What’s So Fair About Fairtrade?

I am frequently amazed by how poorly-tuned my own economic intuitions are, or rather my own economic ‘antennae’. I shouldn’t be amazed. I know full well that most of us know too little about economics, and are poor at guessing at the economic impact of our own choices.

Today’s case in point: Fairtrade coffee and chocolate.

I used to worry merely that the brand name “Fairtrade” had implicitly claimed some sort of monopoly on the adjective “fair,” risking convincing consumers that only that kind of trade is fair (or fairer? or most fair? or what?) and that other kinds are not (not usually? not ever? or what?).

But now I’m smacking my own forehead for not having seen the obvious (?) economic point that by favouring one set of coffee farmers (those who meet its special requirements), the Fairtrade system was thereby disadvantaging some other set of farmers. That is, unless it increases the total demand for coffee, growing demand for Fairtrade coffee necessarily shifts wealth from one set of farmers to another. And since I missed (mostly through not having thought about it enough) this basic economic point, I also never got to a crucial ethical point, namely that we ought to think carefully about whether that particular transfer of wealth is, on balance, a good thing or not.

For more on this, check out this piece by Andrew Chambers, writing for The Guardian: Not so fair trade. Chambers points to a number of reasons for thinking that Fairtrade certification is at best a mixed blessing for the coffee farmers of the world, taken as a group.

(See also this Wikipedia page summarizing Fair Trade Impact Studies. The conclusions seem mostly cautiously positive. But note that these studies seem mostly to look at the impact of Fair Trade on farmers who participate, and (seemingly) ignore the impact on those farmers’ competition, including the sometimes-even-poorer farmers who don’t get to participate.)

OK, so maybe buying Fairtrade isn’t all that a conscientious consumer might hope it to be. Maybe the farmers involved don’t get as much of the Fairtrade markup as we’d like. And maybe the program has redistributive effects that are hard to gauge. But is buying Fairtrade coffee or chocolate at least better than nothing? I’m not so sure it is. In the absence of clear evidence of a net positive impact, I think there’s reason to resist this particular bandwagon, particularly if (as I alluded to above) it is setting itself up as “the” ethical way of buying coffee, chocolate, etc.

So what’s a concerned coffee-buyer to do?

One alternative, if you really are concerned about the plight of poor coffee farmers, is to ignore the Fairtrade label, buy whatever coffee you love most, and send a cheque directly to a well-run charity that promotes, say, literacy or healthcare in a coffee-growing nation. Now, admittedly, most of us won’t do that. That’s why I’ve said nice things before about ideas like (Product) Red, which aims to harness the power of consumerism to good ends. I actually think using your own consumption patters to get yourself to give money to causes you care about makes good motivational sense. But in this case, for now at least, I’m going to be glad that every time I buy a cup of coffee — just like every time I buy cheap consumer goods at Walmart — I’m helping someone in a much poorer nation earn a living.

13 comments so far

  1. Jeffrey on

    Nice post. But can we ask: WWKD? As in: what would Kant do? I can’t claim to be a Kantian, so I’ll try to channel my inner Bowie.

    Bowie draws on Kant to argue that we should press MNCs to raise the wage and labor standards of their overseas suppliers. I don’t think he thinks this is cost free. The most likely cost is that those firms will be able to employ fewer workers going forward.

    So consequentialist reasoning might tell against raising wage and labor standards in developing countries. But a Kantian might emphasize the relationships that people have with each other. They might say: you shouldn’t treat people (that you’re in relationships) with as mere means, or you must treat them with respect. This does not entail having to *benefit* others that you’re *not* currently in relationships with.

    So might the fair trade debate be interpreted as consequentialist vs. deontology. As in: if I want to benefit as many people as possible, then I should buy a lot of coffee from the poorest people I can, at the lowest prices I can (so as to buy the most coffee). But respecting people might require, when I enter into a relationship with them (e.g., to buy coffee), paying a slightly higher price.

    Ok, I’m rambling on here. Just my (or Bowie’s possible) two cents.

  2. Chris MacDonald on

    Jeffrey:

    Thanks for your comment. And I agree with the over all theme: consequences aren’t all that matter.

    But I’m not sure that Fairtrade is the respectful option, either. Some, at least, will charge that it amounts to wealthy Westerners fiddling with markets they don’t understand in order to salve their consciences: using coffee farmers “as a means”, in Kantian terms.

    Regards,

    Chris.

  3. Nurglitch on

    The part of your blog-post that struck me the most was your comment about the common ignorance of most people with economic impact of their choices. In my business we do something called “cash flow management” which is essentially budgeting but also managing the goals for which the clients are budgeting and thus connecting that budget to their overall financial plan. Why am I bringing this up? Well, in my limited anecdotal experience very few people bother to rigorously track their own cash flow, let alone consider the logistical chains by which capital is allocated in a global economic system (system makes it sound so organized…). So it’s interesting to see people, usually people who read Adbusters and consider themselves bright cookies, completely buying into the Fair Trade marketing without consider the question of ‘Fair for whom?’

