Index

6  Fairtrade

New Paradigm or Niche Market?

Arthur Edwards

The following ‘essay’ is an elaboration of a presentation given by Arthur Edwards at a Talking Economics Event of the Associative Economics Network, which took place at Rudolf Steiner House, London, on Thursday March 13th, during Fairtrade Fortnight. Arthur Edwards has been a fair trade campaigner for many years, more recently as secretary of the Oxford Fairtrade Coalition and as a local representative for Shared Interest, a co-operative that helps finance fair trading producers and retailers. He is involved in the Associative Economics Network and last year co-founded the Oxford Economics Forum.

Although I speak as a lay person rather than a professional economist, it is my conviction that, whereas religion and politics have a tendency to emphasise difference, economics can enable human beings to relate to one another in the whole. The science of economics, however, has been led up a blind alley by theories that have made it seem increasingly remote and unreal to anyone outside, and many within, the academic community. My interest in economics is not an interest in a jargonised and abstruse theory but an interest in the practical avenues by which economics can be made relevant as an organisational tool for humanity, bringing it back to life as a discipline. The Fair Trade Movement provides a striking example of a new economic phenomenon, one for which conventional ‘economic theory’ can hardly account.

Fair trade has caught the public’s imagination. Last year, UK sales of Fair Trade products rose some 40%, with even the Government’s Department of Trade and Industry changing its buying habits. This behavioural step-change points to a new emerging paradigm that takes into account the whole context of production and could therefore be said to go beyond the narrower precepts of market economics.

By putting in question today’s overriding assumption that self-interest is the only possible driver of human motivation, fair trade seems to point to a spirit of ‘interest in the other’ which could be taken as a starting point for a new perspective on economic behaviour. At the moment, of course, fair trade is a relatively new and small-scale practice when judged against the mainstream of economic life. But is it just a blip on the curve of economic history, or does it herald the next developmental phase?

Fair trade is already a growing movement. But what does the future hold? Is it a luxury concern — a niche market — for a few wealthy consumers? Or is it an idea that could be extended to create a new paradigm for the whole economic life of humanity?

I would like to answer this question by pointing to the distinction that can be made between ‘Fair Trade’ as a capitalised ‘brand label’ with defined meaning and protected by law, and fair trade simply as two words in common use and open to individual interpretation.

Behind ‘Fair Trade’ is a list of regulations with which a product must comply in order to carry the mark. Compliance will always be an externally adjudicated legal matter. Every new product will need new criteria drawn up, by which to ascertain its fairness, and these criteria will need to be under continuous reassessment. Even so, in a fast changing world it will be hard to characterise the entirety of an organisation’s behaviour and for this to represent what people generally would want to call fair.

In contrast to the ‘Fair Trade’ brand name, with its explicit regulations that make absolutely concrete what its definition is, the two words, fair trade, can seem rather loose — a term to capture anything. What might be behind the expression, therefore, and can we describe this with sufficient accuracy to make it meaningful and give it clout in the marketplace of ideas? Or is it just a woolly notion that can never result in a recognisably coherent set of ideas that we call a new paradigm?

An interesting parallel can be drawn with the organic movement, where ‘organic’ is in a similar position to ‘fair trade’ in as much as that it is both understood as a guarantee mark and a word with a history of its own in the English language.

When I buy organic produce, it may or may not carry a guarantee mark. I may or may not be interested in such a mark and may or may not think it is worth paying extra for. What I am most concerned with is whether or not the produce is actually organic — that is, what defines its ‘organicness’, not so much in legal terms as in a way that points to a reality? For example, I might say that it is organic because it arises out of the ‘implicit organisation of nature’ or some such phrase.

In this vein, to what do we refer when we use the words ‘fair trade’? Without defining it legally, how can I make its ‘reality’ explicit such that it becomes the basis for new behaviour? In other words, what amounts to ‘fairness’ in economic terms?

In response, I would say that economic exchange is not a zero-sum activity. The fact that one party to a transaction makes a profit does not imply that the other party makes a loss. We can imagine the economic world, therefore, as one in which everyone makes a profit, and in which, moreover, there is always something left over. In short, trade liberates capital. The nature of a trading relationship is that each side makes a profit (thereby covering his needs) and capital is liberated, free now to bear fruit in the way it is put to new uses by individuals with insight who use it in further service to the community. This may not be a recognisable picture of economic life in the present age, but it can nevertheless be understood as the true archetype of economic development.

Moreover, one can take the picture further. If just two people are involved and each has a complete picture of the other’s situation, then whether or not the exchange has been fair is something that each party will have a sense for, out of the particular circumstances of that specific trade. You can envisage a scale in the middle of the exchange that each person is able to recognise as being in balance when the trade is fair. In this way, without having created a definition, we can say that there is a reality that each person can recognise, should he choose to make it conscious.

