ARC plays with your money

The ARC, which became a greatly empowered and enriched entity under Labour, is looking to spend $10 million of Auckland ratepayers' money on Eden Park.

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Stuff reports "Council chairman Michael Lee said the proposed contribution would come from its investments, not rates" which is still ratepayers' money, he simply wants to soften the blow by claiming rates wont go up as a result - well they will, as there will be less money than there would have been otherwise.

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The alternative is that $10 million could simply be redistributed to all Auckland ratepayers as a grant. Given around 300,000 or so ratepayers, that extra $30 would be helpful for some, it might even help pay for a ticket to Eden Park - you know, so that people can choose to support it.

Roger Douglas and ACT?

Well if Sir Roger Douglas wants to return to politics and appear on the ACT list, good luck to him. However, it will raise the issue as to whether ACT IS the liberal party that Rodney Hide has been inching it towards. It could be an interesting challenge, after all ACT's original platform had a number of characteristics, that varied from the tempting to the confusing to the disturbing.

The tempting included:

• Zero income tax. That's right, the only tax ACT was pushing back in the early days was GST, with income and company tax gone.
• Privatisation of all government businesses and some activities such as ACC.
• Opening up social services such as health and education to a wide range of choice and competition. People would not have to put up with compulsory die while your wait health care or paying twice for their kids education if they wanted to use independent schools.

The confusing was:

• Absolutely no policy on anything that wasn't economic. For example, justice, law and order, defence, foreign policy, constitutional matters.

The disturbing was:

• Replacing income tax with compulsory private superannuation, compulsory health insurance and education cover. In other words, instead of the state forcing you to pay it to provide services, the state forced you to pay the private sector (although it wasn't always clear if schools would be privatised or not) for the services. Yes it might have been more efficient and more competitive, but it was still compulsion - and absolutely no indication that this was a transitional step which, on balance, I could support.

So let ACT go forward and be rescued by Sir Roger Douglas, but I doubt very much if it will be the liberal party it has aspired to be. Having said that, for some National supporters he might just give them a reason to tick ACT. Given National is largely devoid of policy, ACT can fill part of the vacuum, if only it would fill the vacuum it always has within itself. It is the vacuum that meant ACT had no policy on civil unions, no policy on legalising prostitution and doesn't lead campaigns to get rid of crimes such as blasphemy and sedition.

That, of course, requires a commitment to individual freedom, and only the Libertarianz have that in New Zealand at the moment.

Unfair trade : download the Adam Smith Institute report

It is here

Here are the highlights of the executive summary points, which are even more damning than I expected. 10% of the fairtrade premium goes to the producer, the rest is retail markup:

• Fair trade does not aid economic development. It operates to keep the poor in their place, sustaining uncompetitive farmers on their land and holding back diversification, mechanization, and moves up the value chain. This denies future generations the chance of a better life.
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• Fair trade is targeted to help landowners, and not the agricultural labourers who suffer the severest poverty. Fairtrade rules actually make it more difficult for labourers to gain permanent, full-time employment.
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• Four-fifths of the produce sold by Fairtrade-certified farmers ends up in non-Fairtrade goods. At the same time, it is possible that many goods sold as Fairtrade might not actually be Fairtrade at all.
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• Just 10% of the premium consumers pay for Fairtrade actually goes to the producer. Retailers pocket the rest.

So I challenge the Green Party, and promoters of so called "fair trade", to present the evidence. Show it is more than spreading guilt, feeling good and paying more.

Ask everywhere if your council or employer has hopped onto this bandwagon, why. Send them a copy of the report, and tell them to stop wasting money on this fraud, and instead lobby for free trade, or support a genuine NGO charity in a poorer country.

Fairtrade damned further

Following on from yesterday's reports on Fairtrade, a comment on the Daily Telegraph website makes for sobering reading - about the reality of Fairtrade:

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"I was the acting Chief Exective of the largest independent coffee and tea trader in the world in the early 1990's and found all that you have mentioned and even worse to be true. I want to highlight some of your points toward the end of your article to make clear that the mega-growers also ship and sell their lower quality beans into the Fairtrade markets through brokers and receive the subsidized "charity price" from the "socially responsible" rather unquestioning public. This is exactly what was meant to be avoided, and it is done in huge volumes. This type of illegal activity is almost impossible to police at the level where it occurs, and where supervision has been pursued it has either failed or been simply too expensive to maintain (especially when the bribes at the storage and market delivery locations are factored in). So what happens is that the small farmers end up competing directly with the mega-producers for "shelf-and-mouth" space, which is a losing battle and exactly the opposite of what was intended to occur. Please, everyone, do not buy Fairtrade unless you (or somone you completely trust) can track your purchase back from the cup in front of you to the fields/farmers that the beans (or other produce) came from."

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So there you have it, Fairtrade markets get exploited by the large producers that Fairtrade lovers so abhor, and it is difficult to thwart this.

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One of the most damning criticisms I have of Fairtrade is that it diverts attention from the REAL "fair" trade issue - opening up of markets. Perhaps the most wealth generating and liberating move that could be made for people in developing countries would be for both developed and developing countries to open up their markets.

