The Rise of Market Approaches to Social Problems: The Case of Fair Trade and Its Uneven Expansion Across the Global South

Abstract

This study examines international market formation and expansion with a focus on the social regulation of economic activity. I use fair trade as a strategic case because of its centrality in the growing field of civil society–based initiatives that address social and environmental problems via market mechanisms as well as its comparatively long history that encompasses a substantial change in organizational structure. Using a comprehensive data set of current and former World Fair Trade Organization members, I conduct a series of fixed effect zero-inflated negative binomial regression analyses. Results reveal the variable significance of macro-historical conditions and organizational structures that underlie the market’s uneven growth across the global South. I find that organizational linkages to world society, a history of British colonization, and the presence of Peace Corps volunteers enable market formation and expansion. By contrast, French and Portuguese colonial ties have a constraining effect. Additionally, I find that the organizational structure of the market itself is both directly and indirectly consequential for its growth. The shift from idiosyncratic direct sales networks to a formalized labeling system facilitates market expansion and amplifies the importance of global institutions but diminishes the impacts of international political domination.

Keywords:

• Civil society
• nongovernmental regulation
• organizations
• fair trade
• market structure
• cross-national inequality

Acknowledgements

Many thanks to Evan Schofer as well as Nina Bandelj, Ann Hironaka, David John Frank, David A. Smith, Steven Topik, April Linton, Francisco O. Ramirez, John W. Meyer, Kathleen M. Fallon, and John M. Shandra for their feedback at various stages of this project. I am also grateful to Laurentia Dhanio at the World Fair Trade Organization for facilitating archival data collection.

Notes

1 For the sake of clarity, I use the term “fair trade” to refer to the market throughout its history. Others have used the term “alternative trade” to describe this market, especially prior to the 1990s.

2 Prior studies of fair trade outcomes find positive, though limited, benefits to producers in the global South (Bacon 2005; Bacon et al. 2008; Fridell 2007; Guthman 2009; Jaffee 2008; Levi and Linton 2003; Ruben 2009; Valkila and Nygren 2010; Duchelle et al. 2014; Bartley 2010).

3 When compliance with fair trade standards is evaluated at the product level, the producer can sell other goods that do not meet fair trade standards. Organization-level screening requires that all goods a fair trade organization produces or sells meets the official requirements. However, labels may appear on the individual goods.

4 There are several obstacles to estimating the size of the fair trade market. There is no centralized repository of fair trade sales and related data. When reported, sales data are typically published by individual certifying bodies. Multiple certifications and overlapping organizational networks are common.

5 Language may also play a role in the spread of fair trade markets across former British colonies. However, it is important to note that a great deal of fair trade takes place outside of the Anglosphere and many organizations operate in languages other than English.

6 Top fair trade consumer countries, based on various WFTO and Fairtrade Labeling Organization reports, are Australia, Austria, Belgium, Bulgaria, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Malta, Netherlands, New Zealand, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, the United Kingdom, and the United States.

7 Following best practices, these categories reflect substantive distinctions between former colonizers as they relate to market formation and expansion (Johfre and Freese 2021). Because there is no expectation that colonial ties with powers other than Great Britain, France, or Portugal will impact the market, all other cases are included in the reference category. Corollary analyses support this categorization.

8 I perform a series of robustness checks in order to test for the appropriateness of the model and consistency in the findings. I use post-estimation added variable plots to identify any potential outliers; there were none. In order to test for multicollinearity, I run the zero-inflated negative binomial analyses with different combinations of independent variables included. Tests for multicollinearity reveal stable coefficients and standard errors.

Additional information

Funding

This research is supported by the National Science Foundation (award SES-1129796) and the Center for Organizational Research at the University of California, Irvine.