The Guardian: Is Fairtrade doing more harm than good?

By John Vidal (March 8 2008)

The provocative rightwing Adam Smith Institute has "investigated" Fairtrade and found - shock! - it's doing more harm than good. The rational free market economists, nappy-trained on Milton Friedman and Margaret Thatcher, say the popular system of paying a bonus to producers in poor countries and guaranteeing them an above-market price for their produce, helps only a very small number of farmers, favours some growers over others, pays inefficient cooperative farms and discourages mechanisation. Even worse, they add, it allows UK supermarket chains to profit more from the higher price of Fairtrade goods than the farmers themselves.

This is seductive but misleading. In a perfect world, with no trade barriers or subsidies or future markets or middle men, these academic points would be telling. But the free-trade system, which the Adam Smith Institute prefers and in which western consumers and small farmers must work, is heavily skewed against the poor. At the last count nearly 2 billion farmers were unable to get a decent price for their goods, and were earning less than $2 a day, something which might also be called "unfair".

Fairtrade is not perfect. It was only ever an inspiring idea to try to channel more money to producers in developing countries, and many people hold their nose when they see Tesco and others retailers making more money out of selling a fairly traded chocolate bar than the family who might have spent days labouring in the field to produce it.

But the extra cash that goes to the cooperatives does help. Some groups use it to provide their old people with minimal pensions, others use it to pay for school fees or increase their pay. The point is the group members choose what they do with the extra money democratically. And nearly 7 million people - farmers, workers and their families - in 59 countries now benefit.

Tellingly, nobody is forced to join a Fairtrade organisation, or to buy such products, so you might think that free market advocates such as the Adam Smith Institute would be happy to see the expansion of individual choice that it provides.

Published by The Guardian here

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