So Fairtrade may be making some Africans poorer?

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One of the things about studying development in poor places is that you quickly realise that it isn't as straightforward as the aid charities would like to have you think. We are given a picture of poor farmers scraping a meagre living - either through subsistence alone or commodity crops such as cocoa, coffee and bananas. However, as I recall from studying both Latin America and South East Asia, the reality on the ground is much more complicated. Indeed, the very poorest people in these places, the ones who were going to get done in first when the drought and famine arrives, are what we'd call 'landlass labourers'.

So part of me is pleased to have my ancient geography lectures confirmed by a comprehensive study - this time in Africa:

...wage employment in areas producing agricultural export commodities is widespread. FTEPR survey results from the short questionnaire addressed to a very large proportion (in some cases 100 per cent of the sub-site populations) show that a large percentage of people had experience of working for wages specifically on farms and processing stations producing the commodities that were the focus of the research.

The people who own the farms on which these labourers toil are not the poorest. Yet the focus of development efforts is directed at these owners and, in particular, through Fairtrade at the small and medium sized commodity growers. These findings come from the Fair Trade, Employment and Poverty Reduction (FTEPR) unit at London's School of Oriental & African Studies (SOAS) and they remind us that, as we should know, the most vulnerable in any society are those without wealth. And in Africa wealth means land.

What FTEPR go on to describe is perhaps more worrying still for policy-making and suggests that the western narrative on development and poverty in Africa is mistaken:

This research was unable to find any evidence that Fairtrade has made a positive difference to the wages and working conditions of those employed in the production of the commodities produced for Fairtrade certified export in the areas where the research has been conducted. This is the case for ‘smallholder’ crops like coffee – where Fairtrade standards have been based on the erroneous assumption that the vast majority of production is based on family labour – and for ‘hired labour organization’ commodities like the cut flowers produced in factory-style greenhouse conditions in Ethiopia. In some cases, indeed, the data suggest that those employed in areas where there are Fairtrade producer organisations are significantly worse paid, and treated, than those employed for wages in the production of the same commodities in areas without any Fairtrade certified institutions (including in areas characterised by smallholder production).

This challenge to Fairtrade is serious. We are not talking here of some right-wing think tank but a highly respected institution presenting findings that suggest Fairtrade, far from being a way to address poverty, could merely be enriching the relatively wealthy smallholder at the expense of increasing poverty among the landless peasants employed to harvest that smallholding. And the research also challenges the presumption that the Fairtrade governance model is beneficial - concluding that Fairtrade organisations (and the retailers that exploit the branding) overclaim the beneficial impact of the model, that the co-operative model is unequal in that it favours the larger producers within the co-operative, and that policy-makers need to shift their focus away from producers and towards those who are employed by those producers.

As someone who has been critical of Fairtrade for some while, I guess I ought to be happy that a major piece of research confirms its weakness. However, such an enormous amount of good will has been invested in Fairtrade products by a lot of good people - it will be very hard for them to come to terms with the fact that, while the model has benefited some people, it may be creating a bigger divide between the family farmer and the landless worker. It will be interesting to see the response of the Fairtrade organisations to the work - they've faced criticisms before but never from such a comprehensive review or in such a critical form.

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Fair trade and the keeping of peasants in their place

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The other day the fine town of Keighley was celebrating achieving "fair trade" status. In truth not everyone in Keighley was celebrating this new shiny mark of goodness. Indeed most of the population of Keighley neither know nor care about it's "fair trade" status. However, for those Keighley folk (what do you call someone from Keighley - Keighleyite, Byworthian) who care here's what it means:

A Fairtrade Town is a town, city, village, island, borough, county, zone, district or region that has made a commitment to supporting Fairtrade and using products with the FAIRTRADE Mark. 

