Market activism can influence big companies. This professor says it isn't always moral

A few weeks back, one of the organizers of the Tesla Takedown protests joined The Show discussed to discuss gatherings at Tesla facilities around the Valley. People opposed to Elon Musk’s work with the Department of Government Efficiency were, in the words of our guest, trying to raise awareness about what they viewed as Musk’s unconstitutional acts with the explicit goal of damaging Tesla’s stock price.

Musk’s ownership stake in Tesla is the source of a tremendous amount of his massive wealth, and the theory was that by lowering Tesla’s stock price, the protests might compel him to step back from his political activities. Whatever you think of Musk and his work with DOGE, when Tesla announced its first quarter numbers back in April, shares were down 41%.

Going back a few years, you might also recall when Bud Lite ran an ad campaign with a trans actress named Dylan Mulvaney. In response, conservatives began boycotting Bud Lite, resulting in a 20% drop in Anheuser-Busch’s stock price.

You could argue that both of these protests were effective. But were they moral?

That’s the question Saura Masconale, a professor in University of Arizona’s Department of Political Economy and Moral Science, wants to answer.

Both of the incidents just mentioned would fall into what Masconale calls “market activism” — people using their wallets to express their political beliefs. As Masconale told The Show, she thinks the balance between free market and free society is something we need to think carefully about.

Full conversation

SAURA MASCONALE: I think we live in a market democracy. And by that I mean that modern democracies, at least in the Western world, are committed to both markets and democratic institutions. But with market activism, there is the risk that the market sphere may invade the political sphere. You might remember, there was the North Carolina bathroom law.

SAM DINGMAN: Yes. This was a 2016 bill in North Carolina that banned municipalities from passing ordinances that protect LGBTQ+ people from workplace discrimination. And within that law was a requirement that schools and government offices restrict bathrooms to the gender a person is born with.

MASCONALE: Yes. And something like 200 corporations threatened to boycott their business with the state.

DINGMAN: Do you view the behavior of the corporations in that situation shown as moral?

MASCONALE: We first have to ask why we are committed to markets, right? What is the moral justification for our commitment to markets? I think one of the most important justifications for the commitment of our society to markets is that they are supposed to make the pie bigger for all of us. That assumption, if you want, is based on a very idealized view of markets.

Rather than acting competitively, which is the necessary assumption for the efficiency promise, they can act to engage in what I call an unjust taking.

So now, to go back to your question about the boycott by corporations, I don’t think that was morally permissible because they were outside this theoretical framework. It’s not something that corporations can use to try to interfere with democratically adjudicated outcomes, because whether we like those outcomes or not, if they were democratic and just adjudicated, we should accept them. And if we don’t like them, try to change them democratically.

DINGMAN: I see, so let me see if I’m clocking this correctly. And thank you for that explanation. Continuing to use this North Carolina situation as an example. In that case, state actors at the local level democratically put in place this bathroom law. It caused a lot of national controversy, which then prompted national corporations who may have been doing business in North Carolina but weren’t necessarily based there to use their market power to change the democratically enacted laws of the state.

MASCONALE: Correct.

DINGMAN: I see.

MASCONALE: And interestingly enough, one of the theories of markets, the main theories … markets are good because they make the pie bigger for all of us. But at the time of Voltaire or the Scottish Enlightenment and Montesquieu, there was this doux commerce theory of markets. Markets were thought as a place where we could put our passions away so that we could, like, make good deals.

And now the passions are back into the market, I think the risk is the polarization of the markets that then can trigger an even bigger, like a spiral of polarization in our everyday lives.

DINGMAN: That’s very interesting. So if I’m hearing you right, what’s happened is that there used to be, it sounds like an agreed upon membrane between political life and economic life. And now that membrane has really eroded, and in particular in recent years.

MASCONALE: Yes. And that is the big issue going on. And I don’t think there is an easy fix. I don’t think we will go back to a model, if you want, of market neutrality. And so, we have to redefine probably what that membrane means.

DINGMAN: Yeah. So if, if you were to offer a definition — I don’t want to put you too much on the spot here and ask you to solve what it sounds like for you, it’s a very significant problem. But what would be a proper expression of that membrane?

MASCONALE: So I think, you know, the analogy that I use is with self-defense. Our commitment to markets is not independent, I believe, from government interventions designed to redress market failures. So government intervention against monopoly, government intervention against the excessive concentration of power. When that is lacking, we are in a situation similar to when the state fails to protect our physical well-being when there is an attacker.

So when the behavior of firms constitute what I call an unjust taking — so firms exploit individuals without compensating them. For example, firms can exploit some monopoly power to pay local workers less than the fair market price. I think in that case, it is morally permissible to use our wallet to defend ourselves.

Now, like with self-defense, our ability to inflict a defensive harm, so to use market activism in this case against unjust firms is not unconstrained. Some requirements need to be satisfied. So a firm must be liable, of course, what they call market defense also needs to be necessary.

There are no alternatives, right? The government is failing to intervene, and so market defense is a necessary alternative. But then also needs to be proportional. So the defensive harm cannot be excessive.

DINGMAN: So if I’m hearing you right, what you would like to see is, generally speaking, a world where the market yields to what seems to be the political will of the people, rather than people with excessive influence on the market applying pressure to the market in an attempt to shape the political will of the people.

MASCONALE: Yes. I think markets are a great thing under certain assumptions, and when those assumptions are missing, then we enter into a quite dangerous territory. Because the ultimate risk here is what is referred to as market vigilantism. So you have a few people who can make decisions for all of us just because, if you want, they have more money.

DINGMAN: Well, Saura Masconale is an assistant professor at the University of Arizona in the Department of Political Economy and Moral Science and the author of the paper, “The Morality of Market Activism.” Professor Masconale, thank you for this fascinating conversation.

MASCONALE: Thank you, Sam, for having me on The Show. It was a great pleasure.