Three years on, the world is still living through the mess that was the near complete implosion of the World banking system. Governments have had to intervene to keep the cogs of Western economies turning. They have had to give bailouts to the financial system in an attempt at damage limitation. The crisis though has moved on. The debt has not gone, it has merely been absorbed by states, and is now threatening their stability as well. States in Europe and North America are starting to have difficulties paying their own bills, highlighted by the crisis in Greece. With the crisis now threatening to spread to the Chinese housing market and other sectors in the BRIC economies, there is a question that needs to be asked. Is there a way of enhancing our economic system in a way that can provide more global economic stability?
It seems that the market system is an effective way to increase general prosperity, or at the very least it is the best of a bad bunch. The market system has seen global rates of poverty fall continuously since the 1970s. However, given the recent economic turbulance, it would seem apparent that it needs to be enhanced, but by what mechanism?
Fairtrade, advocated by the Fair trade foundation set up in 1992, is a compromise. It is not unregulated capitalism, that seems quite evidently to be experiencing some difficulties, but a compromise which includes global rules governing an otherwise market economy. It does not require the government to take ownership of sectors of the economy but uses regulation to steer the global economy. It, therefore, keeps market principles, advocated by Ronald Reagan, Margaret Thatcher and Adam Smith, at its heart, but manipulates them to include a sense of social justice.
The concept of the market economy is consumer-led: it is driven by demand from the people. Therefore, any system that intends to boost that demand would be beneficial to the system. Fair trade seeks to increase the wages of the proletariat in developing countries above a subsistence level. If these individuals have an increase in their disposable income they are more capable of buying goods and have a higher standard of living. The firms they buy the goods from have more money to invest and create more jobs. It is a multiplier effect that grows the national economy.
An expansion in the economies of developing nations is likely to have a positive effect on developed nations. Over time it has the potential to expand the number of places that goods made in developed markets can be sold to, having a positive effect on lacklustre manufacturing industries in developed nations. An expansion of developed economy markets has the potential to increase the demand for fair trade goods and so the cycle goes on.
It is now plainly obvious that governments that attempt to structure their economies through a central planning system, like North Korea or Venezuela, do not deliver the promised economic prosperity for their workforces. They have never produced equality or high standards of living for the masses. With a bit of alteration, the market system, advocated by Margaret Thatcher, Ronald Reagan and Adam Smith, has the potential to continue to create prosperity not just in developed nations but in the developing world. Free trade has served the purpose of creating prosperity and reducing poverity well but it now seems that Fair trade has to take over the reins in order to create a more balanced world trade situation. In light of the financial crisis, a quote from Edmund Burke might be useful: "a state without the means of some change is without the means of its conservation". The global centre-right, notably in the UK and US, was right to advocate free market economics but now needs to embrace Fair trade as a way to further global prosperity. Far from being at odds with Fair trade, Fair trade seems a natural progression in centre right politics, and is compatible with the market economics encouraged by many centre right parties.
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