The good people who run the "fair trade" campaign provide a handy action plan for getting to be a "fair trade town" which elaborates further:

Fairtrade is about bringing the farmer and the shopper closer together. It’s about putting people at the heart of trade. Becoming a Fairtrade Town sends a powerful message about how your community wants trade to work and will directly benefit some of the world’s poorest farmers and workers through increasing awareness and sales of Fairtrade in your area.

Brilliant stuff - by searching out that little logo, by persuading the greasy spoon cafe to serve the approved sort of coffee we are making the world a little better and those poor farmers a little less poor. Crack open the bubbly, hoist some bunting and let's have a party. Let's celebrate our municipal goodness!

But hang on. What exactly are we doing here? Is this the best way to make the lives of poor people elsewhere in the world a little better? Or is it just a marketing scam dreamt up to assuage our guilty Western consciences?

It's a bit of both really - the fans of fair trade argue that is it a better model (with its co-ops and supposed transparency) when compared to traditional free trade models (with their nasty bad businesses and entrepreneurs) but there's no evidence that this is the case (pdf):

The benefits claimed by Fair Trade can also be obtained from the normal business relationships that exist between primary product producers and buyers. Attempts by proponents of Fair Trade to denigrate free trade and normal market practices are not helpful and distort realities.

More worryingly, especially in Latin America, "fair trade" does little or nothing to support the very poorest (because those very poorest are landless and dependent on plantation agriculture). Indeed, it could be argued that "fair trade", by preferring the products from (relatively better off) smallholders, acts to increase the risks of destitution for those landless workers.


However, the scale of "fair trade" is such that such impact is marginal - there isn't enough of it to have sufficient of a negative effect on the established trading models. So my biggest concern is that, far from helping smallholder farmers, "fair trade" acts to trap them in essentially uneconomic conditions - they remain poor compared to us guilt-ridden Westerners but are stuck in a condition that merely sustains that relative poverty.


To support me here's a reference from the Guardian:

...economist Paul Collier argues that Fairtrade effectively ensures that people "get charity as long as they stay producing the crops that have locked them into poverty". Fairtrade reduces the incentive to diversify crop production and encourages the utilisation of resources on marginal land that could be better employed for other produce. The organisation also appears wedded to an image of a notional anti-modernist rural idyll. Farm units must remain small and family run, while modern farming techniques (mechanisation, economies of scale, pesticides, genetic modification etc) are sidelined or even actively discouraged.

The success of the "fair trade" model hinges on the success of the Fairtrade Foundation's marketing campaigns - so long as the marketing message ("Fairtrade is Ethical and if you adopt it you are good people") succeeds the model succeeds. But back on the farm we have locked peasants into the peasant agriculture we ought to be helping them escape.

This is all part of a core development message (although to call it's outcome 'development' is to turn the meaning of the word on its head) proposed by organisations such as Oxfam - that we should subsidise subsistence farming as a protection against supply problems (drought, flood etc.) in order to allow for development.

I don't know about you but this does rather smack of keeping peasants in their place, scratting away trying to feed their families and dying at 45. Indeed the entire bien pensant development world is riddled with people promoting some sort of Maoist peasant idyll rather than looking at what happened elsewhere. In the elsewhere with the cars, TVs, computers and so forth that those peasants would like too. In that elsewhere we didn't (at least until recently) subsidise the subsistence farm but rather we encouraged mergers, enclosures and the development of commercial agriculture.

And "fair trade" is part of this corrupted idea of development, of an idea that guilty rich folk should simply hand over extra cash so that people farming ever more marginal land don't starve to death. An idea of development that proposes the use of Western wealth to keep peasants as peasants and then guilt-trips us into coughing up charity to do just that.

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It's capitalism not "fair" trade that lifts people out of poverty...

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It always depresses me to see people who are essentially caring led down a path that really isn't in the interests of those they care about:

An early signatory to the petition, Mrs Palframan has been invited by the Fairtrade Foundation to help hand in the petition to the Prime Minister. 

