Liberty Alone

No seems to be the answer:

Despite Fairtrade’s moral halo, there are other, more ethical forms of coffee available. Most Fairtrade coffee on sale in UK supermarkets and on the high street is roasted and packaged in Europe, principally in Belgium and Germany. This is unnecessary and retards development. Farmers working for Costa Rica’s Café Britt have been climbing the economic ladder by not just growing beans but by also doing all of the processing, roasting and packaging and branding themselves. Shipping unroasted green beans to Europe causes them to deteriorate, so not only is Café Britt doing far more to promote economic development than Fairtrade rivals, it is also creating better tasting coffee.

But Café Britt is not welcome on the Fairtrade scheme. Most of Café Britt’s farmers are self-employed small businesspeople who own the land they farm. This is wholly unacceptable to the rigid ideologues at FLO International, Fairtrade’s international certifiers, who will only accredit the farmers if they give up their small business status and join together into a co-operative. “It’s like outlawing private enterprise,” says Dan Cox, former head of the Speciality Coffee Association of America. Many African farmers, organised along tribal lines, are similarly excluded from the scheme. Other producers complain that accreditation is needlessly bureaucratic and costs five times as much as organic certifications.

I don’t have anything against cooperatives if people wish to form them, but by only supporting cooperatives and working against mechanisation the Fair Trade movement is inadvertently working to sustain poverty (in a large part due to its dominant position in the market).
People grow rich, not by just selling goods, but by increasing productivity. That means less people will be involved in growing coffee- but those people will be free to work on other things - such as processing the coffee, growing other crops, being merchants, making other goods which people desire.

We should really be boycotting Fair Trade and instead buying good quality coffee (and other produce) from independent producers and many of the other schemes which seek to aid development. I know Rainforest Alliance works to try and aid development and help save the rainforests of the world in a far more sensible manner and I’m sure there’s others.

If anyone is tempted to dismiss this article as the ravings of loony right-wingers: Alex Singleton’s work is firmly grounded in our liberal heritage, his biggest inspiration is Richard Cobden, one of the great heroes of British liberalism and radicalism. He’s travelled throughout the poorest areas of the world, talking and listening to the people who need help. He shares the desire of Fair Trade campaigners, the difference is he looks to see what people in the developing world actually want and what actually works.

I’m sure we all want a good deal for the poorest, but Fair Trade, unfortunately does not offer that. Its really in the business of selling political ideology to the poor and feel good conscience salves to the rich.

Progressive Vision tells me that on this day in 1849 the Corn Laws were abolished in the United Kingdom.

The culmination of a great campaign by the Anti-Corn Law League led by the great radical Richard Cobden, this directly led to the splitting of the Tories and the later creation of the Liberal Party. It was at this point Gladstone left the Tories after siding with Peel over the reforms, against the protectionist Tories like Disraeli.

The effect of repeal was to greatly reduce the price of corn, making more food available to the poor and creating greater disposable income for all. It also spurred on the international division of labour causing a decline in British corn growing, but freeing that labour to fuel the industrial revolution and the great advances in living standards that has brought about.

Today we now have the Common Agricultural Policy and well meaning leftists calling for tariffs and protectionism for various reasons ranging from helping the poor (those who benefited from the repeal of the Corn Laws would rightly disagree) to protecting the environment. Free trade is seen as right wing and as benefiting corporations at the expense of individuals when the opposite is true.

We should remember that it was the Radicals who pushed for free trade, not the propertied classes. It was a left wing movement, the right opposed it. The left should celebrate free trade and push for all trade barriers, subsidies and tariffs to be dropped.

Here’s an excellent NYT article.

Why should you expect any compensation from the loss of a job due to free trade when you’ve benefited so much more from it in total?

(Of course, this does not negate any idea of helping those made unemployed at all, just no special benefits for those whose job loss is due to trade).

Don Boudreux at the excellent Cafe Hayek has also written a letter defending this position in which he makes the excellent point:

For any worker to complain that he is victimized by trade would be akin, say, to Elvis Presley complaining that he was victimized by radio because that medium did so much to make the Beatles more popular than him.

Adrian Sanders tells us economics is simple and then proceeds to express a complete economic fallacy. I’m replying here because he uses the interminable MySpace which requires me to do far too much work to post a comment.

