Do Political Boycotts Actually Hurt States' Economies?

by | April 25, 2016

By Nigel Duara

Bruce Springsteen canceled a concert in North Carolina, and Sharon Stone scrapped plans to film a movie in Mississippi.

They are among the celebrities and corporations that declared they will not do business in the two Southern states because they passed legislation that threatens gay rights (Mississippi) and transgender rights (North Carolina).

But the question remains: As a social corrective, does the cancellation of rock concerts and film projects really work?

The answer is ambiguous. Yes, boycotts work if the main point is delivering a message. No, boycotts don't work if the goal is inflicting economic damage, though some state industries are more vulnerable than others.

Boycotting a state to protest its stance on a social issue is not a new tactic. In the 1990s, boycotts were launched against Arizona for the lack of a state holiday honoring Martin Luther King Jr. and against Colorado after voters approved an initiative (later struck down) that would have allowed landlords and employers to exclude gays.

In the most prominent recent example until North Carolina and Mississippi, 12 conventions told Indiana that one reason they chose not to book in Indianapolis was the state's 2015 Religious Freedom Restoration Act, which permits businesses to refuse service to a person if such service violates their religious beliefs.

Indiana's tourism bureau pegged the cost of the canceled conventions at $60 million to the state, but it's unclear whether any of the conventions would have booked in Indianapolis anyway.

The Indiana case illustrates that, without knowing the reasons behind the spending decisions of hundreds or thousands of people, tabulating the effects of a boycott are difficult. But monetary effect is one thing. Reputation is another.

"Boycotts can help frame the image of an economy or a region," said Dennis Hoffman, professor of economics at the W.P. Carey School of Business at Arizona State University. "Image framing and [public relations] really does have an impact, but it's really hard to tease out what that impact is."

Arizona has been the subject of a long-standing boycott over its controversial 2010 immigration law, SB 1070, which requires members of law enforcement to determine an individual's immigration status during a stop. The law remains in effect and certain performers refuse to play concerts in Arizona.

The liberal polling firm the Center for American Progress wrote a 2010 report called "Stop the Conference" that said Arizona lost $45 million in convention business because of the boycott. But that figure presumes all lost business was a result of the boycott, an analysis which Hoffman says likely overestimates the impact of one factor while ignoring other possibilities -- some conferences may have found cheaper room rates, for instance.

In 2014, a religious freedom bill similar to Indiana's was vetoed by then-Gov. Jan Brewer after a week of protests from gay-rights advocates and objections from some business leaders.

Most of the scholarship on the economic effect of boycotts focuses on corporations, which have borne more of the brunt of such actions than states. According to research by Phillip Leslie and Larry Chavis at the Stanford Graduate School of Business, boycotts can register discontent and, when aimed at a particular industry, have a real impact.

When American consumers boycotted French wine in 2003 in response to French opposition to the Iraq War, French wine sales dropped by 26% at the peak of the boycott.

Some states are more vulnerable than others to the financial pressure applied by interest groups from outside of the state.

Georgia's burgeoning film industry, which the state says generated $6 billion last year, was imperiled by a threatened boycott of the state after its Legislature passed its own religious freedom bill last month. Many businesses in and outside of the entertainment industry threatened a boycott if the bill became law. Georgia Gov. Nathan Deal vetoed it on March 28.

Since North Carolina passed a law that requires a person to use the bathroom of the gender on their birth certificate, governors in New York, Connecticut, Vermont and Washington state have banned all nonessential travel to North Carolina. Eighty major corporations, including the Charlotte-headquartered Bank of America, wrote a letter expressing disappointment with the law.

Then the cancellations started.

On April 5, PayPal dropped plans to open an operations center in Charlotte that the company said would have employed 400 people. Deutsche Bank halted a plan to create 250 jobs at a North Carolina technology center. Ringo Starr joined Springsteen in canceling North Carolina shows.

Mississippi also has endured its share of cancellations since the state passed a bill that gives wide latitude to businesses to refuse to serve patrons on religious grounds, an issue that has been most visible in recent years when LGBT couples seek wedding services from companies that refuse to serve them.

In addition to Stone nixing a movie, Bryan Adams called off a concert in Biloxi, Miss.

Any boycott of a state is actually targeted, by nature, at its businesses, and some argue that hurts, rather than helps, a cause.

To boycott North Carolina after the passage of its law, historian Jim Downs argues in Salon, is to abandon the gay community when it needs support most.

"It is unclear if banning travel to North Carolina will have any real political impact," Downs writes, "but it is clear that the ban will only further isolate LGBT citizens in North Carolina from their allies."

In the spirit of supporting the gay community, singer Cyndi Lauper will hold a show as planned in North Carolina and direct proceeds to a North Carolina group working to repeal the law.

There's a secondary cost to the boycotts too. In the flailing of a hair-trigger social media apparatus that identifies, tramples and then burns in effigy the causes it finds unfavorable, the populations of whole states find themselves the subjects of public broadsides.

On Twitter, the insults continued apace on Friday, though Mississippi's bill was signed a week earlier.

"You know if we just let Mississippi do its own thing for a year or two, all those homophobes and racist bigots will [probably] kill each other off."

"Welp, #Mississippi is disgusting & people there ought to be ashamed."

"Dear Mississippi, you suck."

Mississippi's tourism board, Visit Mississippi, did not return calls seeking comment.

(c)2016 the Los Angeles Times