Fair Trade: from oppressed to oppressors?

Fairtrade accused of failing to deliver benefits to African farmworkers screams the Guardian headline. Alright, the headline doesn’t exactly scream, but if they can use journalistic clichés then so can I. Either way it’s certainly not good news for Fair Trade.*

So where’s that precious premium going, then, you might ask? Why into the hands of that holy grail of much development aid: the “rural capitalist” smallholder. That terminology comes from the conclusions of the the DFID-commissioned SOAS report behind the headline. That conclusion, however, switches the quotation marks, putting quotes around “smallholder” (presumably on the basis that are not all farmers so classified have operations that are especially small) and not around “rural capitalist”. It is an interesting indicator of possible cognitive bias.

But a premium for smallholder farmers is exactly what I always thought was the main point to Fair Trade, so what’s the problem? I see a whole raft of issues bundled up here, not all of which necessarily reflect badly on Fair Trade, but which nonetheless do lead to some uncomfortable questions about where now.

1. Have FLO and their brethren just become too successful for their own good? The bigger you are, the harder it is to maintain the highest standards everywhere. Especially when you are relying on economies of scale to make the business proposition feasible.
2. The myth of the noble peasant. I suspect most people in FLO know it’s nonsense, but their marketing plays right up to it.
3. Even if they knew the myth is codswallop, how much did FLO, its senior people and backers, know about the high prevalence of wage labour in some of their agricultural producer sectors? Not much presumably because the report claims to demolish another myth: that “very little wage employment has been created by smallholders in Africa.” One might suggest that, given their business, FLO ought to have understood better, but it seems the failing might be rather more widespread than just the FLO.
4. Who better to hold down the wages of casual labourers than people living in the same village, who know exactly how much work you can extract from someone for a few shillings, and know exactly how desperate their fellow villagers are for work?
5. Lots of aid projects try to stimulate rural capitalists. Why? Because every project needs to identify local leaders and other agents of change: local entrepreneurs are highly prized. (Who do you think all those micro-financiers are lending to?) Plus, other things being equal, a greater proportion of profits earned by such people is likely to stay in and circulate within their communities. Newly minted capitalists may spot other business opportunities in their communities, and invest, which would be missed entirely by outsiders. Conversely, it is hard to design economic development projects that specifically benefit the poorest of the poor that aren’t either incredibly expensive or just hand-outs in disguise.
6. What’s the counterfactual? According to the report many of these labourers are amongst the very poorest in local society, and often disadvantaged for other reasons. Maybe they struggle to get employment on other farms with better wages and employment conditions? They might be no better off as a result of Fair Trade, but it seems hard to argue they are any worse off.
7. All of which might suggest a storm in a teacup were it not for the fact that the Fair Trade Foundation say fair trade is “about better prices, decent working conditions, local sustainability and fair terms of trade for farmers and workers in the developing world” (my emphasis added). Whoops! Did they over-reach?

So what now? The report contains a whole raft of recommendations for fair trade organisations, donors and governments, and yet many of these recommendations, especially to the latter groups, the authors themselves acknowledge are highly difficult if not downright infeasible to implement in the setting of smallholder agriculture. For FLO they include a bunch of technical corrections which may help to a degree, but which will probably also make the whole Fair Trade standard that much more complicated, and therefore more intimidating to smallholders.

The authors also suggest fair trade organisations should invest more in research (now there’s a surprise coming from a bunch of professional researchers!), and better monitoring. However, where will the money come from? The report implies where it thinks there is some fat that could be trimmed:

“These recommendations are unlikely to be welcomed by Fairtrade organisations, or by the supermarkets that profit from the important public relations and product differentiation opportunities that certified products provide.”

And so we’re back to one of the main criticisms of fair trade over the years: a great proportion of the consumer product price premium stays with supermarkets, and only a very small proportion makes its way back to the farmers. As indeed is true for the non-premium bit of the price. The trouble with much fair trade labelling, alas, is that it implies that this normal law of economics is somehow reversed in the case of the price premium on fair trade labelled products.

