Fair Trade as a Non-Solution: A Christian Response to Price Manipulation

Fair Trade? Its Prospects as a Poverty Solution, Victor Claar, Acton Institute, coffeeFair trade products have become increasingly popular, particularly in churches and various Christian communities. To investigate the merits of this approach, economist and friend of the blog Victor Claar recently wrote Fair Trade: Its Prospects as a Poverty Solution.

This week at Common Sense Concept, I review Claar’s book and echo the key criticisms therein.

A significant part of the book — and a big part of its significance — is its objective examination of coffee markets and the fair trade scheme as a whole:

Given that coffee is perhaps the most popular of fair-trade commodities, Claar focuses his attention there, providing an initial overview of the coffee market itself, followed by a discussion of fair trade strategies as commonly applied. Here, we learn a few important things: (1) coffee is easy to grow, (2) its price is inelastic, and (3) the “market appeal” of one’s beans is essential for success. Additionally, and most importantly, (!!!) demand is dropping while supply is rising. “Simply put,” Claar explains, “coffee growers are poor because there is too much coffee.”

From there, Claar dives into analysis, considering each detail as it relates to common Christian concerns. I’ve read plenty of books that critique fair trade in general terms, but Claar’s views on the proper Christian response are a unique addition to the discussion.

Overall, Claar views such schemes as a means for reinforcing barriers rather than removing them:

Instead of imposing our top-down plans on our neighbors across the globe, Claar suggests that we “work to make trade freer for everyone in our global community: a level playing field for all.” Although it might lack the punch, trendiness, convenience, and immediate satisfaction of buying the right pack of coffee beans at the right socially-conscious grocery store, it actually works (e.g. the 20th century).

To read the full review, click here.

Note: I recently had the opportunity to respond to Victor Claar’s views on envy and economics at a recent AEI event. If you missed it, click here.

, , , , , , , , , , , , , , , , ,

  • Michael

    There’s nothing particularly “anti-free trade” about Fair Trade, at least not in the true economic sense.

    It’s a voluntary system that allows the market to value a particular set of attributes (labour rights, community development, sustainable agriculture, etc), allowing those who find those attributes appealing can make informed purchasing decisions. Higher prices in Fair Trade then don’t “distort” the market, rather they incentivize particular production and trading behaviours.

    So it’s a bit hard to see the problem here….

    Also, the information here is rather dated. Coffee has been trading at very high prices for the past year, in large part due to contractions in supply and increased demand. In fact, I don’t think demand’s declined for quite some time… it was stagnant overall for a period, except for specialty coffee grade coffee, where demand continued to grow.