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.