Posts tagged with: fair trade

Blog author: mhornak
Monday, April 30, 2012
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Is ‘fair trade’ more fair or more just than free trade? While free trade has been increasingly maligned, The Fair Trade movement has become increasingly popular over the last several years. Many see this movement as a way to help people in the developing world and as a more just alternative to free trade. On the other hand, others argue that fair trade creates an unfair advantage that tends to harm the poor.
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Blog author: jcarter
Monday, March 26, 2012
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Which does a better job helping the impoverished people around the globe—free trade or fair trade? The American Enterprise Institute recently held a debate on that topic at John Brown University entitled “Free Trade vs. Fair Trade: What Helps the Poor?” Click here to watch the debate between scholars Claude Barfield, Paul Myers, and Victor Claar.

In the debate Dr. Claar raises concerns about both the logic and economic reasoning underlying the fair trade movement. He also expands on that theme in his recent monograph,  “Fair Trade? Its Prospects as a Poverty Solution”, the latest volume in the Acton Institute’s Christian Social Thought Series.

Related: On April 11, Dr. Claar will be visiting Acton on Tap to deliver a talk on “Envy: Socialism’s Deadly Sin.” To learn more about Acton on Tap and other Acton sponsored lectures, visit our events page.

 

Tomorrow evening economist Victor Claar will be leading an Acton on Tap where he will talk about fair trade. As a Christian and an economist, Claar brings a unique perspective to the discussion. He will be asking a number of key questions including: Is fair trade truly the best way to help the poor, and, if not, then what can we do instead?

The blog, Common Sense Concept, recently reviewed Claar’s new book, Fair Trade? Its Prospects as a Poverty Solution. This rerview provides a sneak peak of the discussion ahead at this week’s Acton on Tap:

But good intentions aren’t enough, and as economist Victor Claar in his new book, neither are manipulative trade initiatives. For Claar, author of Fair Trade: Its Prospects as a Poverty Solution, the fair trade movement simply “cannot deliver on what it promises,” and Christians would do well to pay heed.

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Thus, Claar focuses the bulk of his critique on whether such initiatives truly achieve long-term and sustainable success and prosperity. Does fair trade actually lead to the enrichment of the lives it touches, or does it simply give them a temporary boost? Does it — or can it — lead to “transformational, lasting change,” or is it simply our way of giving them a few extra nickels for that week’s bread and milk (not wholly insignificant, mind you)?

Given that coffee is perhaps the most popular of fair-trade commodities, Claar focuses his attention there, providing an initial overview of the coffee market itself, followed by a discussion of fair trade strategies as commonly applied. Here, we learn a few important things: (1) coffee is easy to grow, (2) its price is inelastic, and (3) the “market appeal” of one’s beans is essential for success. Additionally, and most importantly, (!!!) demand is dropping while supply is rising.

“Simply put,” Claar explains, “coffee growers are poor because there is too much coffee.”

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The book offers plenty of arguments against such schemes, but this often unspoken reality illuminates the most central: Artificial, top-down fair trade programs toy with price signals and manipulate individuals to do the wrong thing in the wrong place at the wrong time. “Incentives matter,” says Claar. “Once the stakes of any economic game have changed, people alter their behavior accordingly.”

Join us on Tuesday, May 17, from 6:30-8:00 PM at the Derby Station (2237 Wealthy St. SE, East Grand Rapids 49506) as what is sure to be a very enlightening and lively discussion.

For more information on tomorrow’s Acton on Tap click here.

Click here to read the entire blog post on Common Sense Concept.

The Acton Institute will be hosting another thought provoking and discussion orientated Acton on Tap on Tuesday, May 17. The event will begin at 6:30pm at the Derby Station (2237 Wealthy St. SE, East Grand Rapids 49506).

Leading the discussion will be Victor Claar, who is a professor of Economics at Henderson State University. The Acton on Tap with Professor Claar is titled “Clarifying the Question of Fair Trade: A Christian Economist’s Perspective.” Claar will bring a unique perspective of the discussion of fair trade by fusing Christian and economic principles:

Fair trade is an enormously popular idea in Christian and secular circles alike. Who, after all, could be against fairness? There are now fair trade certified products as varied as coffee, chocolate, fruit, and, most appropriate for an Acton on Tap audience, beer. Victor V. Claar, associate professor of economics at Henderson State University and co-author of Economics in Christian Perspective, however, raises significant economic and moral questions about both the logic and economic reasoning underlying the fair trade movement. Claar suggests that, for all its good intentions, fair trade may not be of particular service to the poor, especially in the developing world.

Claar has written extensively on fair trade including his monograph, “Fair Trade? Its Prospects as a Poverty Solution.” He wrote a commentary in 2010 discussing the economic obstacles for the world’s poor, and how to bring them out of poverty:

If we want to be effective agents in aiding the poor, we should focus our efforts in directions leading to the enhanced value of an hour of labor. That is, we should help poor countries wisely grow their stocks of human and physical capital, all the while bearing in mind that markets and their prices send the best available signals regarding where our efforts can have the greatest impact. The newfound success of innovative micro lending efforts such as Kiva can help show us ways to effectively invest in the accumulation of physical capital by the global poor. Compassion International is a marvelous organization that works to further the education—the human capital—of poor children worldwide, with a financial accountability record above reproach.

Further, markets work best when economic systems maintain the dignity of human beings. First, human beings grow and flourish—and accumulate human and physical capital—in systems that afford them considerable economic freedom. Economic freedom means that people are able to make personal choices, that their property is protected, and that they may voluntarily buy and sell in markets. Yet, economic freedom requires the protection of private property. When property rights are clearly defined and protected, people will work harder to create and to save. When they are confident that the fruits of their labors cannot be taken away arbitrarily or by force, people everywhere have greater assurance that their labors will lead to better lives for themselves and their families. Today’s rich collection of NGOs that work toward basic human rights play a critical role in this regard.