Would fair trade work without those excess profits for supermarkets? I know too little to tell, but one has to guess that market penetration would surely be lower if it were less profitable for the supermarkets, and so, at the very least, there is a trade-off that fair trade organisations need to weigh up.

Ultimately, the bigger problem seems to be the question: can fair trade live up to all its claims reliably on a tiny slice of the product price? If fair trade organisations take a bigger slice how ethical will that be judged? Do we view this as money taken from the consumers (who are paying more) or from the producers (who could receive more if the fair trade organisations’ slice was smaller)? Fair traders have a real problem any time the debate shifts towards the latter consideration.

Many economists think the basic premise behind ‘fair trade’, namely paying a higher price than you have to, is just plain poppycock. But the many achievements of the fair trade movement to date suggest that its rationale is no more poppycock than assumptions of rational economic decision makers, and indeed that it fits very well that gap between theory and reality. The problem is that those assumptions of economic theory work well enough in so many other cases to suggest the gap (and thus its market value) is quite thin.

That does not bode so well for fair trade, but I would not write off the power of human willing self-delusion so quickly. Yes we might all be better off buying the cheaper coffee and then sponsoring a child, but consumers like to think they are doing good when they buy ethically labelled products. It’s part of the modern feel-good sales pitch. If someone is going to trade off that, better they have the moral intentions of the FLO and its peers. The next time I have the option, I’ll probably choose to buy fair trade. There are far worse ways to indulge oneself in this world.

* The Fair Trade Foundation have their own response alleging some methodological flaws in the study. Through the grape vine I gather the researchers are pushing back strongly. I am not in a position to judge how serious is the flaw nor how significantly it might affect the final conclusions.

How not to measure progress

In the run up to the UNFCCC latest Conference of Parties (on now, don’t hold your breath!), the Farming First coalition released this infographic (excerpt below) showing progress towards integrating climate change into agriculture policy around the world. It’s a good cause, but I think the authors haven’t been reading my and others’ warnings about differentiating outputs and outcomes. Either that or they were desperate to find stuff to put in amidst all the stalling in official negotiations at the CoPs. How else to explain their choice to feature not just the first but all four ‘Agriculture and Rural Development Days’* as important milestones?

World Whatever Days can be useful in advocacy, but we have so many of them these days I really struggle to keep up and/or care. More critically, when you feature them in an infographic like this, I really have to question who are you aiming this at? To me this kind of communication reeks of an NGO’s need to impress donors, saying in effect “Look at all the good stuff we’ve spent your money on!” rather than engaging with other stakeholders on the real issues.

All of which is a real pity because you would be hard pressed to find two policy areas, especially in international negotiations, which are more screwed up right now than agriculture and climate change.

* Renamed as ‘Agriculture, Landscapes and Livelihoods’ in its latest incarnation.

Leapfrogging is hard with only one leg

“Environmental systems are easier to set up when development is still in its early stages” claims the FT. This arguably is a misquote from the article (blame the sub-editor?) by Sarah Murray who cites the old chestnut of the leap over fixed line telephony straight to mobile phones in Africa. With the possible exception of mobile money, building, of course, on the earlier leap, and still mostly confined to Kenya, I struggle to think of any other big technological leaps made that have significantly fast-forwarded development on the national or international scale.

That is not to say that small leaps are not being made by various businesses across the developing world, but Ms Murray was talking about the big systemic leaps, especially to greener technologies in such things as agriculture and power generation. Here I feel the picture is less rosy.

Mobile phones first brought benefits to the elite, benefits they had not previously been able to access in other ways, so I imagine that less regulatory hurdles were put in their way. In contrast there are lots of powerful vested interests in agriculture and power generation, and elites have little problem putting food on the table or fuel in their private generators. Moreover significant reform to the farm sector inevitably involves wrestling with that most sensitive of subjects, and one in which elites are particularly attached to their privileges (and thus potential for abuse): land.

