Long-term readers (if I have any) will remember me making a wager with Guido Fawkes over David Blunkett. I lost and consequently Guido won £50 off me.
I haven't paid it over yet, his unwillingness to have me send him money directly (I assume because I don't think he's really called Guido Fawkes) coupled with my very infrequent trips to the Smoke meant that things were complicated.
I really don't like owing anyone money, so when Guido emailed me today to give me a cause to donate it to, I was delighted. He wanted me to donate it to the Globalization Institute, who they I wondered.
Well, Milton Friedman on the front page doesn't look too promising, but it's not his fault that Thatcher thought he was wonderful. The aims of the Institute look very good, I approve of free trade, as long as it's not lopsided with us bullying developing nations into accepting our goods and services while hiding behind protective tariffs ourselves.
I was just marvelling at finding a "right-wing" economics think-tank that I agree with when I saw a name that rang a bell, Alex Singleton. The Institute describe him as "Britain's most prolific critic of 'fair trade' schemes." That's right, he was on the BBC a couple of weeks back sprouting a load of nonsense that I couldn't follow about the evils of fairtrade, something about it distorting the market.
There's not a rational argument against fair trade schemes, but there is an irrational one.
Let's demolish the often cited rational one first, which is the one I think Alex was getting at on the tv. That it's dangerous, socialist thinking which distorts the market. Let's use Alex's own words to disabuse that thinking.
One of the most unhelpful theories taught in basic economics courses is the notion of perfect competition, which has been captured by anti-capitalists to attack capitalism. They argue that brands are anti-market because they prevent perfect competition, a state where products are identical and where companies can only make 'normal' profits, whatever they are.
However, there is no such thing really as perfect competition, nor would it be desirable. In markets, different firms compete not only on price, but also on image and quality. In the car industry, the cars from Peugeot, Ford and Rover compete, but the products are not homogeneous. Consumers are made better off by this lack of sameness: manufacturers add new features and better designs in an attempt to lure custom, leading to ever improving products. In short, the perfect competition model is wrong because it oversimplifies how the market works. Ludwig von Mises, founder of the neo-Austrian school, would no doubt describe the model as "two hypothetical curves."
Add to this the fact that brands help consumers make choices about which products to buy. I know that if I buy cakes from Tesco, they will be of a high quality. I may end up spending more than buying from Mrs Globbin's shop, but I am paying for the peace of mind. When I see a can of Dr Pepper for sale, I know it is a product I enjoy and can trust.
I can't see the difference between that perfectly good explanation and the fairtrade issue. When people buy coffee, or chocolate or even footballs they buy for a number of reasons, price being only one, you're also buying an image. to paraphrase Alex's words, I may end up spending more than buying from Mrs Globbin's shop, but I am paying for the peace of mind. When I see a jar of Fairtrade coffee for sale, I know it is a product I trust and know I'm not giving my hard-earned money to big business.
That leaves only the irrational one, which is that fairtrade is dangerous hippy lefty nonsense.
Rant over, it's Guido's money after all, so £50 will be in the post tomorrow.
No comments:
Post a Comment