And the petition well Mrs Palframan sums it up:

“Despite producing 70 per cent of the world’s food, over half the world’s hungriest people are smallholder farmers who struggle to earn a living from their crops.

“Unless they receive support and improvements to terms of trade, they will remain in crisis due to an unjust food system.

“The farmers still only get a tiny proportion of what we pay for our food and agriculture needs to be made much more sustainable to create food security.” 

The truth, of course, is that these farmers are subsistence farmers - living mostly off the things they raise or grow and selling what small surplus they have for the small amounts of cash they need.  The problem is that people such as the Fairtrade Foundation and Oxfam wish to keep these poor farmers scrabbling in their tiny, unsustainable smallholdings. I'm guessing that, Mrs Palfreman, living in Ilkley as she does, isn't struggling to feed her family from a tiny small holding on the side of the moor! So why does she want to keep people in faraway places in that condition rather than seeing them get the same chances we have?

We've seen the fastest reduction in world poverty in our history over the last decade - over a billion people saved from poverty. This is brilliant but can we remember that it wasn't fair trade, in wasn't aid and it wasn't the hectoring of Oxfam that did this. If we'd followed their prescription that massive decline in poverty would not have happened.

What caring people should know is that is was capitalism, free trade, property rights and that evil neoliberalism that saved that billion from poverty. And, if we let it, capitalism will get the rest of the world's poor out of poverty too. And, you know folks, that means that just as we aren't subsistence smallholders all those Africans won't be smallholders either.

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Free speech, free enterprise, free trade....

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These are the three things that matter most to me - fighting for them is the reason I remain in politics. Little else matters when you get to the crunch - free speech opens the doors of discovery, free enterprise allows us to create wonders from that discovery and free trade allows the riches of that discovery and creation to be shared by all.

These things are also the reason why I'm right-wing rather than left wing. And I'm reminded again just how much the left will always fall back on protection - the route to stagnation, stasis and the promotion of poverty. Here's some chap called Hines in the Guardian:

Progressive protectionism by contrast would instead allow countries to wean themselves off export dependence. It would enable the rebuilding and re-diversification of domestic economies by limiting what goods states let in and what funds they allow to enter or leave the country. Having regained control of their economic future, countries can then set the levels of taxes and agree the regulations needed to fund and facilitate this transition. 

Clearly Mr Hines has never been to North Korea! Yet this proposal - little different from the autarky that thrilled Mussolini, fascinated Franco and led to Pol Pot's murderous 'year zero' - is made seriously by a left-wing commenter in a leading English newspaper.

The left really don't understand this freedom stuff - it's not just that free speech, free enterprise and free trade are morally right, it's that they are better in practice too! And when we limit freedom to speak, to do business or to trade, we make ourselves poorer in spirit as well as poorer in the pocket.

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Is fair trade a scam?

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I came across this article in National Post written by the President of Green Beanery, a Canadian social enterprise in the coffee business. It was a real eye-opener, even to someone as sceptical of fair trade as I am:

That fair-trade cup of coffee we savour may not only fail to ease the lot of poor farmers, it may actually help to impoverish them, according to a study out recently from Germany's University of Hohenheim.

The study, which followed hundreds of Nicaraguan coffee farmers over a decade, concluded that farmers producing for the fair-trade market "are more often found below the absolute poverty line than conventional producers.

"Over a period of 10 years, our analysis shows that organic and organic-fair trade farmers have become poorer relative to conventional producers."

The author sets out why he thinks this is the case explaining that the poorest farmers simply can't afford the certification fees and how many see co-operatives (a requirement of fair trade) as taking away property from the farmer. However, it was the degree of corruption and the way in which the fair trade companies manage supply so as to keep fair trade margins higher that was most striking:

In fact, at Green Beanery we have received bags of coffee, some labelled fair trade, some not, grown on the very same farm and identical in every respect. The fair-trade certified farmer himself can't tell which beans will be sold as fair trade and which not -that decision is made by the higher-ups.

