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Oppressive Regimes and their Allies

Ethical Consumer was founded in the days of South African apartheid when the boycott of South African goods was in full swing.

Ever since we have marked companies down for operating in countries that we view as governed by oppressive regimes, on the basis that it gives the regime funds and legitimacy.

We have just updated the list of oppressive regimes and the methodology used to create it. Companies receive a rating in the Human Rights column on the score tables if they have operations in two or more countries on the list below.

For example, in our ethical shopping guide to Batteries, Berkshire Hathaway (Duracell brand) loses a whole mark for having operations in seven of these countries.

The rationale behind this is straightforward: companies benefit from the very conditions which contribute to oppression, such as harsh labour conditions, lax environmental regulations and an economic environment conducive to corruption and tax avoidance.

Furthermore, trading with a regime helps to make it financially viable.  Oppressive regimes are supported by a series of economic ties without which they would not survive.  Foreign investment is a crucial element of this.

The countries on our updated oppressive regimes list:

  • Bangladesh
  • Burundi
  • Cambodia
  • Central African Republic
  • China
  • Eritrea
  • Ethiopia
  • Egypt
  • Iran
  • Iraq
  • Israel
  • Libya
  • Mexico
  • Myanmar
  • Nigeria
  • North Korea
  • Pakistan
  • Phillipines
  • Russia
  • Saudi Arabia
  • Somalia
  • Sudan
  • Turkey

Indexes and indicators used

Rating countries is obviously going to be politically fraught, and it’s impossible to avoid political bias altogether. Many “human rights” indexes aren’t subtle about it – the Freedom of the World index, for example, produced by the US think tank Freedom House, asks the question below as one of many that determine the level of “freedom” in a country: “does the government exert tight control over the economy, including through state ownership and the setting of prices and production quotas?”

To them the democratically controlled NHS and set prescription prices indicate a tendency towards an oppressive regime.

You, like us, may disagree with this analysis.

We were therefore careful to examine the methodology of each indicator we used, and to avoid any that included things like this. Those that we used are shown in the accordion below.

This is an academic index which analyses words used in Amnesty International, US State department and Human Rights Watch reports (like “occasional” or “frequently”) in order to give an overall score on levels of stateperpetrated violence within each country’s borders, such as torture and extra-judicial killings.

This is produced by Reporters without Borders. It is based on a mixture of numbers of journalists imprisoned and killed, and journalists’ responses to a questionnaire, which contains questions like “In your country, how easy is it for authorities to force the firing of a public radio or TV journalist?”

This is published by the Australian Minderoo Foundation, and estimates the prevalence of forced labour in a country based on questionnaires and on-the-ground research.

The ITUC rating is based on its own analysis, using facts like whether workers are allowed to join trade unions and whether strikes have been repressed. The ICTUR is based on figures for numbers of trade unionists arrested and killed, and whether the country has ratified ILO conventions on trade union rights. We had to use both indexes because neither covers all countries. They were combined into one score.

This is an academic index which takes hard indicators for health, education, housing, food & decent work (e.g. infant mortality numbers), and uses a statistical analysis to adjust them for GDP in order to show how efficiently each country is translating wealth into meaningful social welfare.

This currently just covers Israel, although it previously covered South Africa. It is included because there is a much stronger reason to boycott a country when it is part of an organised campaign with explicit, public goals, requested by the local population.

As the Political Terror Scale is the most comprehensive human rights score, it was weighted more heavily, and was scored out of eight. Each other indicator was scored out of two, although the trade union rights indicator and SERF index scored negatively (see ‘Weighing the risks’, left).

The political arguments about investment and poverty reduction

Ethical decisions about investment inevitably involve weighing up risks – it is not clear whether a company exiting a country with a repressive government is always going to make things better and not worse.

Neoliberals idolise foreign investment across the board, claim that it tackles poverty, and demand that countries grovel at the feet of multinational companies to attract it.

Critics, however, point out that this can be like selling your hair to buy a comb – the things that countries do to attract investment can make it impossible to get the promised benefit. One academic paper put it like this:

“The empirical evidence available provides mixed results and suggests that spillovers [benefits like poverty reduction] do not come automatically or ‘for free’, but instead suggest that what is needed is active government intervention to ‘capture’ the benefits”.

Others – for example Cambridge economist Ha Joon Chang, go further and argue that foreign companies can actually be economically harmful, particularly in the case of the poorest, weakest countries, which can easily be bullied by big corporations. One notorious example of such bullying is Shell’s infamous actions in Nigeria.

On the other hand, there is a huge literature on the effects of country-level economic sanctions, with most agreeing that they generally do harm vulnerable people. The sanctions on Iran, for example, have been found to have particularly harmed the poor, affecting their ability to access nutritious food and healthcare. But again, it depends on the type of sanctions applied.

And the shocking claim that is probably the most famous – that pre-war Iraqi sanctions caused half a million child deaths – turns out to have been false. More recent research has unanimously found that "there was no major rise in child mortality in Iraq after 1990 and during the period of the sanctions".

Weighing the risks

It seems that the overall answer to whether foreign investment is likely to harm or help may be – it depends.

There may be some truth to the (left wing) economist Joan Robinson’s claim that “the only thing worse than being exploited by global capital is not being exploited by global capital”. But only in the right circumstances.

As a result, we used the following method to try to weigh up the risks:

l If the country’s per capita GPD (adjusted for different price levels in different countries) is over the global average ($17,300), we used only the Political Terror Scale, Press Freedom Index and Modern Slavery Index to determine whether a country went on the list.

l If the country’s per capita GDP was under the global average, we used the SERF score and the Trade Union Rights score to give them an additional adjusted score, and then used both scores to decide if they went on the list.

This means that if a poorer country has a good record on translating money into social goods, and good trade union rights, they are less likely to go on the list.

The thinking was that that makes it more likely that operating in the country will do some good.

Exempting countries in a state of humanitarian crisis

We also decided to exempt any country listed by the ACAPS (an independent Norwegian analyst research centre) as being in a state of severe humanitarian crisis. This is currently Afghanistan, Democratic Republic of Congo (DRC), South Sudan, Syria and Yemen.

This was done for reasons of caution – because of the seriousness of the situation, we felt that we shouldn’t issue blanket pronouncements telling companies to get out.

We do something similar on conflict minerals. We ask companies not to simply leave the DRC, but to commit to stay and to work to ensure that their minerals are not funding conflict. This is partly in response to pleas from the DRC, where workers depend on mining for income.

There is some empirical evidence that more foreign investment tends to be associated with less war, and that war, on average, tends to lead to a reduction in investment, as companies don’t want to deal with the risks of operating in a war zone. But again, it all depends on the details. Violence can lead to increased investment if the violence is to the benefit of the corporations, as happened in Colombia.

Changes to the list

Many of the countries on the list have not changed. However, some countries have been removed – for example India and Vietnam did not make the list this time, although since our methodology has changed, that may not reflect a change in the underlying reality.

There are also some notable additions – Mexico is one. This is greatly due to the Mexican drug war, estimated to have claimed more than 100,000 lives to date, which – astonishingly – puts it amongst the most bloody conflicts currently going on in the world.

Egypt is another, as the human rights situation has collapsed there since the briefly hopeful ‘Arab Spring’ uprising at the start of the decade.

While there are no clear answers in this area, we hope that our new list goes some way towards balancing the risk of aiding an unpleasant regime and harming the people who live under it.