Acton Institute Powerblog

Fair Trade Goes Bananas

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You may have heard of “fair trade,” one of the more recent economically-myopic efforts to act as “guarantees that farmers and farmworkers receive a fair price for their labor.”

I’ve written before about the fair trade coffee movement (especially in the Church), which has perhaps gained the most public attention. But fair traders haven’t overlooked any consumables, and the broader movement is likely to receive more attention in the future, as fair trade is a plank in platform of the ONE Campaign (see the text of the ONE Declaration). I’d like to point you in particular to this FAQ about fair trade bananas.

As the FAQ states, fair trade can be seen as the global equivalent of more locally-based minimum wage laws, and arguments against the living wage can thus be applied to fair trade: “Low conventional market prices for bananas often leave farmers unable to cover even their cost of production. The Fair Trade price is the equivalent of a living wage.”

The apparently obvious unfairness of the free trade system, in which so many people subsist on less than $1 per day, is complicated by a number of factors. One of these is that the current global system is not really all that free.

But another important economic reality is what economists call purchasing power parity (PPP). Even Ron Sider, in his 20th anniversary edition of Rich Christians in an Age of Hunger, integrates a number of economic analytic tools into his argument, including PPP (see pages 27-28). So the fair traders’ appeal to a fact, such as that farmers do not make enough to “cover even their cost of production,” cannot simply be taken at face value.

And even in instances where this is the case, the fair trade movement does not bother to take any account for why “low conventional market prices” for a particular commodity exist. In most cases, such as with coffee, the supply far outstrips demand. The world doesn’t need more coffee production. To artificially subsidize the production of yet more coffee is to flood the market even further and undermines the long term viability of the fair trade project.

For more on churches and fair trade, check out this commentary.

Jordan J. Ballor Jordan J. Ballor (Dr. theol., University of Zurich; Ph.D., Calvin Theological Seminary) is a senior research fellow and director of publishing at the Acton Institute for the Study of Religion & Liberty. He is also a postdoctoral researcher in theology and economics at the VU University Amsterdam as part of the "What Good Markets Are Good For" project. He is author of Get Your Hands Dirty: Essays on Christian Social Thought (and Action) (Wipf & Stock, 2013), Covenant, Causality, and Law: A Study in the Theology of Wolfgang Musculus (Vandenhoeck & Ruprecht, 2012) and Ecumenical Babel: Confusing Economic Ideology and the Church's Social Witness (Christian's Library Press, 2010), as well as editor of numerous works, including Abraham Kuyper Collected Works in Public Theology. Jordan is also associate director of the Junius Institute for Digital Reformation Research at Calvin Theological Seminary.

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