Fair Trade Coffee: A sham
Awhile back, Troy sang the praises of Fair Trade Coffee. At the time, I expressed cynicism along these lines: If a commodity can have its market price raised by being tagged as somehow fairer, the motivation to game the system (in order to scheme even more profit from the commodity in question) would be overwhelming.
Well, color me unsurprised by the story in the Financial Times this morning: "Ethical Coffee Workers paid below market wages":
"Ethical" coffee is being produced in Peru, the world's top exporter of Fairtrade coffee, by labourers paid less than the legal minimum wage
I'm shocked, shocked to find out that there's gaming of the system going on. meanwhile, the Fairtrade people are utterly unwilling to deal with reality:
As the board member of one Peruvian Fairtrade-certified coffee producer told the FT: "No certifier can guarantee they will purchase 100 per cent of a cooperative's production,, so how can they guarantee that every bag will be produced according to their standards?"
I seem to recall making that point, and then being roundly criticized for it :) What Fairtrade mainly accomplishes is this: it provides a way to add markup at the consumer end without having to actually do anything at the producer end. The bottom line: if you buy Fairtrade coffee so that you can feel better about it, don't. Just buy the non-Fairtrade stuff, because all you're really doing is providing extra margin to the sellers. In fact, it's worse than that; you're providing them a huge incentive to screw you and the farmers over. To make that point more brutally obvious:
The FT has been told of Fairtrade coffee being planted in protected national forest land in the northern Peruvian jungle.
Using global satellite mapping, a Canadian NGO found that about 1/5th of all coffee production in one Fairtrade certified association was illegally planted in protected virgin rainforest.
Oops.
Comments
Re: Fair Trade Coffee: A sham
[ anonymous] September 9, 2006 15:37:58.000
Comment by anonymous
Yes, any system can and will be scammed because there are bad people all over the planet. That doesn't mean we shouldn't try to do the right things. Reference some of the data in my post on Rwandan coffee a month or so ago. I expect abuses, but do not accept them. The FT article and research you refer to bring visibility to the abuses that can happen in the system. I expect buyers who care about fair trade to shun exposed suppliers and that those market forces you prefer will help fix the system.
The whole idea and system of fair trade should not be condemned because someone found abuses. Rather, we should be pleased that our journalists are doing their jobs well enough to find such abuses, and then try to correct them.
Not buying fair trade coffee just because the system can be scammed is just silly. If you don't belive in the fair trade ideals, that's fine. Are you going to stop buying Starbucks coffee because they pay more than the market rates?
The Real Sham
[Patrick Logan] September 9, 2006 16:26:13.000
The real sham is that conventional economics and accounting actually account for almost nothing of lasting value.
True, working any of these costs into the economic equation is a challenge and naturally, people will work the system. People will work *any* system. But lets not fire pot shots at those who would want to consider how to improve the injustices they see effecting others.
Re: Fair Trade Coffee: A sham
[ James Robertson] September 9, 2006 18:39:07.000
Comment by James Robertson
The market will do a better job of correcting injustices than any set of supposedly "better and smarter" people. Fairtrade is an attempt at price fixing, which will naturally lead to rent seeking
The Market
[Patrick Logan] September 9, 2006 22:00:29.000
How is it that the people offering another choice in the market, called "fair trade" with its own parameters, are somehow themselves not part of the market?
It seems to me this is what "the market" is, a set of choices. You sell brand B and say why it is better, I sell brand A and say why it is better, the market decides. Why is it different just because the reasons for brand A happen to include the marketing phrase "it is better for the growers"?
Nothing new here
[Rick] September 9, 2006 23:15:34.000
It's just a bunch of socialists failing to understand market economics, and western, leftist hipsters falling for it as usual.
Those Commies!
[Patrick Logan] September 10, 2006 0:38:13.000
If only they'd read Atlas Shrudded!
maybe they should read more atlas shrugged
[assman] September 10, 2006 1:42:45.000
Then maybe they would get it into their thick skulls that capitalism works. It has worked for America, it has worked for Europe, it has worked for Japan, South Korea, Dubai, Hong Kong. It is now working for China and India. Capitalism has done more to raise living standards, eliminate poverty and make the world a better place than fair trade will ever do. If people are really interested in eliminating poverty than a logical question is what has been the most effective economic reform to lower poverty. By far in recent history it has been the capitalist reforms in China and India. They have improved millions of people's lives. Denying this is like the cranks who deny quantum mechanics because they just don't like it. You might not like it but it works anyways. And in the end that is all that counts.
Re: Fair Trade Coffee: A sham
[ James Robertson] September 10, 2006 8:09:02.000
Comment by James Robertson
I don't deny the good intentions of the people behind Fairtrade. What I'm saying is that they have unintentionally created a market for a higher priced version of the exact same commodity that everyone else sells for a lower price. The motivations for gaming such a system are obvious.
[avdi] September 10, 2006 8:15:35.000
Reason explored the economics and politics of Fair Trade coffee in a recent article. They found some similar discrepencies between the consumer perception and the reality.
Re: Fair Trade Coffee: A sham
[ Troy Brumley] September 10, 2006 18:54:14.000
Comment by Troy Brumley
I can't speak for all Fair Trade buyers, but Patrick's point that fair trade is part of the market. Some of us choose to shop with an eye to social justice or national interest or the environment. Perhaps "market force" theories based coming out of nineteenth century and earlier thinking needs to be revised in light of the great number of buyers who don't just look for the lowest price or best "economic" value.
[Rick] September 10, 2006 20:19:54.000
Some of us choose to shop with an eye to social justice or national interest or the environment.
That's all part of the marketing of goods. But FTC is pulling the wool over the eyes of western leftists. But that's not hard to do when your whole world view is based on emotions and not reason.
Where the problem is
[ James Robertson] September 10, 2006 20:23:23.000
Comment by James Robertson
Troy,
The problem isn't at your (the end buyer) end. The problem is back on the production end, where the checks for compliance are few, and mostly ineffective anyway. The producers know that they can make additional profit if they can get some of the coffee they sell labelled as "fairtrade" - which seems to be exactly what's happening here.