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If, amid all this Tesco competition commission business, you’re getting a bit sick of being told what goods you should buy and where you should buy them from, I’ve got some bad news for you.
It’s Fairtrade Fortnight. So you can expect to be bashed over the head about your consumer choices a lot more over the next two weeks.
In case you didn’t know, Fairtrade goods are those ones (usually bananas and coffee, but increasingly lots of other stuff as well) with the little blue, green and brown logo on them in the supermarket. Another way to tell the Fairtrade products is that they often cost you more, but offer no discernible improvement in quality over their cheaper, presumably UnFairtrade, cousins.
That’s because you’re not paying extra for better quality. You’re paying extra so that the people who made the goods get more money, and thus a better quality of life.
A noble goal. Trouble is, apparently it doesn’t go to the people who actually need the help most…
Just in time for Fairtrade Fortnight, the Adam Smith Institute has come out with a report saying that the Fairtrade movement doesn’t actually help the most impoverished farmers.
Now I have to make clear upfront that – as you might be able to guess from the name – the Adam Smith Institute is a free market think tank. As such, they are unlikely to publish a pamphlet singing the praises of a scheme devoted to economic intervention. But I suspect they have a point.
Why we’ll pay more for a Fairtrade sticker
So what is Fairtrade anyway? The idea behind it is essentially that producers of goods in poor countries are given a better-than-market price for their products in order to give them a decent wage and ensure they can develop their business, rather than being gutted every time the bottom falls out of whichever market they’re in.
Consumers have lapped it up. We bought nearly £300m worth of Fairtrade products in 2006, and £493m last year. Tate & Lyle has just said it’s going to turn over its entire operation to Fairtrade sugar – 40% of the cost of each bag of sugar will go to its growers and producers in
And why not? It’s nice to feel that our consumer choices are doing some good. Most people don’t want to exploit other human beings if they can avoid it at a minimal cost to themselves, particularly in a public arena where other people can scrutinise your choices.
Sure, they’d probably pay a domestic servant or a Polish plumber far less than the going rate if they can get away with it. But if you’re talking about a few pence on the price of a cup of coffee, for which you get the pleasure of the till operator and other shoppers seeing that you’ve made the ‘ethical’ choice, then it’s no surprise that Fairtrade has been a hit.
But there are issues with Fairtrade. For one thing, it’s a major brand. And as the Adam Smith Institute points out, Fairtrade’s rapid growth and the labelling of towns across the country as ‘Fairtrade’ towns means that other ethical ‘brands’ with different approaches are squeezed out. Not everyone agrees with Fairtrade’s promotion of farming co-operatives, for example, which some argue are more inefficient and prevent people from developing beyond basic agriculture. If
Stop the unfair subsidies instead
The core problem is that in the end, Fairtrade comes down to hand-outs. The point of a free market, when it’s allowed to function, is that the pricing mechanism shows people where there’s a need – and therefore a profitable opportunity – to be fulfilled. Oil prices rise, we go and dig for more oil or find a substitute. Food prices rise, we grow more food. Coffee prices keep collapsing – you find a better industry to work in.
As Ceri Dingle of educational charity WorldWrite tells The Telegraph: “Fairtrade is much more about satisfying the Western consumer’s guilt. No country has ever become a successful economy by being a farm – they need to industrialise.”
However. It’s easy to be cynical about these things, particularly when idiot celebrities swarm all over them waving plastic armbands and spouting nonsense about the evils of shareholders. And it’s entirely true that as Tom Clougherty of the Adam Smith Institute says, what we really should be campaigning for is truly free trade, with tariffs and subsidies scrapped.
But equally, from that point of view, it’s hard to complain about consumers choosing to give select coffee growers in
The good thing about Fairtrade’s success is that it shows that consumers – given a free choice – are willing to pay a premium to back products which they believe are ethical and leading to sustainable development. So in the absence of any real effort by governments to get rid of the subsidies that really cause the pain in the developing world, then if we’re going to object to Fairtrade, we should be looking for better models to follow.
For example, the ASI cites Café Britt as a good non-Fairtrade alternative – these Costa Rican coffee bean farmers have ‘climbed the economic ladder’ by doing all the roasting and processing as well as growing the beans. Or there’s Ugandan group Good African Coffee, for anyone who’d rather buy from a genuinely developing country rather than the arguably pretty developed
As Fairtrade grows bigger, scrutiny of its economic logic will only increase. The ethical sector is ripe for smart entrepreneurs to come up with genuine ways to benefit developing countries, while turning a profit and avoiding reliance on hand-outs. Fairtrade will find it has to compete for the ethical pound, which should be good news for the beneficiaries of ethical produce. That’s the beauty of free markets.
Turning to the wider markets…
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Nikkei up 3% on sovereign wealth fund rumours
In London, the blue-chip FTSE 100 index swung between a high of 5,970 and a low of 5,863 on Friday but eventually ended the day 43 points in the red, at 5,888. Mortgage bank Alliance & Leicester rebounded from previous days’ losses to top the leaderboard, closely followed by Lloyds TSB. For a full market report, see: London market close.
On the Continent, the Paris CAC-40 closed 34 points lower, at 4,824, on Friday. In
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