Fairtrade

[phalarope]

Like many another humanist I support the Fair trade movement. In terms of ethical shopping I guess that purchasing fair trade products gives the small farmer and the poor a better chance to improve their livelihoods. The massive rip offs by which manufacturers and big stores (with notable exceptions) exploit the small producers and perpetuate poverty at source, is criminal. Profit margins trump responsible business practices.

I understand that at the heart of fair trade as a commercial venture is the triple bottom line...profit, people, planet. As a humanist I am a bit put off with that equation. There's something not quite right about it. I would welcome your views.

[Fia]

Until we can find a more equitable way of sharing resources than capitalism (this surely isn't beyond the wit of humanity) which also encourages individuals to reach their potential (so communism isn't the answer either) spending a little more buying fair trade is not perfect, but it does make a difference to folks lives.

[Dave B]

I think that I am with Fia on this, Fairtrade ain't perfect but it is a step in the right direction.

[Alan C.]

We buy fair trade whenever possible (we buy local first) both in the "big" Co-op in Lerwick and in our own community Co-op here in the village.

[Nick]

Like many another humanist I support the Fair trade movement. In terms of ethical shopping I guess that purchasing fair trade products gives the small farmer and the poor a better chance to improve their livelihoods. The massive rip offs by which manufacturers and big stores (with notable exceptions) exploit the small producers and perpetuate poverty at source, is criminal. Profit margins trump responsible business practices.

I understand that at the heart of fair trade as a commercial venture is the triple bottom line...profit, people, planet. As a humanist I am a bit put off with that equation. There's something not quite right about it. I would welcome your views.

Hi, phalaorpe

I don't know why it took me so long to respond, but still...

I too buy Fair Trade produce (besides doing other things in support of such people) but I think it is important that all the circumstances are taken into account. In some ways, Fair Trade is barking up the wrong tree. It may be beneficial in the short term, (and may provide an essential transitional benefit,) but other underlying problems have to be addressed too.

In no particular order, here are some of the factors which aren't particularly obvious.

The farmers don't get that big an increase in the price they are paid for their produce. IIRC, for coffee at (I think it was) Starbucks, the extra cost of FairTrade coffee works out at about 1p a cup, but until they were rumbled, they charged a premium of 10p for Fair Trade coffee.

With Fair Trade bananas, it is not that banana growers were being ripped off by anyone, but that bananas were readily available on the world market at lower prices, because there are better places to grow bananas than in the areas protected by Fair Trade. In the longer term, it would be better for those farmers to get out of bananas, rather than be protected.

While it may be true that certain buyers have strong buying power, the sort of things which would help producers most are such things as easier ways to get their produce to market, capital investment in all sorts of things, (in refrigeration facilities, say, or irrigation) or better access to better seeds (including GM), the opportunity to add value to the raw material prior to export (eg by refining sugar). They would also benefit from economies of scale by banding together, as well as better marketing skills. It is in this way that the whole process can be made more efficient, which is ultimately the best way for the producers to be lifted out of poverty for good.

By all means we should have improvements to stop monopsonistic buyers and such like, but in some countries it is other factors, such as corruption, or weak or unenforceable contract law which is the problem. In other words, effective markets are far more important than imposing rules on supermarkets.

As for the slogan, it is from profits that investment comes. No profits, no development. It might not be the best marketing slogan, but it is true.

[Compassionist]

We buy Fairtrade products. However, here is an article which points out some of the problems with Fairtrade. I was shocked to learn from the article that

Every year, hundreds of tons of food is destroyed in order to keep prices artificially high. At the same time, market competition from outside the EU is restricted.

The article doesn't cite references so I don't know if the statements are true. Perhaps Nick knows?

The article promotes free trade over Fairtrade and criticises protectionist policies. I am not an economist so I am not sure how sound the arguments are. Perhaps you can help me evaluate what the article is saying? Thank you.

[Nick]

Thanks for citing the article, Compo. In fact, thanks for reading my post at all!

Turning to your article. Certainly, within the EU, markets have been wildly distorted. For years we had butter mountains and wine lakes, genearted by artificially high prices to subsidise inefficient (often French...) farmers. I'm not sure about destruction of food, but certainly butter was exported to Russia at below cost, and wine was converted into alcohol for power production, again at a loss. In more recent times, farmers have been paid not to produce, so that prices are kept artificially high. At least these days there is a move towards payemtn for "stewardship of the countryside", which is an improvement. Not a cure, mind, or why is the value of agricultural land still going up so strongly?