Because the fair-trade associations are intent on keeping the price of fair-trade coffee up, they limit the supply of coffee that can be labelled as certified. To the certified farmer's chagrin, most of his fair-trade certified crop could end up being sold as uncertified conventional coffee.

And in this well-intentioned pricefixing game, the fair-trade farmer is the pawn and the joke is on the customer.

It does seem that fair trade has some questions to answer.

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Over to you Africa...

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"We are still getting orders from abroad, all the factories are," said Wei. "But no one is taking them because we would make a loss. The foreigners do not want to pay a reasonable price. We have not made any profits for two years."

 So reports the Sunday Telegraph in a piece about the impact of economic growth, higher wages and cost pressures on Chinese clothing manufacturers. And the big deal here is that the businesses can't produce the clothes cheaply enough to satisfy the cost demands of Western brands and retailers.

Now, however, the Chinese factories have hit a wall. The workers who were once happy to work for as little as £30 a month now want ten to 15 times that sum.

Young men with the latest mobile phones and foppish hair cuts stood around two outdoor pool tables on the streets of Dadun avenue, gambling on the games. Their factory is only paying them for six hours a day in a bid to trim its costs.

More and more workers are choosing not to travel to the South to find work, preferring to try their luck at one of the new factories or construction projects popping up in inland China, where life is cheaper and they can be closer to their families.

Familiar? Yet the first response is to suggest that the answer is for us to pay more for our jeans!

The days of so-called "throwaway fashion", where stores could sell garments cheap enough to be worn for a just a few months and then discarded, could be over, he said.

"Companies should be very scared, as throwaway fashion is now dead," he claimed. "For years they wanted to get more and pay less. They have pillaged the system in China. But now they are going to suffer."

Elsewhere in the world there's a huge continent with millions of people crying our for economic opportunity, crushed by the agricultural protection of Western democracies and patronised by aid NGOs.

It's called Africa - I reckon they'd be pretty good at making jeans? Don't you?

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Thoughts on why bilateral aid doesn't work

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I have always tried to avoid writing about international aid – not because it’s a subject without importance but because, frankly, my neighbours in Cullingworth don’t put it in their top ten areas of concern. Indeed, there are plenty of folk out there who believe that charity starts at home. But I sense, in the debate about cuts, an imminent upwelling of righteous anger at the audacity of ordinary people who’d prefer their taxes spent on schools, hospitals and coppers rather than on buying 4X4s for ‘aid workers’ to drive around Africa.

Although to be honest, that’s not where the aid cash goes as the biggest (by far) recipient of UK aid is India (nearly £300 million in 2008). You know, that poor country that owns Jaguar and our steel industry (at least the bits it hasn’t closed down yet). Perhaps we should have sent some of that aid to Redcar instead?

OK, I hear you saying that all this can be fixed, a good government will shift the aid programme away from supporting Britain’s foreign policy to targeted support for the poorest countries. Somehow, I doubt this – the purpose of the aid budget is not to alleviate poverty but to purchase the continued support of the recipient countries (although how much this actually works remains moot). That and bilateral aid programmes continue to distort the development of poor country economies because they are not associated with requirements for policy changes.

It is in this last point that multilateral aid differs as the intervention of the World Bank and IMF is always associated with requirements to change economic policies, develop better legal enforcement structures and perhaps try to collect a few taxes. The aid is still market distorting but it provides the recipient nation with a pathway to better governance. That pathway includes things like ending arbitrary land seizure, repatriating overseas sovereign funds, collecting taxes and repaying (yes, repaying) some of that debt.

But when the donor nation doesn’t like the medicine prescribed it just sidles up to a giver of bilateral aid, reels out its sob story and lo, the aid is forthcoming. And nothing is done to give people property rights, no efforts are made to end graft and governments continue with market distorting programmes of urban food subsidy, price-fixing and nationalisation.