Most eco-friendly farming techniques either require a certain amount of upfront investment (organic certificates don’t come cheap) and/or have a long term payoff, e.g. better soil nutrient retention. Without security of tenure such innovations will always be restricted to small pilot projects.

Alas most farmers in Africa (Ms Murray was specifically talking about Africa) are smallholders with negligible if any land tenure security. Large commercial farms will at least have the relevant pieces of paper, but may have had to trample upon a few rights just to get them in the first place, and thus can be a lot more vulnerable to changing political winds then they might like, i.e. their tenure security ain’t so great either.

So although I would like to be more optimistic, I would caution anyone expecting a great leap forward in agricultural technologies in Africa or other developing countries. It’s hard to go leapfrogging when one leg is nailed to the floor.

Hat tip: my Dad.

Seeing the land for the jatropha

Amongst all the kerfuffle about biofuels a couple of years back I frequently found myself sub-vocalising good ol’ Pete Townshend:

Meet the new boss
Same as the old boss

And now Anna Locke over at ODI has written an excellent, balanced piece dissecting the real problem: land management and large-scale agricultural investment, of any stripe. She writes:

Among the incentives is the fact that land simply does not cost very much in many ‘land-rich’ African countries such as Tanzania and Mozambique, due to exceedingly low land rentals and taxes, which do not adequately reflect the true value of the land to the users. This means that companies can hold onto large areas of land without having to think too closely about the cost of doing so. Land is allocated on a first-come, first-served basis in many countries, prompting a rush by investors to get to the head of the queue and get as much land as possible. This also means that companies often try to secure larger areas of land than they can manage initially in order to guarantee taking the project to scale or for future expansion, or to get hold of an asset that they can sell on in the future.

Despite the above, cheap land and labour are often the cornerstones of governments’ investment policies. This has been encouraged by some of the international donor agencies and is seen by governments as a way to compensate for often difficult business environments with high costs in other areas. But how can this be squared with the rights of communities and local citizens to adequate compensation for their land and decent work conditions?

I have it on good authority that considerable effort by government and some CSOs was subsequently put into developing a Biofuels Strategy for Tanzania, when the country reportedly has some excellent land laws that are just not enforced very consistently. Maybe this was clever strategy by the CSOs – taking on land law enforcement generally might be too big a challenge – but it appears to be another case of mistaking a power/politics issue for a technical problem, for which, by implication, a technical solution can be found. Given that the biofuels revolution appears already to have faded, can lessons be easily transferred to other agricultural sectors? If the issue was framed as a technical problem in the first place that might be difficult.

I have some other observations cum recommendations:

• Land is definitely cheaper in much of Africa than it is in developed countries. Any economic manager / adviser would be mad not to try to leverage that for the good of the country.
• But navigating local community politics is hard. Investors are right to be wary!
• Developing country governments can help most by establishing clear, transparent processes for handling this, and then following them properly.
• Unfortunately, under misguided pressure by investors, they often appear to short-circuit their own rules which are usually put in place in the first place to protect local people from ‘evil investors’.
• So to developing country governments I say: Yes investors may need help navigating your byzantine bureaucracy, and you should ensure no officials unreasonably hold up business. (Actually it would be great if you could do that for everyone else, but I understand you cannot do everything at once.) But please do not attempt to spike due process.
• To investors I say: Face up to reality. This won’t be easy and you need to be prepared for the long haul. The best way to win over local people is to be good employers who respect the local environment etc. Don’t make promises of new schools etc that you cannot keep (unless/until you make millions). You’re a business not a charity, so just focus on being a good business!

That all said, any rich countries looking to trim some budget fat and maybe to make a nice deal at Durban next week should give the strongest possible consideration to ditching their “incredible and immoral [biofuels] subsidy” schemes. (Quote from Mark Lynas)

Quotes to ponder

If this seems pie in the sky, [Kanayo] Nwanze [the president of the International Fund for Agricultural Development (Ifad)] cites a number of countries that are seeing success by focusing on agriculture – Tanzania, Rwanda and Ghana – whose governments, helped by the private sector, have made a big commitment to farming. "The potential is huge," said Nwanze. "With a little investment, Africa can feed itself and it has the potential to feed the world."

