More Fairtrade

This ASI report does seem to have made some waves. Janet Daley:

But even more serious, the Fairtrade operation helps to keep poor countries and undeveloped economies exactly that – poor and undeveloped.

By sustaining agricultural activity that would not otherwise be sustainable in the global marketplace, it keeps backward populations from developing other forms of modern economic activity that might help them climb out of their backwardness. In order to permit wealthy people to indulge in a bit of sentimental largesse, it effectively preserves an anachronism that locks some of the poorest people in the world in backwaters of primitive economic existence.

What developing countries need is to develop, not to have their present conditions of life and work preserved like a museum exhibit. And the greatest aid to real development – and the proven route out of mass poverty – is through free trade, not Fairtrade.

9 thoughts on “More Fairtrade”

  1. While accepting the main point that poor countries need to raise productivity an agriculture and (in most cases) reduce employment in agriculture (hence to the extent fair trade retards structural change, it’s ‘bad’), I think there’s more to it than this. Some of the fair trade schemes I have read about took workers who were earning a shitty wage and gave them a better wage, plus mandated that the employer made investments in education, sanitation etc. all of which has externalities (well, a demand multiplier in local economy plus long term education externalities). That’s a ‘good thing’ that’s happening with fair trade, that wasn’t with free trade yet is (often/sometimes?) absent from your account of it.

    You can argue that those workers should have moved out of the wine making business (for example) but into what? In many developing countries reallocating labour into more productive sectors is not easy/possible. If fair trade can deliver a sustained increase in price for certain producers doing certain things to qualify, is it so bad that workers stay in those better-paying sectors (would the local economy really be better of in the absence of fair trade and some labour re-allocation)?

    The key question, that I have not seen addressed and would be grateful for an answer from fair-traders, is how the fair trade rules deal with productivity enhancing investment that result in disemployment. It talks about fair trade enabling investment (they say it fosters ‘sustainability’) – and that’s great because poor country agriculture certainly needs to raise capital intensity – but how will they treat fair trade producers who make workers redundant? Because that contradicts their ‘help the worker’ ethos, despite it being needed to raise poor countries out of poverty.

  2. In order to permit wealthy people to indulge in a bit of sentimental largesse, it effectively preserves an anachronism that locks some of the poorest people in the world in backwaters of primitive economic existence.

    /sigh/

    One of the biggest ways in which capitalist economies have managed to raise the value generated for consumers and hence the price paid for goods and services is through the invention of branding. Eeen though the product may be very similar to generics, consumers feel the value they obtain from branded goods is worth the extra money.

    The fact that third-world farmers have noticed this, and – in exactly the same way that Red Bull exploits people’s desire to be perceived as ‘extreme’ or that Armani exploits their desire to be perceived as classy – have created a product that adds value to basic agricultural commodities by exploiting people’s desire to be perceived as ‘ethical’ is an absolutely ingenious *triumph* of capitalism.

  3. “The fact that third-world farmers […] have created a product that adds value to basic agricultural commodities by exploiting people’s desire to be perceived as ‘ethical’ is an absolutely ingenious *triumph* of capitalism.”

    And it’s also a triumph of capitalism that when consumers discover the goods are tainted then the brand becomes contaminated. Management of the damage is possible (c.f. shit in Cadbury’s chocolate) and sometimes not (c.f. antifreeze in Austrian wine).

    It remains to be seen whether the damage to the FairTrade brand (i.e. not quite so ethical as we were led to believe) is manageable (e.g. swift changes to the rules to address the concerns) or not.

  4. “Management of the damage is possible (c.f. shit in Cadbury’s chocolate) and sometimes not (c.f. antifreeze in Austrian wine).”

    Actually, Austrian wine has long overcome that problem, is now very good and widely available in Britain and elsewhere.

  5. …but there are still a hell of a lot of people who, despite the fact that it’s now non-toxic and drinkable, associate it with antifreeze and wouldn’t touch it with a bargepole.

Leave a Reply

Your email address will not be published. Required fields are marked *