Following on from Organic food ‘worse for the environment’ – Economist, this time I’m looking at their attack on Fair Trade.
Their argument in effect boils down to describing the premium paid to Fair Trade producers as a subsidy, which therefore encourages inefficiencies and overproduction, just as government subsidies to farmers in Europe and North America do.
Of the three arguments made by the Economist, this was the most compelling, and the most interesting, but nevertheless was still flawed. The premium is not a subsidy. It’s the equivalent of buyers paying more for a quality product. Perhaps I should rather say Quality, with a capital Q, and direct readers to Zen and the Art of Motorcycle Maintenance for more on that topic. Quality is not just limited to the selfish, but can include the bigger picture as well. In a slightly forced way, the Economist tries to undermine the effect of one’s purchases on change, attempting to steer people to the ballot box. I’d suggest one’s purchases make a far more significant impact. But that’s a digression. Buyers make an informed decision, choosing a product that adheres to certain standards (in order to achieve Fair Trade certification), and are willing to pay more for it, in the same way that people pay more at Woolworths (an upmarket South African supermarket) than at Shoprite (a downmarket supermarket). Woolworths pay their staff more, and as a result their staff are better-trained and friendlier, and certain shoppers cite this as a reason for their purchase preference.
Al of this is fairly orthdox market economics, which is why it’s strange that the Economist chooses to see it differently.
Supply and demand works on Fair Trade farms as well as anywhere else. If all farms and shoppers switched to Fair Trade tomorrow, and there was a glut of coffee, certain farms would lose out, unlike what happens with say European dairy farmers at present, who get to dump their excess on the developing world to the detriment of farmers there, while being guaranteed a price by the government. The response on the Fairtrade site goes into this in more detail.
The Economist as a magazine gets it wrong too often. It supported the invasion of Iraq. It didn’t think global warming was much of a threat. Now it attempts to discredit three aspects of ethical shopping, failing dismally in each case. The magazine seems unable to engage it’s thinking cap when dealing with anything out of a rather limited big business box. Perhaps it’ll take organic and Fair Trade to become a lot bigger before the Economist starts to take them seriously.
The sad thing is that the magazine is treated with so much respect by too many people I know. In reality, it just seems to parrot orthodoxy and yesterday’s ideas.
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Technorati tags: Economist ethical organic farming organic food fair trade
I totally agree that The Economist is treated with too much respect by people who should know better. This is because it manages to market itself as impeccable economic analysis, and too many people are mystified by economics and the high priests who control access to it. If it’s in The Economist it must be true, and I’m too stupid to think these things through for myself.
The Economist isn’t an economics magazine, but a right wing political one, and it uses economic arguments to get its point of view across.