Fair Trade Fast Food: Why Not Manipulate Americans?


McDonald's, worker, employee, fast foodWhat would happen if we had fair trade fast food here in America? What if benevolent do-gooders from Europe and Asia tried to intervene on behalf of American minimum-wage workers and offer a “fair wage” for serving burgers and fries?

Further, what would have happened to me — a former McDonald’s employee — if I had made 5 bucks an hour extra, all out of some well-meaning foreigner’s arbitrary sense of “social justice”? Would I have ever gone to college, or would I have stayed put? Would McDonald’s have remained a competitive job creator, or would it have caved and crumbled next to those who avoided such “compassionate” scheming? Would it have become more difficult for low-skilled workers like myself to get a job in the first place?

These questions (and more) are at the center of my recent post at Common Sense Concept, in which I argue (once again) that fair trade distorts reality and confuses our vocational processes.

But why all the fuss? Wasn’t I, as a minimum-wage worker, being unjustly trampled by “the Man” (in a yellow suit, no less!)? Why did all those privileged cooks and servers at Red Robin deserve more money than me? Was it the “arrogance” of their Mt. Vesuvius burger? In the grand scheme of suburban teenager-hood, why was I of all people doomed to enter that realm of grease and irritable soccer moms?

For [some], my contract with McDonald’s might just as well have been labeled “unjust” and “unfair.” This was not, after all, a “living wage.” Shouldn’t somebody somewhere have stepped in to fill the “gaps” and stop McDonald’s from “exploiting” me? How was I, as a mere teenager, ever to rise above my circumstances without special giveaways and rewards for my efforts? There I was, hopelessly at the mercy of those greedy, hamburger-loving Westerners (i.e. my customers). What I needed, according to some, was simply a higher wage—one through which I would be “fairly” compensated and one with which I could survive while staying put.

After addressing (and hopefully answering) such concerns, I bring my argument full scope, noting that although I was indeed more privileged than handweavers in India or coffee farmers in Kenya, the lesson still applies: “misaligned incentives are dangerous, no matter who you are.”

The lesson, of course, can be learned from our history, which, by comparison, was free of such polluting mechanisms. How, for example, did I come to this privilaged position of mopping floors in an air-conditioned McDonald’s? Was it all by accident?

[A]lthough my beginnings were far easier and far more comfortable than the vast majority of humanity, they did not get this way on accident. The American economy did not grow as it did because my parents (or their parents, etc.) received manipulative hand-outs from do-gooders across the globe. It was not by the benevolence of European aristocrats that my Italian-immigrant and Irish-immigrant great-grandfathers made a “fair wage” on the railroad, neither was it from the superior price knowledge of “socially conscious” townspeople that my Norwegian-immigrant great-grandfather was able to get a “fair” price for his beef cattle.

I could go on and on, but the story of our prosperity is clear. There was, once upon a time, such a thing as real value, and if you could find a way to offer that tiny little thing—whether at a meat packing plant (i.e. “sweat shop”) like my grandpa, or a meat delivery shop (i.e. “fast food”) like myself—the world would be a better place for you, your family, and everyone else.

Put simply, I had the basic privilege of being informed — although not perfectly so, of course — and this guided my decision-making by making my choices clear. I was privvy to a simple lesson about value and how I might offer it to others in the long-run.

The third-world may not be in the cushy position I was privileged to as a youngster, but just as noble outsiders could have thrown a wrench into my own vocational process—or that of the countless others who paved the way before me—we should be careful to keep our scheming hands out of the processes of others.

The market is, above all, a mechanism for association and collaboration, the likes of which naturally tend toward prosperity. It will only work, however, if the resulting partnerships are authentic, viable, and valuable.

To read the full post, click here.

