Robert Murphy

On a recent road trip stop I noticed a pamphlet entitled, “Social Responsibility: How is My Starbucks doing its part?” Even though I had never lain awake pondering this question, I couldn’t help but grab the pamphlet. What follows are some choice excerpts and my admittedly cynical reactions.

• “Maintaining a strong level of independence and diversity among directors continues to be a priority… [O]f the 11 board members…one member is Latino, two are African American (one of which is female), and one other female also serves on the board.”

I think this excerpt vindicates the heartless conservatives who predicted that the goals of “diversity” and “affirmative action” would in practice result in demographic bean counting. In any event, is it really something to brag about, when 18 percent of the board is female? I’m pretty sure that isn’t representative of the coffee community.

• “Starbucks global purchases of Fair Trade Certified coffee totaled 18 million pounds in fiscal 2006, representing six percent of Starbucks total coffee purchases.”

A quick google search reveals that “Fair Trade” certification involves basic principles for farmers, including fair prices (minimum floor prices), fair labor conditions (including an absolute ban on child labor), direct trade (no middlemen if possible), and environmental sustainability.

I’m really ambivalent about this trend of certification. On the one hand, I applaud the fact that it’s technically private sector; Starbucks and other companies are voluntarily patronizing the appropriately certified suppliers, even though they are not legally compelled to do so. When free market economists decry paternalistic government regulation, one of our main points is that voluntary rating organizations can provide consumers with guidance on matters with much more expertise and accountability than bureaucrats.

On the other hand, as an economist I disagree with virtually every plank of the trendy movements. For example, why should Starbucks pay more than it has to for its coffee beans? If one group of farmers is willing to work for $7 per day, while another group is “organized” and insists on $10 per day, how does it help poor people by refusing to hire the first group? Market wages aren’t set by whim; they reflect productivity. It’s simply not true that workers in other countries are poor due to greedy corporations. No, those people are poor because their countries lack institutions of private property rights.

Robert Murphy

Robert Murphy has a Ph.D. in economics and is the author of The Politically Incorrect Guide to Capitalism (Regnery 2007).

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