(Guardian 27 July 2011 – Africa can feed the world)

So far, Kilimo Kwanza [Tanzania’s big new agricultural initiative] has not brought much new under the sun. It focuses on promoting mechanisation and large-scale investments in agriculture.

…

NGOs have pointed out that unless Kilimo Kwanza starts addressing the need of small-scale farmers, who make up the vast majority of farmers in Tanzania, the initiative is unlikely to bring much development.

(Land Affairs 03 Aug 2011 – Secrecy in Law Making)

Is this another case of publicity out-running the reality on the ground?

Blame it on the speculators, why don’t you?

Catching up on what’s been on the Guardian’s Development Matters blog, I’m surprised that no-one else has yet chimed in on the dodgy economics on show by Christian Aid’s Alex Cobham when he points the finger at pension funds for helping drive up world food prices. Now I’m not an expert economist, so I will gratefully defer to anyone who can point out that the error in the following.

One of the basic principles of economics is that prices rise when demand exceeds supply, but then these price rises should stimulate further production thus taking the edge off price rises. So before we get to the pension funds, we have to ask ourselves, are there external factors driving up the price of food globally, to which we answer yes: rising populations, increasing prosperity (richer people eat more and eat more protein which takes a significantly larger land area to produce per unit than arable crops) and climate change are all at work, meanwhile yield improvements are tailing off a bit. This is why rich Arabs and others are buying up large tracts of Africa, and equally why the pension funds are investing in agricultural commodities.

The more important question, in my mind, is why has production not responded to these clear price signals? Farmers are better able to respond to incentive price increases than suppliers of other commodities: new mines and oil rigs take a while to come on stream, whereas farmers can easily up production the following year. Global food prices have been high for a few years now – albeit with plenty of volatility – long enough for farmers to respond. That they haven’t done so sufficiently suggests to me that there is something wrong with the operation of global food markets, which there is; they must be the most highly subsidised in the world and are also subject to various price controls and periodic export bans by twitchy governments.

That is not to say farming is not a risky business: it is, and global price volatility is ample evidence of this. However, commodity derivative markets can actually help a poor farmer who is weighing up whether or not to invest in additional seed or fertiliser this year: they allow the farmer to enter into a contract now to deliver at a fixed price later. (Since bad weather can easily wreck the best such laid plans, the farmer would be well-advised to buy some insurance too.) This is one thing often forgotten about financial derivatives: most (I hesitate to say all) were first devised to ameliorate risk for producers and consumers, not for the benefit of speculators.

However, in the developing country where I live and work, the state controlled marketing boards and cooperatives are extremely poorly run. I suspect very few people working in them even have any idea as to what a commodity derivative is, let alone how they could use them to support their farmers. It is a fine idea to provide floor price support to farmers, but these cooperatives do so so inefficiently that one really has to question their raison d’être. Simply closing them down over night without any replacement, as happened in some countries under IMF-led structural adjustment strictures during the 1990s, would probably leave farmers bereft of any support, but allowing them to be replaced gradually by private sector players, who at least have clear commercial incentives to boost production, would seem a sensible option to me, with governments reduced to a buyer of last resort to provide a guaranteed floor price protection that should insulate farmers from the worst kind of exploitation by the ‘evil’ middle men of agricultural commerce.

Although there may be fortunes to be made and lost along the way, speculative bubbles that do not have any foundation in market fundamentals will play themselves out in time. Moreover pension funds are not your average speculator; they tend to invest for the long run. If they thought there was a problem of over-supply in world farming they simply would not invest. Global agricultural markets must be massive; that speculators – whoever they may be – can have an impact speaks to me more of a tightness in supply coupled with artificial narrowing of the market by price controls and export restrictions.

