Escaping the Poverty Trap: Alternatives Direct Trade Model

“We define poverty as the inability to access opportunity. One aspect of the invasion and colonization of our lands has been our loss of access to markets. For centuries before the arrival of Europeans,  the indigenous peoples of the Americas engaged in long distance trading networks that sustained the lives of large civilizations. Since then, we have been kept in positions of servitude by colonial models that expropriate our labor and resources for foreign markets leaving little wealth behind. ” —Guadalupe Ramirez

In an increasingly globalized world, we have the ability to connect across class, geographic, and linguistic borders to bring opportunity to communities marginalized by centuries of colonial relationships. While the fair trade model has some potential for temporarily alleviating the effects of poverty, we believe that if care is not taken, it will perpetuate rather than resolve the underlying causes of poverty. We are advocating for a refined model of direct trade to dismantle the social structure of poverty at its core. Our AlterNatives trade model seeks to create networks of exchange that foster entrepreneurship and ownership for indigenous women rather than relegating them to a perpetual state of dependance as wage earners.

Since the term fair trade was first used in English over three centuries ago, the meaning has evolved over time. E.P. Thomson described how 18th century authorities in England imposed some limits on the free operations of the market with “notions of common well being.” Though, at this time, it was more concerned with consumer rights and ensuring the poor had access to food rather than being producer focused. A more modern characteristic shared with many proponents of the direct trade movement is concern over the role of middlemen whose actions are often considered legally suspect.¹

In the United States, the notion of economic justice in trading relations was developed as early as 1827 by members of the Free Produce Society, which was an organization founded by abolitionist as a means of challenging slavery.² A significant issue that doomed the growth of the society was the challenge of competing in the open market with slave production.

After WWII, the Mennonite Central Committee and SERRV international of the Brethren Church began developing fair trade supply chains from developing countries to support their relief and missionary efforts.

Then, in the 1960’s the term “alternative trade organizations” became popular to describe efforts to address economic injustice through consumer education and innovative models. Heavily influenced by Keynesian economics, the movement sought to give fair and equal access to markets.³

During the later part of the 20th century, alternative trade was again renewed with passion in the social justice movement as a means to find markets for products from countries that were excluded by conservative political forces. Many activists sold Nicaraguan coffee through churches or assisted Maya political refugees with the sales of handicrafts in colleges and festivals.

A common theme throughout the movement has been a commitment to assisting producers to gain greater access to markets and an intentional effort to reduce the role of the intermediaries.

Typically, developing world producers are limited to tourism markets for higher dollar exchanges. This presents a number of issues including unfavorable conditions of supply and demand. Generally, there are many more producers than consumers, meaning the prices will be low, sometimes even below production cost. Another factor of considerable impact is the cost for producers to gain access to these markets. In Guatemala, the tourist destination of Antigua is as distant and expensive for a rural producer as a flight to the United States. Many tourist locations impose restrictions that exclude the very producers from access to these markets. This creates a class of intermediaries with the ability to monopolize opportunities.⁴

Over the last decade, the term “fair trade” has taken on new meanings as its popularity has grown in the United States. No longer does the term imply assisting developing world producers to gain access to markets; rather, today it is applied increasingly to exporters and intermediaries meeting vague, subjective, and unverified codes of ethics.

As the term fair trade becomes more fashionable, alternative trade organizations seeking to correct the underlying power imbalances that are the cause of poverty face competition with actors who have transformed the meaning of the term to fit neoliberal sensibilities and colonial assumptions.⁵

Increasingly, the term refers to fair and humane working conditions for wage laborers who have little to no direct participation in decision making concerning production or share of profits. Akin to greenwashing, this practice of labeling conventional products with marketing terms aims merely to influence consumers into thinking the product is healthy or organic. As an organization that has supported weaving groups for over twenty years including a current project with over 150 weavers, we have witnessed a significant shift in the motivations, assumptions, and demands of design entrepreneurs and intermediaries.

Developing world producers face many obstacles to competing on a level playing field. Besides restrictions on movement, lack of access to capital, unfavorable political conditions that often limit their participation, these producers are now also being displaced by the very movement that was intended to empower them.

A decade ago we had the opportunity to participate in high level government economic planning sessions held through the Guatemalan government with support of USAID.⁶  In these meetings, the next twenty years of development were being planned and the labor of Guatemalan indigenous women was identified as one of the primary resources of the country.

