World poverty: Can fair trade beat capitalism?

Submitted by Anon on 6 March, 2004 - 8:26

Paul Hampton continues his series about world trade

Many of the young people, NGOs and unions who mobilised for the big demonstrations in Seattle in 1999, or in Cancun and Miami last year, argue that the alternative to the neo-liberal, free trade agenda of the multinationals, the big powers and the World Trade Organisation (WTO) is 'fair trade'. Three million people have signed Oxfam's petition to 'make trade fair'.

According to the US-based Fair Trade Federation, 'fair trade' means that trading partnerships are based on reciprocal benefits and mutual respect. Prices paid to producers reflect the work they do and workers have the right to organise. It means that national health, safety, and wage laws are enforced and that products are environmentally sustainable and conserve natural resources.

Few could quibble with such aims - but the question is, how to achieve them? There are three broad answers - the first from those I will call the 'middle-class fair traders' and the second from the 'utopian reformers'. The third answer is socialism, meaning working class self-management of the world economy.*

The outlook of the middle-class fair traders is well summed up by the widely read No-Nonsense Guide to Fair Trade by David Ransom, published in conjunction with New Internationalist magazine. It offers a romantic view, asserting that "free trade has no future but fair trade does", without being able to bridge the gap between ends and means.

Surveying coffee production in Peru, cocoa in Ghana, bananas in Guatemala and the Caribbean, and jeans from all over the globe, the book ends with those fair trade businesses that import these products into the richest countries of the world. In the UK, the two largest fair trade importers are Traidcraft and the Oxfam Fair Trade Company. There are smaller organisations such as Shared Earth and Equal Exchange.

Twin Trading imports only coffee, which is sold mainly to Café Direct, a consortium owned by Twin, Traidcraft, Oxfam and Equal Exchange. Twin Trading also launched the Day Chocolate Company to market Divine chocolate with Christian Aid and Comic Relief.

Traidcraft has a network of 4,500 'Fair Traders', voluntary representatives who buy and sell products. These sales account for 60% of its turnover. Oxfam Fair Trade sells most of its imports at around 320 of its 850 shops. There are around 75 other fair trade shops in Britain.

The problem is that these initiatives are dwarfed by the multinationals who dominate world trade. According to the European Fair Trade Federation (EFTA), fair trade products in the UK have a tiny market share. Fair trade coffee has around 1.5% of the coffee market, and fair trade tea and bananas account for less than 1%. In 2001, the combined sales figures of Traidcraft, Oxfam Fair Trade and Equal Exchange were around 25 million euros (around £35 million). Traidcraft and the Oxfam Fair Trade Company employ around a hundred people each - a minuscule proportion (0.001%) of the UK work force.

The picture is much the same internationally. The Fair Trade Federation says worldwide fair trade sales total $400 million each year. In North America, fair trade retail sales totalled $35 to 40 million in 1998. Of $3.6 trillion of all goods exchanged globally, fair trade accounts for only 0.01%. According to the WDM, fair trade enables 4.5 million marginalised farmers to benefit from international trade - but this amounts to less than 0.2% of those employed worldwide in agriculture.

Even if we could persuade more of the well-off who have more market power to be more ethical, almost everything we buy has been bought at least once already by the time it reaches us, passing along a vast transmission chain that is difficult to trace, never mind influence, so their ethical purchasing signals will become lost in the general market noise. Ruthless corporations may feel obliged to do more PR, or clean up this or that corner of their business, but they are not going to be turned into benevolent institutions.

Fair trade purchasing might encourage good practice and help a few impoverished farmers, but it does not stop bad practice. Not buying cocoa produced by slaves does not bring the slave trade to an end, nor does it prevent others buying cocoa produced by slave labour.

After nearly 20 years, building up fair trade alongside the existing world trade order has failed to dent big supermarket chains. The likes of Body Shop have co-opted the idea, offering more expensive fair trade products to consumers who want to ease their conscience without really tackling issues such as child labour and exploitation.

The advocates of fair trade schemes could reply that even 0.01% of fair trade is better than 0%, and that socialists have not changed the world in the last 20 years either.

But there is no realistic prospect of that 0.01% ever expanding to a large percentage. And the whole approach is fundamentally mis-focused.

