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The Free Market at Work

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Even with all the government licensing, regulation, and oversight that American businesses are burdened with, the United States still has a relatively free market compared with most other countries. This is especially true on the consumer side.

One of the great weapons that consumers have is the boycott. Let’s look at some high-profile boycotts and then see what it is that they have in common.

Back in 1997, an overwhelming majority of delegates to the Southern Baptist Convention’s annual meeting voted to boycott the Walt Disney Company and its subsidiaries (which include ABC and ESPN) for Disney’s “anti-Christian and anti-family direction.” Many Southern Baptists object to Disney’s policy of offering health benefits to same-sex partners of employees, “Gay Days” at theme parks, and the release by Disney and its subsidiaries of controversial books and movies. The vote was not binding on individual churches or members of the Southern Baptist Convention, the nation’s largest Protestant denomination. The boycott was rescinded in 2005 after the Southern Baptist convention announced that it had “rightly and appropriately” challenged Disney and “communicated effectively our displeasure.” However, the Southern Baptist Convention said it would continue to “monitor the products and policies” at Disney.

In 2012, Ron Johnson, the new CEO at retailer JC Penny, which, with more than a thousand department stores, operates in every state but Hawaii, directed the company to begin a new pricing approach. Store coupons, big sales, and huge mark-downs were eliminated and the policy of “everyday low prices” was instituted. But in April of 2013, Johnson was fired by JC Penny after only 17 months with the company. The new pricing strategy turned out to be a huge mistake, and resulted in a string of disappointing sales and earnings reports. No organized boycott was necessary because customers of JC Penny simply boycotted the policy change with their wallets. Although the traditional pricing approach was reinstated, the company is still struggling.

Also in 2012, the fast-food chain Chick-fil-A was subject to a boycott after it was revealed that the company’s charitable endeavor, the WinShape Foundation, had donated millions of dollars to political organizations that defended traditional marriage and opposed same-sex marriage. Public statements opposing same-sex marriage by president and COO Dan Cathy didn’t help the situation. LGBT activists called for a boycott of Chick-fil-A. Some city mayors expressed their desire to prevent the company from opening any restaurants in their cities. There were attempts by students at several colleges and universities to ban or remove Chick-fil-A restaurants from campuses. The boycott was embarrassingly ineffective. Chick-fil-A appreciation days were even held at some restaurants. In the end, the company released a statement stating, “Going forward, our intent is to leave the policy debate over same-sex marriage to the government and political arena.”

And now, beginning just last month, Target, the nation’s second-largest discount retailer (behind Walmart), which operates about 1,800 stores throughout the United States, is being boycotted for its new restroom policy. According to a company statement headlined “Continuing to Stand for Inclusivity,”

We believe that everyone — every team member, every guest, and every community — deserves to be protected from discrimination, and treated equally. Consistent with this belief, Target supports the federal Equality Act, which provides protections to LGBT individuals, and opposes action that enables discrimination.

In our stores, we demonstrate our commitment to an inclusive experience in many ways. Most relevant for the conversations currently underway, we welcome transgender team members and guests to use the restroom or fitting room facility that corresponds with their gender identity.

More than one million people have signed a petition promising to boycott Target. The true number of American consumers boycotting Target is certainly much larger since many people will just simply stop shopping there without formally signing a petition. It is not surprising, then, that the company’s stock price has plummeted.

What do the official and unofficial boycotts of Disney, JC Penny, Chick-fil-A, and Target over the issues of health benefits, product pricing, same-sex marriage, and restroom use have in common?

They are all examples of the free market at work.

When an individual consumer (or group of consumers) determines that some decision a company makes to institute a new policy, change a policy, raise a price, or promote some cause is not, for whatever reason, a good decision, he (or they) must weigh the pros and cons of engaging in commerce with said company and then ultimately decide whether to continue patronizing the company or to boycott it. Neither decision — that of the company or that of the individual — should concern the government in any way.

There are potentially thousands of decisions, large and small, that businesses — from large corporations on down to small family-owned business — make every day that don’t make national news. Consumer reactions to all of those decisions — whether positive or negative — are likewise examples of the free market at work.

There is, however, something peculiar about Americans and boycotts. What is strange about boycotts is that most of the same people who support the right of an individual, a group, or a class to boycott a company or place of business oppose the right of companies and businesses to boycott serving or doing business with certain individuals, groups, or classes. The fact that there is no right to live where you choose, be employed at a particular job, or obtain service from a place of business does not seem to have entered their minds.

Nevertheless, it’s not just the actions of consumers that show the free market at work. Stockholders are concerned about company decisions that might positively or negatively affect profits and stock prices. Advertising agencies are concerned about good company decisions that might lead to increased ad placement and bad decisions that might cause a reduction in the necessity for their services. Manufacturers and vendors are concerned about company decisions that might increase or decrease their business with a particular company. Competitors are concerned about good company decisions that might take market share from them and bad decisions that might increase their market share. Employees are concerned about company decisions that they may have to help implement or will lead them to consider finding another job. And, of course, all parties are also concerned about positive and negative consumer reactions to changes in company policies.

The reactions of stockholders, advertising agencies, manufacturers and vendors, competitors, and employees to the decisions of their own or other companies are more examples of the free market at work.

The bottom line is simply this: the market is self-regulating. Americans don’t need government to regulate businesses, impose industry standards, push Affirmative Action policies, decree minimum or maximum prices, require licensing for certain occupations, establish anti-discrimination laws, mandate that companies provide certain benefits, or oversee the market.

The free market works, and the freer the market the better it works.

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