But turning more towards the developing world, it is definitely true that the EU is protectionist. You may not remember, but when Britain joined in the 1970's there was a lot of disquiet about about having to buy expensive European butter, instead of the cheaper New Zealand butter, and similar stories. What I have said of coffee growers is just as true for butter producers. But butter producers have votes which matter.

A fact which makes is as interesting as it is disturbing, is that the entire foreign aid budget of the developed world makes less than a 1% difference to the growth rates of the developing world. I suggest to you, that the protectionist attitudes of the EU (and others) more than cancel out the efforts of every charity and overseas aid budget of the developed world. That is a disgrace.

The article cited makes some of the same points that I did. However, I think that Fair Trade is probably a good thing in the short term, to allow adjustment (think the rescue of General Motors in the US). Also, I think they have left out some crucial factors. I see no guarantee that a "free-for-all" would allow a free market to develop. An example in the developed world would be "trust-busting" legislation which was used , most noteably, against Microsoft.

But in the final analysis, I think the article is naive, in that it thinks that withdrawal of government influence is enough. It is not. Besides such things as workable contract law, absence of corruption, warfare and drought or flood, it may well take too long for the market to provide roads, docks, capital, banking facilities, or even effective markets. Without external action, it is also true that, even if matter improve overall, some people, maybe whole regions, could find themselves absolutely stuffed. While it is true, that protectionism is not a long-term solution, there seems to be a distinct lack of humanity in the article. Sometimes people do need a helping hand (often in terms of capital) to cope with necessary change.

Free trade is good, but just withdrawing Fair Trade is no guarantee that it will come about.

Hope that helps. Do post any questions or criticisms you may have.

[Dave B]

Politicians and those with a greed for money always win - fuck them!

[Nick]

Politicians and those with a greed for money always win - fuck them!

Hmmm... except that all the destructive protectionism of the EU comes from the Left, not the greedy capitalists. So we get the absurd example of the EU banning the advertising of tobacco, but subsidising farmers to grow it, and wanting to reduce alcohol consumption whle at the same time subsidising its production.

[Dave B]

OK, Nick, but politics still comes into it, protectionism of any kind is a political tool.

Sorry, I am letting my ideals show!

[animist]

Politicians and those with a greed for money always win - fuck them!

Hmmm... except that all the destructive protectionism of the EU comes from the Left, not the greedy capitalists. So we get the absurd example of the EU banning the advertising of tobacco, but subsidising farmers to grow it, and wanting to reduce alcohol consumption whle at the same time subsidising its production.

I don't know about the present, but historically the EU milk and butter mountains were the result of the strength of the French farming sector, and I don't think this was especially leftwing. You're right about the idiotic policies, though. As regards your remarks about Fairtrade and banana growers, I doubt whether these poor folk can simply switch their production to something else. If they form cooperatives, are they not distorting the perfect market by grabbing a bit of market power for themselves?

[Compassionist]

Many thanks Nick for your interesting and enlightening post. We live in an imbalanced world where the rich get richer and the poor get poorer. Have you watched the following documentaries? If you haven't, I recommend that you watch them. I would love to discuss them with you.

Life and Debt
Capitalism: A Love Story
Sicko
A World Without Water
Blue Gold - World Water Wars
The Corporation

[Compassionist]

Many thanks Nick for your interesting and enlightening post. We live in an imbalanced world where the rich get richer and the poor get poorer. Have you watched the following documentaries? If you haven't, I recommend that you watch them. I would love to discuss them with you.

Life and Debt
Capitalism: A Love Story
Sicko
A World Without Water
Blue Gold - World Water Wars
The Corporation

I don't want to derail this Fairtrade thread. So, I suggest discussing the documentaries in this thread instead.

[Nick]

Hi Compo I've commented on Michael Moore on the other thread.

Many thanks Nick for your interesting and enlightening post. We live in an imbalanced world where the rich get richer and the poor get poorer.

Actually, that's not quite true. We do live in an unbalanced world. And in some ways inequality is growing- executive pay to average pay, for example. But in other ways you could hardly be more wrong. The poor are not getting poorer, they are getting richer. Not only that, but different countries are becoming more equal in international terms. And the reason for that is the demise of socialism, the end of trying to force equality on the world. Take a look at the TED talks by Hans Rosling, like this one.

Is there still enequality oin the world? Yes. Is everything sorted? No. But are things getting better? Definitely.

[Compassionist]

Hi Compo I've commented on Michael Moore on the other thread.

Many thanks Nick for your interesting and enlightening post. We live in an imbalanced world where the rich get richer and the poor get poorer.

