Free trade is fair trade

The other day I was in the grocery store and I happened to look at some of the offerings of coffee, noting with some wonder that every one of them was stamped with “Fair Trade,” raising the question, of course, of what fair trade is. “Fair trade” supposedly means that the workers are given a living wage while the company promotes “equitable and sustainable development.” Well, of course! I thought, I should purchase this coffee instead of the alternative “normal” coffee, which, naturally, enslaves the poor and is leading our planet towards a swift, early demise. Furthermore, I was thankful that there exists in the world a few altruistic executives willing to sacrifice personal gain in order to ensure their workers are fairly paid and the planet is not destroyed. I kid, of course; the only altruism in this case is the “altruistic” desire for executives of corporations to satisfy their consumers. Whether they do that through cheap coffee or expensive coffee with a stamp on it, their only goal is to differentiate their coffee enough that you will purchase a pound or two with a sound conscience. There is nothing wrong with this scenario. It is OK to seek a profit and, as the aforementioned example shows, self-interest and profit-seeking can be a force for good. Not because there are a few valiant CEOs who break the mold and seek to help the poor while sacrificing personal gain, but because these executives are finding personal gain because they are helping the poor. For example, the primary goal of a corporation is typically explained as creating value for its stakeholders who include owners (shareholders), employees, suppliers and customers. This, however, is typically a means to the end of increasing shareholder wealth. If the end goal of all corporations is to further enrich their shareholders, or at the very least create value for their stakeholders, you might think that at least one corporation would include that as part of their mission statement (at least those normal coffee companies would surely say something about being capitalist pigs). However, this is not the case. There is instead some kind of obsession with responsibility to communities, helping the disadvantaged, helping those who help them or some other obviously made up goal. Why don’t any companies just say they want to further enrich their owners and leave it at that? Because it’s bad for business.

What some may find difficult to understand is how a system like capitalism could possibly lead to prosperity for all involved; surely there are losers somewhere. After all, capitalism operates on a somewhat insane concept of essential anarchy. People are allowed to do more or less as they please, seeking their own gain and somehow this is supposed to create employment, prosperity, wealth and progress without anyone planning any kind of end goal. Pretty crazy, right? Well, it is crazy until you consider what those companies must do in order to accomplish their end goals. Take the previous example of coffee growers for instance. Often, outsourced labor, especially agricultural labor, is looked down upon, which is where the concept of fair trade coffee comes from. The negative stigma is generally a result of the worker’s low wages (which is also the main reason they are outsourced to begin with), which can be pennies an hour, certainly pathetic by American standards. If you look further, however, it is worth noting where that pay level comes from. It is not because the corporation suddenly showed up and bullied everyone into working for no pay. Foreign corporations would, in fact, have no presence without hiring labor to begin with. Instead, it was because the corporations offered the best alternative to worker’s previous opportunities. The fact is that many times workers in extremely low-wage countries have the option of possibly being a subsistence farmer and earning 1 cent an hour in excess, or working for a foreign corporation for 5 cents an hour. Either way, these wages are in not large, but a 500 percent increase in pay is quite substantial regardless of the amount.

Furthermore, as demand for labor increases in a country, the wages must follow suit, so it is safe to say that the fair trade coffee gets the first pick of employees, while the other coffee services get what they can’t hire.  This is also the reason why fair trade is most commonly seen in products such as coffee and chocolate, both of which tend to be produced in low-wage, agriculturally-based nations, which are early on in their development. This is the same reason why you don’t see this trend in India, where wages are still low compared to the United States, but competition for labor is high enough that fair trade is a less viable strategy.

The low wage laborers are in no way wealthy, but their poverty is not the result of foreign investment. Instead, foreign investment has given them the few things they do have.


By Mark Davis