Posts Tagged Fair Trade

The Fairest Trade of All

In light of my recent posts on the inadequacy of fair trade (1, 2, 3 & 4), I thought this recent debate on the topic was well worth sharing. The discussion includes AEI’s Claude Barfield, World Fair Trade Organization’s Paul Myers, and Henderson State University’s Victor Claar.

Watch it here:

Barfield provides a good historical backdrop, but Claar, whose comments begin at 33 minutes, provides a strong and thorough critique of fair trade’s failures in both fairness and economic results.

Some of my favorite lines from Claar, in no particular order:

  • “The fairest trade of all is trade that is genuinely free—free from political logrolling by politicians desperate for votes, free from opportunistic lobbying by industries like U.S. sugar and cotton, and free from the harm to the global poor that well-intentioned rich Northerners like us can sometimes bring.”
  • “When the price of something is low–like coffee, or sugar, or cotton–market forces normally direct people to make less of it and move onto something else. But fair trade interferes with the signal that prices ordinarily provide; Fair Trade can never serve as a sustainable long-term development strategy because it will never make people significantly richer than they are today.”
  • “Putting at least some faith in markets to be a powerful force for change in the lives of the poor does not amount to abdicating our concern for the poor–instead opting to cavalierly put our hope in little more than faeries and magic dust. Just as we trust gravity to keeps us all affixed securely to the ground, and just as the principles of particle physics assure you that the chair you are sitting in right now will not let you slip through its seat to the floor, markets work invisibly, but in ways that we understand reasonably well…The laws of physics are part of God’s providence; so are the laws of economics. And we fail miserably in our obligations to our Creator when we ignore the fundamental truths of economics in our efforts to aid the poor—even if our efforts flow from the very best intentions.”

One other item of note is how little argumentation Myers delivers in his primary remarks, throughout which he manages to disregard economic efficiency (because the poor benefit from waste?), downplay petty old “freedom” (because the poor prefer enslavement?) and elevate “rules and regulations” (because the problem is obviously too much access to markets?)—all without providing a substantive argument for how price manipulation benefits the poor and how price accuracy (is there a better word?) hurts them. He provides plenty of anecdotes about how the poor need jobs and affordable goods (is this news?), but provides no cohesive argument for why fair trade fulfills these needs and free trade perpetuates them.

Fair Trade: Its Prospects as a Poverty Solution, Victor Claar, Acton InstituteI’m guessing this lapse was largely unintentional, and that, aptly representing Thomas Sowell’s “unconstrained vision,” Myers simply assumes that the (supposed) morality of fair trade is self-evident—that those who oppose it must simply value economic efficiency over the interests of the poor (and, to be fair, some do). Thus, fluffy anecdotes and pious platitudes about the struggles of the poor suffice for a moral indictment of free trade. Unfortunately, most free traders believe what they believe precisely because  they think it benefits the poor. Myers should start his argument there (when he gets around to making one).

If these assumptions about Myers’ vacuous, emotion-driven remarks are true, then Claar’s later emphasis of Matthew 22:37 is even more relevant than intended.

How do we truly love our neighbor if we are aiming only to elevate our own personal, abstract notions of fairness without checking them against reason or results? How do we truly love the Lord our God if we rely only on our “hearts” and “souls” and not also on our minds? Further, as I’ve indicated elsewhere (1, 2, 3), what does it say about our “hearts” and “souls” if they are detached from an intentionally holistic love of God that looks beyond earthly emotions and assumptions?

Click here to read my review of Victor Claar’s monograph, Fair Trade: Its Prospects as a Poverty Solution.

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Fair Trade Clothing: Keeping Silly in Style

I have critiqued fair trade schemes in the past (here, here, and here), and this week at Values & Capitalism, I do it again, specifically as it relates to clothing.

Relevant Magazine recently published an article on the subject by author Julie Clawson, who attempts to “debunk some common objections to shopping ethically.” Although not aiming to provide a comprehensive justification for such schemes, the article serves as a nice examination point to observe some of the fundamental errors underlying the orientation.

