Keeping foreign influence in context

Posted: June 13, 2012 in Consumer campaigns, Economic Development, Indonesia
Tags: , ,
English: Palm oil from Ghana with its natural ...

English: Palm oil from Ghana with its natural dark color visible, 2 litres Español: Aceite de palma de Ghana con su color oscuro natural, 2 litros (Photo credit: Wikipedia)

Ethical consumption is not going to solve the world’s problems, and here’s why.

To Western eyes, we only know the goods that are ‘Made in China’ that make it to our shores, so we can be tempted to think that they are representative of the country’s entire production, which would be wrong.

I’ll use Indonesia’s stats as an example.

Indonesia’s formal economy produces about $1 trillion of goods and services each year. The informal economy, which is not reported and not measured, is much larger than the formal economy. So many Indonesians working in small workshops, driving rickshaws, and so on are paid in cash and do not pay taxes.

Even within that smaller area which is the formal economy, only 15% (or 1 in 7 workers) are making goods for export, much of it raw materials such as palm oil and copper. So these companies that form part of the supply chain connected to Western consumers but are largely locally-based businesses, not employees of multinationals. Incoming foreign investment – where the operations are substantially controlled by overseas interests – represent about 5% of the economy, so it is generating perhaps 7-10% of economic activity or about 1 in 15 formally-employed workers.

Do-gooders have to remember their limitations. Even if every Western company invested in Indonesia magically stuck to all the core ILO standards overnight (ha!) it would hardly put a dent in solving the issues of Indonesia’s workers.

Besides, there is something slightly offensive in the notion that Westerners need to come in and fix things. Indonesians (and Indians, Cambodians, etc) understand their country’s challenges better than we do.

Having said all that, I’m not denying it has its place. I do think something is wrong with the world if consumers don’t care whether the person who made their household products was paid fairly, had reasonable hours and a safe workplace, regardless of where in the world they are located. I’m just saying we ought to think of ethical consumption more in this transactional manner only and not as a magic wand.

Read on:

  1. Update: I came across the exact figures for Vietnam. There are 3 million employees of FDI enterprises out of a national workforce of 48 million (6.25%) which is pretty close to my estimate of 1 in 15 formally-employed workers.

  2. […] in this post it finally sank in that Indonesia’s primary market is its own domestic one so, even if […]

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