Cashing in on the business that poverty can generate

As pop stars and politicians unite to tackle world poverty, sales of fair-trade goods soar. So there’s big money to be made in penury.

The current Make Poverty History campaign, to which the British Government has subscribed enthusiastically, is admirably ambitious in its claimed aim. You don’t have to be a bloated Western plutocrat to consider that it might even be a little over-ambitious. That “the poor are always with us” is a biblical axiom.

More to the contemporary point, there’s still the odd economist who would suggest that capitalist economies require an equal and opposite poverty in developing economies, in order to support the prosperity of the advanced nations. Another way of looking at it is that the world’s poor unwittingly and wretchedly have an altruistic social function – as Jean-Paul Sartre put it: “The poor don’t know that their function in life is to exercise our generosity.”

The stated policies of the campaign are a mixed bag, too. The demand of “more and better aid” is philanthropically fine, so far as it goes, but Western aid has widely been seen as a necessary treatment, rather than a cure, for poverty.

“Drop the Debt” refers to the hobbling loan repayments to the West in the developing world – again, debt relief of itself can’t generate economic and political stability in nations whose governing regimes inflict famine as a matter of state policy. Only “Trade justice” seems to be a banner under which a clear and constructive consensus can muster. Economic protectionism – by means of which developed economies price producers in developing economies out of their markets – is bad for free market capitalism, not just the poorest members of the world economy.

The trouble to date has been that such campaigns have been conducted mainly by charitable concerns at the margins of the political process. A coalition of government agencies – and the post-modern political class of celebrities – has ensured that the poverty issue is now mainstream. Politicians feel that there might even be votes in it.

But it’s my feeling that the real difference will be felt not when we have the undivided attention of politicians on the subject, but when Western industries appreciate fully the money that is to be made, as it were, out of poverty. If voters are ultimately the only people who can exercise any power over politicians, then it is similarly axiomatic that customers (and the influence they exercise on the prosperity of shareholders) are the people who change industrial behaviour.

In this context, it’s interesting to note that the Fairtrade Foundation – the certification body that awards its fair-trade “FF mark” to products – reports that its approved brands saw a sales rise of more than 50 per cent last year. The sales volume amounts to some £140m, which is less than marginal in terms of retail grocery markets, but it’s a trend that the consumer industries will note. This is particularly true in some specific markets, where Fairtrade’s ethics have made untypically significant inroads. In coffee, for instance, Fairtrade products account for some 18 per cent of all premium coffee sales. We’ll be hearing a lot more of this stuff, as we’re now in Fairtrade Fortnight (perhaps, in campaigning circles, a fortnight is the new week).

According to the Co-operative Bank ethical purchasing index, “ethical consumerism” in the UK was worth about £25bn in 2003. This includes everything from free-range eggs to financial services, so it’s a bit difficult to grasp as a sector. The old saw in ethical investment products used to be that they were for people who didn’t want to make much money – for the rest of us, the arms trade, tobacco, booze and animal experiments were the growth sectors. The Co-op’s figure includes £1.4bn in new money in ethical vehicles and (how do they value this?) £1.8bn in “consumer boycotts”. We might still make more money out of stuff that kills people, but at least the managers of ethical investment trusts are making money too.

It might be too early to call this a trend, but what we can say with some certainty is that money follows markets – in other words, wholesale and retail industries will discover their ethical consciences in direct proportion to such discovery among their customers. And this is not just about fair world trade.

A similar characteristic is emerging in the nutrition debate. I note that PepsiCo has quietly pulled back on its advertising to children and reduced the portion sizes of some products sold in American schools. This may be to avoid threatened legislative restrictions, but it has done so without any of the public fuss that Kraft Foods made over its own product corrections last year.

It may be that the developed world is becoming fed up with being fat, at the same time as being fed up with famine in the developing world. If that’s the case, it really is a trend that the business world will want to track.l

George Pitcher is a partner at communications management consultancy Luther Pendragon


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