    But also a comment on branding, there’s so-called “Ethical Investment Funds” out there that purport to only buy into ethically based securities; if you don’t want to fund arms manufacture, there’s likely a fund that can be sold to you as ethical because they aren’t in that business. Similarly there’s “Islamic Investing”, so no charging interest (capital gains and dividends are halal, apparently), investing in pork bellies, etc. In both cases people buy into them because they want to follow some additional set of rules on top of the usual regulation. What they’re usually sold is a fund that doesn’t cover the prohibited securities anyways, but is now more attractive thanks to re-branding and consumer indifference.

    -Rob

  4. Shel Horowitz, author, Principled Profit on

    Chris, I can tell you why *I* buy fair trade. It’s because I found out a few years ago that much of the world’s cocoa crop is harvested by child labor under conditions approaching slavery, and I didn’t want to be a party to exploitation of children.

    While several of the major chocolate processors have since tightened up their buying habits (thanks in large measure, I believe, to the existence of the fair trade movement), the best assurance I’m not being a party to child slavery is to buy the certified stuff.

    Here’s the article that convinced me to change my chocolate habits: http://www.frugalmarketing.com/dtb/chocolate.shtml

  5. Chris MacDonald on

    Shel:

    Thanks for your comment.

    Child slavery is always bad. Child labour isn’t always bad. So in order to support Fair Trade, I’d need to know not that it prevents child labour, but that it prevents child *slavery* but permits justifiable child labour. Also, I’d want to know not just that it makes things better at FT certified farms, but that it makes things better over all.

    Also, note that my blog entry is specifically about Fair Trade (TM) certification, not “fairer trade” or the “fair trade movement” more generally.

    Chris.

  6. Jeffrey on

    Thanks for the reply, Chris. Let me come back at you.

    Perhaps some westerners are “salve-ing” (is that a word?) their consciences “using” coffee farmers. But it seems wrong to suppose that this is happening in the majority of cases.

    Consider: what you are doing when you buy “regular” trade coffee and give the extra money to starving people. Are you “using” starving people to salve your conscience? I wouldn’t imply that you were.

    In the same way, a person who wanted to pay farmers more than market prices for their beans (i.e., free trade prices) might genuinely be trying to respect those with whom he is dealing.

    Perhaps this isn’t the best result in consequentialist terms, but I still think it has a fair claim (pun intended) on being a respectful result.

    Again, I’m channeling my inner Bowie here. On his view (and Kant’s) there’s no obligation to do what is best for humanity, only to do what respects those with whom one is dealing.

  7. Chris MacDonald on

    Jeffrey:

    This is starting to sound like an argument against Kantianism as a decision procedure! It’s hard to figure out, in some cases, what should count as respectful.

    My worry is that most of us have too little information to make buying Fairtrade an especially respectful option. It strikes me a bit like flipping a quarter to the homeless guy on the street. It makes me feel good then and there, but if I really *cared* (more) about the plight of the homeless, there are better ways for me to help.

    But to be clear: this isn’t an argument against fair trade; just against assuming that Fairtrade (TM) is better (in either consequentialist or Kantian terms).

    Chris.

  8. Jeffrey on

    Your points seem reasonable to me. (I agree that Kantians owe us more by way of an account of what respect requires).

  9. Devin on

    I just got around to reading this post and don’t really have much to add philosophically, but you may find this related article from a development perspective interesting.

    http://docs.google.com/fileview?id=0B5By25qGWLAXNjc0YjdmNzgtNTlmMi00OWUwLTkwZTMtZTY3NzAxZGVkOTMz&hl=en

    It’s a more detailed look at the effects of certification programs on coffee farmers in Nicaragua with some fairly skeptical conclusions.

    What’s pointed out in the article though is that there’s limited competition between fair trade producers and regular producers because farmers who participate in certification programs tend to sell most of their coffee on the regular market anyway. While you’re right that on the consumer side, consumption patterns can have an effect on increasing demand for fair trade coffee at the expense of regular coffee, the certification process and its problems seem to limit this effect quite a bit. It’s still a great theoretical criticism though.

  10. Robin on

    Potentially of interest:
    http://www.blackgoldmovie.com/

  11. […] at least some other cases, the notion of “fair trade” has itself been subject to pretty convincing criticisms, including being criticized for having perverse consequences (i.e., making worse off the very […]

  12. […] That makes it awfully hard, if not impossible, to boost net wages in the coffee industry, in the long run. Now, that by itself is nothing like a conclusive argument against fair trade coffee. But a sound understanding of the economic role of prices does give reason to pause before we accept the notion that we can make people better off simply by voluntarily paying more for a non-scarce commodity. (I’ve blogged before about other problems with the fair trade notion. See: What’s so Fair About Fairtrade?) […]

  13. Ethical Closet? | on

    […] of the ethical factors critics often put forward with regard to ethical shopping, such as buying fair trade garments, buying locally, or avoiding high-pesticide crops or child labour. Of Rees’s 5 […]


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