Fair or Free?

Fairtrade Fortnight is now well under way and Elaine from Aberdeen has written in with a great question:

What is the difference between Fairtrade and Free Trade and which is worth supporting more?

Now that is a meaty question and one I will not be able to do total justice to without writing a 50 page research paper. But I can give you a brief summary of both and my take on how they interact.

Fairtrade is in essence a certification to ensure that a product you buy has been produced by people being paid a fair and sustainable price. In practice this means that people get a stable price for their hard work and can plan ahead accordingly. We all get paid stable amounts but imagine if we were paid against a fluctuating market price...try getting a mortgage on that basis. Fairtrade seeks to extend to others something we therefore essentially take for granted.

Free Trade is the committment to a market free of barriers i.e. subsidies. Many economists believe Free Trade to be the answer to societies ills as the market will naturally heal all if left to do so. It is only when we interfere with the market and place obstacles to regulate, direct and control the market that causes it to act unnaturally.

How do they connect?
Most economists fall into either the Fairtrade or Free Trade camp and very rarely do they cross-over. The reason for this dichotomy is that Fairtrade is fundamentally an interference in the market. Not many will disagree with that point to my knowledge. But those who believe in Fairtrade see it as a neccessary interference, a positive amendment to an already broken market.

On the contrary those committed to Free Trade argue that no interference with the market can be good. In their eyes two wrongs do not make a right.

The final word?
As you can tell this is a complex issue. My take is that the market is broken and imperfect. I wish we did live in a world where a perfectly free market were possible but ultimately we do not. When faced with the reality that the free market is an abstract impossibility one is morally obliged to relieve the negative impacts of the market through the use of adjustments, which in this case we call Fairtrade.

Got that?

Until next time...

Keep it green...

Al

Comments

[jake]

I know many people who agree with both Fairtrade and Free Trade, and I disagree that Fairtrade is as much an interference in the market as you make out. Fairtrade goods simply add an extra non-material quality (ethicalness) to goods sold on an open market, in the same way that Apple add non-material qualities (coolness) to their goods through advertising.

If you object to the 'interference' with the signals sent by price changes, then shouldn't you also object to the 'interference' with demand created by advertising? Both still occur in an open market so I don't see why certain economists have started raising objections to one and not the other. Fairtrade may end up creating a few 'inefficiencies', but no more so than when an inferior product outsells superior ones because of better advertising.

[Al]

Hi Jake

Thanks for the comment. When I call Fairtrade an interference I mean it is a voluntary economic adjustment to a flaw in the existing economic system. And one I fully support across the board. I work for a company that sells Fairtrade and Fairly Traded products and am so pleased to be working in an industry that helps people through the power of Fairtrade.

Make sense?

Cheers

Al