Consumer Power – Post Covid-19
Now that we are beginning to look at easing the lock-down, reignite the economy and re-open the schools, it hopefully won’t be too long before we can see the back of the coronavirus pandemic and get back to life before Covid-19.
I suspect too, we will have a long period of reflection on how we reacted, enquiries and analysis of what we got right and wrong. All with a view to being in a better, more informed, position to address any future pandemics.
There has been much talk about the involvement and behaviour of China and how the world should react. China is almost unique in the world. On the one hand, it’s a communist regime with scant regard for human rights and open democracy. It has a large percentage of its population living in poverty and often rides roughshod over its neighbours. On the other hand, it’s the world’s second largest economy and predicted to become the largest within a decade. It’s China’s economic and military might that makes it very hard for the international community to address any issues it may have with it. While it is relatively easy for the United Nations (UN) to instigate the likes of trade embargoes to put pressure on countries such as North Korea, Iran or Zimbabwe, such options are not really feasible against China. Given China has a permanent seat on the UN Security Council, nuclear weapons and the world’s third largest military, the idea of armed intervention is highly unlikely.
Nevertheless, there is much international discontent, particularly in the West, over China’s seemingly clandestine handing of the coronavirus and how it appears to have taken advantage of the economic collapse in the wake the Covid-19 pandemic. Then we have news that the Chinese government has just implemented a sweeping new security law on Hong Kong that many are concerned could threaten the specific freedoms afforded to the people of Hong Kong that were part of the deal struck when Hong Kong was handed back to China from British control in 1997.
Not surprisingly, President Trump has been typically outspoken of his anger and displeasure over China and quick to threaten all sorts of economic retaliation. While our own leaders and those in Europe and Australia may not follow Trump’s public rhetoric, they probably share his displeasure and desire to act.
However, the reality is there is actually very little national governments or even the UN can realistically do. Yes, the UK Government could cancel the 5G contract with Huawei as part of a public show of international brinkmanship. It may score a few political points but it’s hardly going to have President Xi Jinping quaking in his boots because, as mentioned earlier, China is simply too big an economic powerhouse to be intimidated that way. Let’s not forget either, China currently manufactures much of the essential goods and components we rely on, so we are just as likely to suffer, if not more so, any trade war. Particularly in the short term. The pandemic lock down illustrated just how reliant we are on China.
There is perhaps one weapon, in the economic arsenal, that could well tame the Eastern Tiger and that is the end-user consumer. In a global capitalist economy, it is the consumer that ultimately holds the economic power. The commercial ‘ace up the sleeve’ if you like.
If consumers choose to abstain or boycott particular products or suppliers in protest, then ultimately it can force change. One of the best examples of this was when sportswear brand Nike faced a consumer boycott over child labour practices in the 1990’s. The consumer boycott of Nike led to the company’s global earnings dropping by 69% and a lasting damage to the brand. Consumers wanted greater social responsibility from the company. Nike were ultimately forced to respond to the consumer outrage and became committed to sustainability and made tackling things like childhood obesity part of its global corporate social responsibility.
China is a much bigger, more diverse and harder target that the likes of Nike to use consumer power against. However, there is a relatively easy thing the government could introduce to help; that is extended use of product labelling to inform and enhance consumer choices.
For example, we are all used to detailed labelling on food items to inform and help pick which products to buy based on a variety of personal choices. Things like ingredients for those with allergies; fat, sugar and calorie content for the health conscious; fare trade and free range for the ethically minded.
Products wholly made in China packaged and imported are easy to identify by the ‘made in china’ label. However there are many more products that are assembled and packaged in different countries, but the majority of the components are sourced from China. This is harder to identify, but the introduction of a Local Economic Factor (LM3) label can let consumers gauge the economic impact of their spending choices. The higher the number the greater the impact upon local economies the purchase achieves. Labelling could also be extended to include other things such as environmental ratings and a grading on employee working conditions.
However, just like free range eggs are more expensive than those from battery hens, goods with a high ethical and economic grading will cost more than those with a lower one.
Consumers are free to choose, but in the end you get what you pay for.
This column was first published in the Newcastle Journal on 4th June 2020