The biggest barriers to free markets are not repressive regulations, excessive taxation, or even state-owned enterprises. The biggest barrier is how people perceive the free market. The possibilities of political reform can only go so far but without an intellectual reform, nothing substantial can ever come. Take the example of the recent craze for fair trade coffee or clothing produced in sweatshop free environments. There is no coercive trade barrier imposed by the state yet individuals are voluntarily purchasing more expensive goods. The barrier is an intellectual barrier lead by false pretenses of social justice.
It is absolutely understandable as to why individuals are disgusted by the poverty which plagues most of mankind. People are crowded into stuffy factories for more than ten hours a day doing repetitive work and receiving only meager wages. It is no less unnatural to desire an improvement in their standards of living but these feelings alone, while legitimate, contain no solution to lift the untold millions out of poverty. Fair trade aims to end exploitation of workers by refusing to buy goods produced in the unacceptable conditions described. Unfortunately, this is not the case. What the logic of fair trade essentially amounts to is an attempt to help the poor by boycotting them.
Let us first rewind to the simple observation of Adam Smith. Adam Smith recognized that the market, a system of voluntary exchange, requires both parties to see a benefit in their interaction (or else it would not occur). Voluntary exchange is a positive sum game. Individuals voluntarily flock to job openings in sweatshops everywhere because they see it as an improvement to their current state of affairs. What is often neglected by supporters of fair trade is what alternatives these workers have. Relative to their alternatives, sweatshops are a drastic improvement. Take the example of Senator Thomas Harkin who in 1993 proposed banning all products made with child labour from coming to the United States. According to Oxfam International, thousands turned to prostitution or starved.
Despite this, it has however been argued that it is not fair that capitalists can profit on exploiting poverty. Voluntary exchange is not enough, and there needs to be social justice in order to combat exploitation. To this I ask, what is exploitation? The owners of sweatshops have not made their workers worse off. If they never built the sweatshops in the first place, their would-be workers are left in grueling poverty without the choice of even the most marginal improvement. Oddly, they are not accused of injustice here. They are accused of injustice only when they provide opportunities for improvements only because the improvements offered were not ‘good’ enough according to people who don’t work there on behalf of those who do.
I do not suggest we should settle for sweatshops, we should aim for something better. How we go about this makes all the difference. What truly improves the lot of the ordinary man is greater capital invested per worker- more tools per worker. This increases how much value they can produce and thus how much they can consume. What fair trade proponents should instead advocate for is policies which would permit the entry of more capital. Competition for their labour then bids up their wages. The worst working conditions are found precisely in places with the least free markets where special privileges and regulations create barriers of entry. The removal of these should be the focus, not the removal of capital. An individual should not have his tools taken away and left with nothing simply because a stranger is appalled with what he is working with. Instead, let us do the opposite and offer him more tools and more freedom. Let us make his current choices obsolete in the face of new, better alternatives.