As journalist George Monbiot argues, some people have more dollars than others, and those with the most money are the least likely to want to change the economic system that has served them so well. It makes no sense for the poor, or relatively poor, to look to our buying power, or our ability to touch the consciences of those with more buying power, to change the world.

We should instead look to the potential power we have in much larger quantities - the power of numbers, the power of organisation, and the power given to us by the fact that the working class, although it certainly can't buy everything, does produce everything.

For example, instead of focusing our efforts on helping a tiny minority of ethical banana-traders, we might do better to focus on helping the struggles to organise and gain control by the much larger numbers of workers employed by not-at-all-ethical giant corporations like Chiquita.

The utopian reformers include articulate critics of the existing order. They propose alternatives within the boundaries of capitalism more ambitious than those of the do-it-ourselves fair-traders.

George Monbiot says: "Just policies have been proposed by groups such as Oxfam, Christian Aid and the World Development Movement (WDM), which call, for example, for the democratisation of the World Trade Organisation (WTO); an agreement which permits the poorest countries to defend their infant export industries from direct competition; and binding international rules to force all corporations to trade fairly." ( Guardian, 9 September 2003)

Monbiot believes that the World Bank and the IMF did some useful work after they were formed, but says they are now "constitutionally unreformable" and should be scrapped. He wants them replaced by an International Clearing Union - a body like the one designed by John Maynard Keynes in the 1940s - whose purpose is to prevent excessive trade surpluses and deficits from forming, and therefore international debt from accumulating.

Keynes' idea was that the clearing union would have its own currency, the bancor. Every country would have an overdraft facility in its bancor account no more than half the average value of its trade over the previous five years. The system would charge progressively higher rates of interest for those countries running surpluses or deficits, giving a strong incentive for them to clear their bancor accounts. This would, for Monbiot, maximise world prosperity and level out the power of nations.

Monbiot also proposes a transformation of the global trade rules, to be run by a reformed WTO - a Fair Trade Organisation. He proposes "a clear and non-negotiable sliding scale of trade privileges". He says: "Poor nations should be permitted to follow the route to development taken by the rich nations: protecting their infant industries from foreign competition until they are strong enough to fend for themselves, and seizing other countries' intellectual property rights. Companies operating between nations should be subject to mandatory fair trade rules, losing their licence to trade if they break them." (Guardian, 8 September 2003)

He argues: "To acquire a licence to trade internationally, a corporation would have to demonstrate that its contractors were not employing slaves, using banned pesticides or exposing their workers to asbestos. It would also have to pay the full environmental cost of the fossil fuel it used." (Guardian, 24 June 2003)

Monbiot points out that before the First World War, countries at the early stage of industrialisation almost always protected their 'infant' industries, or borrowed (more likely stole) intellectual property from other more advanced countries.

Britain's industrial revolution is usually dated from the 1760s, reaching its highpoint a century later. For virtually the whole of that period, the key industry in this process - textiles - was protected by the British state by a system of tariffs and prohibitions.

The United States also imposed tariffs during its early industrialisation. In 1816 the tax on almost all imported manufactures was 35%, rising to 40% in 1820 and, for some goods, 50% in 1832. As Monbiot puts it: "The US remained the most heavily protected nation on earth until 1913." (New Scientist, 31 May 2003)

A similar pattern of protection of key industries and the promotion of exports by the state occurred in Japan, Taiwan and South Korea over the past 50 years.

The exceptions to this pattern also prove the rule. Neither Switzerland not the Netherlands protected their infant industries, but "simply stole the technologies of other nations" during their key development phases. For example, in Switzerland in 1859 a company that became Ciba "pilfered the aniline dying process that had been developed and patented in Britain two years before." (New Scientist, 31 May 2003)

In the Netherlands, in the early 1870s, two firms stole a patented French recipe and started producing margarine. They later merged to form Unilever. In the 1890s, Gerard Philips stole Thomas Edison's design for incandescent lamps, and founded Europe's most successful electronics company.

Monbiot also says that poor nations should threaten to default on their debts as the best means to bring about this new world economic order. He points out that the $2.5 trillion is nearly twice the combined reserves of the world's banks. He argues that, effectively, "the poor world owns the rich world's banks." (Guardian, 17th June 2003)

Some of Monbiot's proposals could well become useful transitional measures in the hands of an association of workers' governments restructuring world trade. But who does he think will implement them?

