Fair trade ethics and principles

¶ … moral problem of fair trade. There exists a dilemma here, with respect to the role of corporate actors within our society -- do they serve to increase profits only, or are they bound by a different morality? The role of business in society has to be understood in the context that a business is not an entity capable of action, no matter what the purpose of its formation was. A business, ultimately, is a group of resources, including people, and those people are not separate from society as a whole -- indeed, they are society as a whole. The principles of both consequentialism and Kantian morality are applied to the problem of fair trade and it is determined that despite the enduring popularity of the "corporations are engines for profit" mentality, it is a view that is at odds with the prevailing ethics of our society, while the distributive justice principle at the heart of fair trade is in line with the values of the majority of our society.

Moral Problem

The concept of fair trade arose in the West as a response to the discrepancy between what Western consumers were paying for certain goods and what the producers of those goods were being paid. An early commodity targeted in the fair trade movement was coffee, where a consumer in the West could pay over $2 for a cup of coffee, where the farmer might be paid a few pennies for the equivalent number of beans. For some, this was simply a matter of multiple stages in between farm to mug, combined with profit-taking at each stage. For others, it represented a major ethical dilemma according to the principle of distributive justice (Miller 2010). The moral dilemma is that corporate managers should only be concerned with enhancing the profit of their enterprise (Friedman 1970), and that this conflicts with the principle of distributive justice. This paper will take the position that fair trade is an appropriate application of distributive justice, where the reduction of information asymmetry diminishes the bargaining power of end marketers, resulting in more equitable pricing at the raw materials level. From an ethical point-of-view, this is the right thing to do.

3. Moral Arguments

The first component of the moral argument here is to determine what the role of business in society is. The view that Friedman holds is that business strictly exist to provide a return for shareholders. The form of business is not relevant, for example, nor is the industry in which it operates. A corporation is simply an entity by which capital investment is converted to returns for the investors. While he is right about that, Friedman misses out on the bigger picture. Corporations as entities exist only on paper. A corporation is constituted of things -- resources -- and among these resources are people. Friedman's argument rests on the idea that people who work for a corporation are bound by agency theory to behave as rational agents on behalf of shareholders. Thus, they are bound only to see profits, and in that pursuit should only be bounded by law (Friedman 1970). While this view has proven popular, mostly on the basis of confirmation bias because it means managers will seldom face the need to deal with moral dilemma, the reality is that managers cannot be and never will be perfectly rational agents. They are always going to be humans, and humans are bound by systems of ethics and moral that supersede the role by which they earn their living. There is no ethical system that says mankind's ethics are bound by his profession -- we are in fact bounded by bigger things.

If one is religious, then that religion might serve as the source of overarching morality, but if not there is still overarching morality embedded in our cultural values. There are things that are universally understood to be right and wrong, as explained in Aristotelian virtue ethics. There are things that society defines as right and wrong -- societies set the bounds for their behavior, and this is Kantian deontological ethics (Johnson 2008). Another system argues that outcomes matter, and this consequentialist philosophy is the roots of distributive justice (Sinnott-Armstrong 2011).

International distributive justice was actually developed after Friedman's article was published, its ideas heavily influenced by John Rawls' A Theory of Justice, which was published in 1971. The concept of international distributive justice rests on the idea of the social contract, wherein human societies have implicit contracts, and in these there is an implied need for fairness in dealings and in allocations (Blake & Smith 2013). Fair trade is this idea applied to the real world, where the profits from enterprise are distributed relatively equally on the basis of contribution. Thinking of the coffee example, coffee farming is hard work in often grueling conditions, so there is genuine need for farmers to earn a reasonable living from this enterprise. The default system captures profits predominantly for the end retailer and a series of middlemen who perform relatively simple transportation and warehousing tasks. It is their markups that are responsible for the high price of coffee relative to what the producer is paid.

The producer's low pay reflects a lack of knowledge on the part of the market, however. Where the market understands the outcomes of the system, the market has today in keeping with the principle of distributive justice demanded changes to the system that will emphasize better distribution of the profits from enterprise. Thus, end sellers are forced to make changes in their supply chains in order to ensure that farmers are being paid a living wage for their efforts. Fair trade can also be applied, for example, to sweatshop workers -- it is not strictly an agricultural concept.

4. Conclusion