“Fair Trade” Hurts Third-World Poor

We’ve never been impressed with the self-righteous moral preening of the “Fair Trade” crowd. Simply paying a few cents more for some politically correct coffee doesn’t sound like much of a sacrifice to us.

Further, the “Fair Trade” crowd typically has certain political views — opposition to free trade and to globalization, for example — that are sharply adverse to the interests of poor people in the Third World. It’s long been clear that the real path to a better life for Third World poor lies in market-oriented economic development. Impeding that does vastly more harm than “Fair Trade” schemes can even begin to repair.

But now the evidence is becoming clear that “Fair Trade” actually does little (if any) good.

Thus we have a large study, funded by the British government and conducted with a high degree of academic rigor. The results are summarized on the website of the University of London.

Research finds Fairtrade fails the poorest workers in Ethiopia and Uganda

24 May 2014

Fairtrade certified coffee, tea and flowers do not improve lives of the very poorest rural people in Ethiopia and Uganda, according to a four-year research project conducted by leading development economists at SOAS, University of London. The project studied rural labour markets in areas producing crops for export, under different institutional conditions that included, in some research sites, Fairtrade certification.

Low pay for wage workers, particularly women, and limited access to schools, health clinics, improved sanitation and other social projects in rural areas were among the findings in ‘Fairtrade, Employment and Poverty Reduction in Ethiopia and Uganda’, a report published today.

Teams of highly-trained fieldworkers studied wages and working conditions in twelve areas growing coffee, tea and flowers in Ethiopia and Uganda. As well as reviewing existing studies, the researchers collected new, detailed micro-level comparative evidence from areas producing agricultural exports on how rural labour markets affect poor people’s lives.

The study reveals that wage workers are commonplace on ‘smallholder’ farms in the areas studied, where between a third and a half of listed adults were recent agricultural wage workers. The research also found that these agricultural workers were much poorer than others. Wages were lower on average in research sites defined around Fairtrade certified producer organisations than in sites without Fairtrade certified producers.

Key findings from the report:

• Most rural people in Ethiopia and Uganda enjoy a much higher standard of living than seasonal and casual agricultural wage workers. In rural areas, manual agricultural wage workers are the very poorest.
• Where Fairtrade flowers were grown, and where there were farmers’ groups selling coffee and tea into Fairtrade certified markets, wages were very low – especially women’s wages. In fact, wages in other comparable areas and among comparable employers producing the same crops but where there was no Fairtrade certification were usually higher. This was not because the Fairtrade certified cooperatives were in more marginalised, deprived areas.
• In some areas dominated by Fairtrade certified cooperatives workers in the samples did appear to have greater access to some fringe benefits (e.g., free meals in two sites, or on other sites more access to loans) than workers in areas without Fairtrade certification. Even here, though, other aspects of work conditions were often worse.
• The findings on lower wages held true even after the effects of scale and other differences across workers and sites were taken into account in detailed statistical analysis, contrary to the claims made in the Fairtrade Foundation’s own statement about this research.
• Fairtrade publicises its contribution to the funding of schools, health clinics, improved sanitation and other “social projects” in rural areas. From hours of quantitative and qualitative interviews with respondents and others, including in some cases cooperative managers, the SOAS researchers found that the poorest often had no access to these ‘community’ facilities in the research sites, even when they were or had been wage workers on the processing stations or for producer members.

A trenchant commentary on a British website describes the mentality behind “Fair Trade.”

From its very inception, the concept of Fairtrade was rooted in maintaining low ‘sustainable’ horizons for the poor by those who consider people in Africa and other parts of the Third World to be intrinsically different to the rest of us. The movement did not originate with the poor farmers of the developing world, but with Western NGOs and their army of gap-year do-gooders intent on imposing their reactionary ‘small is beautiful’ values on an Africa desperate for change.

According to the Fairtrade worldview, the poor farmers of the world are in fact quite happy with their lot and only desire a stable, if low, price for their produce. Once this is in place, they will be free to enjoy their simple idyllic existence. The fact that Western countries left extreme poverty behind through rapid industrialisation and urbanisation does not apply to Africa, they say. Instead, it is of paramount importance that Fairtrade ‘promotes and protects the cultural identity and traditional skills of small producers.’ They should receive enough money never to be in danger of starvation, but not enough to afford a foreign holiday or to send a child to university or, indeed, do any of the things we in the West enjoy, lest it undermine their cultural identity.

