Wednesday, November 15, 2006

Running up that Hill

Following my brief post on Fairtrade, Bishop Hill wades in on the side of Councillor Ayling and your humble Devil. BH does consider, for instance, John B's views in the comments, but continues…
But I still think it's wrong. Fairtrade is based on two great lies.

Firstly there is no unfair capture of profits by middlemen. We know this because Fairtrade has to charge a premium to the rest of the market. If they were cutting out middlemen then they should be able to at least match the free trade product if not undercut it, and still give a better price to the suppliers.

But the bigger lie is that Fairtrade makes the poorest better off. Buying Fairtrade will have to two effects and neither will help the poorest.

Firstly it should make the market smaller. Fairtrade is more expensive than free trade and basic economics tells us that a price rise will cause a drop in demand. A smaller market will tend to put some coffee farmers out of business. I would have thought that it was more moral to have two poor farmers than one rich one and one dead one. (I may be exaggerating, but you get my drift).

Secondly, unless Fairtrade manages to completely dominate the market, some farmers will remain outside its umbrella. As the market shifts towards Fairtrade, these poorest farmers will actually lose out as they see their customers are taken from them by Fairtrade cooperatives. The effect of Fairtrade is therefore a double whammy for the poorest farmers - a shrinking market and a loss of customers to Fairtraders. This can have only one effect on their wages, and it's not a good one.

The argument the Fairtraders make to justify their premium price is misleading. We should do the moral thing, therefore: buy exploitation coffee and bid up the wages of the poorest.

This would seem to be the case to me as well.

The other thing that is worth considering (assuming that the article that I read in Private Eye is correct) is that prices for items such as coffee fluctuate. FairTrade fix the prices—usually a few pence above the prevailing market rate, admittedly) with their farmers for a set term; this means that those farmers are, indeed, insulated from a price crash. However, it also means that they do not receive more money if the price of their commodity rises. These rises will only be beneficial to the farmers at the next price negotiation.

Ach, whatever, the fucking stuff is far more expensive that it should be given the minute extra that the farmers receive; someone is making a lot of cash out of the whole business and it is not the farmers themselves. I don't have a problem with that per se (I can, and do, choose not to buy their overpriced shit), only with the kind of sanctimonious cunts who buy FairTrade stuff and then try to lecture me about it.

Those bastards can stuff their organic chickpeas up an orifice or two, frankly...


Anonymous said...

I've fortunately noticed that it is that urban horror, the organic or even worse vegetarian restaurant, that tends to serve 'Fairtrade' coffee. It tastes like roasted shite dissolved in week old bathwater.
I am led to believe that the best coffee is produced by starving peasants cowering under the yoke of oppression.
I salute their sacrifice.

Anonymous said...

Prices for all commodities, fluctuate according to market forces, environmental and social factors. Whether it is coffee, corn, porkbellies, or diamonds makes no difference. This is what derivatives were invented for, hundreds of years ago; so that farmers could get a fixed price for their produce which was known before they started planting. Fairtrade fixing the price is nothing new.

Anonymous said...

"Whether it is coffee, corn, porkbellies, or diamonds makes no difference."

By "social factors" I assume you are referring to a huge multinational company illegally monopolizing and limiting the supply of a non-scarce resource to control the market price?

Anonymous said...

I love the irony of your Google ads on the left!

Anonymous said...

Pro-Fairtrade point 2: if I'm a British(industrialist / sheep farmer / strategy consultant) then I can take out insurance against stuff going wrong that will knacker my business, based on rational decisions and with the premium priced on a rational basis.

If I'm a third-world coffee farmer, I'm not sure it's reasonable to expect me to hedge coffee futures. Again, the Fairtrade organisation effectively uses collective power to provide protection against unexpected problems.

Assuming there were a developed agricultural insurance market in (insert LDC X here), perhaps the story would be different. Again, you guys are applying the principles of 21st century developed capitalism to situations where it just isn't quite relevant.

John B

Anonymous said...

It isn't quite relevant because of the protectionism of the 'caring' Western governments. Supporting a non-solution doesn't make you right or a better person, it just damages those who are not in the collective/cartel.

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