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Does Fair Trade Help the Poor

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mwkruse
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Acton Commentary: Does Fair Trade Help the Poor Michael Miller

Fair trade coffee is touted as a way to help the poor provide the necessities of life for their families. It is billed as a win-win for anybody with heart — for only a slight premium on our coffee we get to help poor farmers while sitting in the comfort of a café.

Many Christian organizations connect fair trade to Christian values including Catholic Relief Services, Presbyterian Church USA, and Lutheran World Relief. While promoting concern for the poor is essential, does Fair Trade coffee really help poor farmers and help in the fight against poverty?

The Fair Trade movement argues that the free market trading system hurts the poor by paying less than equitable prices for commodities. The stated goals of the Fair Trade movement are to empower marginalized producers to become economically stable and self-sufficient and to promote sustainable development, gender equality, and environmental protection. Producers who meet fair trade standards of labor, development, and environmental sustainability become "certified" and thus receive higher than market prices for their goods.

While all of this sounds good, it still leaves me with questions. …

…….

Should Christians support Fair Trade? The question itself is a loaded one — as if those who don't somehow support "unfair trade."

We need to be vigilant against exploitative labor practices and slave labor, and for this the Fair Trade movement should be commended. Perhaps too, Fair Trade has genuinely helped some farmers by ensuring better information and providing more secure credit channels. But even for those farmers benefiting from fair trade, any long term success seems to rely on its remaining fashionable among intellectuals and the American and European consumer — both fickle lots. Like so many of the anti-market plans that have come and gone, Fair Trade will likely hurt the poor rather than helping them.

The best way to create opportunities and sustainable long-term growth are not faddish movements like Fair Trade, but the same institutions that enabled the West to grow rich: secure private property, the rule of law, and free exchange. When these are in place, trade becomes fair, more people benefit from trade, and the truly fair market unleashes the entrepreneurial spirit that is the source of wealth and prosperity.

Free trade and markets have lifted more people out of poverty than all the fashionable political movements loaded with good intentions but pernicious consequences. This is something to think about next time we are in Starbucks and feeling sanctimonious about our cup of coffee.

Comments

7 responses to “Does Fair Trade Help the Poor”

  1. brad wright Avatar
    brad wright

    The irony here is that the most powerful engines of human rights might also be rejected by those most interested in human rights.

    Reply
  2. samlcarr Avatar
    samlcarr

    Michael, looking at it from the other end, the question seems to boil down to who is standing in between. We have the producers and the market, with many levels of traders in the middle.
    Looking at a commodity like tea, this is produced now in places like Kenya, Vietnam, India, and Sri Lanka. In India the producers are a struggling lot. Quite simply, the cost of production is higher than the international market value.
    The small growers have all been wiped out. Almost all have sold their tea gardens to larger players who are have branded products and are directly supplying the consumers.
    In this environment, looking at the prices that tea fetches at the consumer’s end, it is obvious that that price has little to do with the actual cost of production. If a group was to take the tea at a little over production cost, the profit margin would still be excellent and the small grower could continue to tend her garden and supporter her family.
    I live in a town that’s not far from the big tea growing areas. This generation of youth have all left their gardens and come to the plains in search of any kind of work. Most of the gardens were sold in distress and fetched pitifully low prices…
    I’ve seen our coffee producers also go through good and bad periods though not as bad as tea. it is something of a fact of life with commodity markets but inherently should we leave things like?
    A generation of our youth have been stripped of their footholds in the economy and also of their heritage because of a 10 year crisis in global tea prices.

    Reply
  3. Michael W. Kruse Avatar
    Michael W. Kruse

    Sam, I think you are getting into one of more difficult aspects of economic ethics that deals with “creative destruction.” As markets mature and innovation happens, previous arrangements are often radically disrupted. It is an unavoidable reality for a growing economy. In a Western nation, where the economy has such a wide range of options for employment, the dislocation caused by creative destruction, while often problematic, are hardly life threatening. In circumstances like you are describing there is the potential that large corporate entity can “creatively destroy” people’s livelihoods, leaving them with no where to turn.
    The challenge is in how to humanely let market economies emerge through creative destruction in humane and just ways. One danger is a callous destruction of people’s lives by carelessly introducing technologies and practices. The other danger is a conservatism that resists all change tries to perpetually maintain the status quo. It seems to be that justice is about finding the balance between these two ultimately destructive paths.

    Reply
  4. Michael W. Kruse Avatar
    Michael W. Kruse

    Brad, I think that is precisely what happens when over reaction to injustices in one direction pushes us to over react in another direction. We need discernment of justice that balances competing legitmate concerns not ideological polarization

    Reply
  5. Bob Robinson Avatar
    Bob Robinson

    I certainly appreciate the perspective of creating free market trade. This is certainly the best course of action.
    I’m not sure that Fair Trade can be caricatured as a “faddish” or “fashionable” movement, or as an “anti-market plan.”
    I think that Fair Trade can be a stepping stone toward Free Trade.
    For articles from the pro-fair-trade angle, check out “Justice and Fair Trade Coffee.”

    Reply
  6. Michael W. Kruse Avatar
    Michael W. Kruse

    Miller is at a minimum pointing out some of the downside what is often called fair trade. I don’t profess to be any expert on coffee production issues but I do get the sense that the issues very some by region and culutre.
    I think that ultimately what we want to see is a develped economy engaging in free trade. But how do we get there? Unfortunately, I think many trade advocates try to impose a market structure instead of trying to emerge one. Meanwhile, some fair trade advocates seem to have an agenda that wants to forestall open markets from ever emerging. Neither is a very helpful approach. I simply haven’t read enough of the specifics about the various ways fair trade is applied to coffee production but I’ve heard a variety of folks a respect express caution about secondary and unintended consequences.

    Reply
  7. Charles Avatar
    Charles

    Thanks for challenging the prevailing “orthodoxy”… even though it’s the only attempt at “orthodoxy” we seem to care about these days!

    Reply

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