Friday, August 12, 2005

Time for a New Socially Responsible Investment Movement

"doesn't Disney( --which, incidently, I think, is actually Disney/AOLTimeWarner/General Electric/Viacom) engage in some pretty horrendous child labor practices in other countries?"

This is quite possible. I don't know.

I would be very interested in having someone (perhaps a young FLOW entrepreneur) create a credible system for "socially responsible investing." I like the idea of putting my dollars where my beliefs are.

That said, much of the existing socially responsible investing movement is misguided. Often so-called "sweatshops," which have conditions that we consider to be horrible, including extensive child labor, are actually huge improvements over existing conditions. There are cases in which a U.S. corporation closes down a factory because of accusations of "horrendous child labor practices" and the result is that children return to slavery and prostitution. How do we balance a situation in which children work 14 hour days and occasionally lose fingers and arms (but earns a high income relative to others in their society) against a situation in which children are bought and sold as sex slaves? And I think that it is very important to be clear that, in many places, these are the kinds of alternatives that exist.

Stories like the one about the Taiwanese workers striking for longer hours need to be reported a lot more frequently, especially by publications such as Mother Jones and Utne Reader. At an IHS conference on globalization in which American students were complaining about sweatshops and corporate greed, a Mongolian student stood up and said "Please send us your sweatshops. We need them. We want them."

Although "socially responsible investing" is, in principle, a good idea, to date the "socially responsible investing movement" has often been irresponsible insofar as there has been a propensity to impose western standards and expectations in developing world situations in which such standards are entirely inappropriate.

Even individual outrages at plants owned by corporations are hard to assess. As a school director, I was responsible, in principle, for everything that happened under my watch. And bad things happened while I was director: A boy exposed himself to girls in the girls' locker room, another boy put Ex-Lax in sodas and gave them to others to drink, a teacher made sexually inappropriate jokes to female students, etc. I hate the fact that bad things happened on my watch and tried to make sure that they did not happen. But even in very small schools, with very small staffs, I could not control everything that took place.

Imagine running a corporation with many thousands of employees around the world. Simply on a statistical basis, there are bound to be some really horrible situations.

In judging "the behavior" of large corporations, we need to become much, much more sophisticated in how we make these judgments. We need to understand first of all that, in the absence of a deep local understanding of the options faced by local peoples, we can't know whether or not working conditions are actually "bad" or if they are, relatively speaking, great. And, even when truly horrendous incidents are brought to light, in principle we should try to understand if a given corporation, given its size and industry, has a higher than average rate of such incidents or a lower than average rate.

The "socially responsible investing movement," and those publications such as Mother Jones and Utne that report news as if they were supporting such efforts, are not even close to this level of sophisticated analysis. As a consequence, I fear that more often than not such attacks on corporations at present result in workers in developing countries being harmed more by such do-gooders than they are benefitted. The Taiwanese riots for longer working hours, reported earlier in this blog, may be the tip of an iceberg.