I don’t know where to begin, perhaps with the one part he gets right - The more money you have the more choice you can exercise. that is true. Unfortunately it goes downhill from then on.

There’s two main points of criticism, I think I’ll start with the one which was done away with by Adam Smith all those years ago - he assumes a mercantalist model. Apparently saving money on services is bad because it means money flows out of the region. This is like saying imports are bad because you send money abroad. Or to reduce it to the most basic level, me paying someone for something is bad because I then have less money. Put like that it is obviously nonsense, at what stage does it become necessary to do things at greater expense to keep the money? It never does. This is fundamentally an argument against free trade so Adrian Sanders is trying to undo the very foundations of the Liberal Party and its successors.

The second thing is he’s neglecting the individual. Drop the ‘we’ as the masonites tell us. It is individuals who need the money, not a local economy. He rightly says that more money means more choice, but that goes for the individual not for local government. The local government spending money does not help individuals make choices per se, it means they have less money to spend themselves, so less choices available.

Local government saving money does benefit local people too, it means a drop in council tax. It may not be much, but every little helps. The fact that most money comes from central government does not mean that councils should not save money, it means that we need to reform local authority funding.

I’m going to look at why outsourcing is not bad. Not only does it leave more money in taxpayer’s hands, it also raises productivity (which is the very reason for doing it - otherwise it would not be done). This frees up jobs in the local economy, meaning that that most precious commodity of all, human ability, is spread even further. Those people not doing the council’s work in house can now spend their time doing other things, generating more wealth, which makes everyone better off.

If you follow Adrian’s argument then local government should stop people buying produce from outside the local economy because that means money leaves the local economy. Everything should be locally produced and grown. You want a new computer? Tough, its not local, it will mean loss of money from the local economy. You want a banana? Tough, they come from elsewhere, we can’t have money leaving the local economy. Services are just the same as physical goods. You pay money, you get something in return, it doesn’t matter where you get the product from, it matters that you get what is needed.

The arguments Adrian Sanders makes here are the arguments of the protectionist, the arguments that the Liberals have always fought against. They prevent prosperity, especially for the poorest, whilst giving vested interests more power. I am dismayed to see a Liberal Democrat MP advocating such things, but it shows how far the campaign for free trade has fallen.

Local government’s most important job is not trying to micromanage the local economy, it is to provide the services it provides for the least cost at the required standard. That is it.

Drawing upon I, Pencil Milton Friedman explains:0

For me the most important thing is the way people, without knowing each other, without even knowing what they are producing is to be used for, can create something. These links then foster peace and cooperation and understanding.

One of the criticisms of criticisms of attacks on supermarkets like Iain Dale’s recent missive is that a free market doesn’t exist because supermarkets have so much purchasing power.

This is definitely not the case and appears to be based upon a misunderstanding of economic freedom. A free market is one in which there is no governmental interference. Just as free trade is trade with no governmental interference. The market may not be free, but that is not because supermarkets have a lot of buying power, that does not matter at all in terms of the freeness of the market (unless that power is granted them by government action).

In the case of agriculture, the market is not free due to subsidy, tariffs and regulation imposed by government. The exchange between the producer and the purchaser however is non-coercive for products which are allowed to be exchanged. There are not (to my knowledge) any price controls involved.
The supermarket’s side is also not free, there are regulations, the planning bureaucracy and so-called competition rules.

So no, we don’t have a totally free market, I’ll agree with that, but the exchange is free and is not coerced.

Of course, a free market may not produce outcomes which you approve of. For example, you may disapprove of certain crops being grown or animals being reared, but if there is demand then they will be grown. You may think that prices are in some way unfair (although that is not a valid reason for intervention since fairness is unmeasurable and one person’s fair is another’s unfair). Objections to the outcomes of a free market do not mean that the market is not free however. Then again, in matters of individual preference who are you to enforce your preference on all others?

It may be that a free market would not mirror the idealised free market (isn’t that the main reason intervention is justified?) and that is a reasonable argument to make, but an entirely different argument.

Iain Dale asserts that supermarkets don’t operate in a free market and that the poor little farmer suffers because of it (its a familiar argument).