Thus the attitudes of contemporary urban, liberal yuppies begin to look a lot like those of the traditional European nobility. Yes, we want the peasants to live better, but we don’t want them to start rivaling us. So long as our moral and cultural superiority is recognized, we are all for making the peons better off. Noblesse oblige. But only a bit better off. And we aren’t going to be too scrupulous about whether we are really making the poor better off. The key thing is that it makes us feel better about ourselves.

Church Activists Oppose Free Trade: Compassion or Ideology?

From The Institute on Religion and Democracy:

An initiative of the Presbyterian Church (U.S.A.) Hunger Program is organizing U.S. and overseas activists to oppose free trade agreements and resist corporate investments in developing countries. This “Joining Hands” initiative was featured in a workshop at an April 5 PCUSA-sponsored conference on “food justice.”

Joining Hands describes itself as “an initiative of the Presbyterian Hunger Program that fights the root causes of hunger by sparking the formation of networks in developing countries. These networks lead the struggle against hunger at a local level while working with PC(USA) presbyteries and congregations to address global hunger issues.” Hunger Program associate Valery Nodem hailed Joining Hands as “the new approach in the church to do mission.” With the rest of the Hunger Program, it is funded through the One Great Hour of Sharing offering.

The Rev. Alexa Smith, PCUSA staff associate for Joining Hands, characterized the initiative as an effort to shine light into the dark places of international commerce. Developing country decisions to enter free trade agreements and allow foreign investment are often made without consulting the people most directly affected, according to Smith. “Most of the decisions that were causing people problems were not public decisions,” she said. “They were decisions that were made in the shadows.” Smith asked her audience to imagine a poor farmer caught by surprise when “a bulldozer was moving toward your house to displace you because the government had leased the land you were living on to a corporation very cheaply to grow a monocrop for export.”

The Joining Hands associate saw such incidents as symptomatic of a global problem: “There are 1.5 billion people in more than 50 resource-rich countries who remain mired in poverty.” Although the resources are abundant, many of those countries have “very authoritarian governments” that appropriate the proceeds from foreign investment for themselves and their loyalists. “Most of the money is siphoned off at the upper level and never filters down for basic needs like infrastructure, health care, education, and housing,” Smith charged.

Here is the dirty little secret of the activists: they don’t really care that much for poor people in poor countries.

They doubtless think they do, but they in fact are motivated by something else: an hostility to capitalism and free markets.

There is no other sufficient way to explain their embrace of crackpot pseudoscience on certain issues:

Nodem was encouraged that people, such as the networks supported through Joining Hands, “are becoming more aware and they are starting to fight back” against the corporations. He counted rising numbers of “divestments or abandoned or postponed projects” as victories for the poor.

Nodem was particularly suspicious of genetically modified organisms (GMOs) developed by multinational corporations. He rejoiced to recount how Haitian farmers had rejected a gift of seeds from Monsanto. Nodem was also pleased to report that “more and more countries around the world have banned or put in place GMO restrictions.” In the United States, he hailed “the whole organic thing” that disdains fertilizers and pesticides.

These folks, like Marquette students who want the university to boycott Palermo’s Pizza, care more about feeling self-righteous than about actually helping those in need.

As Alan F.H. Wisdom points out:

There is no reason to doubt the stories of abuse communicated through the Joining Hands program. In a fallen world, where authoritarian governments and other unjust structures leave many people powerless and vulnerable, it is not surprising that sinful individuals and institutions take advantage. Lack of transparency can make the problems worse.

Free trade may in some sense globalize the opportunities for exploitation. Yet at the same time free trade limits exploitation by undercutting the old local monopolies that used to hold all power. More open economies allow the poor and others to take the initiative in providing for their families. Some of them create their own jobs as entrepreneurs; others find employment with the very corporations that the PCUSA program habitually denounces. All of them benefit from the unprecedented abundance of food produced with the assistance of despised technologies such as fertilizers, pesticides, and genetic modification.

