Saturday, 7 May 2011

Sixth Rejoinder to Eerlijke Handel on Fair Trade or Free Trade

In response to Eerlijke's post here.

The legal system is messed up because it's a monopoly, as opposed to competitive system. See The Possibility of Private Law for the kind of legal system I advocate.

Competition bids up wages and increases the bargaining power of workers like nothing else can.

I hope the companies I buy from are invested in the poorest regions, and I hope that if they are making extra-high profits because they are paying low wages, or if they cut wages or jobs to make extra-high profits, other companies will soon invest in the region and compete with them for workers. Then they will have to raise wages if they want to keep their employees.

This is what will raise poor people out of poverty: competition, and therefore choices. Unfortunately in many cases government restrictions and a poor law/protection system prevent or discourage capital investment and so limit competition and poverty-alleviation.

While it pales in comparison to the damage done by government restrictions on trade, buying Fairtrade products has a similar effect of lowering the amount of competition in the poorest areas, relative to what it would be if consumers did not value the Fairtrade label.

1 comment:

  1. Graham, my reply is here: