Tag Archive for 'Fair trade'

Organic food, standards and conspicuous consumption

There is a fantastic article up at the Financial Times by Bee Wilson, entitled “What makes a pig organic?”  It’s clearly part of a publicity push for her soon-to-be-published book, “Swindled:  From Poison Sweets to Counterfeit Coffee – The Dark History of the Food Cheats” (Foyles, Waterstones, Amazon), which was recently book-of-the-week on the BBC.  It starts with:

This is a tale of two pigs. The first – let’s call him Soren – is reared in Denmark. For the first few months of his life, he lives a cramped existence in a barn. This pink, flabby creature is castrated so that his meat won’t taste too strong. When at last he is allowed outside, his only freedom is a small concrete run. At a young age, he is killed and turned into bacon, using potassium nitrate and sodium nitrite. When you put slices of him in a pan, white watery liquid runs out.

The second – let’s call him Juan – was lucky enough to be born in the Iberian peninsula. He is sleek, black and hairless, a descendant of the original wild boar. Juan spends his life munching acorns among the oak trees. By the standards of animals destined for pork, he is allowed to live a long, calm life. He is only killed when he is 20 months, oldish for a pig, after which time his flesh is cured in sea salt until his fat turns to oleic acid, a fatty acid similar to that in olive oil. Juan is now jamón ibérico de bellota. When you eat slices of him, the salty flesh melts in your mouth.

It should be perfectly obvious which pig has led a better life and makes for better food. But there is one further crucial difference between the two. Because he has had only organic feed and has not suffered the worst indignities of factory farmed pigs – overcrowding and no access to outdoor space – Soren the Danish pig ends his life in a British supermarket labelled “organic”. Whereas Juan, for technical reasons, doesn’t qualify for the organic label.

… which is just a little bit sensationalist, but gets the point across.  A little later we start getting into the truth of the matter:

When you buy an organic egg you are not just buying the means to make an omelette, you are buying a dream. It is the dream of something delicious, which will simultaneously be good for your body and good for the hens and people who produced and packed it. It is the dream of being self-indulgent and virtuous at the same time – which essentially encapsulates the main yearning of our consumerist world. As Lynda Brown says: “Everybody wants an organic egg to come from a chicken that has led an idyllic life. But most people don’t actually want to pay for it.” The result is that when you look behind the dreamy label of much organic food – as with Soren the pig – you find it is not so very different from the industrial, compromised food you were trying to buy your way out of. The yolk is still pallid. The workers are still underpaid. The hens are still crowded – just a bit less than for conventionally farmed eggs.

In other words, buying organic is a form of conspicuous consumption.  How do we know that buying organic is a “dream of being self-indulgent and virtuous at the same time”?  Well, as Bee notes later on:

Take soy milk. In the Tesco longlife milk aisle, you can choose between: first, Tesco Calcium Enriched Soya Drink (at 63p a litre), your basic average soy milk; second, Tesco Organic Unsweetened Soya Drink (at 99p a litre), a premium-looking product with a price tag to match; and third, Tesco Value Unsweetened Soya Drink (60p a litre) with its no-frills packaging. Yet if you look at the small print, you will see that the Value soy milk is organic too. In other words, you are being offered a choice between spending 60p on organic soy milk that doesn’t appear to be organic or 39p more for the organic soy milk that loudly trumpets the fact. By paying that 39p, you are effectively admitting that organic food is simply an idea to you. It is an idea that says wealth and health (whereas “Value” is an idea that says poverty). This is the reductio ad absurdum of “organic” as a brand.

However morally-driven we might all pretend (and like) to be, people like Megan McArdle are a rarity.  For the vast majority of us, buying organic is a way of tickling our egos or showing off to our dinner-party guests.  If we actually end up easing the living conditions of the creatures we eat, that’s a largely unnecessary bonus, because it’s the label that counts.  This is not unique.  In a very real way, buying organic food is much the same as buying “fair trade” food.  We’re buying the highly-visible feel-good factor.  Don’t believe me?  Here’s another titbit of evidence.  Bee Wilson notes:

In the US, [t]he USDA allows many more nonorganic ingredients to be used in “organic” food than are permissible in the UK. Last year, there was outrage when the USDA certified Anheuser-Busch’s Wild Hop Lager, which included hops sprayed with pesticides and grown with chemical fertilisers, as an “organic” beer.

Wild Hop Lager does get lampooned, but not because they failed to make their product truely organic.  People bag it because it’s a bad beer.  Here are it’s reviews on RateBeer.com, BeerAdvocate.com and hop-talk.com.  Notice that none of them are rejecting it because of it’s judicious use of the word “organic.”  They’re rating it on the basis of what makes a good beer.  The closest we get is from the latter, saying:

Why is it awful…? Because once again a megabrewery is trying to make a product that looks like a craft brew, yet they are pouring their money into marketing it and not into making it.

