Part III: Fair Trade and Economic Decentralization:

Moving Toward Regional Self-Sufficiency

Alex Jackimovicz
 
In my first article, “Free Trade and Economic Centralization: the TPP and TTIP”  (Global Impact, April 2015), the trade
agreements of the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP)
were shown to be part of a new assault on democracy and the ability of sovereign nations to govern their economic
policies. Economic globalization and free trade were examined as a means through which economic power was
further consolidated and centralized into the hands of a few unaccountable corporate entities, effectively escalating
an ongoing process of de-localizing economic power and decision-making.
 
In my second article, “Free Trade and Economic Centralization: Delocalization and its Malcontents” (Global Impact,
August 2015), I demonstrated how specific trade policies produced economic inequities and the destruction of
livelihoods and lives. In particular, the direct impacts of free trade were shown to exacerbate an ongoing race to the
bottom of wage suppression and job dislocation. Examples such as NAFTA clearly illustrated how such trade
agreements result in a substantial employment loss for both Americans and Mexicans and massive economic
migration into the United States.
 
The economic turmoil caused by “free trade” has given rise to the 'fair trade' movement. Based on the solidarity
among producers and consumers, fair trade attempts to alleviate poverty and reduce the unjust outcomes of trade on
worker producers. This article will examine fair trade as an alternative to current trade agreements and the need for
economic decentralization to create thriving economies around the world.
 
Fair Trade
The premise of fair trade is to ensure in the current global market that fair prices are paid to producers
in developing countries.  It's an alternative approach to trade where there is a partnership among
producers in developing countries and consumers who are willing to pay higher prices that reflect a
fairer remuneration for workers and the production processes.  Purchasing fair trade coffee, for
instance, supports higher wages for coffee producer workers and more sustainable agricultural
practices. Fair trade advocates argue that the prices determined by “the terms of trade between rich
and poor nations are unjust because prevailing market prices for the goods produced [in developing
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nations] are too low for the laborers to reap a wage reflecting their dignity.” 
 
The effects of fair trade have been shown to be considerable and
widespread.  Individual producers have received higher prices for
their goods. In the case of fair trade branded coffee in Mexico, the $1.26 per
pound of coffee that fair trade producers earn is double the regular market value,
with an extra $0.15 per pound added on if it's certified organic. Less visible but
even more impressive benefits included greater access to credit as lenders are
more willing to extend favorable credit conditions with a cooperative having a
'perceived market future'.  Price guarantees and greater access to credit
contributed to greater economic and social stability for farmers.
 
These economic benefits are multiplied when the producers are organized as cooperatives. In several case studies,
cooperative producers’ family incomes and livelihoods were dramatically increased. Secondary benefits include the
diverse range of projects sponsored by the cooperatives. Profits were used to help cover immediate family expenses
for medicines and a variety of family emergencies. Families were able to diversify their incomes with additional
training and marketing assistance to develop alternative income sources. Expanded economic activities include the
production and marketing of artistry, the establishment of community stores, the development of bakeries, improved
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production of basic grains, and other enterprises.     
 
The fair trade efforts are part of a global demand for fair compensation for workers throughout history. However, the
efforts to have a fairer trade do not change the dynamics of the larger system of global capitalism, nor the
fundamental challenges and contradictions that the system poses for workers seeking economic justice. Neither can
it truly address poverty and income disparities. Fair trade isn't a panacea, though living standards are more
protected.  Fair trade introduces a moral component into a de-humanized system of international exchange of global
capitalism and free trade, without challenging any of the fundamentals of centralized production or the specialization
of industries for export. Transnational corporations still control the vast majority of trade, dictating what is exported,
where processing occurs, and the pricing of this system.
 
Nevertheless, the worker cooperative models within the fair trade production line offer a glimpse of how the economy
can be transformed for workers, when they are the owners and managers of their businesses. The great advantage
of the cooperative model is that the revenues benefit everyone, and the interests of the whole cooperative aren't
separate from the workers who run it, nor from the communities with which they are embedded. The cooperatives are
engaged in their communities, and offer a form of workplace economic democracy.
 
The fair trade movement is one which tries to find a path forward given the dominance of free trade, the reduction of
trade barriers, the necessity to be plugged into the global marketplace—for better, or worse.  However, fair trade
doesn’t address the imbalances that thrive on free trade. The real answer to an economy based on centralization and
monopoly production is a decentralized production and a re-localization of regional economies.
 
