Posts Tagged prices

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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The Ultimate Exchange Rate: Real Value in a Material World

The Parable of the TalentsIt’s easy for us economist types to get caught up in earthly measurements of value — partly because it’s fun, but mostly because it’s important.

Even more important, however, is the pursuit of real value in heavenly terms. When it comes to this, we all struggle with getting the earthly “exchange rate” down, and as long as sin is around, we always will.

But Jesus gives us a pretty clear image of what it might ultimately look like in these back-to-back examples.

The kingdom of heaven is like treasure hidden in a field, which a man found and covered up. Then in his joy he goes and sells all that he has and buys that field.

Again, the kingdom of heaven is like a merchant in search of fine pearls, who, on finding one pearl of great value, went and sold all that he had and bought it.

In other words, no matter how much we have accumulated in our own lives, whether it’s wealth, skills, prestige, or status, none of it matches up to the value of a life transformed and saved through Christ.

But how do we purchase such a life? How do we make this ultimate trade-in?

The first and most important answer is that we can’t — Jesus already paid the ultimate price through his blood, which pays for our entrance into the “kingdom of [God’s] beloved Son.” It is only through this propitiation that we can be saved.

But there is still this central notion throughout the Gospel of obedience, which Jesus often illuminates by talking about trade. The question rises: If the ultimate price is already paid, what is left to trade in? What are we Read the rest of this entry »

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Pay What You Wish: The Origins of Consumeristic Charity

BreadI previously wrote a post discussing Panera Bread Co.’s new pay-what-you-wish business model and its macro implications.

Here’s a brief summary of how the new store works (from USA Today):

While the store does have cashiers, they don’t collect money. They simply hand each customer a receipt that says what their food would cost at a conventional Panera. The receipt directs customers with cash to donation boxes (there are five in the store). Cashiers do accept credit cards.

Last week, the Freakonomics blog posted a new study on pay-what-you-wish pricing, which suggests that the best way to maximize profits in such models is to “combine pay-what-you-wish pricing with an appeal to charity” (quoted from Freakonomics).

Marketing professor Ayelet Gneezy reached this conclusion by presenting 113,000+ theme park visitors with several pricing schemes for purchasing souvenir photos.

The four schemes, as summarized by Freakonomics, were as follows (and I quote):

  1. A flat fee of $12.95
  2. A flat fee of $12.95 with half going to charity
  3. Pay-what-you-wish
  4. Pay-what-you-wish with half going to charity

When it came to profitability, the “charity” factor provided a healthy boost in demand for photos sold under the pay-what-you-wish option.

As Gneezy explains in the abstract:

At a standard fixed price, the charitable component only slightly increased demand, as similar studies have also found. However, when participants could pay what they wanted, the same charitable component created a treatment that was substantially more profitable.

This would seem to bode well for the Panera model, even though Panera is far less explicit when it comes to the actual amount devoted to charity. Although “all profits” will go to charity, the consumer has no idea 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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