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If we really care about the global poor, we should work to make trade freer for everyone in our global community: a level playing field for all. That means tearing down all of the barriers we use to keep the global poor from working in the very jobs in which they are perfectly positioned to make the greatest lasting gains.

To read the full commentary click here.

Click here for more information on next week’s Acton on Tap.

Blog author: jballor
Wednesday, August 18, 2010
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A constant theme here at the Acton Institute is the idea that good intentions are not enough…they need to be connected to sound practice.

In a reflection on fair trade at WORLDmag.com, D. C. Innes commends Victor Claar’s monograph, Fair Trade? Its Prospects as a Poverty Solution.

Fair TradeInnes, an associate professor of politics at The King’s College in New York City, writes,

It’s admirable that people wish to better the lives of coffee growing peasants. I also applaud their use of private initiatives and organizations. But before scorning their neighbors for not sharing their means, and before trying to turn the world inside out and upside down on the basis of an adolescent “why not?” they should make sure that the vehicle they have chosen for their dreams actually does what it’s supposed to do, and doesn’t do more harm than good.

Check out Claar’s book for more on the intentions, challenges, and realities facing the fair trade movement.

The NYT Freakonomics blog notes that the Fair Trade movement does not exist independently of the laws of economics:

But the problem with Fair Trade coffee is that as the program scales up, the alternative market ethics it wants to sustain collapse. Inevitably, the Fair Trade market becomes subject to the same laws that drive the conventional commodities market. When the price of coffee drops, the appeal of Fair Trade’s price support lures growers into the cooperatives that sell coffee under the Fair Trade label. As poor growers rush into Fair Trade agreements, the supply of Fair Trade coffee rises. Protected by the price floor, the Fair Trade coffee remains inflated despite flagging demand. What Fair Trade importers thus end up doing with the excess Fair Trade coffee is dumping it—upwards of 75 percent of it!—on the conventional market.

This is a huge problem for Fair Trade. Essentially, to be successful, it must, as I have stated in the past, “argue for a complete standardization of its price-fixing methods.”

Fair TradeThis gets at the paradox of religious support for Fair Trade. It makes those who argue so vociferously against “consumption” as an evil, something that feeds the Big Ag “devil” (to use the Freakonomics blog’s terminology), instead rather promote and endorse consumerism of another kind: Fair Trade consumerism.

That’s how you get to the point of mainline denominations pushing Fair Trade commodities (like coffee) in the church narthex and small groups, like moneychangers in the temple courtyard.

The Freakonomics post is lengthy and worthy of attention. But for a more comprehensive discussion of Fair Trade, be sure to check out the new monograph in the Studies in Christian Social Ethics and Economics series, Fair Trade? Its Prospects as a Poverty Solution.

In this book, Henderson State University economics professor Victor Claar examines the case of coffee in particular, and relates that in his

past place of worship, dedicated parishioners freely gave of their time and talents throughout the year to serve the retailing, advertising, and distribution efforts of Equal Exchange. Those parishioners who had taken on the ministry of fair trade coffee advertised frequently in the weekly bulletin and monthly newsletter—at no charge, of course. They also operated a coffee cart that was open for business between and after Sunday services, and they took great care to stock up on extra-special goodies in anticipation of gift-giving occasions such as Christmas and Valentine’s Day. They carefully maintained their inventory on hand, placing
orders with Equal Exchange when stocks were getting low. Of course, Equal Exchange was the only coffee served during coffee hour, where an Equal Exchange sign was prominently displayed to remind everyone that ours was a congregation that cared about the poor.

Claar concludes presciently: “In any other setting but a church, the message would be clear: If you enjoyed today’s free sample, be sure to pick some up on your way out to savor at home all week long.”

Order your copy of Fair Trade? Its Prospects as a Poverty Solution today.

This week’s commentary is from Victor V. Claar, an economist at Henderson State University and the author of a new Acton Institute monograph, Fair Trade? Its Prospects as a Poverty Solution. Follow his economics blog here.

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Poverty, Capital and Economic Freedom

By Victor V. Claar

When poor countries grow rich, it rarely has anything at all to do with how many mouths they have to feed or the abundance of natural resources. Instead, across the globe, poor countries of all sizes, climates, and endowments begin to grow rich as two key factors increase.

First, countries grow rich as their human capital improves. Human capital is the term economists use to describe the value that a country’s people possess through their accumulated experience and education. For example, there is little doubt that India’s recent growth explosion is due in large part to the education—including the knowledge of the English language—of its people.

Second, countries grow rich as they invest in and accumulate physical capital: the machines, tools, infrastructure, and other equipment that make the product of each hour of physical labor more valuable. That which both human capital and physical capital share is that they both transform the result of an hour of a person’s hard work into something of even greater value. As the value of an hour of labor rises, employers gladly pay higher hourly rates, knowing that their bottom lines will be the better for it.

If we want to be effective agents in aiding the poor, we should focus our efforts in directions leading to the enhanced value of an hour of labor. That is, we should help poor countries wisely grow their stocks of human and physical capital, all the while bearing in mind that markets and their prices send the best available signals regarding where our efforts can have the greatest impact. The newfound success of innovative micro lending efforts such as Kiva can help show us ways to effectively invest in the accumulation of physical capital by the global poor. Compassion International is a marvelous organization that works to further the education—the human capital—of poor children worldwide, with a financial accountability record above reproach. (more…)