The changes that are beginning – slowly – to improve Africa are happening in spite of aid programmes. In truth aid programmes can actively discourage the development of a strong business culture – why bother developing the necessary infrastructure of a free economy when the aid fairy will drop some cash on you tomorrow? If we worried less about so-called fair trade, social justice and other such nonsense – and concerned ourselves with promoting free markets in Africa then we’d be doing a damn sight more for poor folk than all the billions of bilateral aid money.

But if we’re going to spend that money let’s use it to change things rather than prop up corruption, graft and the old third world disorder.

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Food, regulation, hypocrisy and the success of supermarkets

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When it comes to my libertarian instincts, food has always been a weakness. I hate the damage done to the quality of what we eat by the destruction of local food networks, by the homogenisation of fresh produce into a tasteless lowest common denominator. And I find the continued success of fast food retailers like Greggs, Subway, KFC and McDonald’s profoundly depressing – poor quality, barely edible crap sold at the lowest possible price and without any thought to what us poor proles are stuffing in our gobs. It’s no surprise there are so many fat people around when so many graze almost non-stop on such fat, salt and sugar stuffed awfulness.

Despite this my liberal hackles rise when "campaigners" get so mixed up over what they’re opposing in the “great food debate”. The arguments wielded by the greens, by "hyperlocal" fans and by the "transition towns" movement are inconsistent, anti-trade and exclusive. Consider these issues below, for example:

Are the “campaigners” opposing the sourcing of vegetables, flowers and other produce from cheap labour countries? Do they understand how these provide a good growth and development opportunity for countries like Kenya, Ghana and Colombia? Or are they just so bothered by the environmental costs of air freight that those African and Latin American workers can go hang?

Do the “campaigners” appreciate that so-called “fair trade” isn’t fair? Have they stopped and asked what happens to the workers picking coffee or bananas on plantations when those plants are rooted up as no longer viable because of “fixed” trade preferences derived from the “fair trade” concept? Fair trade – rather like Tesco really – destroys as many jobs as it creates, saves or protects.

The “campaigners” rail against something called the “trade balance” (a mythic concept invented by so-called poverty campaigners with slightly less economic reality that the idea of “competitiveness”). But at the same time “campaigners” support geographical protections placed on processes, subsidies to wealthy western farmers and the extension of tariffs on imported fresh produce. Protecting feta or parma ham takes precedence over supporting the economic development of Africa.

Our “campaigners” talk to us about local food networks, the impact of the local multiplier and such worthy sounding “new economics”. Sadly the economics isn’t new at all – the multiplier features in Keynes and is widely criticised as an analytical tool. Tiebout argued that the multiplier is not stable over time or across economic groups making it a difficult measure to apply with high degrees of confidence. The glibness of the LM3 model covers over its weakness as a means of understanding local economies (along with very little sound empirical testing of the approach) - yet it is still used almost without challenge or question.

I am happy to fight the good fight – supermarkets destroy jobs because they employ fewer people than traditional retailing models. But my concern isn’t just about that indisputable fact but that supermarkets also destroy quality, contribute to the drunken, violent urban culture we have seen grow in this country and continue to secure privileged cost advantages through favourable tax and planning treatment when compared to town centre retailing (and especially markets). Sadly the New Economics Foundation and others seem to have lost sight of the 'non-free' nature of the market environment in retailing and development - focusing on rational business behaviour rather than contrary and sub-optimal regulatory and tax regimes.

Maybe we bring all this on ourselves through the decisions we make about shopping but those convenience decisions come about because supermarkets have a cost advantage they would not enjoy if public authorities allowed town centres to compete on a level platform. Lower business rates per square foot, free parking and more flexible planning regimes - a more free system in fact – would go a long way towards restoring convenience shopping to our market towns and suburban town centres. Right now the anti-car, high tax regimes in our towns only serve to increase the success of supermarkets.

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