Fair Trade is an enormously popular idea in Christian and secular circles alike. Who, after all, could be against fairness? Victor V. Claar, however, raises significant economic and moral questions about both the logic and economic reasoning underlying the fair trade movement. In this monograph, Claar suggests that, for all its good intentions, fair trade may not be of particular service to the poor, especially in the developing world.
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5 of 6 people found the following review helpful
Format:Kindle Edition
Twenty-three years ago I was in my first semester of the M.B.A. economic development program at Eastern University. I took a required class that exposed us to development theories and presented case studies on development efforts from around the world. It was a semester long immersion in futility. The class had its desired effect. I'm ever haunted by how easy it is to make things worse and how hard it is to foster sound economic development.
Today, many Christians motivated by concerns for compassion and justice are looking for ways to use their economic influence to help the poor. A very popular approach is to support fair trade goods. Fair trade coffee is probably one of the most popular examples. My own denomination (Presbyterian Church, U. S. A.) is deeply involved with Equal Exchange through the Presbyterian Coffee Exchange. The aims are noble and inspiring. But having developed a skeptical eye early on, I'm always compelled to ask if a strategy like this really works.
FT Recently my cyber-friend and economist at Henderson State University, Victor Claar, wrote a small book Fair Trade? Its Prospects as a Poverty Solution. Claar begins the book by presenting a brief overview of the development and the dynamics of the modern coffee industry. Two economic issues that feature heavily are the inelasticity of both supply and demand, and the low barriers to entering the coffee growing business. These two combine to create a volatile industry.
Next, Claar presents a brief history of the fair trade coffee movement and how it is intended to work. That is followed by a chapter that examines whether or not fair trade coffee can work as intended. In short, based both on the way fair trade coffee works, and based on the intrinsic dynamics of a commodity industry with low barriers to entry, he concludes it cannot. In fact, paying select farmers a premium price can actually lock those farmers into production of commodities (ex., coffee) that they should be abandoning for more profitable products while simultaneously drawing other farmers into a market who would be better served by growing other crops. To understand the details of why this is so, I encourage you to read the book.
Claar concludes with a chapter on how we might respond. He offers some helpful perspective but I strongly resonated with this paragraph:
"Speaking more generally, 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 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 lending enhanced value of an hour of labor ..."(57)
Amen! Claar goes on to mention microlending efforts by organizations like Kiva as just one avenue, but there are others. I know of churches that are developing relationships with communities in emerging nations to learn from indigenous brothers and sister how best to make their resources available to them.
When I was approached by Victor to review this book and write a foreward, I was more than happy to do so. I appreciate the book's irenic tone and the affirmation of concerned Christians trying to do the right thing with their economic decisions. But I also appreciate the concise clear analysis Claar brings to evaluating the effectiveness of fair trade. If fair trade is a topic that captures your interest, then I highly recommend that you become acquainted with this volume.
(From a blog post at my blog on 1 Sep 2010, The Kruse Kronicle: [...]
Today, many Christians motivated by concerns for compassion and justice are looking for ways to use their economic influence to help the poor. A very popular approach is to support fair trade goods. Fair trade coffee is probably one of the most popular examples. My own denomination (Presbyterian Church, U. S. A.) is deeply involved with Equal Exchange through the Presbyterian Coffee Exchange. The aims are noble and inspiring. But having developed a skeptical eye early on, I'm always compelled to ask if a strategy like this really works.
FT Recently my cyber-friend and economist at Henderson State University, Victor Claar, wrote a small book Fair Trade? Its Prospects as a Poverty Solution. Claar begins the book by presenting a brief overview of the development and the dynamics of the modern coffee industry. Two economic issues that feature heavily are the inelasticity of both supply and demand, and the low barriers to entering the coffee growing business. These two combine to create a volatile industry.
