Re: FairTrade article in Christian Science Monitor

On Aug 28, 9:48 am, Ian Smith <i...@xxxxxxxxxxxxxxxxx> wrote:
On Thu, 28 Aug 2008 05:49:41 -0700 (PDT), bernie <bdig...@xxxxxxxxxx> wrote:
On Aug 27, 3:34 pm, Ian Smith <i...@xxxxxxxxxxxxxxxxx> wrote:

The fundamental problem is that you seem to think it would be in their
own best interests to have them watch their children starve.

No, I don't.

You seem to have nothing to offer other than 'let them eat cake',
while at the same time decrying an arrangement which operates
within the 'free market' 'rules'. The irony that you do so from a
rich, highly protectionist nation would be in some way laughable,
were the situation not so sickening.

That I live in a country that has moderate protectionist
policies compared to most others has zero to do with the argument.

Exactly - which will be why I have not offered it as supporting any of
the argument, merely noted the irony.

As I have stated a number of times, Ian, I have no problem with
folks spending their money on FairTrade. My issue is with them
being given the idea that it is a program that is economically
valid and is a long time solution.

But you have no justification as to why it is economically invalid -
and the fact that it exists within the 'free market' without
government intervention or subsidy is pretty good evidence that it is
actually economically entirely valid. The very fact that it is a
market sector that exists and is not merely stable but growing rather
suggests that it _is_ valid. Or are you defining 'valid' in some
strange way? It might not exist in a highly simplified economic
model, but it exists in the real world, and I know which seems more
'valid' to me. When a text book tells me something cannot exist, but
I see it day in day out in the real world, I know where I think the
error lies.

Ah, I think I see where we are not communicating. I am saying the
program is not economically valid because it is not sustainable in the
long term. By economically sustainable I mean it cannot exist sans
efforts external to the market. You seem to be saying that because it
exists it is economically valid. That begs the question, "If growers
of coffee were not guaranteed a base price that is not influenced by
the market price could they continue to operate?" The answer has been
demonstrated over and over in the coffee trade. They cannot continue
to operate at a loss and they go broke. If your definition of
economically valid is that a program exists then we disagree on what
is valid. I think a fair analogy would be the current welfare system
in the United States. It exists. I would not argue that it is
sustainable or an economically valid solution to the problem of
poverty in the United States simply because it exists.
To put a finer point on it, Ian, I don't belive I have said it
can't exist. I have said it is not sustainable as a valid economic
model. There is a big difference. When you strip away all the verbiage
and marketing spin of the fairtrade and like programs the bottom line
is that it is an attempt to guarantee economic survival using non-
economic means. If it were labeled welfare or charity I would have
much, much less issue with the way they are promoted.
I would again go back to the questions I have posed a number of
times and which have never been fully addressed. If there were not a
surplus of coffee and a surplus of labor would be be having this
conversation? The answer is, as always, that we would not. Secondly,
if there is an imbalance of supply in both labor and product then how
does subverting the natural tendency of the market by supporting
prices help reduce the over supplies? You seem to think that the tiny
percentage of coffee that is sold as fairtrade coffee will effect a
market change that will allow the laborers and growers to get out of
the oversupply problem. I disagree.

If you could demonstrate how subsidizing over- production
to encourage more production is a long term solution I'm all ears.

That's a straw man argument, and I think you are clever enough to
realise it is. I'm not defending subsidised over-production. There
is no subsidy being paid, simply a different pricing model, and
encouraging a pricing model that allows for more than lowest
denominator commodity supply-and-demand can be a long term solution.
Lots of things are priced on other than base commodity value. Almost
all of your argument deflates if you simply step aside from the
assumption that coffee has to be priced that way.