Indeed, this opening of new markets and new opportunities is the means by which hundreds of millions worldwide have emerged from poverty in recent decades. The UN’s Food and Agriculture Organization reports that over the last 20 years the proportion of undernourished persons in the world has dropped from 19 percent to 12 percent. This is the story that the PCUSA’s Joining Hands initiative is not telling. Perhaps corporations are not always the bad guys.

These clerical leftists are not well-meaning people who are just mistaken. They are rigid ideologues who are putting their anti-capitalist ideology ahead of the interests of poor people in the Third World.

The Political Version

Globalization Helps the Poor

From Alvaro Vargas Llosa, and account of a conference he attended where leftists derided free trade.

MONTERREY, Mexico—Is global capitalism making the poor even poorer, or is it in fact rescuing millions of people out of their misery?

I recently had the chance to participate in a series of debates here about this issue organized by Foreign Policy magazine and Letras Libres, a Mexican cultural publication. Nothing I heard at that meeting changed my conviction that the glass is half-full despite the doomsayers who predict horrific calamities.

Ever since the Industrial Revolution, poverty has been significantly reduced throughout the world. Two hundred years ago, the average income per person worldwide was the equivalent of less than $2 a day; the figure is $17 today. This fact is relevant to the current discussion on globalization because, even though the information technology revolution, biotechnology, the emergence of new world players and outsourcing may give us the impression that we are in the midst of something entirely new, we are simply witnessing a new phase in the process of innovation that is the market economy—and this began a few hundred years ago.

The fact that 20 percent of the world’s population is extremely poor should not make us forget that millions of lives have improved dramatically in the last three decades. Illiteracy has dropped from 44 percent to 18 percent, and only three countries out of a total of 102 included in the U.N.’s Human Development Index have seen their socioeconomic conditions deteriorate. China’s economy used to represent one-26th of the average economy of the countries that comprise the Organization for Economic Cooperation and Development; today it represents one-sixth.

If globalization is so good, why is it that leftist activists -- including the “social justice” crowd around Marquette -- don’t like it?

The reason is simple. It’s the market helping the poor. It’s global business, and not government bureaucrats, nor political activists nor multinational organizations that are creating the benefits.

Thus the process is going on without the transfer of a massive amount of power to the people with whom the “social justice” crowd identifies.

And truth be told -- although they would never admit it, even to themselves -- those folks would rather that poor remain poor than for the poor to prosper in a way that doesn’t increase their power.

Yea, Keep Them Out!

France: Economy Mired in a Statist Morass

You know that a free market economic philosophy has become dominant when even a Mainstream Media organization like the Associated Press blames the economic woes of a nation on government control.

But that’s what the wire service did in a report on France.

PARIS - Clusters of migrant workers mount the train’s crowded carriages, leaving their families and filing across the border to work at jobs more plentiful and lucrative than at home.

These hungry young men and women are not from lands riven by war or financial ruin, but from France — one of the world’s richest countries, and straining to stay that way.

Their knapsacks bear laptops or bottles of champagne, and their transport of choice is the Eurostar train, zipping them beneath the English Channel to London, a city radiating growth and opportunity.

The French workers are leaving an economy that is treading water while those of developing nations, and other wealthy ones, speed ahead. They’re fleeing a land once seen as a symbol of superior quality but that now even the French are convinced is in decline.

Half of French households live on less than $1,990 in income per month. Unemployment hasn’t fallen below 8 percent since 1984. Public debt has quintupled since 1980 to fund a welfare state that more people depend on for survival. Imports are spiking and fueling a ballooning trade deficit. France was among the top 10 richest countries per capita a generation ago — today’s it’s slipped to 17th place.

France is now on the cusp of change, choosing a new president who will be expected to yank the state-dependent economy out of its doldrums — but probably won’t. None of the candidates to replace conservative Jacques Chirac in the first round of elections April 22 appears to be a French Margaret Thatcher who would force profound and painful reform.

Fresh ideas

Some of the freshest economic ideas are coming from Francois Bayrou, a champion of the average guy riding on disillusionment with the left-right paradigm. Bayrou, polling in third place, would allow businesses to hire two employees free of payroll taxes and social charges for the first five years — a shocking proposition here. But he would govern by consensus, a formula certain to bury bold reform.