Fair Trade is of growing interest to Wall Street and Midtown because artisan producers represent a great pool of unorganized labor. There are no labor standards, unions or government protection because the majority of artisans are independent contractors, most of whom are obligated to provide their own means of production as well as materials for the pleasure of having a job. In an age of outsourcing and competitive labor pricing, there is no need for the bad press of a sweatshop. Hire rural peasant women and call your job training entrepreneurship and women’s empowerment.

A question that is often asked by students of International Aid is, are these effects a conspiracy  or a mistake? During a period at the beginning of the century, it appeared that fair trade might actually assist native producers to obtain new levels of wealth and opportunity. Then the AID industry became involved with its politically connected players and public funded agencies that began to direct and shape the movement for the benefit of retailers and distributors and away from producers. In Guatemala, USAID funded the development of the Alternative Exporters Association AGEXPORT. This agency received funding to support the growth of artisan and other non-traditional exports. Rather than funding producers to gain access to markets, USAID funded programs that positioned members of the oligarchy⁷ to monopolize on growing opportunities and to vertically organize supply chains under their management. In this way, government policies moved to counter the liberating impact of fair trade and ensure that colonial power relationships were maintained.

Today, foundations like the Clinton, Ford, and Gates Foundations, are heavily involved in the funding of supply chain integration. The primary issue is that rather than supporting developing world grassroots producers to gain access to markets, these programs predominantly benefit Northern intermediaries and contract professionals to consolidate and improve production.  For producers, the glut of subsidized production frequently lowers prices and results in further consolidation, land loss, and wage devaluation.

Further complicating the issue, a wave of young people from the global north applied the term fair trade to selling anything made by a person from the developing world. When a person from the global north, usually well-intentioned, comes to work in the fair trade textile industry, they already have access to capital, and have marketing skills such as knowledge of photography, web design, and social media far greater than indigenous producers. Rather than assist producers with these advantages, they retain the benefits of price markups through relations that mirror conventional trade relations rather than transform them.

Selling a native design or their poverty without helping the community break those cycles of poverty is simply cultural appropriation. Livable wage or not, these producers are still relegated to a dependent status on those in control of marketing of their products.

While consumers are able to compare the taste or quality of construction of an item, it is very hard to evaluate the economic and social models of production and distribution. We believe that highlighting the importance of direct trade is crucial for globalization to deliver its potential benefits to those who have been denied them for so long.

The advent of the internet may offer the best opportunity to not only raise awareness about these issues but also to facilitate direct trade with producers and truly eliminate the role of the intermediary.

The AlterNatives Approach: Creating Opportunity not Dependency

AlterNatives is a social enterprise formed by the Highland Support Project in 1994 with the mission of providing direct market access to native producers. For over two decades, AlterNatives has innovated models to harness the power of the market to foster artisan empowerment, education and entrepreneurship.

HSP’s vision and methodology are shaped by the cooperative model of economic and social development. A cooperative exists to assist its members to succeed. Often confused with terms like collective and commune, a cooperative is a market oriented enterprise that seeks to improve wealth, income and quality of life for its members. Cooperatives are very similar to corporations with one slight semantic difference. A cooperative functions to assist members to make/save money where as a investors (members) of a corporation derive benefit from the development of the corporation. A simple example: A farmer’s cooperative will purchase a tractor to assist the independent members to increase productivity, and then the members may sell or not sell through the cooperative and retain the profits of their work. They pool their funds to purchase and cover a capital cost that would be too great for any single farmer to purchase and maintain. While in contrast a corporation will purchase a tractor and may hire farmers as labor for the production of wealth that is shared by investors, many of whom are not involved in production or sales. These investors benefit from productivity of the corporation and not themselves.

AlterNatives is embracing a growing movement identified as BCorps or benevolent corporations. When an organization is incorporated under state law for market activities, it has a fiduciary responsibility to maximize profits of its shareholders. Management may be sued if policies concerning workers rights or the environment are viewed as interfering with the maximization of profits. In the neoliberal climate, forward thinking business managers have to move with caution.⁸

AlterNatives functions as part of and in support of an organizational ecosystem established to assist indigenous communities remain on their land, in their community, and with their culture.

The Association of Highland Women (AMA) is an empowerment program that fosters the growth of women’s circles. These circles are an organizational nuclei for the delivery of behavioral health, education and development programming.

As an alternative trade organization,⁹ AlterNatives engages in more than serving as a marketing tool for Indigenous produced and traded products. AlterNatives supports the creation of social capital by partnering with HSP to provide artisan training, social service programming, and forming networks. Over the last decade, numerous workshops have been offered to artisans concerning marketing, production techniques, quality control, and design.

