Fair trade and the law of unintended consequences

Some businesses cynically promote “giving” that is more about making us feel good about ourselves than truly helping others.  Think of companies who sell marked up water where a deliberately undefined percentage of the proceeds goes to charity.  Instead of paying an extra 50 cents for a commodity where perhaps a nickel goes to some ill-defined charity and the other 45 cents profits the company, I recommend donating the whole 50 cents and buying your water elsewhere.  Or drink tap water.  Now you get to release endorphins for being generous and wise.

Fair trade coffee is all the rage in many churches.  Does it really help those it attempts to, or is it another counterproductive measure? Read some interesting thoughts at Is fair trade really fair? | Reason To Stand.

  • Fair trade trades in the same markets of empathy that charities do.
  • It does not have the power to lift whole nations out of poverty like free trade has because it ignores basic market principles.
  • It preys on the desire to feel good (as opposed to actually doing good) that many people (mostly liberals) have.
  • It assumes an unsubstantiated predatory view of markets.
  • It encourages inefficient economic practices (by discouraging mechanization)
  • It encourages people to stay in agriculture when they could move to other industries which could produce more wealth for more people.
  • It fosters a moral hazard where lower quality goods can be foisted onto artificially captive markets (ie. moral-minded churches) while higher quality goods are sold on the free market. I’ve been the unlucky recipient of this sort of deal where a local church provides fair trade coffee which costs as much as Starbucks but tastes like burnt rubber. This is wholly unfair to the consumer.
  • Fair trade is based on a Marxist economic understanding where equality of outcomes is held to be the standard of “justice”. For this reason you’ll hear a lot of talk of “social justice” in pro-fair-trade material.

4 thoughts on “Fair trade and the law of unintended consequences

  1. I disagree with you on this one.

    I have found that Fair trade helps some people thinking about others in ways they have never done before. Even if you do not have time to do a mission trip or volunteer in a church ministry, you can still make a difference in someone’s life just by how you purchase things you normally purchase. From the perspective of someone who has been focused on helping others for quite some time, Fair trade might seem less effective than other ways to help others. But from the perspective of someone who never thought much about others, say those new to Christianity, Fair trade might be the first step to getting someone thinking about how they could start helping others. And it could lead them to other ministry areas.

    Buying Fair trade does not give you a tax deduction or recognition. I have certainly seen a few participants on mission trips I have been on focus more on the task (and recognition they are doing the task) instead of the purpose which is to show God’s love to others. That does not make that mission trip wrong. it just means some people participate for the wrong reason.

    As far as market distortions, while I do not disagree, in most countries where Fair Trade workers are found, the markets are already distorted for other reasons anyway. How much in payoffs happen? How much in unnecessary fees? Growers do not profit from any of those. At some point, Fair trade will probably outlive it’s usefulness. But right now, it does help improve the lot of local growers.

    Your next to last bullet is almost funny. Nobody is forced to consume Fair trade coffee. It is no worse than Girl Scout cookies in that aspect. Yes, the marketing forces a strong encouragement to go ahead and buy it, but you certainly are not forced to do so.

    I agree there is a lot of talk of social justice in the material. But what do you mean equality of outcome is the focus? Instead, Fair Trade pushes a co-op approach to allow producers better leverage to deal with companies purchasing their products. Is that so bad? A group can negotiate better terms than an individual. Makes sense to me.

    I agree Fair trade is not perfect. But I do think it helps in many ways. And i think the world is better off with it than without it right now.

  2. Agree with LoneStar Jeff about the existing market distortions. America is not a true free market, but we are aeons closer than many countries which grow coffee.

    One of the things that has long bothered me about shopping is where our goods come from, who makes them, and how those people are treated. If someone has to work 12 hours a day for 7 days a week in a factory, and is still dirt-poor, I don’t think that person is really getting a decent wage – especially when she makes a garment for $2 that is then sold over here for $150. (Now, I’m the first to point out that once you factor in shipping costs, tariffs, distribution costs, overhead, payroll, and – most importantly – product development, that $2 garment costs a lot more than $2, but… couldn’t you sell it for $152 and double the wages of the people who make those clothes?)

    On a side note, I hate that we outsource so much of our manufacturing to other countries which lack our environmental standards (hey, let’s pollute places that we’ll never be! poor people don’t mind!), as well as to countries (i.e. China) that hold such a huge amount of our debt. But ask liberals about social justice, the environment, and fair labour when they impose massive corporate taxes and onerous regulations on companies in America…..

    • Agreed. I would gladly pay extra if there was a non-governmental audit function giving me confidence that things were made / grown with reasonable wages and less pollution.

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