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Fair Trade not Band Aids

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Karl William's commentary on the power of neo-classical economics and the challenges that face fair trade NGO's.

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Fair Trade not Band Aids

  1. 1. FAIR TRADE not BAND AIDS!
  2. 2. FLO is a group of 24 organizations working to secure a better deal for producers. It owns the FAIRTRADE Mark - the product label that certifies international Fairtrade standards have been met.
  3. 3. Fairtrade standards are designed to tackle poverty and empower producers in the poorest countries in the world. The standards apply to both producers and traders.
  4. 4. 5 KEY OBJECTIVES: 1. ensure that producers receive prices that cover their average costs of sustainable production
  5. 5. 2. provide an additional Fairtrade Premium which can be invested in projects that enhance social, economic and environmental development;
  6. 6. 3. enable pre-financing for producers who require it
  7. 7. 4. facilitate long-term trading partnerships and enable greater producer control over the trading process
  8. 8. 5. set clear minimum and progressive criteria to ensure that the conditions of production and trade of all Fairtrade certified products are socially, economically fair and environmentally responsible.
  9. 9. Principles specific to small producer organizations ….don’t depend on hired workers all the time, but run their farm mainly by using their own and their family’s labour ……... Profits should be equally distributed among the producers………. All members have a voice and vote in the decision- making process of the organization.
  10. 10. Principles specific to hired labour …. Forced labour and child labour is prohibited…… the right to join an independent union to collectively negotiate their working conditions ….. Working conditions are equitable for all workers. Salaries must be equal or higher than the regional average or than the minimum wage. Health and safety measures must be established in order to avoid work-related injuries.
  11. 11. In 2007 Fairtrade sales amounted to approximately €2.3 billion worldwide, a 47 % year-to-year increase over 2006. At the end of 2008 there were 872 Certified Producer Organizations in 58 developing countries. That represents more than 1.5 million producers, about 7.5 million people, including dependents, who are benefiting directly from Fairtrade.
  12. 12. Sources products from worker and farmer owned cooperatives and accredited fair trade factories First non-food company in Australia (and second in the world) to be accredited fair trade.
  13. 13. Nick’s difficulties: -Supplier suspended for 3 months b/c didn’t address gender bias. But this is Pakistan!!! Couldn’t find (willing) woman. -Stitching centre min of 15 years, but Nick’s manager’s daughter was 14 years. FLO busted
  14. 14. PART 2 DEALING WITH THE ROOT CAUSES OF UNFAIR TRADE (a)Conventional neoclassical objections to current Fair Trade initiatives (b1) Geoist insights into Third World aid (b2) Geoism’s True Cost Economics (b3) The ultimate cause of sweat-shop conditions – unemployment. And its solution!
  15. 15. CONVENTIONAL NEOCLASSICAL OBJECTIONS TO CURRENT FAIR TRADE INITIATIVES •Price distortion •Impact on conventional producers debate •Bias towards cooperatives •Retail pricing debate
  16. 16. CONVENTIONAL ECONOMIC ARGUMENTS Price Distortion Similar to other farm subsidies, fair trade attempts to set a price floor for a good that is in many cases above the market price and therefore encourages, as fair trade opponents claim, existing producers to produce more and new producers to enter the market, leading to excess supply, leading to lower prices in the non-Fair Trade market.
  17. 17. CONVENTIONAL ECONOMIC ARGUMENTS Impact on conventional producers debate Fairtrade does not address the basic problem, which is that too much coffee is being produced in the first place. Instead, it could even encourage more production.”
  18. 18. CONVENTIONAL ECONOMIC ARGUMENTS Bias towards cooperatives Certification is predicated on political assumptions about the best way to organise labour. In particular, for some commodities certification is available only to co-operatives of small producers, who are deemed to be most likely to give workers a fair deal when deciding how to spend the Fairtrade premium. Coffee plantations or large family firms cannot be certified.
  19. 19. CONVENTIONAL ECONOMIC ARGUMENTS Retail pricing debate Retailers add their own enormous mark-ups to Fairtrade products and mislead consumers into thinking that all of the premium they are paying is passed on. The Economist estimated that only 10% of the premium paid for Fairtrade coffee in a coffee bar trickles down to the producer. Fairtrade coffee, like the organic produce sold in supermarkets, is used by retailers as a means of identifying price-insensitive consumers who will pay more.
  20. 20. THE GEOIST PARADIGM I Third World aid If the poor don’t own the land on which they live, what will happen to their unavoidable rent when good people from the First World try to better their lot by building:
  21. 21. ….. dams, wells and irrigation infrastructure?
  22. 22. …. hospitals and clinics?
  23. 23. ….. schools?
  24. 24. ….. roads, bridges, trains, telecommunications, electricity etc. etc. etc.?!!!
  25. 25. THE GEOIST PARADIGM II True Cost Economics and the application of fully-costed natural resource charges, thus building in the proper costs into the shelf prices
  26. 26. - Carbon emissions and other pollutants
  27. 27. -Applying the full cost of water to such underpriced items as:
  28. 28. Factoring in the full cost of petrol to things such as: - addressing the food miles issue) -pollutants -noise -road maintenance -traffic accidents & injuries -oil spills -unsightliness of roads (compared to pedestrianised enclaves) -maintaining standing armies to protect/invade oil fields etc.
  29. 29. - Applying natural resource charges on pesticides, herbicides, fungicides, weedicides, synthetic fertilisers etc., depending on their rated ill effects
  30. 30. - hammering, through the tax system, agricultural practices which lead to soil erosion
  31. 31. - Making producers and users of excessive packaging pay for the resultant use (and perhaps pollution of) landfill
  32. 32. - As moral sentiments don’t seem to discourage many of those putting our biodiversity at risk (GM, land clearing etc. ), let’s send them monetary signals! The Monsantos of this world should also put up an Ecological Security Deposit in case they bugger things up.
  33. 33. THE GEOIST PARADIGM III The ultimate cause of sweat-shop conditions – unemployment. And its solution!
  34. 34. •Tax shift – the double incentivisation
  35. 35. •Tax shift – the double incentivisation •Reducing/ eliminating the market price of land and any associated borrowing costs.
  36. 36. •Tax shift – the double incentivisation •Reducing/eliminating the market price of land and any associated borrowing costs. •Slashing the wastage of tax compliance and collection costs
  37. 37. •Tax shift – the double incentivisation •Reducing/eliminating the market price of land and any associated borrowing costs. •Slashing the wastage of tax compliance and collection costs •Practically eliminating tax evasion (incl. foreign)
  38. 38. •Tax shift – the double incentivisation •Reducing/eliminating the market price of land and any associated borrowing costs. •Slashing the wastage of tax compliance and collection costs •Practically eliminating tax evasion (incl. foreign) •TCE - the cost of employing labour becomes a relatively more affordable and attractive input. Resource efficient, not labour efficient
  39. 39. •Tax shift – the double incentivisation •Reducing/eliminating the market price of land and any associated borrowing costs. •Slashing the wastage of tax compliance and collection costs •Practically eliminating tax evasion (incl. foreign) •TCE - the cost of employing labour becomes a relatively more affordable and attractive input. Resource efficient, not labour efficient Boosting employment by self-funded infrastructure rollout
  40. 40. But the *real* puzzle lies unanswered…….
  41. 41. This one’s back to you. What, then, is the real puzzle, the great mystery, the ultimate head-f*cker, the underlying reason why these proposals haven’t been adopted?

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