I doubt that full market liberalisation is the optimal solution to agricultural commodity price volatility, and in any case it is clear that politically this is currently out of the question. But a lot could be done to make markets operate more efficiently, and to allow developing country farmers to benefit more from rising demand. Blaming pension funds and other speculators, however, is akin to shooting the messenger. Christian Aid should be capable of better than this kind of base populism.

Free parking for rich farmers?

Whenever I hear of a new protected area being created I always worry about which local communities maybe losing their land. Fines-and-fences conservationists with strong connections to donors may regrettably outweigh remote indigenous communities in the considerations of central government elites.

Whether or not that was the case when Gambella National Park was created in Ethiopia in 1974 I have no idea – it is the site of the second largest mammal migration in Africa! – but it now appears that global agricultural investors trump the conservationists. If a national park’s boundaries are to be compromised for sensible concessions with local residents then I will happily applaud (the rigidity of interpretation around protected area regulations is one reason I am ambiguous about their benefits), but selling a park out to international agribusiness doesn’t even come close.

Unlike the countries further south, my guess is that wildlife-based tourism is pretty low in Ethiopia, so the government doesn’t think its losing much. All of which just goes to show that getting biodiversity to pay for itself can yield better protection than some piece of paper.

How much global condemnation will the Ethiopian government face for this decision only time will tell, but it looks like facts are being created on the ground quicker than a conservation campaign can mobilise. I feel sad for the White-eared Kob, and the likely loss of one of the few remaining great plains spectacles left in the world.

Big farm, big deal

Last but not least on my round-up of what was blogged while I was putting my feet up, my eye was caught by this article from Madeleine Bunting on a massive land deal on Mali (bought by the Libyans). It is so far from least that I have created an entirely new category Land Tenure to house it. I should be blogging a lot more about land as it is critical to just about every conservation and development project* I have ever come across.

These kind of land deals are serious business in Africa these days, and so they should be. Africa has got a lot of land which is underutilised. Various problems raise their head. From a conservation perspective unutilised land might have a lot of utility as a biodiversity reserve. I’m generally not a big fan of trying to cover half the earth in protected areas, but that is not to say there are not good arguments for adding to what we’ve got, especially in lesser known habitats. Moreover, as this blog is certainly prepared to argue, creating a protected area is not necessary to conserving habitat. However, plonking a new big agricultural project smack down in the middle  of a biodiversity hotspot, as I have seen happen, really does not count as a good idea.

Another problem with land deals is you always have to ask: whose land is it? Unfortunately the politicians’ answer does not always accord with local views on the matter. As with any such large investments, even ignoring the lure of corruption, there are often incentives for officials and politicians to simplify a more complex situation on the ground in order to appeal to investors. If all of this translated into full compensation for those affected and better services for all this would be less of a problem, but Africa’s governance problems have severely eroded governments’ capacity to act as an honest broker across all sorts of issues. The strength of feeling over this incredibly sensitive issue should never be underestimated; a major land deal between S Korea and Madagascar was cited as a factor in the less-than-constitutional change of government there in 2009.

But, the thing that often gets missed in all of these discussions is the question: why is this land underutilised? It certainly isn’t all remote wilderness. Agriculture in much of sub-Saharan Africa is a byword for inefficient production. Governments are now seeking to resolve this by bringing in foreign expertise and investment, but the fact is that, around here at least, they could do much to free up the agricultural sector without selling out their countrymen. Government run marketing boards and cooperatives are horrendously inept, and it is hard to see what benefits they bring smallholder farmers; however evil the much abused middle-man is, he at least has the incentive to get the best kind of inputs (seed, fertiliser, pesticides) to the farmers at the right time of year. Unfortunately politicians like to take a rather paternalistic attitude to rural farmers when in fact often the best thing they could do is just get right out of the way other than a few very basic market interventions such as subsidised inputs (ref recent stories on Malawi) and setting floor prices on staple produce (to limit the ‘evilness’ of the middle men).

Finally, governments could clear up land tenure properly so farmers could use their land as collateral on loans. But that would limit politicians’ scope for making those big deals they love so much … so not much chance of that happening any time soon.

