Devil’s advocate: fair trade

Ethical choice or overhyped green brand? Free market ideologue Richard D. North takes on fair trade

Fair trade is a brilliant idea - consumers see a logo on a label, pay a little extra, and help build business and society in the “Third World”. Even better, they feel good about themselves. It is development aid for the post-Thatcher, consumerist world of brand positioning.

In line with that, fair trade even helps the reviled supermarkets, which bear no extra cost but gain kudos.

Letting the supermarkets off the hook

One could argue that fair trade only mitigates some of the toughness of the supermarkets’ tough buying habits. That poses a paradox, because it’s still an open question how responsible we feel supermarkets are for the conditions of the people who supply them.

I am inclined to think supermarkets should apply decent minimum standards, and then stand back - I’d prefer ordinarily decent standards to special pleading.

Fair trade is a minnow

The UK market for fair trade now stands at around £300 million a year and “affects 100 million farmers and their dependants”, according to a House of Commons International Development Committee report in 2007. So far as we know, conventional economic growth – and decent government - is still the fastest and surest way of making poor people less poor.

The hard-nosed “unfair” direct investment in developing countries, at $800bn a year utterly dwarfs fair trade in its power for good. Indeed, it is the distraction from real-world economics that most irritates free-market ideologues like me about fair trade.

What does fair trade achieve?

Is fair trade the most efficient way of doing charity? I’d rather give to well-established religious groups with their cheap, stable, well-informed local workers doing definite good to very poor people.

Even in principle it’s hard to know whether charitable or any other subsidies work well for economic growth. In practice, there’s a lack of serious evidence about many fair trade schemes.

The fair trade ideal tends to assume that small, organic producers, often working as co-operatives, are the best way to produce wellbeing and, say, coffee. And it is also assumed that these producers are so virtuous that it is worth subsidising them to stay in business against their often more commercial competitors, or the wider market.

It almost certainly seldom reaches the very poor, who aren’t organised enough to take advantage of it.

One suspects that there are plenty of cases where there’s waste and worse, and that in others whole regions are improved. In some cases fair trade may do unique good, in the sense of drawing in donors who wouldn’t go for any other method. Quite often, poor producers can’t begin to behave as well as western campaigners assume they should.

From aid to trade....

The kind of people who liked Oxfam, Direct Action, and Christian Aid in the 1960s and 1970s were keen on the idea that poor people in the tropics were better off as self-sufficient peasants. They were, in particular, drawn to the thinking of President Nyerere of Tanzania, with his village-based view of economics.

There was the problem of the degree to which Nyerere forced his people into the villages he had in mind for them. But that was arguably a relatively slight embarrassment compared with the imagined merits of the post-colonial African socialism he espoused.

The development radicals were also increasingly aware that big, state development projects funded by western aid funds tended not to work. In this, at least, they agreed with the free market types. Bit by bit, the free-market sceptics seem to win most of the development arguments.

The worst problem for very poor countries was now often accepted to be how little they were exploited by conventional capitalism. There was increasing interest in the idea that poor countries might do better with “trade, not aid”. But “free trade” has a terrible reputation with the soft left, green liberals.
The World Trade Organisation, which trumpets the merits of unfettered trade, was the liberals’ favoured ogre. Besides, the aid that was given to promote business was assumed to be promoting neo-liberal economic policies in client countries.

The bottom line

The idea of fair trade is a very media-friendly way of simultaneously showing that the development movement has grown up, but is also still radical.

Fairtrade may do a bit of good, but it may not do it very efficiently. Maybe we should continue buying its products, but let’s not imagine that “brand aid” is going to do much good - free trade is far more important.

Richard D.North is a journalist, author, and founder of Living Issues.