This may be another important point where we don't agree on a
definition. By subsidy I include all monies paid to a producer for a
product that are not market based. In other words, if the market is
paying $1.00/lb for specialty grade ethiopia and fairtrade is paying
$1.43/lb for exactly the same coffee I consider that a subsidy which
is not going to materially effect the root causes of poverty in the
coffee trade. I understand that those few farmers and pickers who
belong to the select coops participating in the program will be
helped. I have no problem with that happening. They are acting
rationally. My argument again is that the program will not address the
root causes of poverty in the coffee trade and I am of the impression
that the programs at issue market themselves as impacting these root
causes. Your example of the schools and wells built are exactly to my
point.
Now, Ian, if you consider the premium paid for fairtrade coffee
to be just an element of good marketing using the capitalist model I'd
have to agree. If people pay for fairtrade because it makes them feel
good and that is worth the premium they pay I can accept that in the
spirit of free market trade. Once the marketing crosses the line to
imply it has any material effect on the root causes of over production
and an over supply of labor I have an issue.

Ad nauseum, Ian, I have not argued anywhere that the fair trade
model should be torn down.

OK, you are loudly criticising it yet at the same time you don't wish
it to be removed? That's a strange sort of double-think - are you
really saying you think it's all wrong and bad, and should stay just
the same? If you don't think it should be taken away, I really and
truly don't understand what you are saying, and would like you to
elaborate.

I'm approaching the question from the mind-set that many of the
"cause" coffee programs do not in fact provide the benefits they
market and are not valid economic solutions to economic problelms.

- but doing so from the assumption that an "economic solution" means
one particular sort of economic solution (one based upon lowest basic
commodity supply-and-demand pricing). It's no surprise that fair
trade doesn't 'work' within that model of economics, because it isn't
operating within that model of economics. In the real world, however,
FT does work - it's out there, it exists, and if it didn't work it
wouldn't be growing, it would be long gone.

theory that postulates that increasing subsidies to a market

Different pricing is not subsidies - and you know it. Just because
one variety of something is priced more expensive than another, it
does not mean it is subsidised. Just because one set of workers gets
paid more than another doesn't make them subsidised. Or would you
maintain that every market where you have labour unions (for example)
is subsidised? Is every jurisdiction with a minimum wage one that
operates on subsidies?

Why, yes. Minimum wage laws are subsidies. The customer pays
more for a unit of labor than they would without the law being in
effect. That is as clear an example of a subsidy as I can think of, by
the way. If, as an employer, I can hire a part-time student to work
for me for $5/hr and they are happy and I am happy there is no reason
for the government to intervene in the contract. When the government
comes around and decides that "fair" is $7.00/hr the money comes from
a subsidy funded by increased prices above what the market really
demands. My production does not go up because the government decrees a
minimum wage. More customers do not come in the door because the
government decrees a minimum wage. The only effect of a minimum wage
is inflationary and a false labor market. Or in my case it is laying
off 40hrs of labor a week.

You are arguing that something is bad, but whatever it is, it seems
that it's not fair trade (or even Fair Trade, or even Transfair), and
whatever you are arguing about very possibly does not exist in the
real world.

I happen to believe that the laws of economics are fundamental like
those of physics.

If you actually believed that then I would say again - you aren't
worth talking with. If they were fundamental in that way, 'fair
trade' would not exist, Transfair would not exist. It just wouldn't
be here, and we could not be discussing it.

Because the laws of economics are fundamental doesn't mean
subsidies won't exist or that people won't try to use social means to
resolve economic problems. It happens all the time. Because a program
exists for a time does not mean it is valid or it doesn't violate the
laws of economics. That also happens all the time.

If it's that fundamental we can't be having this discussion, because
it can't exist.

arguing whether or not I agree with the laws of gravity. I simply
accept how things work and when I see schemes that I don't believe
will not materially change a situation I can rely on those rules of
economics and commerce. It doesn't mean I support poverty or starving
children or any of the ills of the system, any more than it means I
support building falling down because of the laws of gravity.

This is where your analogy falls down actually - things that assumed
that gravity did not exist _would_ fall down. There are no buildings
in existence that the designer created assuming gravity does not
exist.

'Fair trade' _does_ exist, now, today.

Yes, it does. And, again, that it exists does not in any way
provide that it is a valid economic solution to the problem of
oversupply of labor and product.

regards, Ian SMith
--
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regards,
Bernie
.

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