The economics of boycotts- Nov 23,2023

The recent campaign to boycott the products of companies that are believed to support Israel has not been without controversy. While some view the boycott as a patriotic act and duty, others see the boycott as harmful to the local producers, traders, and the domestic supply chain. Consequently, in light of the Israeli attack on Gaza, marked by a vicious disregard for the lives of vulnerable civilians, especially women and children, and considering the economic repercussions of the boycott on Jordan, it is imperative to delve into this complex issue.

What is a boycott?

According to the Cambridge Dictionary, the act of boycotting is defined as "refusing to buy a product or take part in an activity as a way of expressing strong disapproval." Boycotts have been employed since the end of the 19th century to protest practices deemed unfair. The term "boycott" originates from the name of an English land agent, Charles Cunningham Boycott, who substantially increased rent for his tenants in Ireland, leading to mass evictions.

In response, the community united, refusing to pay or collaborate with him, ultimately compelling his departure. Since then, boycotts have proven to be an effective, nonviolent tool for raising awareness of issues and have often resulted in positive changes.

Examples of boycotts

The effectiveness of a boycott depends on the level of public support it receives, the size of the target companies, the duration of the boycott, and the clarity of the boycott’s message.

Some examples of successful boycotts include: Mahatma Gandhi boycotting foreign-made goods, particularly British goods, encouraging the use of Indian-made products to demonstrate widespread national support for independence. In 1955, Martin Luther King Jr. and the Montgomery Improvement Association organized the Montgomery Bus Boycott, catapulting civil rights into the national spotlight and leading to the outlawing of segregation on public buses. In the early 1980s, the United States and other countries refused to engage in business or travel to South Africa, contributing to the end of the apartheid system there.

Recently, boycotts of products from companies that support Israel have spread throughout the Arab world. Even in countries like Bahrain, where the leadership has made statements and overtures that were not viewed as popular, the Bahraini Society Against Normalization with the Zionist Enemy organized a sit-in in the capital on November 17. The purpose was to express support for the Palestinian people and demand the cancellation of normalization agreements between Bahrain and the occupying entity.

The boycott in Jordan

Motivated by the criminal onslaught on civilians in Gaza and the rest of Palestine, the boycott in Jordan began after October 7, 2023. It quickly gained ground, supported by the "Boycott, Divestment, and Sanctions (BDS)" movement, which is well-established in Jordan and many parts of the world. Companies that appeared to support Israel through in-kind and financial gifts have provoked the partisan sensitivities of Jordanian citizens and the Arab world.

Consequently, the boycott resulted in the closure of several outlets as sales dropped, damaging the reputations of the target companies and their outlets, and leading to employee layoffs. Moreover, the impact on the parent companies has been felt, with a likely drop in earnings per share and a corresponding decrease in stock prices. The economic war waged by Jordanians and others worldwide is showing signs of effectiveness, especially if it continues for an extended period.

However, at home in Jordan—a country facing low economic growth, a double-digit unemployment rate, rising poverty rates, a fiscally inflexible budget, and growing public debt—the economic question arises quickly. According to some, the boycott may worsen the current economic malaise. Moreover, those against the boycott claim that a country like Jordan, which has, rightly or wrongly, based its modernization vision on the growth of the private sector and foreign direct investment, would likely suffer from a derailment in its implementation plans. This uncertainty could hamper both domestic and foreign investment, affecting the targeted levels of economic activity.

However, it is important to be mindful that typically, when a group is affected by an economic policy or condition, its members attempt to convince the public and the legislature that their interests align with those of the whole country. Meanwhile, they may overlook the circularity of the economy, where the economic losses of some provide opportunities and gains for others—a concept well explained in the Creative Destruction principle of Joseph Schumpeter. Imported food products can be easily replaced by domestic ones, helping grow local new and nascent businesses, provided there is a proper business environment. This also reduces the trade balance deficit and pressure on the Jordanian Dinar.

History shows that sanctions imposed on countries led to import substitution, triggering rapid industrialization. When Holland placed Britain under siege, the latter emerged within a few years as an industrial power. Similarly, when the UK did the same to the US, the US emerged as a superpower. Among Jordan’s surrounding countries, those that faced economic sanctions became more industrialized and self-reliant. Such examples are manifestations of the Arabic saying, “Necessity is the Mother of Invention.” Jordan should not be the exception. Therefore, even though there may be short-term losses and adjustment costs for buyers and sellers, the long-term impact may well compensate the economy and strengthen it.

Moreover, in an economic war, like in regular wars, there is a cost. Bearing such a cost is an accepted principle, as long as it supports the national aspirations of the country and causes harm to the enemy.

 Therefore, in loyalty and deference to our brothers and sisters and their children in Gaza, Jordanians should continue the boycott and demonstrate their proud and patriotic mettle by taking the boycott into the long run. From an economic perspective, we must view it as some of the cost of war, and a set of opportunities to grow local industry and products.

Published in Jordan News:

https://www.jordannews.jo/Section-36/Opinion/The-economics-of-boycotts-32530