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The Adam Smith Institute
The Adam Smith Institute is the UK's leading innovator of free-market policies. Named after the great Scottish economist and author of The Wealth of Nations, its guiding principles are free markets and a free society. It researches practical ways to inject choice and competition into public services, extend personal freedom, reduce taxes, prune back regulation, and cut government waste.
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The poverty of fair trade
By Alex Singleton
But it also leads fair trade producers to increase production. The reason coffee prices are so low on the world markets is that there is too much production. By encouraging even more suppy of coffee, fair trade makes the world price fall further. This makes the vast majority of coffee producers worse off. It also focuses us away from dealing with the real, long term solutions. After all, our objective should be to enable people the world over to enjoy the same wealth that we in Britain enjoy. Paying a little more for a cup of coffee is not enough. Instead of following fair trade, we should open up our markets to more overseas agricultural products and stop dumping European produce on world markets. There are also good schemes like Technoserve which help overseas producers react to market forces and move into more profitable markets. Fair trade is a nice gesture, but we should do more to fight poverty than just give gestures. Feedback
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Adam Smith Institute Tel +44 (0)20 7222 4995  Adam Smith (1723-1790)
Adam Smith was the great Scottish philosopher and economist best known for "The Wealth of Nations", his pioneering book on free trade and market economics.
A wide selection of material about Adam Smith is now available on the Adam Smith website. This includes the full text of his two major works, The Theory of Moral Sentiments and The Wealth of Nations. |
Fair trade coffee is based on the best of intentions, but on balance it probably makes things worse. Its good effect is that it increases the income that fair trade producers receive.