The article tries to “debunk” four common excuses for not “shopping ethically” (whatever that means), which include the following:

  1. Ethically made clothing isn’t stylish.
  2. Ethically made clothing is more expensive.
  3. I can’t find clothing that is ethically made (in all areas).
  4. If I don’t buy ethically made clothing, at least the workers in sweatshops will still have jobs

The most fundamental question, of course, is what constitutes “ethically made clothing,” but the last of these “excuses” (#4) gets closest to the core of the issue.

A sample from the author’s piece:

I am disturbed by the assumption that a worker’s only options are a horribly abusive job or no job at all. Such a view assumes reform is impossible and that conditions can never improve. The call to eliminate sweatshops is not a call to shut down factories (which is too often the path taken by clothing companies caught in unethical behavior); it is a call to improve conditions in those factories. The point is not to destroy jobs and lives but to bring healing to those already broken.

An excerpt of my response:

No. Such an “assumption” is no assumption at all. “Such a view” does not assume that “reform is impossible and that conditions can never improve”; it merely recognizes that such factories are currently the best options in these countries, or are, at least, the best options in the minds of their employees. If these companies picked up and left and their employees were left to beg on the street, would “reform” be suddenly made more possible?

What it does assume is that trying to manipulate companies against their will and instituting arbitrary price targets and controls is counterproductive. It assumes that no company with real-life competitors and sensible shareholders will or should agree to blindly pulling prices out of Clawson’s magic bag. It assumes that buying jeans with materials produced at low costs in Venezuelan sweat shops is more in the interests of the Venezuelan people than supporting an ineffective, inflationary “social justice” cartel or starting a bloody war with Hugo Chavez. It assumes that real economic “reform” and progress is a messy thing, and that America didn’t get to its air-conditioned skyscrapers without its own share of nasty working conditions and low wages (more here).

Above all, it assumes that, in Clawson’s words, “the economics at play here are complicated,” and that changing the corresponding economic systems is even more complicated—much more so than, say, telling self-absorbed Westerners that by listening to their Inner Price Genies they can place a bet for “social justice” and save the world in style.

Read the full critique here.

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A Real Fair Trade Solution: Kill the Big Ag Behemoth

I have routinely criticized “fair trade” schemes as ineffective, inefficient and counterproductive — a convoluted form of temporary charity that would be better if treated as temporary charity.

The real problems that cause poverty are deep and complicated, and they cannot be fixed by magical price inflation by Westerners (particularly when our own view of value is as distorted as it is).

As I pointed out in my review of Victor Claar’s book on the subject, one of these problems is often the nature of the given market. When it comes to coffee, for example, Claar explains that “coffee growers are poor because there is too much coffee.” The solution is hardly, “more coffee!”

Many of these realities are difficult to change for good reason: accurate, voluntarily determined prices reflect the real preferences of real people who are just trying to create real value. This includes both the consumer and the creator (the coffee grower). Yet other realities are stubborn because they are involuntarily determined.

This is where we should be setting our sights, and this week at AEI’s newly rebranded project, Values and Capitalism (formerly Common Sense Concept), I focus on one of the biggies: agricultural subsidies.

Here’s a taste:

Although the aims of “fair traders” are often noble (e.g. when “equality of outcome” doesn’t masquerade as “fairness”), their efforts would be much better spent tackling the real problems that impact economic development in the long term. If we’re looking for a game of Demolish the Western Privilege Machine, agricultural subsidies are a marvelous piñata.

The price distortion caused by such subsidies is summed up nicely by Daniel Sumner in an AEI paper on the subject:

Farm commodity subsidies—including price and income supports—crop insurance subsidies, and disaster aid encourage US production and disadvantage farmers who attempt to compete with subsidized production from the United States. These programs stimulate more production when Read the rest of this entry »

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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 Read the rest of this entry »

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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.

