The Fair Trade movement, promoted by Brown Dining Services and urban coffee shops everywhere, has been attracting some negative attention recently. In the Dec. 7 issue of the Economist, an article on "ethical foods" suggested that the idea may be misguided. In the intervening months Fair Trade has become a hot topic in the blogosphere. This dispute, like so many others, can be introduced by reusing the old headline: "Curmudgeonly economists question the methods of do-gooders."
This is not a simple issue, but here's a basic synopsis: The Fair Trade movement consists of non-governmental organizations that contract with small farmers in the third world and guarantee them price floors and above-market prices. This protects the relatively inefficient little guys from being run out of business by the low crop prices created by large industrial producers. The small producers' crops (most notably coffee) are then exported to the developed world and advertised as "fairly traded." The slightly higher price is split between retailers and consumers.
The problem, in theory, is that this exacerbates the original problem of low crop prices. By shielding small producers from adverse market conditions, Fair Trade encourages them to continue to produce coffee instead of transitioning, however traumatically, to different pursuits. Thus, the supply of coffee on the market doesn't decrease, and the market prices don't increase.
Non-Fair Trade producers are hurt by Fair Trade - but that's kind of the point. Some big coffee producers have responded by starting their own Fair Trade divisions.
Fair Trade organizations are doing some things that no one would argue against, such as educating farmers and giving them better access to credit. These practices create human capital and facilitate development. However, by most accounts, Fair Trade is making it easier for farmers to avoid the difficult but perhaps necessary process of moving to new crops or occupations.
It's difficult to dispute that the Fair Trade movement helps small farmers in the short term. The broad, long-term effects are far more uncertain. However, I tend to side with Fair Trade's detractors for a somewhat different reason: Selling morality is just a bad idea. Fair Trade expands the idea of consumers' personal preferences by extending it to moral preferences, like buying Fair Trade coffee. This doesn't make sense and sets a troubling precedent.
Markets are efficient because consumers know what they themselves want, and that's all they know. They serve their own preferences, and this directly increases market efficiency with respect to those expressed personal preferences. When consumers decide that they prefer to buy coffee that advertises itself as ethical, it just means that they prefer to think of themselves as ethical. The expression of that preference does not necessarily correspond to real ethicality - consumers are taking it on faith that their actions are truly ethical.
In other words, when I buy a Toyota over a Ford, I do it because it's a better decision for me. I have a good idea of what's best for me. But when I buy Equal Exchange over a generic brew, I do it for the general welfare of Ecuadorian farmers. That is faintly ridiculous. I have no idea what's best for Ecuadorian farmers. Intelligent scholars disagree over it. All I know is that one coffee advertises itself as more ethical than the other. It's the rare consumer who even understands how Fair Trade works, let alone has the background, the will and the free time to form a defensible opinion about its effects. Whatever Fair Trade accomplishes, it accomplishes through good faith or ignorance - take your pick.
Fair Trade is a case of over-democratization. It very loosely reflects consumers' opinions on a rough constellation of non-governmental economic and social programs that they know almost nothing about. This is distinct from traditional consumer activism, which I fully support. Consumers should educate themselves as much as possible and make informed decisions about their purchases, but Fair Trade is different because it forces moral decisions through advertising.
I doubt that Fair Trade is a bad thing, on balance. However, I dislike that it presents a complex moral package in black-and-white wrapping.
Much has been said about expressing our social consciences through consumption, but that actually doesn't sound so great to me. Where will it end? What if products start labeling themselves along partisan lines? During the 2004 campaign, we already had "Dubya Ketchup" for Republicans who didn't want to add to John Kerry's Heinz fortune. If the Fair Trade movement has its way, shopping for mere quality will one day seem quaint.
Matt Prewitt '08 would like extra foam in his cup of morals.
