Fair Trade, Starbucks, and Globalization

The Fair Trade movement is catching up in UK. Marks & Spencer the retail chain has introduced fair-trade certified cotton clothing and coffee in a big way. In Scotland, Edinburgh has declared itself as a fair-trade city. And this is UK which still lags behind Germany and The Netherlands.

My introduction to Fair-Trade movement took place few years back when I visited Nuremberg and stayed with a German family. They volunteered their time in a fair-trade shop. I did get a chance to spend a morning in that shop marveling at the coffee, cocoa, bamboo hats from Uganda, Ghana, India, and other countries. My first reaction was – Wow, what a noble concept. But when I looked at the prices, I was a bit confused. Is this charity masqueraded as commerce? Is this another avenue for rich to show their hearts to Africa?

I am a believer of free-trade, markets, and the Chicago doctrine. Accordingly, I believe free trade is fair trade with markets determining the right prices. But, I do take certain caveats into account and the biggest of all is – to ensure the people participating in free-trade can participante in the market economy. Some have argued that fair-trade is a problem solving approach to certain existing trade disparities and injustice. To me, it means – do not wait for deep-rooted institutional reforms, do not wait for banks, courts, and law enforcement to create a platform for well functioning markets but look at fair-trade as an immediate/interim fix for the effect and not the cause. Well, I buy this approach for now.

So why are companies really interested in fair trade? How does it relate to “globalization” which seems to be the epicenter of all economic development arguments these days?

First of all, the buzzing of the term globalization has been heavily weighted towards economics and international business just the way history is towards kings and nation-states. But I’d rather prefer a more systemic approach. Often times, people work in their own silos abstracted out by their respective disciplines and specializations – history, behavior sciences, sociology, polity, economics, management, etc. And to come up with a grand unified theory is like inventing cold-fusion and frankly, God only knows whether it is humanly possible to overcome the volume of space and time involved.

I don’t want to write something of the size of “War and Peace” here. So these are simple personal answers to personal questions. And grossly simplified to the extent that it may appear as unstructured vacuuous sentimental chatter in which case you are at liberty to blame it on my espresso which is my driving force here.

Coffee is a drink I live by. It has all the reasons to be my prop. It’s one of the most widely traded commodity and along with cocoa the most popular fair trade good. As history goes it was first discovered by a goat herder in Ethiopia whose goat became happy-happy after munching on some berries. Then as time flew, coffee traveled through many ports and kingdoms, by soldiers and smugglers until it reached Starbucks. Yet, Ethiopia still remains as one of countries where coffee farmers don’t get their due.

Now the question that comes to mind is when coffee reaches a multinational giant like Starbucks where does it stand vis-à-vis the coffee drinker. If I drink my favorite espresso in San Francisco or London or Singapore am I not feeling a sense of unity of space? Or, when my Dutch colleague talks about Starbucks, do I bother that the coffee came from his local roasting plant. Hardly ever do I bother where the coffee beans came from as long it’s Starbucks. Said in another way, an MNC called Starbucks has transcended my political boundaries, time zones, and has brought a feeling of oneness, a sense of homogeneity, and made me a global citizen.

The same phenomenon can be observed for any other MNC – say McDonalds.

Now does that mean everything can be homogenized? Is that possible? Well, that is a bit tricky – from a business standpoint. Porter’s concept of maintaining competitive advantage requires that goods differentiate. And the reality is smart MNCs tailor their products and services to local tastes and expectations. But to what extent, should they go without giving me the feel – McDonalds in Munich is not the same.

This ties into what Bruce Mazlish has argued that in all human societies, there comes a balance between homogeneity and heterogeneity. And from a business perspective it is important to understand the belief systems, culture, and traditions to figure this out. It is no longer an option, but a requirement. For example, when I walked into McDonalds in Delhi, the cheese burger is not beef. Now, I can imagine the consequence of serving beef burgers in Delhi, but if you have come from Des Moines, Iowa, chances are you may be surprised. So there lies the line of separation between homogeneity and heterogeneity.

The other piece is societies and belief systems are dynamic and constantly changing. Certain beliefs, certain customs, and habits are changing faster than others as we are invaded by cable TV and Mariah Carey. And people in Riyadh will respond at a different pace than those in Seoul. While globalization brings us closer through commerce, and increases movements blurring our political and geographical boundaries in our psyche, it also questions our identities in ways that are unprecedented. Our legacy beliefs systems come at cross-roads more often, and we question ourselves – who we actually are?

Now, how do we deal with these questions - individually and as a society. And my hope rests on how dynamic our social scientists are in moving with time rather than getting stuck in the details of some epoch. This will determine answers to the market analysts and those who study consumer behavior.

And may be that’s where Starbucks or Marks & Spencer come from when they arrive at Fair Trade? First, I believe it gives them corporate branding. Second, it gives consumers a choice and “feel good” to be a participant in this movement. These companies are telling us that there is a sizeable market segment that will appreciate this idea. So, it is charity or more aptly, quasi-charity used as a selling proposition! In other words - they are being different and they will be so, as long as the cost of this differentiation is offset by their earnings.

I don’t want to state this with a negative connotation and diminish the potential of fair trade that can lead to free trade. Trade brings prosperity, prosperity brings wealth, and wealth brings justice. And MNCs have a big role to play to use this as vehicles to bring social justice.

I spent few months in outskirts of Ranchi, Jharkhand and have observed the Santhals and Mundas colloquially called Adivasis. Tribal culture still thrives in the forests there. They are extremely poor people in our economic terms. In the near by village, a make-shit market called haat used to be created once every few days where these Adivasis would come and sell their produce - wild fruits, flowers, twigs, and other hand-made crafts. Usually, they would sell in wholesale to some fixed town merchant.

I remember this woman, who used to walk 20 miles for half a day to come to the haat, with her baby tucked behind her back, to sell some twigs that she bore on her head. And then she would wait. Wait for hours for the merchant to arrive. As the day progressed she would get more and more anxious. Finally, sometime before sunset the merchant would show up. He’d come late on purpose. Why? Because the woman would be in a hurry to return back home before it got dark. She was forced to sell her stuff in distress – dirt cheap. And then in the next haat, four days later, same thing would happen again.

Exploitation such as this is going on for years from Ranchi to Uganda. And I am not sure that fair-trade can reach to this woman’s benefit so soon. But baby steps are being taken, and that’s the good news.

The MNCs albeit their vested interest are at least listening. Well, I take that back. It’s after all we consumers - our societies and beliefs that is providing incentives to the MNCs to listen. As Howard Zinn has said that the cry of poor is not always just but if you do not listen to them you will never know what justice is. Moving in the direction of listening to them is definitely a good thing.

MNCs are the only institutions that can truly globalize the world. The half-glass empty viewpoint will be - they are our only hope. As someone noted - to understand which institution is most prominent in a given period in human society – the simplest way is look at the size of buildings. There was a time in history when the tallest and grandest buildings were churches, cathedrals, and temples when religious institutions used to dominate human life. Then later the seats of governments had the grandest building – when politics and Hegelian states were most powerful components of society. Now, if you look at the size of today’s buildings – there’s no doubt that the present belongs to the MNCs.

So whether Fair Trade will bring in prosperity to farmers I don’t know. Whether others will join the bandwagon that Starbucks and Marks & Spencer have embarked upon - we have to wait and see. But at least some people are thinking and have made a start.

My coffee is done and so is this piece.

http://www2.marksandspencer.com/thecompany/trustyour_mands/fairtrade.shtml
http://www.starbucks.com/aboutus/StarbucksAndFairTrade.pdf