Actually, that's not quite true. We do live in an unbalanced world. And in some ways inequality is growing- executive pay to average pay, for example. But in other ways you could hardly be more wrong. The poor are not getting poorer, they are getting richer. Not only that, but different countries are becoming more equal in international terms. And the reason for that is the demise of socialism, the end of trying to force equality on the world. Take a look at the TED talks by Hans Rosling, like this one.

Is there still enequality oin the world? Yes. Is everything sorted? No. But are things getting better? Definitely.

Thank you very much for the link. I am most impressed by the dataset of Hans Rosling. It definitely shows that things are improving for the poor. I am certainly pleased about that.

[Alan H]

I am most impressed by the dataset of Hans Rosling. It definitely shows that things are improving for the poor. I am certainly pleased about that.

If we want things to improve further (and who doesn't?), then we might be able to learn from how we got this far, but we also need to look at how we can make sure it gets even better (which may not be the same as how we got this far). Then we should be looking at how we can accelerate this progress.

[Nick]

I don't know about the present, but historically the EU milk and butter mountains were the result of the strength of the French farming sector, and I don't think this was especially leftwing.

Err... no. THe initial subsidy came from the incredible weakness of the French farming industry, which could not compete with other producers. A leftie, protectionist solution was applied, which rewarded farmers for producing milk people neither wanted nor needed. At one time, the subsidy equated to about $2 a day per cow; double the daily income of around a billion of the earth's population.

You're right about the idiotic policies, though. As regards your remarks about Fairtrade and banana growers, I doubt whether these poor folk can simply switch their production to something else.

Indeed. I did say "in the longer term..." It may be the right course of action is to help them switch, not to preserve them in an uneconomic activity.

If they form cooperatives, are they not distorting the perfect market by grabbing a bit of market power for themselves?

Not really. The principal benefit the would derive from organising themselves into co-ops would be economies of scale. They would be able to cut costs and improve their output, thus raising profits. This has nothing to do with perverting markets, but is rather the way that markets drive growth and innovation.

While I'm at it, I want to re-phrase something I wrote earlier:

A fact which makes is as interesting as it is disturbing, is that the entire foreign aid budget of the developed world makes less than a 1% difference to the growth rates of the developing world. I suggest to you, that the protectionist attitudes of the EU (and others) more than cancel out the efforts of every charity and overseas aid budget of the developed world. That is a disgrace.

To clarify: The entire foreign aid budget raises growth rates by less than 1% of the developing world's GDP. Removing protectionist barriers to their exports would raise growth rates by a greater amount.

I don't know if anyone was misled before, but anyway....

[Compassionist]

I am most impressed by the dataset of Hans Rosling. It definitely shows that things are improving for the poor. I am certainly pleased about that.

If we want things to improve further (and who doesn't?), then we might be able to learn from how we got this far, but we also need to look at how we can make sure it gets even better (which may not be the same as how we got this far). Then we should be looking at how we can accelerate this progress.

I agree with you. Also, I think it would be helpful to cancel debts owed by low and middle income countries to high income countries.

How can protectionist barriers e.g. by EU be removed?

[Nick]

Also, I think it would be helpful to cancel debts owed by low and middle income countries to high income countries.

Debt cancellation has it's place, from time to time, but OTOH, if lenders find that their loans are not repaid, further loans, which may be the best option, are unlikely to be supplied.

In a parallel example, Argentina (IMO, for largely political reasons) complained that the Spanish owned oil company was not investing enough, so they nationalised it. It has now become a racing certainty that other companies will think long and hard before investing a single penny in Argentia.

How can protectionist barriers e.g. by EU be removed?

Vote for Eurosceptic, free-trade parties, and complain to your MP. Not much, but it's a start.....
If Hollande wins in France, which he is almost certain to do, fireworks will begin. We may be seeing the end of the Euro, and with it, a radically different Europe, and sadly, much more protectionist. It won't be pretty. In France, over 30% have voted for dangerous parties of the left and right. In Spain, there is 25% unemployment, (over 50% for under 25's). Greece and Italy are governed by technocrats, the government of the Netherlands fell because of the EU. Germany holds the key, but if Merkel does what is necessary to extracate Europe from the total failure that is the Euro, she is unlikely to survive politically.

Luckily for the developing world, China, India and Brazil have abandoned socialism, and the US never adopted it, so may provide some hope, but hold onto your hats.

[Alan H]

Phew! Posts about the NHS have been moved into the thread: The future of the NHS (if any)