Free Liberal

Coordinating towards higher values

"Fair Trade Coffee" Hurts the Poor

by Paul Gessing

Lots of http://en.wikipedia.org/wiki/Free_trade">do-gooders like to believe that "fair trade" is superior to genuine "free trade." As discussed on wikipedia, the term "fair trade" is:

An organized social movement and market-based approach to alleviating global poverty and promoting sustainability. The movement advocates the payment of a fair price as well as social and environmental standards in areas related to the production of a wide variety of goods. It focuses in particular on exports from developing countries to developed countries, most notably handicrafts, coffee, cocoa, sugar, tea, bananas, honey, cotton, wine, fresh fruit, and flowers.

The intent is to help raise living standards for those in poor countries. But does it work? A growing body of evidence says "no." This article from theChristian Science Monitor argues persuasively that "fair trade" actually harms the poor.

As the author points out:

If there were just 10 small coffee growers worldwide, the price per pound of beans would be astronomical, and many people would rush to become coffee farmers. The current market price is "low" by comparison because there are already so many growers competing. By paying more than the market price for coffee – the authentically fair price – fair traders send a signal to people in developing countries to join an already overcrowded field.

In doing so, they artificially lure them away from perusing better-paying jobs that would enrich the diversity of a developing country's economy. A caffeinated price means more growers, more land destruction, more dependency on a single cash crop. It's a subsidy that undercuts the very sustainability fair traders want to promote.

Unfortunately for the do-gooders, the best way to help inhabitants of third-world nations is genuine free trade. Also, helping to educate them on the benefits of trade and limited government would be helpful.