Free-Market Economies Need to Incentivize Justice
How difficult is it for companies in free-market economies to remain competitive and hold true to their values and mission? In countries like the United States, where the production of goods and services is directly linked to the country’s ability to generate wealth, competition is crucial in order to maximize output of the aggregate economy. But within this system of competition there arises a problem: a free-market economy does not necessarily incentivize justice, a virtue most would hold as key to a healthy society. In fact, a free-market economy can often use unjust means in order to reach the ultimate end of great wealth. For example, in the tobacco industry, many companies are actively participating in ethically repugnant but perfectly legal business practices. A free-market economy that emphasizes maximum output at the cost of the dignity of individuals will lead to many ethical and social problems. One result of this system is that many smaller countries are falling prey to a system in which they have no real choice but to cooperate.
In developed countries, like the United States, smoking prevalence has steadily decreased over the last several decades. In 1965, 42.4% of adults classified themselves as cigarette smokers, compared to just 16.8% in 2014. This is great news for all those aware of the dangers of smoking, which include cancer, heart disease, COPD, and pregnancy-related issues.
But the countries that will bear the brunt of the tobacco epidemic in the 21st century are not developed countries like the United States and many countries in Europe. Instead, it will be developing nations, specifically those in Latin America and Asia. Because of the steady decline in the prevalence of smoking in developed countries, tobacco companies are looking to countries with poor education on the subject and with little political ability to stop tobacco from entering the market. Population growth coupled with targeted advertising from tobacco companies all but guarantee a rapid increase in the prevalence of smoking in developing countries. Around 80% of the 1.1 billion smokers worldwide come from low and middle-income countries, and current trends suggest that 7 out of the 10 million annual deaths due to smoking will occur in developing countries by the year 2025. The shift to developing countries by the tobacco industry will inevitably lead to a major increase of tobacco-related disease worldwide due to poor healthcare services in these countries. It is a perfect storm: the combination of heavy marketing promotion of tobacco products in poor countries and the poor health infrastructure of these countries.
There is no doubt, however, that these companies are adding a valuable economic resource to these countries, creating jobs and increasing revenues to developing economies, and increasing the overall standard of living for the citizens of these countries country. Indeed, sanctions on the tobacco industry could have negative results on the economies of these countries, including: lower tax revenues via reduced demand and increased illicit activities, decreasing employment in the manufacturing, farming and retail sectors, and impoverishing smokers with higher prices.
But there are many reasons to believe that much of these economic fears are unfounded. First, many developing countries have a difficult time implementing tax measures. This is for several reasons. Many of the workers in developing countries are agricultural workers that get paid “off the books,” so many of the modern ways of raising tax revenue (income or consumer tax) are not really effective. There is also the issue that those governments do not have the ability to create efficient tax systems due to a lack of resources and the ability to train staff.
It is also often difficult to analyze just how much illicit trade increases as a result of these measures. (This raises a further question about what kinds of measures would actually be effective.) Tobacco manufacturing plants have begun to use technology that decreases demand for laborers in tobacco, and farmers in countries with fewer technological resources are facing increased costs of production and decreased global prices are being encouraged to switch to alternative crops.
There is also evidence that tobacco manufacturing plants and farms are often resorting to unethical business measures, including dangerous work environments for children and unlivable wages. For example, in Malawi, “80,000 child tobacco workers suffer from a disease called green tobacco sickness, or nicotine poisoning” as a result of the handling of leaves without protective clothing. Many of these children either do not receive a wage or receive the equivalent of $0.25 for 12 hours or more of work at one time. And in many of these developing countries, parents are forced to put their children to work in order to help to provide for their families. And all of this is perfectly legal, because these business practices are not being conducted on home soil, in developed countries where this is illegal.
But the purpose of this article is not to point out to sins of the tobacco industry, or any particular industry for that matter. Instead, this is meant to highlight the kinds of things that are legal in a system that typically prioritizes the maximization of revenue over human considerations. A major task for the next century on the political and economic level for the United States and for any other country with global influence is to find a way to incentivize ethical business practices, as well as practices that help domestic companies promote their mission and values. In the tobacco industry, for example, there could be subsides to conduct research into creating healthier alternatives to the cigarette, or perhaps heavy economic sanctions for using child labor abroad. Or perhaps there could be reforms specific to the individual firms that allow them to find ways of maintaining ethical boundaries while not losing out on profits. But all would help to limit how often firms have to choose between what is right and what is profitable.
1. “Trends in Current Cigarette Smoking Among High School Students and Adults, United States, 1965â€“2014.”Â Centers for Disease Control and Prevention, Centers for Disease Control and Prevention, 30 Mar. 2016, www.cdc.gov/tobacco/data_statistics/tables/trends/cig_smoking/index.htm.
2. “Tobacco.”Â World Health Organization, World Health Organization, www.who.int/news-room/fact- sheets/detail/tobacco.
3. Mackay, Judith, and John Crofton. “Tobacco and the Developing World | British Medical Bulletin | Oxford Academic.”Â OUP Academic, Oxford University Press, 1 Jan. 1996, academic.oup.com/bmb/article/52/1/206/284538.
5. Palitza, Kristin. “Child Labour: The Tobacco Industry's Smoking Gun.”Â The Guardian, Guardian News and Media, 14 Sept. 2011, www.theguardian.com/global-development/2011/sep/14/malawi-child-labour-tobacco-industry.