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  • http://twitter.com/remnantculture/status/96245767882276864 Remnant Culture

    What about fair trade fast food? Why don't we try manipulating Westerners for a change? New post: http://t.co/Jc0Irx5

  • http://twitter.com/commonconcept/status/96284220145672192 Common Sense Concept

    RT @RemnantCulture: What about fair trade fast food? Why don't we try manipulating Westerners for a change? New post: http://bit.ly/onYSSZ

  • http://twitter.com/remnantculture/status/96305374281474050 Remnant Culture

    It wasn't by the kindness of European aristocrats that my immigrant great-grandfathers made a fair wage on the railroad http://t.co/Jc0Irx5

  • http://twitter.com/josephsunde/status/96305898015830016 Joseph Sunde

    @mwkruse FYI: just wrote on fair trade with a touch of "vocation" http://t.co/8UlqRAm

  • http://twitter.com/remnantculture/status/96600114075934720 Remnant Culture

    Q: Why manipulate foreign coffee growers when we could be toying w/ our own low-wage workers? A: Western arrogance: http://t.co/Jc0Irx5

  • http://twitter.com/josephsunde/status/96954004176769024 Joseph Sunde

    What if an organization devised a way for wealthy foreigners to pay $3 for a McChicken, instead of the usual $1? http://t.co/8UlqRAm

  • http://twitter.com/jeffwrightjr/status/96962695319928832 Jeff Wright

    "Fair trade distorts reality and confuses our vocational processes." http://t.co/AhG2fec

  • http://twitter.com/josephsunde/status/96963269272670208 Joseph Sunde

    RT @jeffwrightjr "Fair trade distorts reality and confuses our vocational processes." http://t.co/TtyhKC8

  • http://twitter.com/remnantculture/status/99299124020649985 Remnant Culture

    I'll have one fair trade McChicken please… http://t.co/Jc0Irx5

  • Michael

    It seems as though you have a rather distorted understanding of Fair Trade and how it works.

    Presuming you’re thinking specifically of Fair Trade certification, a more accurate description of how it might work in your fast food example is:

    1. An external body, made up of a variety of stakeholders, establishes a set of standards
    2. Your employer voluntarily commits to meet those standards, which includes paying you a better wage
    3. Your employer is independently monitored/audited to ensure it is actually following through with its commitment
    4. Your employer is provided a tool (a logo of some sort) that demonstrates to its customer base that it has been independently verified as having met the standards
    5. Customers who value those standards, including your higher wage, choose to “reward” your employer with their business.

    Fair Trade certification doesn’t really get involved with wages so much beyond requiring conformity with ILO conventions (respecting national minimum wages, collective agreements, industry norms, etc), but that would be a more accurate depiction of how it might work in your McDonalds example.

    There’s no distortion of markets or reality in this scenario, rather you have greater transmission of information from sellers to buyers. “Perfect” information is as important as “perfect” competition in free market theory because it allows actors to make the most rational choices according to their utility.

    People (and businesses) who value the things Fair Trade is about will choose to purchase Fair Trade products. Those who don’t, won’t (at least, not because they’re Fair Trade).

    As a quick note, your depiction in a piece linked from this one of what it means when Equal Exchange (or anyone) pays more than the supposed “market price” is also strange. By definition, that “market price” is composite of all prices paid for a given product, which means individual actors don’t “distort” the market, rather they collectively define it.

    Plus, coffee, like many products, is differentiated by a number of different factors… it’s not a uniform product.

  • http://www.remnantculture.com/ Remnant Culture

    1. Yep. But how does this “external body” establish this set of “fair” standards, and how are such standards deemed “fair”? What is the moral understanding of “fairness” that these standards align to? That’s the fundamental issue here. I think the “external body” should be the consumer. Private Fair Trade organizations or no different than ”fair trade” Big Ag policies. They try to subvert an otherwise natural flow of information.