Read the rest of this entry »

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Big Bad Machines: Economic Myths, Western Arrogance and Indian Textiles

In my most recent post at Common Sense Concept, I examine a recent attempt to prop up India’s handmade textile industry.

The IOU Project recently released an ad chock-full of economic myths and Western arrogance, urging us to buy their products and resist the almighty, domineering force of industrialization.

According to the ad, if we lose the battle against the machines, we will quickly descend into poverty, unemployment, and sameness. (LOL)

This is typical fair-trade manipulation: flooding markets that would naturally subside, retract, or level out, resulting in long-term stagnation, price confusion, and plenty of other things.

In my post, I take a look at six of the ad’s main assertions, arguing that more machinery, freedom, and energy consumption is exactly what India needs.

Here’s an excerpt of my response to the anti-machinery talk:

According to the theories in this video, we [industrialized] Westerners should be helplessly enslaved by now, forced to do the bidding of modern machinery. But perhaps we have been! Here we are, destined to work in high-rise buildings and air-conditioned offices, pining away on the internet and dabbling in ideas when we could be sewing our own clothes, hand-washing our own laundry, growing our own food, and thatching our own huts. Dang machinery!

Here’s my response on the handmade industry being (supposedly) emission free:

The cavemen of yore were certainly more environmentally friendly than we are, but they filled their days hunting for food, trying to stay warm in the winter, and hoping they’d have time to come up with a written language. Such a life might sound like paradise to the idealist sitting in the front row of Eco-Imperialism 101, but at what point are we willing to Read the rest of this entry »

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Coffee in Rwanda: A Lesson in Individual Empowerment

Rwanda Coffee Exports by Unit Value of Destinations

Source: William Easterly / Aid Watch

William Easterly and Laura Freschi recently posted some encouraging words about Rwanda’s coffee industry over at the Aid Watch blog.

According to Easterly and Freschi, there have been some recent signs of success:

“There is preliminary evidence that the coffee industry is creating jobs, boosting small farmer expenditure and consumption, and possibly even fostering social reconciliation.”

In any other country, such progress might seem ordinary or mundane, but as you probably know, Rwanda has had its fair share of economic turmoil. Most are familiar with the tragic genocide that rocked Rwanda in 1994, but Rwanda’s socio-economic woes have roots that go back much further.

When it comes to the country’s coffee industry, Easterly and Freschi provide a brief history:

The history of coffee in Rwanda is intertwined with the country’s political fortunes, and stretches back to the 1930s when the Belgian colonial government required Rwandan farmers to plant coffee trees, while setting price restrictions and high export taxes, and controlling which firms could purchase coffee. These policies helped create a “low-quality/low-price trap” that would bedevil the post-colonial governments that continued similarly heavy-handed policies.

This poor foundation held the country down for most of the century, but it reached its inevitable collapse after the Read the rest of this entry »

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Commercializing Charity: “Buy This Lollipop and End Poverty!”

Gap Red Campaign

Can one kid change the world? Sure, but she'd maximize her impact by not buying the t-shirt.

When you go to the grocery store, do you pay the extra dollar for the Fair Trade coffee because the bag tells you it will help farmers in need? Or perhaps you like to spend a little more on your clothes because Bono told you it would end AIDS in Africa?

Do such actions come from genuine, unadulterated compassion, or do they come from a mixture of guilt, laziness, and even self-righteousness?

Or, perhaps you feel like capitalism simply isn’t capable of doing its job effectively without your “socially aware” purchases.

Jeffrey Tucker recently wrote a piece on the Mises Blog about the commercialization of charity — a trend that Tucker sees partly as proof of capitalism’s adaptability, but primarily as a ridiculous and ineffective sham.

Tucker recounts how a 12-year-old boy tried to sell him a glass of lemonade by saying he would use the profits to “stop child abuse.” For Tucker, this situation was simply the breaking point after a long day of being confronted by “socially conscious” Read the rest of this entry »

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