From coffee at our favorite coffee shops to bananas at the grocery store, most of us have seen the "Fair Trade" label on products we use regularly. With its noble aims of providing farmers with higher prices, setting high production standards, and reducing poverty (Fairtrade International, n.d.), the Fair Trade movement has blossomed over the last couple decades. As excellent as the Fair Trade movement's goals are, some of its unintended consequences have led some to wonder if Fair Trade is as fair as it intends to be. For instance, one key component of the Fair Trade movement is that it seeks to attain a minimum price for members' produce. While it is honorable to ensure that farmers receive fair wages, as Nunn (2019) notes, Fair Trade prices for coffee (just one example) are typically higher than the global average market price for coffee (Fig. 2). This is problematic since it serves as a type of price floor, reducing incentives for farmers to compete for higher quality (possibly even higher standards than set by fair trade, if competition were good enough) and creating the possibility of surpluses (unemployment of resources) (Cowen & Tabarrok 2018, p. 154). Thus, while Fair Trade may help increase wages for some farmers, its price floor disrupts the delicate balance between supply and demand. A second problematic aspect of Fair Trade price floors is that they crowd producers out of the market—while Fair Trade's aims are wonderful, there is simply not enough resources to ensure that every producer can participate in the program. This means that smaller producers who might have had a chance without Fair Trade may not have the opportunity to enter the market. Thus, in conclusion, while Fair Trade has noble intentions and has benefitted many farmers, its broader economic implications suggest that perhaps an alternative method could accomplish these goals in a more effective way with more widespread benefits. References Cowen, T., & Tabarrok, A. (2018). Modern principles of economics (4th edition). Worth Publishers. Fairtrade International. (n.d). "Aims of the Fairtrade standards." Fairtrade International. https://www.fairtrade.net/standard/aims. Nunn, N. (2019). The economics of Fair Trade. The Reporter, 2, National Bureau of Economic Research. https://www.nber.org/reporter/2019number2/economics-fair-trade#4.

If someone asked you, “what is the best way to help the poor?,” what would you say? If you are like me, one of the first answers that comes to mind is donations—specifically, donating clothes and food to those in need. Pictures come to mind of children in Africa receiving hot meals from Western funding or receiving secondhand clothes from Western donors. This option seems to make the most sense—after all, it satisfies the poor’s most obvious needs. However, what if this method is not as effective at helping the poor as we think? What if, at the expense of meeting immediate needs, donations disrupt local economies, thus contributing to the long-term cycle of poverty instead of alleviating it? One example of this is posed by Garth Frazer (2008), who was among the first to quantitatively assess and establish a causal relationship between Western used clothing donations to African countries and the decline of the apparel production industry in those regions. Frazer (2008) writes that when Americans donate used clothes, the extras that aren’t used in the United States are often sent to Africa, where they fill markets at low costs (p. 1765-66, 1781). While, in theory, this would help African consumers by providing them access to cheaper clothes, Frazer (2008) found that these donations were “responsible for roughly 39% of the annual decline in apparel production, and roughly half of the annual decline in apparel employment,” and that one would have to limit the amount of clothes donated to “one light T-shirt” or “one-quarter of an Oxford shirt or one-tenth of a pair of blue jeans” per person to keep such donations from hindering the apparel production industry in these countries (p. 1781). In other words, while clothing donations have some value because they help meet the poor’s immediate needs, they also hinder long-term solutions to poverty by tampering with an entire section of African industry, meaning that employees lose their jobs, which means they have less opportunity to save, thinking beyond their immediate needs—a process that is fundamental to wealth creation and to helping people move out of poverty. So, then, what should we do if donations can cause so much harm? One first step could be to ask the poor what they need—in other words, instead of assuming how we should meet the needs of the poor, taking the time to listen to those needs would help us identify what they need (perhaps, in the case of apparel companies, employment or loans for small-to-medium businesses would be helpful in place of or in addition to meeting immediate physical needs). This would enable the donors to best steward their resources by investing in lasting and effective poverty solutions, and the recipients to thrive by moving beyond a temporary survival mentality to a wealth-creating and saving mentality. Reference Frazer, G. (2008). Used-clothing donations and apparel production in Africa. The Economic Journal, 118(532), pp. 1764-1784. https://www.jstor.org/stable/20108883.