If we take this up at the level of a traditional village economy, it is still possible to see how people can be sufficiently aware of one another’s circumstances to know whether or not goods changed hands at the right price. If the local baker goes out of business, then it may be that the local community bears the responsibility for not paying a sufficient price for his bread to enable him to continue producing for the community and earning a living (unless of course he is just a bad baker and hopeless businessman).

Indeed, this situation can be made apparent through accounting. If every business were to make its books available, we could form a complete picture of the village economy. If willing, each person could then act to ensure that the economy as a whole stayed healthy, at the same time as looking after his own interests. A general sense of fairness can thus be envisaged, which does not require prescription of the ‘right’ way to act. Rather, it arises freely out of individual insight. This gives to the economy a living dynamic which it can never attain under a rule-based system. Transparent accounting provides the mirror in which humanity is able to see its economic reflection.

Of course, we no longer live in a village economy but in a global economy. Yet the principle is no different; it is a matter of basing economic life on synergy rather than competition. To go in this direction means to unveil the other side of the transaction, to take enough of an interest in the whole picture to be able to act not just on one’s own behalf but also with regard for the whole community.

How can this principle be activated? Apart from establishing brand rules, is there an organising principle that makes for fairness? Rather than being an externally imposed ‘generality’, can it result from the initiative of those who are engaged in the exchange, acting not only with fuller economic insight, but also freely out of their specific and unique circumstances?

To this end, our relationship to accounting can become reciprocal, so that it acts not just as a mirror in which to behold our activity, but as a map which we draw together and in which we trace our movement, especially our forward movement. Indeed, an early edition of the Oxford English dictionary has the following entry for fair trade – ‘free trade conditional on reciprocity’. Of course, underlying this expectation of a change in human behaviour, is an image of human beings wanting and finding the means to organise their economic life in conscious co-operation. But this is not new; it is simply that we do this today in the belief that competition delivers the best result. Given the considerable downside that accompanies competition-based economics, however, we should not discount or gainsay the potential of humanity to create a more dignified economic future.

Returning to my earlier analogy, just as ‘organic’ points to something inherent in the organisation of nature, I would like to suggest that ‘fair trade’ points to how this potential is linked to our ability to recognise the interdependency of today’s global economic life. Indeed, the health of the global economy depends increasingly on human beings beginning to see that it requires co-operative enterprise, albeit subject to rational individualised planning, and that we can best reflect the world’s interdependency through the way we behave. Moreover, as individual actors our behaviour does not necessarily need to be prompted by external rules or prescribed by governments. Accounting provides the means whereby we can receive an objective picture of our past activity, which can allow us to reflect individually and in partnership on the appropriateness or otherwise of our future intentions.

In conclusion, I would like to add that I believe that it is by describing an idea in generally doable terms that it becomes widely accessible. So far, the fair trade idea has been spread through association with the specific challenges of helping third world producers, for example African cocoa producers. Lately, the idea has been applied in our own backyard; farmers markets are aspiring to create fair trade. Yet everything in modern economic life is reciprocal. If you tell people that they need only pursue their own self-interest because the big picture will sort itself out, you must expect selfish behaviour. If you tell them that regulation is in the hands of an external agency then you rob them of their responsibility to co-create.

How different it would be if, in the normal conduct of business, we used accounting to see the part our actions played in the larger economy. For it is in overcoming our economic isolation that we will find the source of fair trading. After all, it was only when we entered into the alienation of modern times that we lost sight of this essential economic principle. One only needs to imagine a trade fair in pre-industrial times, for example, to see that the central question today is how to replicate this in a way that is appropriate to our present stage of consciousness and conditions of economy.

[This was the 3rd in a series of events that aim to explore contemporary issues from the perspective of associative economics. The format of the evening aims towards a conversation, stimulated by a brief presentation (from which the above was taken). On this occasion the subject of the evening coincided with ‘Fairtrade fortnight’ an annual opportunity for the fair trade movement to raise its profile. This led to wider attendance than just those with a connection to associative economics, particularly as the event had been advertised on the Fairtrade Foundation website.]

About 25 people attended this event. As well as those connected directly with fair trade organisations, there were also some PHD students and several people with backgrounds in finance and investment. The ensuing conversation touched on many subjects: does fairness come down to a power issue, to what extent it is necessary for there to be an external regulator, is it practical to set up a new body to administer a world fairtrade mark, what is the difference between an organisation and an institution, to what extent are our economic ideas influenced by the image we have of what a human being is.

Comments welcome to [email protected]

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