His dilemma illustrates why ethical capitalism rarely comes with easy answers or universal values. That’s why the shareholder model, in which companies are singularly focused on profits, has its merits and lately seems underrated. It’s impossible to please every politically engaged employee plus the community and shareholders without engaging in some level of hypocrisy or arbitrary decision making. Often it amounts to corporations engaging in economic diplomacy in response to social activism. That not only leads to less stable alliances abroad, but also greater business risk. It’s nearly impossible to anticipate which causes will gain attention at which point in time.
The U.S. has a long history of sanctions and embargos on certain countries. But individual companies pulling out on their own volition is new and different. The sanctions the government put on Russia were based on a larger geopolitical strategy by a government that’s ultimately accountable to all voters, not just the noisiest activists.
The Coke pullout heralds a big change in the post-World War II era assumption that more trade is always a net good that will enrich the world and bring more peace, prosperity and shared experiences. On balance, it was an approach that worked; the postwar era was mostly peaceful and did raise global living standards. But we’ve left behind the “Buy the world a Coke” days, and instead we demand that our companies punish citizens of countries whose governments do things we disapprove of. It’s not clear the new world order will deliver better results.
Allison Schrager is a Bloomberg Opinion columnist. She is a senior fellow at the Manhattan Institute and author of An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk.