Here’s an extract from a book on fair trade that I had occasion to look up. In what circumstances is fair trade a good thing? If we dig into our pockets to buy something at a higher price than necessary in order to engage in ‘fair trade’, then we know a few things.
- The sacrifice we made paying a higher price could have purchased more good for the beneficiaries if we’d given them our money – usually a whole lot more. In other words in terms of helping it’s inefficient – often hugely so. Often the exchange rate back to the people one is putatively helping is less than 25 cents to the intended beneficiaries for every $1 we invest.
- Even without this diluting, if people are producing a product for a price that’s inflated against world prices, they’re entering a new kind of dependency – on us. Perhaps they’d be better off adjusting to the unfair price and (hopefully) producing something else which has a less ‘unfair’ price. Presumably in many cases the there’s nothing much else the producers can produce, but this is a hard thing to know.
In any event, I’ve always been hugely ambivalent about fair trade, but it’s a subset of what might be called ‘inefficient do-gooding’. The same issue turns up in a different guise in environmental policy where we reduce waste to landfill and increase kerbside recycling. Usually this reduces greenhouse gas emissions (though sometimes even that isn’t true), but we could do a lot more environmental good, if that’s what we want to do, by just spending the money on the environment directly – say with a stand of carbon sequestering trees, rather than spending the money on kerbside recycling.
On the other hand there is an argument that a lot of human do-gooding is not focused on utilitarian efficiency. Kristina Keneally supports the still-birth foundation because she has been touched by still birth. It’s arguably not the most ‘efficient’ use of her time in terms of alleviating human suffering, but it’s something she wants to do. By the same token maybe people don’t want to make an ‘efficient’ contribution to the environment, they want instead, (maddeningly as far as I’m concerned) to reduce their carbon footprint. So what – O Troppodillians – can we say about this?