A Fairer Trade

The following is a response to the argument against the Fairtrade label espoused by those who justify their economic transactions with the mythical concept of free trade. For instance, the Adam Smith Institute (ASI), Channel 4 News 1 Mar 05; Iain Whyte, Conservative leader on the City of Edinburgh Council, The Scotsman 2 Mar 05. The argument was also advanced in an ASI report posted on the Fairtrade email network ostensibly from a benign source requesting a rebuttal from Fairtrade.

***

“The fact that there is no need for people to die of starvation and there are people dying of starvation is a fact of some importance you would think.”
Antonio Gramsci, Italian dissident

“The one and only social responsibility of business is to make profits”.
Milton Friedman, free market economist

Full of economic jargon, charts and statistics – Intended I suspect to mystify rather than inform – the substance of the ASI’s report was: that by distorting market value, the good intentions of Fairtrade would indirectly bring about increased poverty and unemployment for the poor coffee farmers they intended to benefit. The subtext of the ASI’s report was that Fairtrade should stop meddling in processes it doesn’t understand. The sine qua non: consumers should return to the more established (and nefariously traded) brands.

So ASI considers all the market manipulation by the greedy bastards as the workings of the invisible hand, but to pay developing world producers a fair price and for consumers to act ethically by choosing the fairly traded product is anathema. It doesn’t take a genius to figure out there is something wrong with a logic that promotes greed and exploitation as a market ‘reality’ but acting ethically as a market distortion.

The simple truth is: applying the free market economist’s own criteria, if the demand is there for ethically sourced coffee and can be supplied at prices consumers are willing to pay then that is the most fundamental market ‘reality’, *the law of supply and demand. It is then up to the providers to respond to this ‘reality’ – not dictate to consumers what brands they should or should not buy.

*Of course in practice, supply does not follow demand as straightforward cause and effect, as some political economy theorists would have us believe. Clearly a ‘demand’ has always existed for Fairtrade, which wasn’t being supplied by the monopolies that controlled not only supply of the product but supply of knowledge about the product. Fairtrade has not only offered the possibility of more ethical shopping, but has raised awareness and thus the level of ‘demand’. Control of supply then can constrain demand. Moreover, any demand can be influenced and seemingly over-determined by the social and economic structures that circumscribe our lives, structures that are often developed and reinforced by those who have power and control over supply. However, that said, it’s up to us as responsible human beings to make the effort as far as we are able to become more knowledgeable so that we can ‘demand’ a better world.

This is the glaring paradox of the ASI position. Supposedly avowed advocates of consumer-led demand and *free market response, they are trying to undermine Fairtrade by dictating what consumers should choose, and of all things, citing adverse effects of consumer choice on the market!

*Free trade is an anomalous concept unless what is meant is a gift economy, otherwise all trade is a negotiation circumscribed by relations of power. In practice then free trade is meaningless. There is simply the struggle for a fair deal up against the power of rich elites and their desire to make as much profit unimpeded. Those who acclaim free trade like ASI wish to restrain the struggle for a just deal while preventing all restraints on their profit engineering. Here, ASI and Iain Whyte even wish to restrict consumer free will and outlaw the possibility of ethical behaviour.

Putatively they are suddenly concerned about the ramifications of consumer choice – ramifications transcending the actual transaction between source grower, factory worker, provider, shop assistant and consumer – on the livelihood and welfare of another poor farmer somewhere else in the global economic system. Really! ASI is asking the consumer to comprehend the effects of their purchases on each and every aspect of the global economic order – something no economist can do.

The ASI pseudo-ethical argument against Fairtrade not only conflates the ethics of individual action with accepting responsibility for the *free response and actions of others and the consequences that follow, but with capitulation to an ideology, the so-called free-market paradigm.

*Of course, ethical engagement demands the individual neither favour the malign actions of others, nor hinder the benign. But that is not the same as capitulating your own ethical behaviour because the free response of others to your ethical actions may lead to malign results. And this is the case whether the final outcome, as the market readjusts, is ultimately benign or not. If another’s response is not free then surely what should be condemned is not the ethical behaviour but the conditions and strictures that are constraining or determining the other’s response.

