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Greg Jones

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Does self-regulation work?

Does self-regulation actually work? Is it effective in modifying behavior in the long term? Or does there always have to be a financial incentive, or threat of sanctions to ensure a group of people comply to any standards. Is it human nature to require an incentive , to feel they have gained a profit or avoided sanctions, or can society rely on public's concern for the greater good. Can society and capitalist business organizations behave in an institutionally altruistic way, without threat of sanctions or finical incentive, in regards to the idea that they can self-regulate their own behavior and business practices long term.

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  • Dec 3 2013: I used to think yes, now I say no. The problem with self-regulation is that ultimately it depends on the market, and requires a majority of the market to be socially conscious, and aware.

    Fairtrade is a good example - it has devised a set of standards around ethical practices by producers, fair wages to workers and a fair price for output. These standards are not very onerous, and indeed some argue that they do not go far enough. Non-fairtrade coffee beans sold in poorer regions of the world are sometimes produced in very tough conditions and are sold to corporations at a very low price.
    Now, if self-regulation worked, Fairtrade would inevitably become a universal minimum standard for the coffee industry - people would flock to fairtrade coffee, causing sales of non-fairtrade coffee products to plummet, forcing those vendors to either switch to fairtrade or downsize and eventually close.
    This hasn't happened for a number of reasons - awareness, apathy and especially price. Because social responsibility & moral obligation are neither universal nor absolute values, SR is just one factor to be considered, often subordinately to price. The market demands low prices first, frills second.

    Thus legal regulation is needed because market regulation does not work. In a free market, where 99% of businesses adhere to a fantastic non-obligatory standard, it only requires 1 to ignore that standard, undercut the prices of the rest, and gain quick and vast market share from the poor, the cheap, and the indifferent.

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