al choose to stay or go (Starbucks has chosen to go). We have a free country and they can do what they want unless formal sanctions say otherwise.
But surging unemployment definitely will be bad for Putin, as it is for any regime, and Russians under 40 really like their Internet and western products. Those aren’t as trivial to them as you make them to you. (I know first hand.) Younger Russians want to be part of the western world. And in the South African example some of the softer sanctions cutting them off from the world, such as exclusion from international sporting events, produced the most pressure on the government. So by the three tests, unemploying those cashiers may matter a good deal more than you think.
Jon Murphy
Mar 22 2022 at 7:11am
It’s unclear from an economic or political economic point of view that these three goals can be accomplished via sanctions:
To your first point, sanctions do not necessarily reduce the size of an economy, especially as the world has become more open to trade. They would if the nation could be effectively embargoed (eg, North Korea), but Russia less so. Even as the US and EU cut off Russian energy imports, Russia was able to sell to China, India, and other places at a higher price, thus keeping their income the same. Especially when a good is relatively inelastic, increases in price do not harm the producer.
To your second point, sanctions do not necessarily deter from aggression. Indeed, sanctions tend to increase aggression by reducing the cost of aggression. Just some quick famous examples: Japan bombed Pearl Harbor in response to US sanctions, North Korea has been rapidly building a military program, Iran has been actively funding violent groups, etc.
To your third point, as I state above there are no examples of sanctions putting pressure on authoritarian regimes to change. In fact, sanctions tend to entrench the authoritarian regime.
Jon Murphy
Mar 22 2022 at 9:26am
As I tell my students all the time: be specific. What incentives are you discussing? What’s the mechanism at play? One cannot just invoke “incentives” like a magic word to prove their point. Be specific.
Jim Glass
Mar 22 2022 at 12:13am
But what I fear most is the slippery slope.
“Slippery slope” is a lame argument because it presumes that people (other than us, of course) are too stupid to tell the difference between different things.
If I protest against how IBM did good free-market business with the Nazis from 1933 through the Holocaust, facilitating genocide, next I might protest against Chick-fil-A. Or is it that if I protest against Chick-fil-A then I’ll protest against IBM having aided the Nazis … I dunno.
It’s interesting that IBM’s main defense to this charge has never been to deny that it is true, but to say “Doing business with the Nazis was entirely legal until Germany declared war on the USA, and after that our records are lost.”
Which I think raises an interesting question for free traders — of which I am one! In fact, I am about the most militant free-trader I know in real life. But as I see the world, the free trade area has geographical limits. So let’s look at this case….
It was entirely legal for IBM to do business with the Nazis starting in 1933. That being the case, you free traders out there: Do you think IBM should have stopped trading with the Nazis at some point? If so, when? Why? What trumps free trade?
Does that apply now?
Vivian Darkbloom
Mar 22 2022 at 5:04am
“Why does the fact that these companies are active in Russia mean that they are somehow financing Putin’s war?”
Either the direct and indirect economic activity generated by those companies is exempt from Russian tax or Putin has a segregated tax fund for this war that includes only taxes from other activities to finance it.
Phil H
Mar 23 2022 at 8:27pm
If you claim on the one hand (as I do and I assume that all the writers on this site do) that markets are near-miraculous processes that have transformed human life and our ability to support new endeavors; and that markets link together complementary processes, I Pencil-style, in ways that are fundamentally unpredictable and difficult to trace; then you don’t get to say…
“I wonder how employing Russian cashiers to sell windbreakers in St Petersburg or bricolage items in Moscow is “supporting the war”.”
We don’t know how. What we do know for sure is that it *is* supporting the Russian economy and state.
You haven’t actually offered any reasons to rethink the basic argument: trade makes rich therefore stopping trade will make poor. It’s no more complicated than that, and it’s a very well-supported intuition.
Jon Murphy
Mar 24 2022 at 3:32am
That’s not the lesson behind I, Pencil. We do know how markets work. We do know the various linkages. The point of I, Pencil is that no one needs to know all the linkages in order for the system to work. The knowledge of how to build a pencil is dispersed throughout the economy. But it is there.
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