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MEBP Lecture 7 on Private Politics
Lecture notes of lecture 7 of Managerial economics, business and politics
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Seminar 7 – Private PoliticsPart I – Private Politics
Previous seminars focused on public politics, which is about the competition among interests
in the arenas of government institutions.
This seminar deals with private politics which focuses on changing the behaviour of private
economic agents. Not through government action but through social pressure and the threat of
harm to the business. The media plays an important role in private politics.
E.g. Obesity is a nonmarket issue of McDonalds. Activists can either go through public policy
and try to make legislation or can use private politics and directly target the company.
Private politics
= application of social pressure to firms.
Private politics is frequently used by NGOs and other social activists because they think it
is more effective to target economic agents directly than going through government.
The participants in private politics are viewed as strategic, in the same sense as that a firm
looks which actors are pivotal in public politics.
The evolution of private politics Private politics has evolved in four stages:
1. In 1970s, social activists used to focus exclusively on governments.
a. They were an important force in the wave of social regulation enacted during the
1970s.
b. But change is slow, and you need access to government, this access is limited, and
governments can be counter-lobbied by firms.
2. By the 1990s, activist groups were targeting firms directly rather than through
government.
a. The challenges here are that some firms are too costly to target, and others didn’t
reply to the social pressure.
3. Activists started targeting the entire supply and distribution chain to disrupt the markets
in which firms operated.
4. In response to these threats from activists, firms started to self-regulate in order to lessen
social pressure and avoid targeting. In implementing their self-regulation, some firms
partnered with NGOs, shifting from confrontation to cooperation.
, a. Self-regulation is important because:
i. It provides an alternative, albeit imperfect, to government regulation.
ii. It provides an explanation for the widespread adoption of corporate social
responsibility by firms.
iii. It provides an explanation for the movement by many activists from
confrontation to cooperation: that is, working with firms to implement their
self-regulation.
Activists can engage in confrontational private politics or cooperative private politics:
Confrontational private politics
A frequent component of confrontational strategies is boycott. Nevertheless, the effect of
boycott on firms is not clear. The empirical evidence is inconclusive.
Confrontational campaigns focus typically on a social issue such as workers’ rights, animal
rights, rainforest conservation, the opening of superstores selling groceries, etc.
Confrontational campaigns
Case: Walmart:
What should Walmart do about the private politics campaign? Should it fight back,
bargain with the groups, or concede to their demands?
It is strange because:
o It offers low prices (which is very good for consumers),
o The company hired young, old and disabled workers,
o It is the second largest employer after the US federal government, and
o Wages were higher than other big mass retailers.
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