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Bad Economics Fortnight

March 4th, 2010 Posted in Economics by

It’s “Fairtrade Fortnight” – apparently… Don’t get me wrong. The people behind the “Fairtrade” brand (which is a brand just like Coca Cola. It is a brand. Full stop.) have good intentions. But what they believe in is bad economics. They are ultimately out-of-touch and misinformed and rely on woolly rhetoric and guilt-inducing marketing.
I think this facebook group says it best:

Fairtrade is a cartel that favours farmers in relatively wealthy countries (eg Mexico), who can afford to sign on to the Fairtrade brand, at the expense of those in the poorest countries, who cannot. Fairtrade incentivises the growing of cash crops, like coffee, which encourages the overproduction of these crops and locks poor farmers into a dependence on Fairtrade for their income. According to Oxford University economist Paul Collier, Fairtrade ensures that poor farmers “get charity as long as they stay producing the crops that have locked them into poverty”, perpetuating the poverty trap that Fairtrade claims to work against. We also object to the bullying tactics used by the Fairtrade cartel to get exclusive access to universities, etc, by having their rivals banned. This is a coercive measure that limits freedom to choose between different products.The only way to help lift the poorest farmers out of poverty is by boycotting Fairtrade and buying goods from the poorest, non-Fairtrade countries. Our alternative: Buy products from poor countries and spend the amount you save on real charity that helps the neediest, not a privileged elite of Fairtrade-sponsored farmers.

A good video:

Quote: “we don’t have a view on mechanisation…”

Oh dear…

Some more articles here:

Not So Fair Trade

The Poverty Of Fairtrade Coffee

Unfair Trade

3 Responses to “Bad Economics Fortnight”

  1. Philip Walker Says:

    Alex Singleton’s article that you link to mentions Good African. It’s worth flagging them up directly, as they illustrate what’s wrong with Fairtrade. The Ugandan company is, so it claims, the first fully African-owned and run coffee company exporting retail-ready roast and instant coffee into the EU. That in spite of the tariff barrier! It helps farmers to improve productivity through innovative techniques and mechanisation, and also supports a lot of social enterprise and farmers’ savings co-operatives.

    Basically, they’re wicked evil capitalists who are actually involved in real, genuine development work, while Fairtrade and associates wring their hands about how dreadful it is to be so poor.

  2. Geoffrey Payne Says:

    This doesn’t make sense.
    If it is true that Fair Trade doesn’t make much difference to improving the income of farmers in the third world, then what is it that stops these farmers from becoming nice middle class people sipping latte in the smart cafes shown in the film?
    The alternative to being a small farmer is not giving up farming and becoming prosperous and middle class. If farming is “modernised” as suggested, the alternative to being a small farmer is to become unemployed. If you want to become a prosperous middle class person you need an approriate education and an alternative and marketable skillset. Losing your current means of livelihood does not in itself give you that.

  3. Tom Papworth Says:


    The truth is that huge numbers of farmers producing small amounts of cash crops inefficiently is part of the problem. Some of these farmers would be better off doing something else. That’s not to say that they should be forced to do so, and if some (privilaged western) people want to buy Fairtrade Coffee so that other people (poor cash-croppers) can continue to produce cash crops inefficiently, that is a private matter between them.

    However, what Fairtrade seeks to do is to discourage the consumption of coffee made by efficient farmers and developing world manufacturers, thus penalising efficiency gains and preventing their progress.

    Ultimately, developing world countries will only be able to offer children “an approriate education and an alternative and marketable skillset” if they can built their economies. That is not going to be achieved by paying their people to continue to scratch a poor living out of the soil. It will be achieved the same way as we achieved it: by rewarding efficient production and incentivising the inefficient to seek other opportunities.