Fair Trade Coffee

In keeping with my goals for this next year, last night Joshua and I researched Fair Trade coffee. I had been buying fair trade for awhile, but I wanted to understand better why it was a good practice, whether it was helpful, and if I should continue spending an extra couple of dollars.

I am still thinking this through, but I thought I would share a little of what we found out. Basically, fair trade works through individual co-ops in villages where there are many coffee producers. The co-op helps the farmers produce organic coffee, while, ideally, increasing the farmer's wages compared to other coffee farmers. Today, we found that the average coffee farmer can get anywhere from $.30-$.80 per pound of coffee. Through the co-op coffee is bought for $2.40 per pound, roughly. The money is paid to the co-op and then distributed to farmers. I'll come back to this in a moment, as we talk about criticisms.

 There is a long list of rules the co-op and farmers must adhere to. One of the rules restricts coffee farmers from using child labor, which is abundant in many countries, preventing children from going to school. I especially liked this aspect of the program. Another aspect I like, is farmers are expected to use the increase in wages to help their community, whether through scholarships, building wells, or other beneficial programs. You can read more about the impact here.

Now to the criticism. We learned from the oh-so-reliable source, Wikipedia, that many of the criticisms can be found in the corruption of the leaders in various co-ops. Each village or area has their own co-op, which is run by people in the community, and if those leaders are corrupt it could lead to stealing money from farmers or abusing their power in other ways. This could mean farmers are only receiving the same amount per pound that non-fair trade farmers receive.

My main concern stems from a paper Josh found online from Iowa State about economics and fair trade. You can read it if you want, but I warn you--it's long. It all boils down to basic supply and demand. The demand for coffee is much less than it used to be, but fair trade prevents the cost from being under a certain price. This makes more farmers want to produce coffee, thinking they will earn higher wages, but there is not enough demand to use all the coffee that is farmed. In normal economics, this would drive farmers to produce other crops because they would realize they couldn't live off of what they were making, but with fair trade, it almost encourages farmers to produce with or without demand.

I may have to think it all over for awhile. I like the restrictions on child labor and helping communities, but I also don't want to be part of something that prevents economies from actually growing in other areas. Let me know what you think, my mind is a little stuck...