Fair Trade is a Farce

It is not very often that an idea that is exceedingly counter-productive and disastrous for the world begins to take hold. Yet in recent years, a new idea has begun to sweep the mainstream US consumer landscape that risks pushing poorer nations in Africa further into their already deep holes: Fair Trade. An idea promulgated as a solution to pay farmers a fair wage instead ensures that they continue to live in destitute poverty. The fair trade market, especially for food, has been growing in recent years by claiming to pay farmers a fair wage for their labor. As a consequence, food sold under the label in developed nations such as the US receives a significant markup. However, only 10% of the markup for Fair Trade goods ends up doing the farmers a service. You pay a significantly increased price for Fair Trade products, but in reality, your money ends up in the hands of the supermarket, not the farmers. The other major concern with Fair Trade is that ultimately, it will not help anyone. Western consumers are subsidizing farmers by paying them more for their products than the market price. If the price of a good, such as chocolate, is low, it is because there is too much of it in the market. But if a set price for chocolate exists, there is little incentive to produce another, more beneficial crop. And as farmers continue to produce more of the crop, the price will descend further, creating problems for every farmer who is not under the fair trade label. Instead of giving people the tools, incentives, or money to change, Fair Trade is ensuring that they remain wholly dependent on the charity of finicky and unpredictable Western consumers. It is a carbon copy of the old adage, “Give a man a fish, he eats for a day. Teach him to fish, he eats for a lifetime.” Fair Trade misunderstands what the actual problem is. Africa is not in need of money. On the contrary, it is rich with resources and has a population of people who would do almost anything to get a job. The problem has always been corrupt and protectionist governments. Development money in Africa is usually spent to buy a Parliamentarian their fiftieth Mercedes instead of building a necessary road. Fair Trade attempts to rectify a terrible situation in Africa in the wrong way. The way forward is not through subsidies, but a greater support for free trade. The West rose alongside economic liberalization. The United Kingdom and United States developed through the acceptance of international trade and free markets in the 18th and 19th century. Such liberalism is also responsible for the rise of the East Asian Tigers, Hong Kong, Singapore, Taiwan and South Korea, beginning in the 1960’s. Now examine what position all these countries are in. From this perspective, Africa’s situation is not surprising. Its governments also tend to be very protectionist. In a Heritage Foundation Index on Economic Freedom, only one African nation ranks in the top 30. The US, Hong Kong, and other Western European nations all occupied the top ten. There is hardly any investment going into Africa because of the flaws of its governments. Success lies in governments cooperating and endorsing the system of economic liberalization that has had positive effects in other places around the world. Western governments can also contribute to development through a credible patent system. Let nations who produce goods patent their product, so that around the continent, the nations who produce traditional hats and crops are the ones who make money on the royalties. The current situation resulted from Western companies simply understanding patent law and rushing in to secure royalties. Allowing Africans to earn money off what they produce at a price that is real instead of artificially inflated will bring stable results to the continent and could contribute to lifting people out of their poverty. The Andover Hill can also begin to contribute to the cause. Oxfam and the Center for Global Justice should stop selling such “Fair Trade Chocolate,” working instead to raise awareness of the atrocities committed by various African governments. Functions that everyone enjoys like the Coffeehouse should instead work to aid anti-government political groups existing everywhere from Zimbabwe to Sudan. Money and decent wages are not the problem; Africa is simply in a climate not conducive to foreign capital and investment. The future for Africa lies in an endorsement of free trade, not a farce as ineffective as fair trade. Institutions of government and citizens should lend their support to promote globalization and groups such as the WTO; these are the keys to a sustainable and prosperous future. Maybe when the reality of a global marketplace begins to sink in can African nations finally begin to provide for their citizens.