The ethical consumer has responsibility only for those economic transactions they partake of. For any purchase, the ethical consumer’s locus of responsibility is this: that every worker involved in bringing the product purchased from source to shopping basket – the grower, the factory worker, the shop assistant et al – is paid a fair price for their labour. Moreover that she has working conditions that satisfy international standards of human dignity in labour. It is enough for the ethical consumer, in the role of consumer, to focus their responsibility on their own actions and transactions without assuming responsibility for the ideology of the market.

If the present free-market oriented ‘reality’ is over-determined to result in malign poverty for the majority world, regardless of whether consumers choose to act ethically or not, which is what the so-called free traders are claiming, then clearly there is a major flaw in free market ideology and practice.

If the market is failing the majority world, condemning populations of farmers and other workers to enduring poverty as the ASI seem to concede, and if perversely this is significantly worsened by the actions of the ethical consumer as the ASI say they believe, then the rational response from the ASI is not to condemn Fairtrade but to question their own philosophy of free market capitalism and its manifestation in the real world. However, the ideology, institutions and practices of the so-called free market and its failings – clearly transcending the responsibility of the individual consumer and their purchases – is a structural and political matter, requiring a collective response.

For free trade profiteers to challenge Fairtrade on the basis of ethics is not only laughable, but inconsistent with free market principles. The fundamental axiom of free trade philosophy (sophistry) asks that everyone behave in their own self-interest – irrespective of the consequences on others (or on the environment). In other words, free trade ideology is axiomatically the very contradiction of ethical behaviour: the promotion of unrestrained selfishness.

Since the market is no more than the mirror of the cumulative *behaviours of its contributors, the current gross disparities between rich and poor should surprise no one. If, on the other hand, the fundamental axiom of economic philosophy demanded everyone act ethically, that is, if we all took responsibility for the impact of our economic behaviours on others (and on the environment), the market adjustment would reflect this, with positive repercussions for society (and the environment) inevitable. Fairtrade as solely a consumer foundation is in no position to make this demand; it simply offers the possibility of ethical behaviour in the economic sphere.

*of course, economic behaviour includes the deliberate development and associated over-determined evolution of institutions, financial structures, political influence/control, binding legal frameworks and regulatory/deregulatory functions, and corresponding institutional practices and determinants – which in a system that promotes unrestrained selfishness will always evolve to serve the interests of powerful elites. An evolved structural context may (or may not) influence or constrain subsequent behaviours, or may simply favour some behaviours over certain others. It is clear the present system of incentives that rewards unrestrained selfishness in a ruthlessly ‘competitive’ society without accountability for or strict regulation against detrimental social/ecological impacts favours the most corrupt and malign practices. From a selfish impulse such a system of incentives is constructed. Only from the will to selfless action can the conditions evolve for ethical behaviour and natural justice to flourish. The consummately enlightened and just society will offer its resources to the most deprived in society, in perpetuum. Not trickle down, but raising up.

In contradistinction to ASI, there is no contradiction in Fairtrade’s position. Firstly, Fairtrade as a consumer led movement is justified in demanding and promoting ethically sourced products. Supposedly, the consumer is king. Secondly, unlike ASI who are promoting a political ideology, the so-called free market mechanism and all its real world manifestations, Fairtrade simply permits an ethical perspective. By providing information and outlets for fairly traded goods, they offer the possibility for consumers to shop ethically if they so choose.

With remarkable chutzpah, Iain Whyte calls Fairtrade goods “politically motivated goods.” How can goods be politically motivated? Fairtrade simply offers the consumer another choice in the market, one that allows consumers the right to act decently towards their fellow human beings. What does count as politically motivated is the attempt to deny consumers this choice.

Iain Whyte further promulgates the myth that the promotion of Fairtrade will hit consumption. His reasoning: Fairtrade stigmatises other coffee producers as unfair and the “negative marketing could hit consumption and demand.” But they can only be stigmatised and boycotted by those who want to drink coffee that is fair. A consumer transformed ethically aware doesn’t drink any less coffee than before, they merely stipulate that they want Fairtrade. The market will re-adjust to reflect the new behaviour.

