It seems like an awfully inefficient way of helping though.
If you care about the farmer’s situation enough to pay a premium which he or she only gets 10% of, why not buy normal coffee and send him or her a dollar?
Do you have his address? And the addresses of all of the other farmers? And if consumers send money directly to the farmers, what percentage would the farmers get? If you send a dollar to twenty farmers, each farmer gets 5%. Doesn’t it make more sense to collect the money centrally, and have the organisation distribute it? And individual farmer or small group of farmers might not have enough money to build a school or buy a community water pump. But a central ‘charity’ would have the means to distribute the money for the greatest good.
There should be a number of charities and aid organizations that help poor communities with projects like schools and wells. I’ll admit that I do not know how much their overhead eats up of the donations they get. My guess would be that far more of the donated amount than 10% ends up in the right place.
I have no problem with people paying more for their coffee (or tea or bananas or whatever) but they should go into it knowing what they are actually buying. I think that a lot of people believe that all or most of the premium ends up in the pockets of the poor farmer.
I think you really need to dig up that cite for the 10% - You started out just mentioning it in passing, now it’s become a major point in your argument.
There’s nothing wrong with “FairTrade”. It’s a branding mechanism similar to “organic” or “EnergyStar”. The producers and supply chain agree to certain procedures, compliance is monitored, and the consumer has a choice. There’s no coercion; it’s just the free market in action. This is exactly what the market excels at.
My complaint with the status quo of third world agriculture is that the first world (especially Europe, but the U.S. has some egregious examples too) has large import tariffs and/or local subsidies that prevent third-world farmers from freely competing. Forget about fair trade, give them free trade!
Coffee is one of the products that is freely traded, which is why many farmers go with it. At least they have a chance in the coffee market. In other agricultural market, it’s stacked against them so much they’re effectively closed out. If they had more choices, the farmers would be less dependent on coffee and would have alternative agricultural markets they could compete in. And that would give them more leverage to negotiate better coffee prices. (“Screw me with the coffee price this year and I’ll go with wheat next”–they can’t really do that now.)
So, for all those who like the “fair trade” movement, don’t forget to knock down your own governments’ trade barriers. They’re at least half the problem.
Sure thing.
I think this is where I read about it. Since it is in Swedish I’ll have to summarise the main points.
The 10% apparently comes from Tim Harford author of The Undercover Economist. “A tenth of the price premium for a cappucino reaches the farmer, the rest stays within the company”.
Then the columnist goes to his local store to check the cost and finds that the fair trade coffee costs 69,80 per kilo which is 20 kronor more than other brands from the same company.
Then he asks the Fair Trade organisation in Sweden which certifies these things how much the farmer gets per kilo. Currently that is 4 kronor per kilo. Apparently the price premium the farmer gets varies with the world market price and sometimes there is no difference. So out of the 20 kronor the farmer gets 4 which is 20%.
It should be noted that the columnist works at a free market think tank, which might disqualify his opinion for some people.
So that’s were the number comes from. I have no idea if the number is true in this case or for other products or countries.
Has anyone read Harford’s book?
Unable to read Swedish, I’ll have to take your word for what the article actually says, but if the farmer is just getting the straight market price and no other benefits, that’s not FairTrade by any definition I’m familiar with.
I take it that the fair trade premium to the farmer is the 4 kronor extra per kilo. But that sometimes it’s less than 4.
But again this is only a column. It would be nice to read an actual study.
Duly noted, but as someone who worked with SA economists for years, I think I’m able to see the difference. What we (maybe only I) are saying is that there is an overproduction problem associated with free trade goods that could ultimately cause more harm to the whole than the benefits to the few it provides. Yes, the pump in the village helps more people out than only the individual farmer, but, how many friggin’ coffee growers are there versus other farmers? What about the farmer that says “Hey! I can sell coffee to furriners for more money!” and then doesn’t grow corn that just happened to be the staple food of the people in the village? Is he going to subsidize the diet of his fellow man with all that extra cash? Ummm…I’m thinking no. You can’t have every farmer in a region trying to get in on the sweet deals without there being some kind of negative repercussions. Free trade product creates a false floor economically that I do not believe can be sustained in the long run. Overproduction, corruption and false-hopes do not make for sustainable-growth.
Again, I’m for increasing the knowledge and information dissemination to the common farmer more so than trying to come up with a fancy way to make rich westerners feel better about their morning cup-o-jo. It is pretty arrogant to say that we rich-white folk know better than those poor-melatonin-enriched people do. I’m certain that if they had access to simple market information they would know best how to handle their situation, middle-man or no.
-Tcat
If the problem with Fair Trade coffee is that it leads to too much coffee being produced, I would like to go on record as being willing to help drink the excess.
For quite a while, a few years back, I did voluntary work for one of the fair-trade charities mentioned earlier. While I was mostly involved in struggling with their fund-raising database, I’ve got some general background knowledge about the way these things operate.
Charities like the one I was working for liaise with local organizations - small businesses, workers’ collectives, locally-based charities, what-have-you - with an emphasis on creating sustainable development; that is, generally improving the economic infrastructure of the area where they’re working. So, some of the pitfalls people have been talking about are already foreseen, and avoided, by the development workers - obviously, for example, a situation where everybody’s growing the same cash crop isn’t sustainable, so the charities will work together to plough the profits back into more diverse economic programmes.
How? Many different ways. Obvious ones are improvements to health care (because healthy people are more economically productive than sick ones), education (educated people versus ignorant ones, same thing). Others are improving business methods among the target communities, or doing things like setting up affordable credit unions (so a local entrepreneur can get venture capital to set a small business going, instead of having it strangled at birth by unaffordable interest rates from loan sharks.)
(Human rights come into it, too, to some extent - corrupt or oppressive regimes restrict economic opportunities for the population they’re oppressing, after all. So fair-trade charities will be at least tangentially involved in opposing human rights abuses, and many of them a lot more than just tangentially.)
Fair trade organizations are not, bluntly, run or staffed by stupid people - they’ve got a lot of experience in promoting long-haul economic development, improving people’s lives by increasing their economic opportunities. They’ve done, and are continuing to do, a great deal to improve the lot of communities in the developing world. Of course, there’s still a long, long way to go …
About the organization I worked for; although it was explicitly faith-based (run and largely staffed by openly professed Christians), it wasn’t doctrinaire in any way - aid was never dependent on receptiveness to a Christian message, there was no proselytization, and in fact the organization worked closely in some areas with like-minded Islamic charities. And, it was pretty damn clear, from inside the corner of a warehouse that was their main HQ, that the money coming in wasn’t being frittered away - the facilities were good enough to get the job done, but no more; quite a few people donated their time and efforts for free, and the charity’s full-time employees, though they weren’t on third-world wages, were making substantially lower salaries than they could have earned elsewhere.
In summary; don’t make the mistake of believing that these people are stupid, or ineffective, or insincere. Because (by and large), they’re anything but.