Across the spectrum, jobs are question No. 1 for French voters mulling their presidential choices.

“I’d like to live in France. But I don’t want to work there,” said Nicolas Boutry, whose family lives on the French Riviera but who works for a London bank.

“In France you either search eternally for a job, or you stay eternally in a job,” he said.

Strict French labor laws are dubbed “worker-friendly,” yet millions can’t find work. Industries decamp to countries like China where hiring is cheaper and easier. Job seekers leave for countries like Britain with more job openings.

It would take major upheaval in France’s labor markets to draw people like Boutry home. A dramatic solution, too, is needed for the chronically unemployed and for the minorities in French housing projects, where riots broke out in 2005 and up to half of young people are unemployed.

A generation ago, debt-laden, strike-suffering Britain looked enviously at France, which boasted lavish worker protections and paid its state-run businesses to innovate.

History, however, favored free markets. Thatcher’s unpopular economic reforms in the 1980s left Britain better placed to benefit from fast-changing labor markets and accelerated capital movements.

“We should not be afraid today to be inspired by what works. The British model managed to create a society of full employment, peaceful and confident in the future,” wrote Pascal Boris of France’s BNP Paribas bank, who heads a group of French executives in Britain.

Bono: Capitalist Exploiter

From the free market Ludwig von Mises Institute, an account of how a certain rock singer and premier moralist actually behaves.

Bono and his wife, Ali Hewson, have been traveling the globe endorsing their new clothing line, Edun. This clothing line promises to create Fair Trade–like principles which respect the workers who make the clothes and pass on the workers’ story.

As Ali Hewson says with an interjection from Bono, “It’s making people aware of the story of clothes . . . do you really want to put on something that’s made — with despair.”[1]

Bono promises to have decent working conditions and to abstain from employing child labor.

According to the factory manager in Lesotho, Thabang Kholumo, the wages paid are 600 rand (currently $87.68) a month. This is a little over 50 cents an hour assuming a 40-hour work week.

Surely these are twice that of other factories in the area? Not so. The country of Lesotho has minimum-wage laws by profession. According to a report highlighting current labor market conditions in Lesotho on the Global Policy Network website,[2] the minimum wage for trained sewing machine operators is 650 maloti ($94.80) a month.[3]

Unless there were specific fluctuations in the currency price at the time of Thabang Kholumo’s information, Bono would have been paying below the minimum wage allotted for textile workers. In any event, he doesn’t seem to be paying more than the required minimum.

And further:

Thabang Kholumo reveals that 125 female employees make 3,000 items a day. These items retail for $50-$300! A pair of Edun jeans will cost you a pricey $275. You can do the math for yourself. One pair of jeans $275 and one month of work $87.68 in Bono’s “sweatshop.”

According to Bono’s mistaken economic theories, he is no champion of the poor in his own factory. These wages are incompatible with the message Bono and Ali are trying to portray. Bono speaks about creating a new business model that can be emulated by other companies. In fact, he is doing what others are doing and have done for a very long time, and it is good for everyone.

So Bono is paying workers a wage that is -- by American standards -- wretched, and making a ton of money off them.

So that makes him evil, right?

No, he’s paying a wage that looks very good compared to the subsistence agriculture to which his workers would otherwise be relegated.

And work like Bono is providing is a necessary stage in the economic development of Lesotho. You don’t go directly from subsistence agriculture to Silicon Valley high-tech industries.

Bono may be paying below-minimum wages today, but that will not last as the productivity of his employees improves. One thing that would speed up this process is even more foreign “sweatshop” investment, which would stimulate competition for Lesotho’s labor force even more. Countries like Lesotho need more sweatshops, not fewer. Perhaps Bono can persuade some of his multimillionaire entertainment industry friends to invest with him.

To say that Bono’s factory is something special would not be truthful. The Edun clothing line is doing well, and is employing hundreds of people. That’s great. It’s called capitalism.

But what Bono is is a hypocrite. Much like Al Gore’s buying carbon offsets to support his lavish lifestyle, there is nothing wrong with what he is actually doing.

What is odious is his self-righteous moralizing.