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Developed countries need to end export subsidies that mean their producers undercut those from competitors, they also need to end prohibitions, quotas and tariffs on imports so that the most efficient producers have a fair shot at the wealthiest markets. Developing countries need to abolish legal monopolies on imports and infrastructure, open up internal markets to competition and remove prohibitions, quotas and tariffs on imports, especially those that can aid in improving productivity.

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Fairtrade diverts attention from the fight to remove these barriers to productivity and wealth, by claiming that fiddling with prices can make people wealthier.

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Of course those in poorer countries should not be maltreated, should not have their property stolen, should not be expected to work in extremely dangerous conditions, but the answers to this are complex, and lie significantly in having governments which apply a rule of law, which protect individual rights and property rights.

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So what is "fair"? Janet Daley in the Daily Telegraph today notes how the word "Fair" has been misused by the left and is now used as a synonym for equality of wealth, yet is highly destructive.

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She said:

... even more dangerous is the peculiarly lethal principle of "fairness" that seems to prevail in the NHS (or at least at the National Institute for Health and Clinical Excellence, which determines what treatments the NHS may use): if everyone can't have it, no one should. On this basis, procedures and medications that could save or transform individual lives must be barred if they cannot be made available to every patient who might conceivably benefit from them.

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Once again, "fair" must mean "the same": so the breast cancer patient who is a young mother may be denied the drug that could lengthen her life because it would not be feasible to provide it for all the breast cancer patients who are over 80, and if she offers to pay for the drug herself she may be barred from receiving any NHS treatment (because it is "unfair" for her to use her own money to buy what others cannot afford).

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How have we come to accept such vindictive uses of the word "fair"?

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Of course it was initially the fault of the Left and its special pleading lobbies, which - like some Fairtrade promoters - had a lot to gain. But the Right has been complicit: it has surrendered words like "fairness" and "opportunity" - and accepted caricatures of other words such as "selfish" and "greedy" - with scarcely a murmur of dissent."

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Indeed. Expect John Key this year, and David Cameron two years from now to talk about fairness a lot - and both will be peddling the status quo.

Fairtrade fails and deceives: Part Two

Like I posted earlier, there are a whole host of reasons why Fairtrade creates perverse incentives and can hurt more than help. However, most of them come down to one major difference between Fairtrade and free trade - Fairtrade corrupts the price mechanism. Prices aren't just about "what it costs to buy something", they are signals about whether to increase or decrease production due to demand, whether to increase or decrease consumption, they inform about quality. They are the culmination of many factors, but ultimately are the culmination of free choices to produce/sell, and to buy. It is the ultimate democracy of the market, more than voting for a politician, it is voting for a product. Sadly too many do not recognise this.

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Price sends the following key signals, Fairtrade grossly distorts these:

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1. Prices for produce are partially a function of quality: The better the produce, the better the price, and vice versa. This rewards good farmers, innovative farmers and producers, and penalises those growing in areas less suitable or those less attentive (who should probably do something else).

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2. Prices are a function of supply and demand: Very low prices for produce reflect over supply relative to demand, which is a signal that some producers should stop producing or shift to other commodities/enhance quality or the like. Paying some regardless of quality and demand, suppresses prices for all others and encourages more to produce, creating a cycle of increased poverty. This particularly hurts those unable to participate in Fairtrade, but even if all were involved in Fairtrade, it would create a glut of unsold produce. Buyers would pay high prices, but would be turning away produce - which wouldn't get paid for, which may end up harming the most productive. Think carefully how much harm this could cause.

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3. Low prices encourage higher productivity: Producers of low priced products can decide to change what they produce or could become more efficient, so that their margins over cost are better at lower prices. This means taking steps to increase productivity, such as in Brazil where in the coffee sector mechanisation can mean five people can have the productivity of 500. The price is then shared between less people. What do the others do? Well they can produce goods and services that people will pay more for - perhaps Fairtrade activists could help them out to find what these could be rather than trap them in overproduced commodities?

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4. Paying high prices for Fairtrade products damages sellers of other goods and services: While you’ve been assuaging your conscience buying Fairtrade bananas or coffee, you’ve spent money on those goods that you might have spent on other items. Not only have you lost out on not having those, so has the producer of those missed out on you not buying them. Given the amount of the Fairtrade premium milked by others along the way, you might also question whether the high price didn’t largely benefit your local supermarket as much as the farmer. You might have bought more fruit and vegetables, you might have bought more meat, you could have spent more on clothes, holidays, or paid off your mortgage. In other words, a whole chain of people could benefit from what you save paying market prices.

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So how long will this Fairtrade charade persist? As long as you keep supporting it and not asking questions. Ask those supporting this why they encourage overproduction of poor quality produce in poor countries. Ask them why they encourage old fashioned means of production that keep people stuck in labour intensive jobs. Ask them how much of the Fairtrade premium goes to retailers and wholesalers, and don't take "not a lot" as an answer, ask for number. Ask why you should pay more to buy one product and then not buy another product, which also helps people making it?

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Make THEM think too!