Blood money, inefficiency in “free market” supply chains

A recent article in The Guardian by Lucy Siegle presents some uncomfortable facts about the conditions of production or of many middle-class home comforts. She reports on the human or environmental impacts involved in the production of nine items, from toy packaging to jeans to laptops.

The article presents an informative look into the complex global supply chains that are generally hidden from view when we purchase our products at the Big Box store or on the internet. When reading the article, I was struck by how the reality of global supply chains is often so far from the beneficent free markets found in economics textbooks. The article largely speaks for itself, but let me highlight two disconnections I found particularly egregious with regard to the so-called free market supply chains for mobile phones and coffee.

1) Mobile phones. A critical component of mobile phones and other consumer electronics is coltan (technically, columbite–tantalite) a mineral from child-filled mines that help finance civil war in eastern Congo. Here is an example of the invisible hand of the market at work: the decentralized global supply chain of a massive global industry originating in conflict minerals that fuel war and thus help sustain underdevelopment of the most resource-rich country in the world. Anthropologist Jeffrey W. Mantz has been writing about this, stressing the link between commodity chains and unfree labor, and has written on coltan production in eastern Congo.

2) Coffee. Despite years of fair trade movements, the majority of profits from the global coffee industry still go mostly to speculators, retailers and roasters. As Siegle points out, longer the supply chain the worse off the producers. In other words, the more market transactions involved, the worse for the original producers of the product.

In the first case, go far enough up the supply chain and what you find is blood money. In the second, the extension of the market mainly allows profits to be siphoned off from the producers. Read the original article for seven other conundrums for ethical consumers. What to do?

I agree with the Siegle that anticonsumerism and consumer activism are insufficient to reform the whole system. Yet the news is not all bad. As the story on deforestation for toy packaging shows, with enough motivation and organization, such as the targeted actions by Greenpeace against Mattel, consumer activism can have real effects on the brands running global supply chains. But as the coffee case shows these problems can persist despite years of activism. Transnational activist movements have learned from experience, and from critical commentary by scholars such as Gay Seidman, and real impacts can in fact be made.

Another problem, of course, is that not everyone can or will be an activist. But what more people can do is help change the dialogue, by challenging free market rhetoric wherever it comes from; markets are often destructive (and often depend on perverse policies enacted in our name). They need to be governed not just for equity but often for sustainability or even efficiency.