A goal of our partnership this year is to strengthen the networking of Indigenous producers through a campaign to promote cooperation and not competition.¹⁰ The goal of the campaign is to raise solidarity amongst grassroots producers and strengthen networks to achieve greater scale in purchasing supplies and reduce marketing cost. A few of the objectives are to share cost for international trade shows, support direct trade through online trading platforms, and coordinate for continued skills development.

The greatest challenge is bringing justice to a globalized market. This is where the traditions and knowledge of native people are of such service to humanity. Markets are not abstract mathematical equations, they are relationships between human beings trying to meet their needs and improve their lives. Native economics have long considered the importance of the common good as well as the environment.¹¹

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1. Fridell, Gavin (2003). Fair Trade and the International Moral Economy: Within and Against the Market. CERLAC Working Paper Series.
2. Newman, Richard S. Freedom's Prophet: Bishop Richard Allen, the AME Church, and the Black Founding Fathers, NYU Press, 2008, p. 266. ISBN 0-8147-5826-6
3. Newman, Richard S. Freedom's Prophet: Bishop Richard Allen, the AME Church, and the Black Founding Fathers, NYU Press, 2008, p. 266. ISBN 0-8147-5826-6
4. Marketing Intermediaries can include re-sellers, physical distribution firms, marketing services agencies and financial intermediaries. These are the people or steps between a producer and final consumer. For many engaged in alternative trade, the entire purpose of the activity is to minimize the role of intermediaries and the critique of “fair trade” as practiced today is that many are using the language of fair trade to sanitize the role of the intermediary and maintain lower cost for retailers and consumers while not developing opportunity for growth or market access for producers.
5. Neoliberalism is an economic term referring to ideas associated with laissez-faire economics. Its advocates today support deregulation, fiscal austerity, privatization, free trade, and a minimal role for governments. -Colonial assumptions: Colonialism is the acquisition of the colonist, by brute force, of extra markets, extra resources of raw material and manpower from the colonies. An area of Postcolonial Studies is the continued existence of the philosophers, ideologies,  justifications and prejudices that allowed colonists to convince themselves of their own high moral value while committing atrocities against native people. While in the 15th century, Europeans were bringing civilization and God to heathens, today neoliberal proponents are providing jobs, improving efficiency, and ordering the world according to economic theories that their “priests” have divined from numbers. A significant colonial assumption is the perceived right towards indigenous knowledge, designs and labor with little consideration towards the historical power imbalance that leaves communities unable to defend their basic economic or cultural rights.
6. HSP has sponsored membership for AMA to participate in trade and economic development associations. Frequently the only Indigenous people in the room, members of AMA have obtained a unique opportunity to witness how political power is utilized to maintain economic advantage.  After more than decade, AMA continues to be marginalized from opportunities. In one particular stunning example, a web page containing relevant trade opportunity information was immediately removed when AMA staff telephoned with an enquiry about participation. They were told that the page never existed. The saddest aspect is that it appeared that the staff of the trade association assumed that Indigenous people did not know how to use computers or the internet as many urban Guatemalans were just learning at the time.
7. Luis Reyes is absolutely clear that Guatemala has elite. This is a community of wealthy business people, including the family of Carlos Vielman Montes, former President of the Chamber of Industry. This elite dominates business associations such as CACIF. Other interviewees made similar statements about the existence of an elite, whose wealth, family networks, control of influential business organizations, and social life, set them apart from the rest of society. For example, without any question to prompt him, a former director of the Chamber of Industry referred to families such as Castillo, Novella and Botrán as ‘the power group’, ‘the elite’ and ‘the clan’  (Hugo Ordóñez Porta, interview 12/6/00).  THE WORLDVIEW OF THE OLIGARCHY IN GUATEMALAN POLITICS  Roman Krznaric
8. A dated but excellent article concerning the challenges faced by COSTCO in paying living wages as a public company and why CSR efforts are a challenge in current legal environment.  http://reclaimdemocracy.org/costco_employee_benefits_walmart/
9. We define alternative trade organizations as those that utilize proceeds of sales to assist partner communities transform the conditions of poverty. Beyond fair trade, alternative trade organizations engage in providing social services and developing awareness and support for needed political change.
10. A phenomena of increased foreign NGO activity and traders has been a dramatic increase in competition rather than collaboration.  Competition for funding that not only sustains programs but also salaries has significantly fragmented leadership. Additionally, outside funders decide community leadership through their funding choices most frequently devoid of any local participation or voice.  Therefore many community organizations and producers have developed a culture of competition and secrecy instead of collaboration.
11. Accepting the invisible hand, Chapter 5: Ethics in the Maya Marketplace Ramirez, Blevins, Wight.