A Thinking Reed

Look for the "fair trade" label?

Written by

Lee M.

in

Church-related organizations like Lutheran World Relief have really jumped on the “fair trade coffee” bandwagon. I sometimes, but not always, buy fair trade coffee and have never been able to make up my mind whether it actually does any good.

This article (via Byzantine Calvinist) argues that it doesn’t:

In fact, in this type of low-entry barrier market, a program like fair trade coffee can’t effectively raise the well-being of third world coffee growers by paying them more. Doing so would raise the returns to coffee production relative to other activities and would induce more farmers to produce coffee. This would expand the supply until the price farmers receive dropped back to the subsistence level. The only way to prevent that from happening is to prevent farmers around the world from entering the market or producing more, or to limit who receives fair-trade prices. These tactics, by arbitrarily selecting beneficiaries, really would be unjust.

Who’s right here? And how does the average consumer tell? And do our individual purchasing decisions make a difference, or is that just moral narcissism?

Comments

6 responses to “Look for the "fair trade" label?”

  1. Siel

    Well, fair trade coffee isn’t JUST about fairer prices — It also encourages farmers to diversify into other crops (meaning less coffee) and to use more sustainable coffee practices (shade grown, organic, etc. — which reduced the amount of gross coffee produced) and to focus on quality coffee (not planting crops too close together or picking the cherries too quickly, resulting in too much low quality coffee).

    I think there’s also a misconception that paying fair trade prices means giving farmers some kind of handout. Fair trade is more about getting the farmers a fair cut of the profits — Often, middlemen and companies gouge farmers who don’t have the resources to get their coffee to the market and have to rely on these middlemen.

    It’s great you’re thinking about these issues — There are a lot of quibbles going on about it. Some great sites to find out more: Global Exchange, Oxfam, TransFair. Hope that helps 🙂

    Reply
  2. Steven

    Dear Blogkeeper,

    This is an excellent post, and I hope to see many excellent replies, such as this first one. I honestly don’t know the answer to your question–but I have to admit, I haven’t asked the question.

    I sometimes wonder if the “laws” of economics are as intractable as all of that. Further, isn’t some good done by simply raising people’s awareness of the issues? Finally, I doubt that it ever sinks to the level of moral narcissism because the intent is always to reach out and help others. It would seem that the intention is part of the key.

    However, I think it is valid to question whether it is ultimately helpful. What I do know from reports is that it is objectively, presently helpful to those who are engaging in the activity. Their standard of living has improved greatly, and their bettered living conditions tend to spread out to surrounding areas (at least so I’ve read and heard). This may not be ultimately helpful, but I’m not certain it is useful to think in terms of 10 or 20 years, when starvation and grinding poverty are a matter of this year.

    But then, I don’t really know.

    shalom,

    Steven

    Reply
  3. Joshie

    Yeah, what Siel said. There is much more to fair trade coffee than a simple raise to producers. And the global coffee market is more complex than he makes it seem in his typical economist arrogance (oh you puny mortals with your good intetions, you just don’t understand how the world really works!)

    Reply
  4. jack perry

    It’s true that the effect of fair trade could be raise all market prices, and higher prices would encourage other producers to enter the market, so that the increased supply would subsequently lower the price.

    However, in the short run, some farmers are making more income, and are thereby acquiring the capital necessary to diversify their crop, improve their techniques, etc., which would protect them against the eventual shift in the long run. One hopes that Fair Trade would be educating them to prepare for that.

    (I’ll bet that guy would make a similar argument to this one when he explains why it’s perfectly alright for oil companies to be making big profits after Hurricane Katrina!)

    Reply
  5. Lee

    Reminds me of John Maynard Keynes: “In the long run we’re all dead.” The fact that there are people who benefit from it now is significant.

    Also, I think the fact that fair trade co-ops allow farmers to bypass the companies who have a virtual stranglehold on those markets is important.

    Thanks, everyone for the good comments, and thanks, Siel for the links! I found this which looks informative:

    http://www.oxfamamerica.org/pdfs/coffeeresourceguide.pdf

    Reply
  6. Kevin Carson

    I’d add that fair trade is not intended as a comprehensive solution. I’d also like to see some genuine free market reforms–like attacking the quasi-feudal land system in Third World countries that lets absentee-owned plantation agriculture exist in the first place. The real owners of those corporate coffee plantations are not the corporations, and not some landed oligarch; they’re the peasants who mixed their labor with the land.

    Reply

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