    2. Yes. This also doesn’t change my scenario. I am assuming that McDonald’s “commits” to those standards voluntarily.

    3. Yes. Again, if I don’t think the standards constitute anything close to “fairness,” why does this matter to me?

    4. Yes. Like a “Fair-Trade-Certified” stamp on my McChicken, right?

    5. Yes, customers who value arbitrary definitions of fairness choose to reward and reinforce products assumed to be fair, resulting in arbitrary price signals based in nothing more than an external body’s arbitrary notion of “fairness.”

    My piece, however, is meant to apply to any notion of “fair trade,” regardless of specific application, which could go anywhere from the private/voluntary level to government tariffs. That’s why I didn’t get too mired in the details of how Organization X actually tries to manipulate prices — I simply think they do (we obviously disagree on this).

    I certainly prefer faulty prices when arrived at voluntarily, as they are inevitable in a free market economy (humans are faulty), but I do think schemes like the ones you describe lead to a distortion of markets nevertheless, which in turn results in a manipulation of people.

  • Michael

    1. What does it matter if all parties (farmers and businesses) are free to decide for themselves if they want to conform to them? In effect, consumers do have final say because they can always choose not to purchase the products.

    But, as a point of interest, most Fair Trade certified products are traded within the “Fairtrade” system run by Fairtrade International and its members. Standards are set and revised through a multistakeholder process, with hefty producer input. http://fairtrade.net/how_we_are_run.0.html

    2. Then where’s the issue? McDonalds management is making a business decision to pay higher wages, perhaps because its important to them or perhaps betting that they will be rewarded in the marketplace by customers who value them doing so. If the former, then they lead the market and create a competitive pressure to increase wages sector wide on their own, if the latter, then they follow consumer interest to attract business.

    3. If  you mean the employee, then it doesn’t much matter, does it? I mean, your employer has decided that this is what they want to pay you. If you figure you should be paid less and they won’t do it… well I guess you should look for an employer who’s willing to meet your lower wage demands?

    If you mean the customer and you simply don’t value the higher wages and any other standards that come with this hypothetical “Fast Food Fair Trade”, then I guess they just wouldn’t go into your decision to eat there or not. Other factors like price, quality/taste, convenience, the colour of Ronald’s hair, whatever, would be more important.

    4. In this scenario, it’d be the business rather than the product that would be “certified”, so the vehicle used to communicate certification could be used pretty well anywhere by the company.

    5. It’s not that the customers “value arbitrary notions of ‘fair trade’”, it’s that they value *that* (specific) definition of fair trade, regardless of how it was established.

    But I think you might be a bit confused about prices within a free market… they’re (theoretically) set by people choosing to buy and sell at a range of prices. There’s no distortion of markets here at all… if anything, there’s the creation of a new market (or perhaps, segmentation of an existing market) in which new product/business attributes can be valued.

    There’s nothing particularly unique about this (indeed, this is what branding is all about), the difference is the brand is built around principles of “fairness”.

    I’m not sure how this gets us to “manipulation of people”, and it’s not clear how this isn’t a still comfortably within the realm of free trade.

  • http://www.remnantculture.com/ Remnant Culture

    The fundamental purpose of Fair Trade is dissatisfaction
    with the outcome of free trade, so in essence, you are getting people to buy someone a higher wage for someone else. This, among other things, is unsustainable and counterproductive to the professed aims of the fair trade movement at large. Such programs have a fundamental issue with wages determined by a
    free market, and if they don’t, I’d be interested in what the “fair” is referring to.

     

    You can certainly try to build “higher wages” into some form
    of subjective value, and the free market will certainly let you (I’m not arguing it should be banned), but this is messy
    because the value *is* the
    wage/price (not something separate, like Ronald’s red hair). If people are
    essentially *buying* some arbitrary notion of a higher price (someone having a higher wage),
    this is an extremely inefficient and unproductive way to accomplish that, and
    it makes messy assumptions about what prices/wages do.

     

    If a consumer really
    wants to help a farmer by giving them more money, they should send them an
    envelope with a check, let prices do what prices do, and stop filling the
    pockets of well-meaning middle men. Your point illuminates that what fair trade really does is uses poor people to satisfy the guilty sentiments of Westerners and make a profit along the way.

