How not to fight modern-day slavery

That is the topic of my latest Bloomberg column, here is one excerpt:

The Slave-Free Business Certification Act of 2020, introduced last week by Republican Senator Josh Hawley of Missouri, sounds unobjectionable, maybe even worthy. As the U.S. engages in a worthwhile and necessary reassessment of the role of slavery in its history, the bill would force large companies to investigate and report on forced labor in their supply chains.

In fact, the net effect of the bill — contrary to its stated intent — might be to increase slavery worldwide.

As a general principle, companies should cut off commercial relations with any known sources of slavery. Yet this law calls for mandatory corporate investigation and auditing, backed by CEO certification and with significant penalties for non-compliance. The investigatory process is supposed to include interviews of both workers and management in the supply chain.

Such a get-tough approach has a superficial appeal. Yet placing an investigative burden on companies may not lead to better outcomes.

Consider the hypothetical case of a U.S. retailer buying a shipment of seafood routed through Vietnam. It fears that some of the seafood may have come from Thailand, where there are credible reports of (temporary) slavery in the supply chain. How does it find out if those reports are true? Asking its Vietnamese business partner, who may not even know the truth and might be reluctant to say if it did, is unlikely to resolve matters.

It is unlikely that businesses, even larger and profitable ones, will be in a position to hire teams of investigative journalists for their international inputs. Either

Keep reading this article on Marginal Revolution.

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