C. Gopinath

A SIGN I see in a local grocery store encourages me to buy bananas at a higher price because it is a `fair trade' product. Similar signs are also found near the shelves selling some brands of coffee. Here is a chance for me to do good while buying my weekly groceries, without a major impact on my budget. (The subtle message that free trade is not fair is debatable and we will set that aside for the present.)

The people promoting the notion of `fair trade' are using the concept to alert the community to the fact that in many commodities such as coffee, cocoa, bananas, and so on, small family farms are being hit by world commodity prices. Without the economies of scale that larger corporate farms have, small farmers are operating at subsistence levels and are affected by swings in prices.

TransFair, an organisation based in California, certifies and helps small coffee farmers in Nicaragua market their products. The higher price earned goes towards education, better housing, road construction in the community, and so on. Is this altruistic behaviour on my part?

Altruism is defined as an unselfish interest in helping someone else. Stated in this manner, it is the anti-thesis of self-interest guiding economic decision-making where the benefit for others is a by-product of the act and not a direct motivation. For altruism to work in the retail arena, it should perhaps not make a significant difference to the price I would pay and yet assure me that I am doing good in the process.

After all, if the difference in the price of the bananas was not going to be about one dollar but perhaps ten, I would be inclined to buy the cheaper bunch and make a mental note to send a cheque to an agency that works to educate farmer's children.

By playing on altruism, social activists have been able to achieve a lot. Indian anti-child labour activist, Kailash Satyarthi, has perhaps been able to achieve more for freeing children working as bonded labour in carpet factories through the establishment of the Rugmark certification label than protests in front of carpet factories would have achieved. If one performs an act beneficial to others to gain some personal benefit, then it is not an altruistic act. Thus, if I say that I will send the cheque to the farmer's cooperative and simultaneously check to see if the amount is going to be tax deductible, then, it certainly is not an altruistic act because I am still guided by some personal benefit.

Of course, a philosopher may argue that the `satisfaction' that my banana purchase gives me would be counted as a benefit and wipe out the altruism of the act.

Western philosophers have been hard-pressed trying to explain altruistic acts. Yet, it fits in quite nicely with the `karma' beliefs in the Hindu/Buddhist systems.

The `fair trade' movement, to stay true to its altruistic objectives, needs to do a lot more to maintain the spirit of its enterprise. The proponents have to try and eliminate middlemen who eat up the margins between selling price and cost of production. While the concerned customer may pay a higher price willingly, if the benefit does not get into the hands of the farmer but gets eaten up along the way, then it is much ado about nothing.

Some reports suggest that many retail stores which sell so-called `fair trade' products are not only ensuring that the farmer gets a higher price, but also that various margins have also been padded along the way! When they see a good thing going on, the retailers are hoping to benefit. Self-interest continues to dominate their thinking when the altruists are not watching.

The integrity of the concept of `fair trade' would mean that someone should not only certify the goods to ensure that the system does ultimately benefit the small farmer but also that the term's use carries the same meaning everywhere. That would require obtaining a trademark for it. But certification, trademark protection, and so on, cost money and some of the corporations and middlemen along the way are not too keen to be a part of all the controls that go along with the fair trade movement. They argue, instead, that if the customer just wants to feel good about helping the community, why not assure them that the company will donate a percentage of the sales from some select coffees to the farmers?

Good idea, but who is to supervise the process to check if it is 5 per cent of sales price, for what period, and for all packs and varieties of that coffee? Or are they just riding on altruistic feelings of their customers to peddle a whole range of products?

Would similar altruism help in other areas of the market as a means of withstanding the pressures of competition?

Wal Mart, the world's largest retailer, has built a reputation for offering low prices on a wide range of goods in its supermarkets. The range of goods and price advantage are so significant that when WalMart moves into a community, it slowly manages to put everybody else out of business.

Community leaders are upset that several neighbourhoods become rundown as the small stores close. But the same community leaders would find it difficult to make a decision to avoid buying the cheaper plastic buckets at WalMart and support the local hardware store instead by buying at higher prices. Perhaps an appeal to help a farmer in the Congo or Nicaragua is not as strong as the appeal to help one's own country.

Elected representatives of the citizens feel they are doing their bit for the nation when they pass laws that prevent software contracts going offshore. By giving the contract to the domestic company, they believe they are keeping jobs at home.

Another appeal towards altruistic behaviour like the fair trade folks are those who promote the nationalistic label. The Federal Trade Commission specifies that for a product to attach a "Made in USA" label, "all or virtually all" of the product must be made in the country.

Private organisations such as "Made in USA Organisation" and "Crafted with Pride in USA Council, Inc." try to promote the concept of local manufacture to keep the jobs home. They have registered trademarks and allow their use as to invoke a nationalist pride in the buyer.

The altruistic appeal is to make you feel good about keeping the jobs home (and possibly not be too concerned if that means paying a lower price for an imported product) and, thereby, challenge all the economists who argue that globalisation is a good thing.

Altruism may be a difficult concept to sell on its own but organisations that have found other themes to stress, such as nationalism and fair trade, have been able to successfully intervene in the process that rational economists thought was simple and straightforward.

(The author is professor of international business and strategic management at Suffolk University, Boston, US. His Internet address is cgopinat@suffolk.edu)

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