Is Fair Trade coffee really ‘fair’? The short answer: no.
EconTalk’s Russ Roberts chats with Duke Econ Prof Michael Munger about the concept of Fair Trade Coffee. It’s a very difficult challenge to ensure that a consumer price increase correlates with a laborer salary increase. But, even assuming that this difficult challenge is overcome, here is the resounding problem with the Fair Trade concept:
- What is the purpose of increasing the pay of unskilled labor in developing countries? By artificially increasing pay for a job that requires no learned skills, this discourages learning skills that would result in higher paying jobs in a freer market (without these artificial pay increases). Put more simply: what is the motivation to learn how to use a computer when working on the farm pays just as much? Allowing unskilled labor to remain a poorly paying occupation encourages a country’s economy to develop more highly skilled opportunities.
If I were religious, I would subscribe to the religion of free trade. Amen, Russ.