    As I say above: Why don’t they do it to the American poor while they’re at it?

  • http://www.remnantculture.com/ Remnant Culture

    The fundamental purpose of Fair Trade is based in dissatisfaction with the outcome of free trade. Such programs and proponents have a fundamental issue with wages determined by a free market, and if they don’t, I’d be interested in what the “fair” is referring to. 

    You can certainly try to build “higher wages” into some form of subjective value,
    and the free market will certainly let you (I’m not arguing voluntary “fair trade” should be banned), but this is messy because the value *is* the wage/price (not something separate, like Ronald’s red hair). If people are essentially *buying* some arbitrary notion of a higher price (someone having a higherwage), this is an extremely inefficient and unproductive way to accomplish that, and it makes messy assumptions about what prices/wages do (which produce messy outcomes). 

    If a consumer really wants to help a farmer by giving them more money, they should
    send them an envelope with a check, let prices do what prices do, and stop filling the pockets of well-meaning middle men unnecessarily. They are buying into sham that has negative ripple effects, and that’s what I’m trying to expose. 

    Your point about it being a niche market is right, and it illuminates what fair trade really does: uses poor people to satisfy the guilty sentiments of Westerners and make a profit along the way. 

    As I ask above: Why not include the American poor while they’re at it?

  • Michael

    Actually no, fair trade is about using trade to mitigate a variety of “social bads” (or, conversely, propogate a series of “social goods”). Whether or not either occurs within a free trade context is irrelevant.

    For example, one of the more common examples given to explain farmers suffering among supporters of Fair Trade is the “middleman”, often described as having near total control over prices paid to poor farmers because of his monopsonistic position betwen a region’s farmers and the next stage in a supply chain. Their position is said to be strengthened though asymetric market information and monopoly over farm credit.

    Imperfect information and competition are anathema to properly functioning markets, which run counter to free market theory.

    However, should those “social bads” occur within as close to a free trade context as possible, acting to mitigate them in them in this way is certainly not anti-free trade, neither in theory nor ideology for that matter.

    If you truly believe that the value is the wage/price, then you should have no problem with what we’re talking about. If a company can sell its product for a price (or a labourer can sell his/her labour for a price), then by your definition that is its value.

    How the wage/price is derrived is irrelevant, which is precisely why I mentioned the colour of Ronald’s hair. Companies spend loads of money to differentiate their products/companies from their competitors, specifically to add market value. This is the purpose of branding – to, as much as possible, diminish the substitutability of a McDonalds hamburger with one from Burger King. There’s no reason why this shouldn’t also be applied for a more meaningful purpose like fairness, decency, etc.

    Another way to look at it, if you’d like, is you can see Fair Trade as a means to value attributes that would otherwise be externalities due to imperfect information, distance from consequence, or whatever.

    Your conclusion that Fair Trade existing in a niche means its purpose is to allay “Western guilt” and make a profit is not supported by anything we’ve discussed, and could only be true if (a) it brought no benefit to the poor people you mention (in which case you would expect them not to participate), (b) supporters of Fair Trade were motivated by guilt (most aren’t, in my experience), and (c) they could be kept unaware of its supposed ineffectiveness (otherwise it wouldn’t allay their guilt). You’ll have to demonstrate all three of these conditions to actually make this argument.

    As for the American poor, I suppose it’s a matter of someone figuring out a way to use a market mechanism to address whatever aspect of American poverty you want addressed and applying the resources to it.

