| Since my connection with this site comes through Quentin Beningfield and Fairtrade, it seems appropriate to start my random musings on that subject. Most of those finding their way to this blog will probably have at least some idea what Fairtrade is all about, but I hope that not too many of you will be bored if I go into the nitty-gritty. Commodity prices paid to producers in developing countries have been on the slide for years, under pressure from the multinationals and the supermarkets, always eager to drive down costs so as to maximise profit margins. On top of that, producers are at the mercy of prices set, not where the crops are grown but on Stock Exchanges in London, New York and Tokyo. The crop must go to the market at harvest time whatever the world price is doing. When prices happen to be high at that moment farmers can make a living, when prices take a dive they struggle to survive. Fairtrade is an effort to redress the balance and ensure that small farmers can get a decent return on their investment and their labour. The Fairtrade price is set at a level commensurate with this objective and acts as a floor level below which the price will not go: when market prices are high the Fairtrade price goes up with them, when they drop it does not go down below that floor level. In addition, a small premium is paid for social projects, which the whole community must decide democratically how to spend. Typically the money will go to set up a school or health post, or to pay a teacher or nurse for an existing one, or to improve transport in remote areas. The Fairtrade system is closely monitored by the international Fairtrade Labelling Organisation, who inspect the books of companies using the Fairtrade logo on their products, to ensure that the Fairtrade price and the appropriate premiums really have been paid. They also visit the producers to ensure that the premium money is really being spent on community projects and that the decisions are indeed taken democratically by the whole community. In any enterprise involving money there will be those who will try to cheat, and with several million people now involved in many countries there are going to be some who succeed, but the set-up is designed as far as humanly possible to minimise successful cheating. Even the multinationals and supermarkets do not lose out, as the Fairtrade sector is still only a tiny part of the overall market – and they can always play in the Fairtrade sector too if they want to. Increasingly they do – even Nestlé, bête noir of the ethically-minded, have their own brand of Fairtrade coffee. There was much unease when they started that, but it illustrates another important point about the way Fairtrade works: it’s not the company that gets Fairtrade accreditation, it’s the product. Somewhere, coffee farmers are selling their beans to Nestlé and getting paid a fair price for them. Other farmers (maybe even the same ones!) are selling beans to Nestlé and being paid the old unfair price as those beans are destined for Gold Blend and the other non-Fairtrade coffees in the Nestlé range. It is hard to see how anybody could fault such a scheme, but there are always detractors of anything. The inappropriately-named Adam Smith Institute (Adam Smith, if he were still living, would certainly repudiate the tosh this ‘right-wing think-tank’ produces) recently produced a ‘report’ on Fairtrade, which found that it didn’t do farmers much good and was harming economies in the developing world. You would expect such a report to be based on meticulous research, but it’s not. The ASI’s line of reasoning seems to be: according to our ideology, Fairtrade ought not to work, so it doesn’t. It ought to distort ‘the market’, so it does. Evidence is not needed when an article of faith is called into question. In fact, Fairtrade does raise an interesting question about the operation of ‘the market’. The prices charged for Fairtrade products in supermarkets are often noticeably higher – this is quoted by the ASI as evidence that Fairtrade is dubious, as they ask “how much of this higher price finds it’s way back to the producer?” If you have been paying attention you will be able to answer that: the producer got his fair price, probably weeks or months before the jar of coffee or bar of chocolate appeared on the supermarket shelf. Any extra profit is going to the supermarket or to middlemen just because they can get away with it. Ethical consumers are being ripped off and ‘the market’ ought not to allow that to happen. It’s a market failure, but it’s got nothing to do with Fairtrade. |