Today’s Gross Ignorance Award Goes To Samanth Subramanian On Fair Trade

The correct view to have of fair trade – as it is described by progressives – is a minority interest that raises consumer utility so not only why not but it’s a lovely thing. Because raising consumer utility, as perceived by the consumer, is the point of this whole having an economy thing. Everyone thinks their lives are made better by buying from those they prefer to buy from. Few of us would knowingly buy from those still employing chattel slavery. Rather fewer will pay a premium for Fair Trade items for the beneficiaries of the scheme are the Tristrans and Jocastas that administer it. But then some do indeed gain comfort from knowing that the dimmer members of the upper middle classes are being offered a form of indoor relief.

So be it, their money, they should indeed spend it as they think makes them better off.

As to the larger issue of course the only fair trade is free trade.

Then we come to this piece by Samanth Subramanian on the subject. Which contains this howler:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Back then, the countries that grew these commodities and many others were still known as the Third World, and the habit of not caring about their farming conditions was a legacy of their colonial past. For centuries, trade propelled the colonial project, and exploitation was its very purpose. The farmers of Asia, Africa and South America were forced to raise the crops that the empire’s companies wanted, to work the crops in abject conditions, and to part with them at ruinously low prices. In the last century, the empires melted away but the trade remained lopsided – with the imbalance now rationalised by the market, which deemed it “efficient” to pay farmers as little as possible. In the 1970s, a Ghanaian cocoa farmer often received less than 10 cents out of every dollar his beans earned on the commodities market; as a proportion of the retail price of a chocolate bar, his take was smaller still. Child labour was common. The chocolate companies prospered and their customers shopped well; the farmers stayed poor.[/perfectpullquote]

That is not free trade which Fair Trade must now rectify. The Ghanaian cocoa trade in the 1970s is actually the poster child for the perils of managed trade.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Various administrations in Ghana, including the colonial one, have used cocoa as a source of public revenue, and in so doing the Ghanaian experience offers a recurrent example of a policy practice followed by many other African countries: taxing the country’s major export sector to
finance public expenditure (Herbst 1993). Revenue extraction by the state has had varying effects on production depending on global prices, marketing costs, explicit taxes on the sector, and macroeconomic conditions such as inflation and overvaluation of exchange rates and inelasticity of cocoa supplies. Regardless of the level of extraction,….[/perfectpullquote]

Why were Ghanaian cocoa farmers getting piss all? Because The State was nicking all the money:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]As Beckam (1976) noted, the Convention People’s Party (CPP), founded by Kwame Nkrumah, benefited from extremely favorable postwar market conditions and accumulated cocoa income on a massive scale: following the sharp increase in market prices in the 1950s, farmers were paid two to three times more than they received before the war, and between 1947 and 1965 the government collected almost one-third of the total value of cocoa export as export duties. In 1950/51 the government increased export duties
and began to take a much larger share of cocoa revenue by means of a graduated ad valorem tax that increased with the increase of the average selling price per ton of cocoa. To extend its influence to the rural sector, in 1953 the Nkrumah regime also created the United Ghana Farmers’ Council (UGFCC), which was mainly concentrated in the cocoagrowing regions despite its remit to cover the interest of farmers all over the country. The UGFCC was made the monopoly buyer of cocoa to create a platform for organizing the farmers behind the government and its administration.[/perfectpullquote] [perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Following the second elections in 1954, the cocoa export tax was further increased while the producer price remained at the same level for four years.[/perfectpullquote]

Nkrumah paid for his African socialism by screwing the cocoa farmers.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Real producer prices dropped consistently through the 1960s because of inflation fueled by the government’s printing of money to compensate for loss of revenue from cocoa and the introduction of an exchange rate policy that led to the heavy overvaluation of the cedi, the local currency. By 1983, market exchange rates were nearly 44 times the official rate. Between 1970s and early 1980s, it is estimated that as much as 20 percent of Ghana’s cocoa harvest was smuggled into Côte d’Ivoire (Bulír 2002).[/perfectpullquote]

In the 1970s Ghanaian cocoa farmers were being pegged out and right royally rogered intimately by the State. Which is why thy got a pittance from the free market price of their cocoa beans.

Adding the Tristrans and Jocastas as an extra layer of bureaucracy feeding off these same unfortunates is not the solution to this problem. Killing off the idiocy of the Ghanaian government policies is.

Which is why Samanth Subramanian wins the Gross Ignorance Award of the Day. Because if you don’t know these things, are unaware of the most basic underlying facts of the subject under discussion, you’re not going to end up finding any useful solutions to the problems identified, are you?

To claim that Ghanaian farmers were being screwed by the free market is to reveal oneself as a dunderhead. But then it’s a snowflake writing in The Guardian so we’re all real surprised, right?