Posts Tagged coffee

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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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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Case Study: Would You Risk It All for Grapes and Beans?

Over the weekend I came across this video (created by Caleb Brown) via the Inertia Wins blog.

The video tells the story of a married couple who took the risk of starting a coffee and wine shop called Grape + Bean.




In response to the video, Inertia Wins blogger Ryan Young asked the perfect question: “What’s at stake for entrepreneurs?

Every day people take risks to start new businesses. Some risks are certainly bigger than others, and some endeavors are certainly more worthwhile than others. But who is to say which endeavor is worth what?

The beauty of the free market is that no central planner can dictate whose idea is more beneficial and whose isn’t. We, as a society, are in control. And thus, entrepreneurs must tailor their products to society if they wish to be successful.

In the video, the couple talks about how they put their livelihood and their family stability on the line by launching Grape + Bean.

But why? For what? Were they inventing a new means for time travel? Were they creating the Read the rest of this entry »

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