And you misrepresent the fair trade movement by introducing government subsidy. I never mentioned that. In fair trade, the consumer is given the choice by being able to identify in the grocery store which products are guaranteed to have paid a fair price to their primary producer. I choose to pay a little more for my coffee, for example, because the extra will enable the farmer to send his children to school. That has nothing to do with government subsidy. It’s consumer power.

I had a smile in my local supermarket when I noticed a certain British food company was carrying the fair trade logo on its sugar. I remembered how, about 20 yrs ago when I was in the food trade, a representative of that very company held forth at great length in my office about what nonsense this fair trade malarkey was, and how it would ruin economies. His arguments reminded me alot of yours. But now the market for fairly traded goods is growing apace. And his company has the logo.

I call that progress.

I didn’t see much evidence of the fair trade movement on my visits to WalMart when I was last there. But if it hasn’t arrived yet, I’ll wager you it will be there soon.

If morality is our primary concern, then such a principle should be avoided at all cost. (bad pun intended)

In a free market, both the buyer and the seller determine the price of a product. The seller factors in all of the cost to make the product (labor, materials, etc.) and adds to this a per-item profit. The buyer determines how much of the product they are willing to buy relative to other products (known as “opportunity cost”).

Now imagine that two farmers grow fruit, one has apples and the other has oranges. The apple farmer (Farmer A) is hard-working and productive but the orange farmer (Farmer O) is an agricultural genius. Even though he has a product that is harder to grow, he is able to use his skills to squeeze out more fruit than other farmers in his area. Because of this skill, he can produce his crops cheaper than his neighbors.

Let’s say that you are a buyer and for a dollar can get either two apples from Farmer A or three oranges from Farmer O. Let’s also say that you like apples and oranges equally well. Which would you buy more of? Most people will buy more oranges which means that Farmer O will sell more than Farmer A.

According to your “fair trade” idea, though, Farmer A deserves to get paid a price that is higher than the “market” value. Let’s say that the government agrees with you and decides to subsidize Farmer A by paying him an extra 50 cents so that he will be able to compete with Farmer B. Who will now be better off? No one. Here’s why:

Farmer B: The price of apples and oranges are now equal so Farmer B’s productivity advantage is useless. Since oranges are harder to grow he is better off just planting apples and will switch to that crop since the government provides money for doing nothing.

Farmer A: Farmer A used to sell his apples for the market price but now that the government has subsidized the crop, other people (such as Farmer B) have an incentive to grow apples too. Now he will make more per apple but will sell fewer apples because of the increase in the apple supply. He will likely lose more money than before the government intervened.

The Buyer: The buyer used to be able to have a choice of apples and oranges but now no one can afford to grow oranges so he has fewer choices.

Also, where did the government get the money to pay apple farmers? They took money from other people (Farmer B, buyer, etc.) in order to make them pay a higher price than they think the product was worth. How is this fair to them? Subsidies may help the farmers in the short run (in the long run it tends to put them out of business) but it eventually hurts everyone.

What you are talking about has been tried for hundreds of years (mostly notably in the Soviet Union). Look at the countries that practice the policies you are talking about and you’ll see that they are almost always poor. It is an inevitable result of forcing people to pay more for a product than they think it is worth.

The problem is not free markets make people poor but that poor people often don’t have access to free markets.