Next, Claar presents a brief history of the fair trade coffee movement and how it is intended to work. That is followed by a chapter that examines whether or not fair trade coffee can work as intended. In short, based both on the way fair trade coffee works, and based on the intrinsic dynamics of a commodity industry with low barriers to entry, he concludes it cannot. In fact, paying select farmers a premium price can actually lock those farmers into production of commodities (ex., coffee) that they should be abandoning for more profitable products while simultaneously drawing other farmers into a market who would be better served by growing other crops. To understand the details of why this is so, I encourage you to read the book.
Claar concludes with a chapter on how we might respond. He offers some helpful perspective but I strongly resonated with this paragraph:
"Speaking more generally, 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 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 lending enhanced value of an hour of labor ..."(57)
Amen! Claar goes on to mention microlending efforts by organizations like Kiva as just one avenue, but there are others. I know of churches that are developing relationships with communities in emerging nations to learn from indigenous brothers and sister how best to make their resources available to them.
When I was approached by Victor to review this book and write a foreward, I was more than happy to do so. I appreciate the book's irenic tone and the affirmation of concerned Christians trying to do the right thing with their economic decisions. But I also appreciate the concise clear analysis Claar brings to evaluating the effectiveness of fair trade. If fair trade is a topic that captures your interest, then I highly recommend that you become acquainted with this volume.
(From a blog post at my blog on 1 Sep 2010, The Kruse Kronicle: [...]
By Elise Amyx
Format:Kindle Edition
I read this book last summer not knowing much about fair trade coffee at all and found it very helpful in understanding the reality of this "trendy" chairty. I usually read with a pen so I can underline good points and I ended up underlining nearly the entire book! It's a quick read quick but very rich in material. Claar covers everything surrounding economic principles of the coffee market, the history of the fair trade movement, and the moral implications of supporting the fair trade movements.
Claar does a phenominal job explaining the unintended consequences of the fair trade movement. Though ecnomics can be a tough topic to tackle, Claar explains the coffee market in simple terms for those who may not be so demand-supply "inclined." He starts by outlining why coffee prices are so unpredictable which allows readers to understand the purpose of the fair trade movement, and then discusses the enormous problems fair trade ironically creates for the coffee market. Claar tackles the argument beautifully and makes such a sound argument it's hard to disagree with. This quick read is a MUST READ for anyone questioning the impact of fair trade on developing nations.
Claar does a phenominal job explaining the unintended consequences of the fair trade movement. Though ecnomics can be a tough topic to tackle, Claar explains the coffee market in simple terms for those who may not be so demand-supply "inclined." He starts by outlining why coffee prices are so unpredictable which allows readers to understand the purpose of the fair trade movement, and then discusses the enormous problems fair trade ironically creates for the coffee market. Claar tackles the argument beautifully and makes such a sound argument it's hard to disagree with. This quick read is a MUST READ for anyone questioning the impact of fair trade on developing nations.
1 of 2 people found the following review helpful
By Joseph Sunde
Format:Kindle Edition
My exposure to "fair trade" products came slowly, beginning at a Coldplay concert in tenth grade when I first spotted Chris Martin's "Make Trade Fair" arm doodles.
My response? "Woah!! Cool!!"
Five years later, as a junior in college, I was a bit more skeptical. My college had selected a particular brand of fair trade coffee to be the exclusive choice in our cafeteria and campus cafes -- a decision that surely primed plenty of youngsters into self-righteous bliss.
Just a year prior, I might have responded with similar warm fuzzies, but after reading a few books the previous summer, I had a new perspective. Such get-rich-quick development strategies, I learned, were bound to be ineffective, inefficient, and counterproductive.
Yet by expressing these sentiments, I found little solidarity. After speaking with various college faculty and fellow students about my concerns, I quickly realized that I was firmly on the fringe -- a lone, cold-hearted calculator, critiquing anti-poverty initiatives that were filled to the brim with good intentions. How dare I?
But good intentions aren't enough, and as economist Victor Claar argues 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.