    But you’ll note that Fair Trade doesn’t apply to all aspects of poverty, it can’t solve all problems, and it won’t be successful everywhere its tried. Sadly, there’s no panacea for poverty, American or otherwise. That doesn’t diminish the good that it can do, though, nor does it mean people shouldn’t support it, especially if they actually care about doing the sort of good Fair Trade sets out to do

  • http://www.remnantculture.com/ Remnant Culture

    You said: “Your conclusion that Fair Trade existing in a niche means its purpose is to allay “Western guilt” and make a profit is not supported by anything we’ve discussed, and could only be true if…”

    a) it brought no benefit to the poor people you mention (in which case you would expect them not to participate)

    “No benefit”? My goal here is to maximize benefits/effectiveness, and my argument in this piece (if you’ve read it) is that it is not the poor’s long-term best interest to be involved in such. The whole point is that it doesn’t bring a long-term benefit to the poor. As I argued in my other piece, if the benefit is in getting them through the next week (and not long-term prosperity) — which excludes the impositions on vocation, etc. — there are much better ways to accomplish this.
    (b) supporters of Fair Trade were motivated by guilt (most aren’t, in my experience)

    “Guilt” as I’m using it, is probably more broad than you’re assuming. Nevertheless, this is a generalization and I certainly don’t think it’s all guilt.

    (c) they could be kept unaware of its supposed ineffectiveness (otherwise it wouldn’t allay their guilt). 

    My goal here is to make people aware; nevertheless, I’m not one to assume that someone’s persistent unawareness to their illogical choices invalidates my argument. It’s besides the point. I disagree with plenty of people’s free-market purchases and why I think it’s dumb or morally wrong doesn’t depend on whether they “are kept unaware” of their error. If they hear the opposing side and still think fair trade effective, the guilt is still being allayed. People disagree on stuff.

    That all said, I think we understand each other’s arguments, even though we certainly both think the other has gaps to close. I’m hoping to do some further writing on this topic in the near future, with some potential interviews with economists, and I hope you stay engaged. I enjoyed the discussion.

  • Michael

    Forgot to address the bit about sending a check instead of profiting middlemen, negative ripple effects, etc.

    First, I’m more than a little surprised to see you advocating a welfare approach over one that’s market-based.

    Second, while farmers are protected within Fair Trade through guaranteed minimum prices (companies can always pay more), the remaining actors in the supply chain are not. If you believe in markets like I think you do, then you should still expect to see the middlemen’s economic profits approach zero due to regular, old competitive forces. The difference in Fair Trade is the farmer, as the weaker actor, can’t be squeezed by more powerful actors to accept punitive prices.

    Third, you’ll have to actually demonstrate negative ripple effects, ideally with empirical evidence, to expose Fair Trade as the sham you think it is. From what I’ve read so far, you haven’t actually tried to do that yet.

  • http://www.remnantculture.com/ Remnant Culture

    Real quick:
    1. Stick around this blog and you’ll learn that I believe the market *is* the approach. There is no need to use it for charitable purposes. That’s what charity is for. I am distinct from other free market folks in this regard (though certainly not alone).

    2. There is plenty of evidence of sellers pocketing extra cash from fair trade coffee. See Tim Hartford’s the Undercover Economist for a few examples.

    3. As a quick example, I’d point to the disaster of the Soviet Union. I know that won’t be sufficient for you, but once again, my argument is that fair trade is price fixing of the voluntary variety. I could point to the minimum wage. Or Big Ag subsidies. Or…(I could go on). I’ll leave that for another post. I’m too lazy to track all the evidence down on a Friday evening. :)

    I’ll check out after this one. Nice chatting with you and thanks for reading.

  • http://twitter.com/remnantculture/status/102149988473249792 Remnant Culture

    RE:

    The
    fundamental purpose of Fair Trade is dissatisfaction

    with
    the outcome of free trade. Such programs and pro… http://t.co/ouDdqKU

  • http://twitter.com/remnantculture/status/102194697321185281 Remnant Culture

    RE: Real quick:
    1. Stick around this blog and you'll learn that I believe the market *is* the approach. There is no n… http://t.co/CHklxfH

  • Michael

    Alright, we can close off if you’d like. A few of my own closing thoughts then, following up on your two posts above.