… which is really saying nothing about the desirability of environmental sustainability or the avoidance of man-made chemicals.  If Anheuser-Busch produced a not-at-all organic beer that nevertheless tasted good this reviewer would be all over it.

On “fair trade”

I’ve never been comfortable with the “fair trade” movement. The motives are commendable enough (who doesn’t want higher and more stable prices paid to farmers?), but it has always seemed to me to be predicated on a basic misunderstanding of economics, or at least the belief that in this case, economic incentives can be overruled by political and social will.

My brother and I occasionally debate whether economics or politics is supreme in the life of a nation and it’s people. It’s hard to argue that politics and populism don’t trump economics on occasion. Witness the madness of the U.S.S.R.’s draining of the Aral Sea, or the fact that Robert Mugabe is still in power. However, while terrible and life-destroying, these events nevertheless seem to me to be short-term in the grand scheme of things. In the end, I suspect that the power of economic incentives is (almost) inexorable. The power of personality might hold it at bay for a lifetime, especially if the country has a common enemy to rail against (Cuba), but not forever.

So when it comes to the fair trade movement, I cannot help but wonder how guaranteeing above-market prices for some farmers can — in the end — achieve anything other than to encourage more coffee to be cultivated. As any first-year economics student can (or at least ought to be able to) explain, an increase in supply will lead to a lowering of equilibrium prices, and while a few farmers will be protected by the fair trade scheme, the great majority will be further impoverished.

I also worry that new crops may be planted on poorer quality land that suffers from more variable conditions, meaning that output (and therefore prices) will also be more volatile.

I am reminded of all of this because Dani Rodrik, a strong advocate of attempting to ameliorate the negative aspects of free trade, has just blogged on this very topic. He raises three very good questions (all quotes are from his entry):

  1. “[E]ven though fair trade brands sell as premium products, they often … sell at exactly the same price as the regular one. [T]his is a puzzle because farmers are supposed to get more when they produce the fair trade brand … Here is how the industry explains this: ‘Michael Ellgass, the director of house brands for Sam’s Club, said the company could afford to pay fair trade’s premium because it has reduced the number of middlemen.’ … Come again? So let me get this straight. The company could actually increase profits by cutting out middlemen, but waited to do so until fair trade came around and the increased revenues could be passed on to farmers instead of the bottom line?”
  2. “Fair trade certification requires that growers commit to various farming practices, and often other things too [such as rules on pesticides, farming techniques, recycling and mandating that the children of farmers were were enrolled in school]. Now, which one of us really know what “fair trade” certification is really getting us when we consume a product with that label? The market-based principle animating the movement is based on the idea that consumers are willing to pay something extra for certain social goals they value. But clearly there is an opaqueness in what the transaction is really about. And who gets to decide what the ‘long list of rules’ should be, if not the consumer herself?”
  3. “Isn’t the farmer himself a better judge of how his extra income should be spent? Should these decisions be made by Starbucks instead? (There are of course social assistance programs where cash grants are conditional on things like this, but they are (i) meant to be aid rather than fair payment for work rendered, and (ii) designed and administered by national governments rather than foreign firms.) Is conditionality imposed by multinational companies better than conditionality imposed by the World Bank or the IMF?”

Dani is not alone in his concerns. Joshua Gans has publically worried about this before (here, here and here). The Economist wrote late last year on the topic here (well worth a read). Indeed, in Australia two (admittedly pretty conservative) academics lodged formal complaints with the ACCC against Oxfam Australia, suggesting that it might be guilty of misleading or deceptive conduct.

The London School of Economics cafeterias exclusively stock Fairtrade coffee. You can see mention of it in the official newsletter of the university here (13 March, 2006). Within the sub-discipline of Trade & Development, LSE’s economics department is ranked in the top few in the world. I wonder if any of those faculty members were consulted before the school made their decision?


Tim Harford covers the topic tangentially in his book, The Undercover Economist, suggesting that retailers that offer both fair trade and regular products are simply using the fair trade brand as a form of price discrimination. This benefit (to the retailer) disappears, though, when they stock fair trade goods exclusively (as LSE’s cafeterias do) or decline to charge more for the fair trade brand (as Prof. Rodrik focused on). As noted by Free Exchange over at The Economist, this latter example implies a lessening of the retailer’s profit and a greater capture of the final product value by the original farmer, unless there really were greater profits to be had by cutting out the middlemen and the retailers waited until the fair-trade movement to exploit them.

Perhaps we have a coincidence of two phenomena. On the one hand, a consumer-driven (or interest-group-inspired) push for non-market-determined prices to be paid to the farmers gave rise to the fair trade movement. On the other hand, perhaps a lessening of administrative and logistic costs have made increased vertical integration (a.k.a. capturing more of the value chain, or cutting out the middleman) economically feasible or even desirable. If this is true, the coincidental timing would answer Rodrik’s first question.