As Claar makes abundantly clear -- and as most of you know -- my Christian-college experience was not an anomaly. Over the past decade, churches and various Christian institutions have grown increasingly confident in attaching themselves to such schemes, selling and promoting fair-trade products as a significant part of their outreach initiatives.
This rashness, however, is simply rashness.
As Claar explains:
'Too often we simply throw things at a problem --because we do indeed have much to give -- rather than find out first what is needed most and where we can serve most effectively. When needs are persistent rather than temporary, we must stay focused on our hope for the long-term improvement of the prospects of the subjects of our care.'
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 people a temporary boost? Does it -- or can it -- lead to "transformational, lasting change," or is it simply our way of giving away a few extra nickels for one week's worth of 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."
Sounds like a good spot for some Western stimulus, eh?
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."
Such manipulation might indeed be helpful if the do-gooders of Equal Exchange could actually understand and predict market fluctuations, but they can't. Thus, their activities spur coffee growers to follow distorted prices toward ends they might otherwise avoid. On the whole, this imposes a static view of opportunity on such farmers and inhibits them from rising above their circumstances. As Claar explains, it "keeps the poor shackled to activities that, while productive, will never lead to poverty reduction on a large scale -- or even a modest one."
This is not even to mention the other issues with fair trade that Claar examines: its overall expensiveness and inefficiency, its minimal impact on poverty (even if it works), and the questionable motives and actions of fair-trade sellers and middle men.
Fortunately, there is a real and lasting solution, which is the focus of Claar's final chapter: "How Might a Caring Christian Respond?"
Instead of imposing our top-down plans on our neighbors across the globe, Claar suggests that we "work to make trade freer for everyone in our global community: a level playing field for all." Although it might lack the punch, trendiness, convenience, and immediate satisfaction of buying the right pack of coffee beans at the right socially-conscious grocery store, it actually works (e.g. the 20th century).
Freeing up global markets (or simply allowing them to run organically as is) may not be sexy, but in the long run, it will lead to sustainable growth and will eventually direct those trapped in flooded markets to pursue more productive activities. In such impoverished areas, price signals are typically difficult enough to discern as it is. We would do well to work toward improving their accuracy rather than muddling it further.
But in addition to our call as Christians to care for the sick and assist the poor (an important one, to be sure) how does Claar's approach feed into our overall view of humanity as a whole?
Claar answers the question with eloquence:
"I am convinced that real, long-term hope for today's global poor lies in our united prayerful anticipation of the day in which we will no longer think in terms of 'us' (wealthy Westerners) and "them" (the global poor). Instead, the question that should gnaw at us most deeply is how we can each be effective forces to bring about a world in which such a distinction is no longer relevant -- a world in which all people share together, with enduring personal dignity and freedom, the blessings and rich abundance of God's gracious and innumerable gifts intended for us all."
If only I could scribble that on my arm!
My response? "Woah!! Cool!!"
Five years later, as a junior in college, I was a bit more skeptical. My college had selected a particular brand of fair trade coffee to be the exclusive choice in our cafeteria and campus cafes -- a decision that surely primed plenty of youngsters into self-righteous bliss.
Just a year prior, I might have responded with similar warm fuzzies, but after reading a few books the previous summer, I had a new perspective. Such get-rich-quick development strategies, I learned, were bound to be ineffective, inefficient, and counterproductive.
Yet by expressing these sentiments, I found little solidarity. After speaking with various college faculty and fellow students about my concerns, I quickly realized that I was firmly on the fringe -- a lone, cold-hearted calculator, critiquing anti-poverty initiatives that were filled to the brim with good intentions. How dare I?
But good intentions aren't enough, and as economist Victor Claar argues 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.
As Claar makes abundantly clear -- and as most of you know -- my Christian-college experience was not an anomaly. Over the past decade, churches and various Christian institutions have grown increasingly confident in attaching themselves to such schemes, selling and promoting fair-trade products as a significant part of their outreach initiatives.