    1. Your believe charitable purposes have no place in the market, rather that’s what charity is for.

    That’s fine, as long as you’re aware that the belief has no real grounding in economic theory.

    Charitable intent is obviously a part of some peoples’ utility, and Fair Trade, as it actually functions, creates a market through which such consumers can better pursue their utility. It does this by attaching information to a product (related to how its produced and traded) that would otherwise be lost. This allows people to value the product with enhanced knowledge and make purchasing decisions accordingly.

    2. Evidence of sellers pocketing extra cash from Fair Trade coffee

    Of course there is. It’s to be expected (within Fair Trade or otherwise), and you’d hardly need an “undercover economist” to find it. My point is that it’s irrelevant if you believe in the power of markets to self regulate – more Fair Trade means more competition, which means economic profits from Fair Trade for these sellers should approach zero, no?

    The only way this could be a critique of Fair Trade is if any “extra amount” a consumer pays is some sort of donation that’s supposed to be sent to the farmer but gets skimmed along the way. Of course, that’s not how Fair Trade works… the farmers have long since been paid for a product you buy in a store. Plus, Fair Trade products aren’t always more expensive than their conventional counterparts.

    3. The Soviet Union, minimum wage, and big ag subsidies being evidence that Fair Trade… ?

    You’re right, they’re not sufficient. I daresay it would be more efficient to focus on Fair Trade itself, looking at the standards, the available evidence, etc. than trying to hammer out some convoluted cautionary tales out of those topics.

    You may also be surprised to learn that most Fair Trade supporters are against big ag subsidies. Agricultural tariffs too.

    4. The whole Western guilt response to my response….

    Everything you say here undermines your original assertion about Western guilt being what Fair Trade is really about, but ok.

    a. I have read the piece and it’s not convincing. It’s not clear to me if your Equal McExchange is a competitor to McDonalds or a certification body, but in either case there’s no reason to expect the reduced net employment.

    Unless you think this will lead to a net decrease in McChickens (which you don’t actually argue), then employment will remain static in the McExchange as a competitor model (McDonalds makes fewer McChickens, hires fewer people; McExchange makes more McChickens, hires more people).

    If McExchange is a certification body, then McDonalds is simply pursuing a revenue maximization strategy by segmenting the market and they always have the choice to abandon the strategy if it doesn’t meet expectations. That’s how things work anyway, even without something like Fair Trade.

    The National Post piece you link to show impacts is garbage, by the way. The writer clearly misrepresented the German study he offers as “proof” (which is write in front of me as I type… all nine pages of it). Plus, his assertions aren’t borne out by any evidence. Below I’ve linked a response to that specific article and a more fulsome, independent analysis of a decade of academic studies, for your interest.

    http://fairtrade.ca/en/news-views/news/response-lawrence-solomon-article
    http://www.fairtrade.org.uk/includes/documents/cm_docs/2010/n/2_nri_full_literature_review_final_version.pdf

    b) Fine.

    c) Within the context of what I was talking about (your assertion that Fair Trade is only about appeasing Western “guilt”), what you’re trying to do is irrelevant. The point about them needing to remain unaware was in reference to the fact that, if Fair Trade is ineffective, they would have to remain unaware of that fact for it to actually appease their guilt.  There’s probably no point in going further into this because you’ve already backed off the original point.

    Look, if you do decide to write something about Fair Trade in a future piece, here’s my small request. Before you formulate your arguments, look into the actual standards of Fairtrade certification so you’re clear on what it is and what it’s not. Then have a look at the actual evidence of how it plays out on the ground, see if you can find people who have direct experience with it. Then really try to understand the markets in which it operates and the contexts of production. Once you’ve got all of that, then formulate your arguments. The problem with Claar’s work is it looks like he went at it with a preconceived notion of how things worked and tried to find evidence to support his notions, which isn’t very good science.

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