Chris Harman

Thinking it through

Unfree and unfair

(November 2002)

From Socialist Review, No.268, November 2002.
Copyright © Socialist Review.
Copied with thanks from the Socialist Review Website.
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

The aims of fair trade face a hostile system

There are still people who see lack of clarity in the anti-capitalist movement as a positive thing. Even someone who has played such an important role as Vittorio Agnoletto of the Genoa Social Forum praises the lack of ‘ideology’. But sometimes lack of clarity leads straight into traps set by the movement’s bitterest opponents.

There was a recent example of this when some NGOs started a campaign for ‘free trade’ for Third World products in advanced countries, claiming this would alleviate horrifying levels of poverty. It was a campaign greeted with enthusiasm by some of the most unashamed apologists for neoliberalism – including New Labour’s Clare Short. At last, they said, the movement against globalisation was grasping how the poor would benefit from World Trade Organisation measures against restrictions on trade and from International Monetary Fund encouragement of Third World countries to produce cash crops for export.

Restrictions on trade by the European Union countries, Japan and the US do make it more difficult for Third World producers of some goods to sell their produce – for instance cane sugar, whose import into Europe is restricted to provide profits for the producers of subsidised beet sugar. But the central causes of Third World poverty lie elsewhere.

This can be seen by looking at the crisis which is hitting workers and peasants involved in coffee growing worldwide. The price paid to coffee producers has slumped over the last three years. As a result hundreds of thousands of people have been driven into desperate hunger. The catastrophe can be traced back to the WTO/IMF/Clare Short message that trade is the answer to poverty. In the 1990s, as part of their turn to the market, Vietnam’s rulers accepted this message and turned the country into the world’s second biggest coffee producer. But at a time when most of the world was suffering from stagnating or falling living standards, the only effects were for world production to shoot ahead of what people could afford to buy, and for the price for all producers to be halved.

Something similar has been happening with sub-Saharan Africa’s manufactured goods. From the mid-1980s to the mid-1990s the proportion going into international trade rose from 51 to 56 percent. But in the same period its share of worldwide output fell as the terms of trade for its products got worse. This coincided with the large scale entry of China into global markets. Attempts by one country to export its way to economic growth pushed others backward.

Far from ending poverty, increasing trade has only shifted it from one part of the world to another. Things might be different if global output and consumption were growing rapidly. In that case workers and peasants worldwide would be getting the higher incomes needed to buy the increased output of Third World goods and commodities. But that is not happening. The three centres of the global economy – the ‘triad’ of North America, Europe and Japan – are all stagnating or growing very slowly. The overwhelming bulk of their trade and investment is directed towards each other, with a small portion going to a handful of ‘newly industrialising economies’ and hardly any to the rest of the world. This is because capitalists – including Third World capitalists – see the most profitable place for most investment as being in the already industrialised countries. For them, much of the rest of the world only serves two purposes. It can be squeezed for interest payments on debt. And it can provide a stream of profits for western multinationals that have bought up much of its basic infrastructure under IMF-imposed structural adjustment programmes. The pressure to export is pressure to get the minimal sums necessary to cover these outflows of money. It can only add to the impoverishment of wide sections of people.

Tinkering with trade controls is not going to produce any measurable improvements in the poor’s lives. Focusing on trade rules can, however, distract the movement against globalisation from seeing where the real problems lie. Even measures more radical than free trade, like those of the ‘fair trade’ movement – cannot do more than scratch the surface of the problem. Fair trade coffee, for instance, involves companies set up by western NGOs guaranteeing coffee farmers a market with fixed prices in return for control over the methods and quality of production. The coffee is then sold as a ‘niche’ product through supermarkets and coffee shop chains – who get the usual mark-up on the price. This can improve the situation of individual groups of farmers. But it cannot deal with the global poverty produced by falling commodity prices as supply exceeds what people can afford to buy. Fair trade coffee only accounts for 1.5 percent of world raw coffee bean sales, and comes at the expense of other coffee farmers who do not have links with the fair trade organisations.

Meanwhile Penny Newsman, the Fairtrade company’s managing director, ‘acknowledges that the business model is stretched when market prices are as low as they are now. She says it probably would not work with the most price sensitive products at the lower end of the price scale ... Her company makes a profit and pays a small dividend to shareholders. “First and foremost we are a business,” she says.’

Oxfam, which helped set up Fairtrade, certainly recognises that direct marketing cannot deal with the worldwide catastrophe for coffee farmers. It has recently proposed joint governmental intervention to raise prices. This includes burning huge amounts of coffee to remove it from the market. This is no different to the obscene capitalist method of destroying stocks of goods to make their production more profitable – as if the problem was not that people are too poor to buy them, but that too many of the things they wanted were being produced. Coffee is drunk by many poor people in regions like the Middle East and Latin America who would like more, not less.

Dealing with world poverty requires much more than Third World producers accessing western markets, whether on free trade or fair trade terms. It is a product of a global system dominated by the concentrations of capital at its core and the smaller concentrations around the edges. Dealing with poverty means challenging those who run these concentrations.

The struggle to end the burden of debt is one step in this direction. The struggle to stop IMF structural adjustment programmes is another. But ultimately there is no avoiding the need to challenge multinationals directly and the states that support them.

Fair trade coffee only accounts for 1.5 percent of world raw coffee bean sales

Last updated on 27 December 2009