* By which I mean either straight conservation or combined conservation and development project. Obviously there are all sorts of education and health related interventions which have nothing to do with land tenure. It is, though, also a critical issue in recovery after natural disasters such as the 2010 Haiti earthquake, see David Week’s recent remarks on the issue. (Refer also to the post and comments on ActionAid Australia’s blog; it seems the government Haiti, in echoes of what I see here, was never much interested in land tenure reform or clarity before the earthquake either.)

New year, new start

It’s the start of a new year (hope you all celebrated in style, folks!), and many people choose this time to start something new. Of course not all of  them last, but mostly we at least mean them do so when we begin them, even all those ill-fated fitness drives. No-one deliberately joins the gym in January if they actually intend to stop going in February.

Donors are no different (though their financial year may be). They always like to start something new, to fund that innovative new project that transforms the aid landscape. This has two pernicious effects. Firstly, it means that boring old-style stuff (even last year’s great innovation) that has been proven to work is no longer the flavour du jour, which is a great pity since if something is proven to work (and is value for money) then it ought to be a no-brainer to fund. Not so! This can be incredibly frustrating for NGOs who regularly have to find new justifications to fund the same old work.

Secondly, in the absence of endlessly increasing amounts of money (maybe not an issue for DfID over the next few years), one or more existing projects have to make way for the new ones. This is easily accomplished by putting a timeframe on all these projects in the first place, thereby automatically freeing up funds later on. Hence we end up with fixed term development projects in which we are only just approaching success when the taps are turned off. I have written before about the sustainability issue (my greatest pet peeve), but I recently also came across a fantastic (old) post by Owen Barder on the issue.

As Owen pointed out more recently, this fixed-term fixation is especially hypocritical when applied to such things as agricultural subsidies. And yet the default approach of otherwise reasoned commenters (ok, one commenter at least) is to assume that subsidies must be for a limited period only.

How about this for a new start instead: what if donors just funded the same old stuff for once, and didn’t put a term limit on it right from the start, but said “Let’s see how this goes …”?

Zoning farms and forests?

Apparently Jeffrey Sachs and a bunch of food scientists think we should zoning farmland according to the results of scientific assessments. (I don’t have a subscription to Nature, so am having to rely on Richard Black’s blog post.) As with much of what Prof Sachs suggests, it is hard to disagree with the principles he propounds, but I do wonder to what extent these ideas are feasible. In many human affairs the problem is not so much working out what would be the ideal way to manage something, but how to get from where we are (with all the vested interests and established ways) to where we want to get to. Political and social systems are inevitably evolved systems with all the inherent imperfections that kind of heritage implies. Richard Black draws the analogy with city planning, but most major cities in developing countries are largely unplanned, especially in the poorest countries, with development happening far faster than planners can keep up. Indeed unmanageable rules systems may well lead to corruption as being the only way out of the impasse.

Richard Black does point to some encouraging signs in Brazil, although arguably his examples are cases where conservationists have pragmatically surrendered the moral high ground in favour of active engagement with agricultural interests. I applaud the approach, but it is a big leap from such obvious self-interest to enlightened self-restraint when it comes to expanding your farm. As everyone from Brazilian soy-barons to Israeli settlers knows, facts on the ground count for an awful lot, and I fear land grabs will be a menace to conservation for many years to come. It would help, of course, if these land grabs were not encouraged by planning bureaucracies with ungrounded and over-simplified notions of land resources, of which I have seen a few examples at close quarters, and I suppose if Sachs et al’s proposed network of agricultural land research centres can help mitigate this then we should be thankful. But overall, I tend to side with Bill Easterly when it comes to the choice of Planners vs Seekers, and this kind of approach does rather sound like another gigantic planning exercise.

Projects such as Valuing the Arc are, I am sure, daunting technical challenges which should not be underestimated, and the researchers involved will have to use a range of innovative approaches to succeed. But it will take real visionary zeal and political cunning to translate such research into practical action. The research, alas, is usually the easy bit.