Economic Decentralization
Economic centralization concentrates wealth and power and utilizes
free trade as a tool for maintaining an uneven playing field skewed
towards large economic players.  The solution lies in reversing this
through localization where all important economic decisions affecting
local people are made as locally as possible, where

local communities regain the power to determine and control their

preferred economic and political paths. Instead of shaping all systems to conform to a global model that emphasizes
specialization of production, comparative advantage, export-oriented growth, monoculture, and homogenization of
economic, cultural and political forms under the direction of transnational corporate institutions, we must reshape our
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institutions to favor exactly the opposite.   

To this end, Prout proposes the decentralization of the economy. This is accomplished through several key principles
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that protect local determination and self-sufficiency. These include: 

1. Control of local resources by local people

2. Using local production for meeting local needs, that is, for consumption and not for profit
3. Using cooperatives for most of production and distribution so that wealth and ownership is more equitably
distributed and local controlled.
4. Local hiring of local people to achieve 100 employment
5. Allowing only locally produced products to be sold in local markets.

In practice, decentralization follows the strategy of subsidiarity,  that is, favoring the local whenever the choice
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exists.    Subsidiarity means that decisions should be made at the most local level, by the most local competent
authority. It also implies that production and consumption should maintain the shortest distance between them rather
than conforming to designs of long-distance trade. This is a shortening of the supply lines which has an immediate
effect of encouraging the local economy and local employment.
 
When determining how local a business should operate, subsidiarity requires that one consider the smallest area first,
while recognizing that larger industries may require a larger area of operation. For instance, much food production
can take place locally but the manufacturing of vehicles or airplanes may take place at a regional level.
 
The road to self-sufficient, regionally-based economies requires actions by government and business to strengthen
local economic control. The following are a few suggested steps:

 Transferring manufacturing subsidies away from centralized and large-scale production to preferential
treatment of local production instead.
 Municipal governments should screen local subsidies and incentives to test for local ownership and positive
impacts for local workers and business.
 Encourage local purchasing (buy local) through local labeling and requiring government contractors to buy
locally.
 Capital controls need to be installed to 'keep the money local'. Reregulation of the banking system to
penalize capital flight out of communities caused by banks and financial
institutions so that greater advantage is achieved through local investment than
flight and 'capital mobility'. 6
While policies promoting localization assist with local economic development and economic democracy, ultimately the
entire economy needs to be decentralized. Rules of international trade favoring production for export should be
replaced by principles of prioritizing production for local consumption, instead of maximizing private profits. Trade
rules should maximize local production, local self-reliance, and food and energy security
 
Free Trade in a Decentralized Economy
Prout supports free trade only when there is a sufficient supply of local production to meet local/regional demand, that
is, in a decentralized economy. Surpluses may then be traded between self-sufficient regional economies. Only when
a regional economy is fully developed can free trade principles lead to greater wealth for communities. Such trade
would provide goods not available locally and hence help local economies which lack certain raw materials and
corresponding industries.
 
The free trade in a decentralized economy would not interfere with the development of local economies to run home-
grown industries and meet local needs.  The current free trade model of the global corporate economy maximizes
profitability by making local consumption dependent on centralized production. Local industry is unable to compete
and is too often crushed. Prout’s idea of free trade enhances local production by exchanging only surplus goods with
other regions for other goods which aren't easily obtained or otherwise developed locally, thus enhancing the lives of
people in both regions.
 ________________________________________
Notes
th
[1]  Global Envision, Exploring Market-Driven Solutions to Poverty, “Free Trade VS Fair Trade”, Oct 26 , 2005. Web,
7 Nov 2015 http://www.globalenvision.org/library/15/834
[2]   Fair Trade Research Group, Colorado State University, “One Cup at a Time: Poverty Alleviation and Fair Trade
Coffee in Latin America” Web, 11 Nov 2015
http://cfat.colostate.edu/wp-content/uploads/2009/09/One-Cup-at-a-Time.pdf
nd
[3]  Cavanaugh and Manders, ed., “Alternatives To Economic Globalization: A better world is possible” 2  edition.
San Francisco Berrett-Koehler, 2004. p149.
[4]  Sarkar, P.R., “Decentralized Economy – 2.” 1982. Proutist Economics: Discourses on Economic Liberation.
Kolkata: Ananda Marga Publications, 1992.
[5] ibid Cavanaugh and Manders p149.
[6] ibid Cavanaugh and Manders p154.