Taking a step back and looking at this, the argument is not one of free trade, its one of sentiment and so-called fairness.
The charge is that the supermarkets use their buying power to screw the little farmer and that somehow this means its not free trade (Why? Because the farmer cannot set the price at will?). Then of course the argument of ‘fairness’ comes in and apparently its unfair for the farmer not to get a better price (but isn’t it also unfair if the poor consumer has to pay more for their food because the farmer gets a higher price? Won’t that have a negative effect on obesity since fresh produce will be too expensive for the poorest?)

This is not an argument based upon economics, it is one based upon appeals to the emotion and sentimentality.

Lets look at the facts:

• Supermarkets are not in a monosopy position - there is not one buyer. There are several supermarkets, there are also other buyers for much produce, small shops, producers of processed food etc.
• Supermarkets do not collude with each other. The competition is too fierce to allow that. Tesco knows that its market position is not permanent. It used to be Sainsbury’s who were the biggest supermarket. In a few years it may well be someone else. If supermarkets were to collude then someone would break that collusion, either for getting goods outside the cartel or for good publicity by exposing it and getting one over on the competition. Every time there’s an investigation into practice there is no evidence of illegal activity.
• Supermarkets do not use force to get the prices they do. They don’t threated people’s lives or health, they don’t go round breaking legs or shooting people
• Market distortion comes at the other end of the market with the subsidies granted to farmers - This distorts the market, it keeps farmers who’d otherwise go bust in business, it encourages over production which results in low prices for produce. Granted, in terms of this market, the distortions are probably less now that the CAP is paid on the basis of land rather than production, but it still distorts the market massively. It still encourages low efficiency and productivity which reduces profits.

So, whilst I’d agree that free trade doesn’t exist, that is because of the subsidy farmers receive. Instead of targeting the supermarkets we should be targeting the waste of tax payer’s money that goes into subsidies.
It will be hard going for some farmers (hence the policy of gradual reduction which I believe is supported by the Liberal Democrats), but that is the way the market works. Those who are inefficient, don’t produce a product people want to buy and are unproductive will go bust. Those who are efficient and produce goods that people want at a price people will pay will do well.

Why we spend so much time and money on a tiny proportion of the population and economy I don’t know. It seems to be some sort of sentimental view of the farmer as custodian of the countryside and lifeblood of the country. It should be treated as any industry and left free to engage in the free market.

The Globalisation Institute has something on the latest absurdity of the CAP, and Tom Papworth expands on it.

Will the LibDems call for scrapping it yet?

There’s been a little lunacy emanating from the Welsh Liberal Democrats recently, but this really takes the biscuit.

This is basically a call for tariffs and protectionism. Its a call for putting the interests of farmers over those of everyone else.

Farmers already gains from obscene tariffs and the inhuman Common Agriculture Policy which sees $1200 a year taken from the pockets of a 2 child family to spend on farming and around $20 billion in losses a year from the developing world - far more than we spend on aid.

This goes to give each cow in the EU $2.50 a day - when billions of people struggle to live on under $2 a day.

This is obscene.

Now we’re told that the farmers cannot cope and need more help, now dressed up as ‘fair trade’ (remember, free trade is the only fair trade).

If they cannot survive with the obscene level of support they already have then frankly what are they doing in the business?

I’m sure people will complain about the job losses - but its not liberalisation which causes them, its the protectionism which encourages stasis and protects from the competition which breeds progress and success.

The Liberal Democrats are meant to be a party of free trade, a party of the individual and the masses against the classes. Not a lobby group for today’s high profile campaign.

As for British farmers being labeled ‘Fair Trade’. If the Fair Trade group lets them then fine, they can apply and be approved or not.
If they can’t, then develop their own branding. See if you can get people to pay a premium for that. That’s all fine, but it is not the politician’s place to support that.

Update:
The hypocrisy of this still rankles.
Why is Fair Trade seen as neeed? Because the developed world is deliberately pursuing protectionist policies designed to remove the developing world’s comparative advantage and means to develop and get out of poverty.

With the depressing situation in Venezuela (its so predictable, price controls mean that food shortages are arriving, Chavez is continuing his clamp down on opposition and his dictatorial measures), its good to see that Peru is embracing economic freedom and free trade to the benefit of the country and its citizens.

Along with Chile I hope that the sensible economic policies can be combined with social policies which will help the poor not hinder them and increase the wealth and opportunity of all. Hopefully they will then be beacons of liberty and prosperity in long suffering South America.