It may not be intuitively obvious what American Apparel, fair-trade coffee, the Toyota Prius, and Monterey Bay Aquarium’s Seafood Watch have in common. The connection is hiding beneath the surface, and it signals what may well be a seismic shift in the function of free-market economies. The connection is this: each one of these products carries something in addition to the basic goods, some value added component that makes them marketable in spite of a higher initial purchase price: they have an ethical content.
Ethical content is becoming a market commodity. It is being advertised and sold as an integrated corollary to consumer transactions, something extra that you can purchase along with your coffee, or jeans, or car. At the Starbucks online store, a pound of fair-trade coffee costs $11.49, while a pound of houseblend costs $9.99. What am I buying for my extra $1.50? It seems to me that I’m getting at least the appearance of a more ethical process, a transaction that favors local growers more than it favors distributors and consumers. I am buying an ethical commodity.
The existence of the ethical commodity can be seen in the reverse, as well. Companies like Walmart are perceived as having a negative ethical content in their products. In pursuit of the lowest possible source-to-shelf costs, their economic and environmental policies are perceived as being detrimental to both local and global communities. In this case, the difference between paying $18 for Harry Potter and the Half-Blood Prince (Book 6) at your local book seller and paying $15.69 at Walmart is a negative ethical commodity. You’ve saved two bucks by not purchasing a more ethical process along with your savory teen fiction.
The idea of commoditized value in a transaction beyond the consumable goods is nothing new. Think about the difference between a $25 pair of shoes from Payless and a $225 pair of shoes from Nordies. Of course there are some differences in materials and in manufacturing, but most of the difference in cost between those two shoes has to do with the name Cole Haan, or Steve Madden, or Kenneth Cole. You’re buying a fashion commodity along with the piece of stitched leather. The value of the fashion commodity is demonstrated by the fact that people will buy $225 shoes. Think too about the difference between buying a mini-van and buying an SUV. For most people, the mini-van is more practical, and more economical, both in initial price and in long term ownership costs. But when you drive a mini-van, nobody thinks you might be on your way up to Yosemite for some base-jumping off of Half Dome. There is a lifestyle image that is commoditized with the SUV that doesn’t exist in the mini-van. When my wife and I bought a stroller for my daughter Sophia, we purchased one that had a higher safety rating than similar models. In addition to the cost of materials and assembly, we purchased a perceived safety commodity.
The emergence of an ethical commodity is a significant shift in economics. It is a redemptive use of one of the most powerful social forces around; free-market capital. The establishment of ethical content as a valuable commodity means that, rather than market forces driving consumers toward the lowest price, consumers can make decisions about whether or not to purchase a better process with their goods. In a commodified economy, this means that there are people who will want to purchase ethical content, and there are also people who will want to be perceived as people who purchase ethical content. For both groups, market forces will propel them toward goods and services with recognized higher ethical content (ordering Striped Bass instead of Black Sea Bass). As a raging free-market fanboy, you can see how this would make me ecstatic. Anything that accomplishes beneficial results within the community without sacrificing consumer choices or economic incentive is a good thing, and a robust thing.
I do, of course, have some concerns. First, I’m concerned that ethical content might be a fad. Introducing elevated market prices for fair-trade coffee growers in South America might be a good thing, but it can turn into a disastrous thing if those markets collapse when ethicism becomes unfashionable again. The farmer who made capital investments in equipment and stock on the basis of those inflated prices will be hardest hit when he can no longer sell his goods at $1.25 / lb. The same is true for the New England fisherman who invests in equipment to switch over to line-caught seafood, on the assumption that investing in a more ethical process will enable him to recoup that investment by marketing to ethical consumers. When those consumers are no longer willing to pay an extra $2 for his more ethical process, he is stuck bearing the costs of the market’s fadishness.
I’m also worried about the social perceptions that will trickle down to the poorest consumers. There are millions of people in this county for whom there is no real option; they can’t afford the two dollar difference between the cheapest item and the item with higher ethical content. American Apparel is not an option for them, the Walmart t-shirt is. In our striving for a more socially and environmentally aware marketplace, we need to make sure that we don’t denigrate those who can’t afford the commodity of ethical content.
We also need more accountability from independent organizations. As ethical commodity becomes a viable marketing tool, there will be companies that want the shine without the spit. There will be companies that appropriate the language and appearance of ethical content without the supporting processes. The Fairtrade Foundation and the Seafood Watch list are both examples of independent organizations with transparent goals and standards. We need similar organizations for apparel, sustainable farming, retail, and every other facet of this robust economic milieu. Consumers who are choosing to purchase ethical content with their goods need to do so in an informed way, and these sorts of accountability structures help ensure that.
So here we are. It has never been easier to make ethical choices as a consumer, and to do so within a coherent market structure that preserves consumer choice and economic incentive. I’m a fan.