Thus, if the unfair producers don’t wish to lose this share of the market, then they need only supply a Fairtrade alternative. If Fairtrade can supply coffee ethically traded, farmers receiving a just price for their commodity, at competitive prices for the consumer, then the big monopolies with a much greater market share can certainly accommodate the same.

It’s revealing that none of the monopolies have supplied a Fairtrade alternative despite the clear demand from consumers. Instead their response is to conduct a subtle media campaign which attempts to discredit Fairtrade in the hope of undermining consumer confidence in the label. This is not a standard attempt to influence consumer choice through advertising their own product, but propaganda to constrain the consumer to an ideology.

In a startling example of doublethink, Iain Whyte labels Fairtrade a restrictive practice. But Fairtrade is the expansion of consumer choice. However, what is restrictive is the determination of large monopolies (and their spokespeople) to control what comes on the market in order to protect their outrageous profits.

For Iain Whyte’s enlightenment: in the supply/demand chain, consumer demand that is restrictive is simply known as consumer choice. Choice can be restricted however, by restrictive practices at the supply end of the chain: e.g. unreciprocated market access, monopolisation, mergers and acquisitions, non-competitive payments, kickbacks for contracts, homogeneity of product, corporate political might, lock-in of infrastructure, price-fixing cartels. Protections like subsidies and tarrifs are only restrictive when they are applied unevenly and thus unjustly. To deny nascent businesses in the developing world the same protections that prospered the mature monopolies and leavened growth in the developed world is perhaps the most entrenched restrictive practice of all. It comes as no surprise that the current situation is the reverse of natural justice: it is the richest countries that continue to enjoy the benefits of subsidies and tariffs to the detriment of the poorest.

Iain Whyte admits the hardship caused by the present system as growers are undercut and put out of business. In the present system this is disastrous for the poor grower. However if we had ubiquitous Fairtrade they could at least switch their production or shift their employment to another Fairtrade product so that they are no longer locked into a nexus of desperation and poverty.

Iain Whyte keeps up the pretence that “all participants in the market enter into the bargain willingly.” which shows his argument is really directed at the simple-minded. How can someone desperate, poor and unemployed who has nothing to trade but their labour in a saturated cheap labour market enter into a bargain willingly? When you have nothing and you’re offered peanuts, the outcome is already determined. Similarly self-interest that is basic survival cannot be equated with the selfish interest of gross profits. Greed that takes advantage of desperate necessity for increased profit is nothing other than exploitation and not “a bargain entered into willingly.”

It is all very well to “drive down costs,” but when the results are gross profits for the elite while the majority world suffer wretched poverty and the environment heads towards irrecoverable degradation, “the economic benefits” are outweighed by the unnecessary plight of the majority and the manifest threat to the systems of life on earth.

Simply stated, the corporate imperative is to maximise profit. The ideal is to socialise (externalisation in the jargon) as much of the cost as possible, which includes avoiding all liability for detrimental impacts on society and the environment. Cheap labour is just one more example of private profit at public expense.

Martin Vander Weyer writing on fair trade (New Statesman 28 Feb 2005), lends his support to claims that exploitative labour practices by Western factories in the developing world are *justified because the alternative is worse – dependency, prostitution, begging and, at best, farm labouring. He quotes Martin Wolf: “Taking a stance against this kind of trade development is mere tokenism. To be upset over poverty is entirely justifiable; to block a route out of it, in response, is not.” The ‘conscience of New Labour’, Claire Short, also employed this spurious argument when, as DFID secretary, she inveighed against campaigners who urged boycotts of sweatshop products (The Observer 10 Dec 2000), again citing begging and prostitution as the only alternatives to exploitative factory labour. But what these advocates of exploitative globalisation daren’t challenge is why that should be the choice at all. If factories in developing countries were legally bound to meet International standards for human dignity in labour, we could precipitate the route out of poverty. And with large profits being had by the multinationals and monopolies in developing countries, they can certainly afford to increase wages, improve working conditions, and provide adequate training and education.

*It would seem a remarkable conjuring trick that this argument was unassailable among the political elite in the 1990’s and was bought wholesale by New Labour, since it amounts to the statement that the exploitation of the poorest is for their own good. But perhaps it’s not so remakable after all.

***

Original version first published March 2005 on the Fairtrade email network