His list of what corporations would have to do in order to be able to trade internationally does not include insisting that they permit and recognise workers' union organisation.

He does not approach the issues from the workers' viewpoint, or see working-class mobilisation as the path to change.

Exactly who he thinks will bring about change is not clear.

He calls for a 'democratic revolution' in which institutions such as the IMF would be scrapped and some governments would be replaced by better ones. Other institutions such as the WTO and the UN would be reformed, presumably, by those better governments.

Monbiot describes his proposals as creating a "modified species of capitalism" - yet he hopes they will also "create the conditions in which capitalism is destroyed" (Age of Consent, p241). The same ambivalence extends to the multinational corporations that control world trade and the bourgeois governments that administer the system on their behalf.

Monbiot's proposals assume that capitalist governments have both the power and the interest to transform the multinationals into 'vegetarian great white sharks', and that these corporations will accept such a status. This is to misconstrue what capitalism is. It is in the nature of capitalist corporations to be rapacious vehicles for profit making, and for capitalist governments throughout the world to create the conditions in which firms can best exploit wage labour.

The idea that we can change the world, not by workers taking over those corporations, but by some sort of diffuse public pressure making them behave differently, is plainly utopian. The idea that the world's only superpower will volunteer to surrender its hegemonic status is indeed "hopelessly unrealistic" (Age of Consent, p64).

Monbiot suggests that the poorest governments in the world could group together and threaten to default on their debts. But this is highly unlikely given the present political character of many of these regimes, never mind the kind of alliance that would have to be formed to make it happen. Nor is the strategy a particularly enticing prospect for their inhabitants, who would most likely be the first to suffer from its consequences, without necessarily having given their consent.

Monbiot also looks to the global justice movement. The recent World Social Forum, where 100,000 activists from 130 different countries met, was another impressive gathering, but this movement does not represent the kind of cohesive social power that can take on the multinationals and the governments and replace capitalism with something better. As Indonesian socialist and trade-unionist Dita Sari recently commented, large parts of the movement are dominated by NGOs, funded by various governments or corporate foundations. They do good work on many issues but cannot be a force to change the world fundamentally.

Monbiot's 'reformed WTO' proposals are in fact a programme for lobbying, writing columns in the Guardian, and so on, rather than mobilising the working class by starting from workers' immediate issues of struggle and organisation.

Yet workers are the only social force in every country across the globe with both the power and the interest to end capitalism and replace it with a new social order free from exploitation. This was the key argument made by Karl Marx and one that George Monbiot ignores in his rant against the Communist Manifesto in The Age of Consent.

Workers - because they produce the wealth that the multinationals expropriate, are simultaneously the immediate victims of exploitation but also the producers of profit - giving them both a reason to revolt and a unique social power. Workers are the immense majority in most countries of the world, and connected by an intricate web of production and trade. The working class is also capable of building democratic organs of power (such as unions, factory committees and councils) embracing millions that can make the key collective decisions about what to produce, how to do it and who gets the proceeds.

Only by freeing the world from the domination of capital can we end the inequalities of world trade. And the transitional stages towards that are those of the mobilisation of the working class - solidarity in struggle, international organisation and links, measures of workers' control - not those of an agenda for reform from the top by a better WTO.

  • The final parts of this series will look at Marxist ideas and traditions on free trade and protectionism.


Another more drastic alternative to free trade, popular on the green wing of the global justice movement, is localisation. Localisation means that: "everything that can be produced locally should be produced locally". Proponents such as Colin Hines argue that reducing the volume of international trade would give nations both economic and political autonomy and prevent the damage done to the environment. The problem with localisation is that it would trap the poorest economies in their current subordinate relationship to the rest of the world, and would require a whole new coercive apparatus to impose it. It is a backward looking and 'reactionary reformism'.


Workers Liberty special issue on Globalisation

  • Globalisation: the workers' response
  • Imperialism, yesterday and today
  • The new economy

£2.50 including p&p from AWL, PO Box 823, London SE15 4NA. Cheques to 'AWL'

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