08 July 2010

Keep Fair Trade Fair.

I've always been a huge proponent of capital-based social ventures. Since free-market systems generally result in more efficient allocation of resources, it only makes sense that the same principals would extend to the non-profit/community realm. For years, self-made billionaires have used market based strategies to combat poverty, eradicate diseases, and create world class educational institutions. The Gates Foundation is a perfect example as their lofty goals are being realized utilizing a rigid, corporate-based approach to management (They are also quietly building an elite club to encourage the wealthy to give away their billions). The hope is that business rigor will result in superior results versus traditional non-profit entities.

For years I've been tracking microfinance, social VC's, nonprofits and other social ventures. Something i've been hearing about recently are so-called Fair Trade companies. There are national and international standards that ensure compliance to ensure the production of goods are fair-wage, eco friendly, and a whole host of other goals. There's one I really like called the world of good that recently sold to ebay; the founders spent most of their time traveling the world to buy products directly from local artisans. They helped the poor of the poor with access to worldwide consumers while ensuring the artisan the lion's share of the profit on a sale. From a consumer standpoint, it gives them a clear alternative to mass-produced, homogenized goods.
A win win win.

But i get a bit skeptical when i hear new buzzwords being quoted everywhere. And "fair trade" seems to be the mot du jour. Just this morning I heard a story on NPR about an African born, US raised man go back to Africa to build a factory and sell "fair-trade" t-shirts. Is this becoming just a marketing ploy (vis-a-vis "green" technology) ? Has it become merely a new entrepreneurial opportunity? Will the altruistic focus lose out to an extra $1 of profit per product?? Let's hope not. For the artisan's sake. And for the sake of poverty alleviation.

You are already starting to see this in other social entrepreneurial realms. You hear about usury interest rates and unfair lending practices in microfinance. This sector has now become so profitable, that all big banks are jumping into the fray. The first microfinance IPO took place with SKS in India. When push comes to shove, will a publicly traded company succumb to the demannds of investors or of the small business owners ? I think the answer is obvious.

Let's be optimistic and hope that Fair Trade blows up just like microfinance did. Let's hope millions of small artisans and entrepreneurs around the world gain access to the worldwide consumer. And let's hope the flailing Fair Trade companies do not think profit first, fair trade second. Let's hope they keep Fair Trade Fair. The beauty is the consumer ultimately decides. It should continually demand transparency and rigorous standards.


  1. I, for one, also believe that social entrepreneurship can exist and remain a win-win situation. Like you alluded to, it comes down to expectations - how much money does the entrepreneur and his investors want to make? As long as the potential to make more is there and skirting any regulations is easy, companies will take advantage of those in more vulnerable positions. But, I hope that the influence of persons like Bill Gates spreads faster than those who just want more for themselves. In addition, the artisans you describe often make such unique and fashionable products that it would be a shame not to see them marketed to the masses.

  2. I agree. There will always be free-loaders with questionable ethics when emerging trends develop. Long-term, though, its the idealistic, high quality companies and individuals that thrive.

  3. as we discussed b4 quality of free trade goods is my concern. their access to business/manafacturing intelligence from outside resources is crucial. btw, anybody know a free trade source that can provide low cost, artisan gift baskets made of various materials. is there an online marketplace i can go to?

  4. From personal experience I have found that actually making Fair trace a success is very hard work - a full time job- esp. when doing it 'right'. This begs whether taking some profit to your cause is 'wrong'. But the concept is great, if we can find a more friendly way to do international trade 'honestly'. To Sagar's point also, quality vs. price becomes obvious overtime. Then the 'reason to buy' begs whether having a fad like 'green' is better than not. Win-win situations are always great if there infact is a win-win. In most cases some others win...and that is why 'everybody is not doing it'. Either way, we keep on striving to make this a more 'fair' world.