This rashness, however, is simply rashness.
As Claar explains:
'Too often we simply throw things at a problem --because we do indeed have much to give -- rather than find out first what is needed most and where we can serve most effectively. When needs are persistent rather than temporary, we must stay focused on our hope for the long-term improvement of the prospects of the subjects of our care.'
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 people a temporary boost? Does it -- or can it -- lead to "transformational, lasting change," or is it simply our way of giving away a few extra nickels for one week's worth of 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."
Sounds like a good spot for some Western stimulus, eh?
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."
Such manipulation might indeed be helpful if the do-gooders of Equal Exchange could actually understand and predict market fluctuations, but they can't. Thus, their activities spur coffee growers to follow distorted prices toward ends they might otherwise avoid. On the whole, this imposes a static view of opportunity on such farmers and inhibits them from rising above their circumstances. As Claar explains, it "keeps the poor shackled to activities that, while productive, will never lead to poverty reduction on a large scale -- or even a modest one."
This is not even to mention the other issues with fair trade that Claar examines: its overall expensiveness and inefficiency, its minimal impact on poverty (even if it works), and the questionable motives and actions of fair-trade sellers and middle men.
Fortunately, there is a real and lasting solution, which is the focus of Claar's final chapter: "How Might a Caring Christian Respond?"
Instead of imposing our top-down plans on our neighbors across the globe, Claar suggests that we "work to make trade freer for everyone in our global community: a level playing field for all." Although it might lack the punch, trendiness, convenience, and immediate satisfaction of buying the right pack of coffee beans at the right socially-conscious grocery store, it actually works (e.g. the 20th century).
Freeing up global markets (or simply allowing them to run organically as is) may not be sexy, but in the long run, it will lead to sustainable growth and will eventually direct those trapped in flooded markets to pursue more productive activities. In such impoverished areas, price signals are typically difficult enough to discern as it is. We would do well to work toward improving their accuracy rather than muddling it further.
But in addition to our call as Christians to care for the sick and assist the poor (an important one, to be sure) how does Claar's approach feed into our overall view of humanity as a whole?
Claar answers the question with eloquence:
"I am convinced that real, long-term hope for today's global poor lies in our united prayerful anticipation of the day in which we will no longer think in terms of 'us' (wealthy Westerners) and "them" (the global poor). Instead, the question that should gnaw at us most deeply is how we can each be effective forces to bring about a world in which such a distinction is no longer relevant -- a world in which all people share together, with enduring personal dignity and freedom, the blessings and rich abundance of God's gracious and innumerable gifts intended for us all."
If only I could scribble that on my arm!
More About the Author
Dr. Victor V. Claar is a professor of economics at Henderson, the public liberal arts university of Arkansas, where he specializes in teaching principles of economics courses. He holds two graduate degrees in economics (M.A. and Ph.D.) from West Virginia University. Prior to arriving at Henderson, he taught for nine years at Hope College in Holland, Michigan. At Henderson he also serves on the graduate faculty as well as the faculty of the Honors College.
Prior to moving to Michigan, he spent his life in the Appalachian region. He is thankful for two caring parents, both of whom were raised by remarkable single moms.
Professor Claar spent a recent year as a Fulbright scholar, giving graduate lectures and conducting research at the American University of Armenia. He publishes regularly in peer-reviewed journals of economics, and recently published a new book about fair trade.
He resides in Hot Springs, Arkansas.
Prior to moving to Michigan, he spent his life in the Appalachian region. He is thankful for two caring parents, both of whom were raised by remarkable single moms.
Professor Claar spent a recent year as a Fulbright scholar, giving graduate lectures and conducting research at the American University of Armenia. He publishes regularly in peer-reviewed journals of economics, and recently published a new book about fair trade.
He resides in Hot Springs, Arkansas.
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