Since we're skipping this assignment, I'm going to post my response to Reluctant Entrepreneurs / Black Sheep here! =)

I think the chapter “Reluctant Entrepreneurs” had the best overview of the pros and cons of microfinance, and insights into small business ownership in developing nations, of any article we’ve read this semester. For example, this quote seemed pretty in line with everything we have read, “Given the chance, it seems that even people who had been hit by extreme hardship were able to take charge of their lives and start their exit out of extreme poverty.” Later in the article, though, the harsh reality of small business ownership is spelled out. Many people do not want to own their own business; they turn to owning a small shop or corner store when all of the “desirable” jobs dry up. Faced with economic uncertainty, families turn to entrepreneurship to make ends meet but they are not mentally vested in their decision. In order to feel comfortable, people want a guaranteed paycheck and small business ownership is far from a guaranteed income.

I also found it a little odd that the interest rates for microloans are so high. I understand the math; a small loan has just as many transaction costs as a large loan and also requires a certain amount of return to be desirable to lenders, but 50+% seems like it’s just taking advantage of the needy. The article also mentioned that 97+% of the loans are repaid, so it seems the interest isn’t crippling… but it still doesn’t sit well with me.

“The Parable of the Black Sheep” seemed like a strange choice, as the author seemed to insinuate that poor people enjoy being poor. I’m not really a fan of the attitude that some people are just stupid and deserve to be poor. The parable started with a poem about people loving their poverty, then described the stupid ways his father didn’t bother to save money for a dowry, and then went on to blame people with their hand out for being in that position. While I believe people should try everything in their power to escape poverty, there are usually additional circumstances at play – people should be just a little less quick to make sweeping judgments about those less fortunate.

That said, I thought there were two great nuggets of wisdom in his words, the first is “Domestic violence thrives in a culture where women do not know what they are capable of.” When anyone fails to recognize their own potential, or capabilities, they leave themselves open to be taken advantage of. The second quote is, “Energy comes from the darkest days you have experienced. A person who has not been hurt does not have those experiences.” I think everyone finds their drive add motivation from different sources, but a terrible experience can show someone what they are capable of, or what they never want to experience again.

There were a few quotes in “Game-Playing: Rethinking Power and Empowerment” that stood out to me. The first is from page 10, “Empowerment… is a force exerted by an individual or group as a capacity to produce change and an affecting and transforming power but not a controlling power.” This concept stood out to me because the idea of empowerment in this context is presenting an idea to an individual or group so they can be influenced by it, take the idea, and continue to run with it. This is how change happens, slowly, through ideas.

I also appreciated the idea of “power with” which was defined on pages 11 through 12 as, “The capacity to achieve with others what one could not do alone.” This isn’t a new concept; anyone that has ever played organized sports has heard a coach say “the team is greater than the individual.” What makes this idea novel is the idea of teamwork as power, creating “power with” through the interaction of the team.

On page 13, the idea of power as it relates to established business started to take shape. Up until this point, I wasn’t quite seeing the connection to Fair Trade, “Power is never the property of an individual; it belongs to a group and it remains in existence so long as the group stays together.” People are quick to say, “that’s how we’ve always done X” but change is possible once people realize that the established modes of business, or operation in general, are changeable – the people doing the work have the power to, as a group, say no or disband or change the established mode of working. If enough people get behind an idea, the people making decisions are no longer in control.

This relates to Fair Trade in many ways. First, we all know we vote with our wallet. If enough people demand change at the consumer level, the power shifts to the consumer and businesses have to react. In business, if the analysts and managers doing the day-to-day work band together, they may be able to suggest and implement improvements (for example, related to sourcing materials).

The statistics in “A Brilliant Idea” ended in 2007, with the U.K. beating the U.S. in total sales per capita. Out of curiosity, I set out to find out what has happened since then. Oddly enough, it’s incredibly difficult to find any real data on total Fair Trade sales, but I was able to find a university study done on the years 2007 – 2009 (http://www.uvm.edu/~kpanosia/Site/About_Me_files/FairTradeReport.pdf). The most revealing bit of data in this report is on page 8, Data Table 1, “Retail Sales Around the World.” According to the report, sales in the U.S. still trail behind the U.K., with annual growth in the U.S. around 7% per year. In the U.K., awareness of Fair Trade has caused growth of 15%. (That, however, pales in comparison to Canada; 66% growth in 2009!)

According to the article, Fair Trade sales are weak in the U.S. because of a “…culture of self-centered political and emotional isolationism… and a virtually undeviating commitment to the capitalistic market economy…” With the slower growth in the U.S., it’s not surprising that companies are slow to buy in. If the people don’t demand it, the companies won’t provide it.

That said, according to “A Brilliant Idea,” maybe growth isn’t what the Fair Trade market wants! According to the article, the only way to supply the volume of any commodity that a large-scale market may request would include large, plantation-style farming which is in direct competition with democratically run farms and runs counter to the point of Fair Trade.

Small scale seems to be the only way that Fair Trade can operate, but it makes me wonder how viable a business model Fair Trade will be in the long run, in terms of its ability to help large numbers of people. If the ultimate goal of Fair Trade is to become large enough that all farmers and artisans can sustain themselves and their families, the scale must expand and deliver enough of an output that the money flowing from the developed world impacts every artisan/farmer in developing nations. It runs counter to my intuition to think that the best case scenario is helping a very small number of people, but this article seems to suggest that small scale is not only the best case, it is the only way.

Hello,

I am a student in Professor Combellick's Entrepreneurship, Fair Trade and Social Justice class at Fordham in New York. It is nice to meet you all and I hope I am responding in the right place!

A few points jumped out at my while watching the Films For Action documentary "The Dark Side of Chocolate." Many employees and executives of cocoa companies both started out adamantly dismissing the possibility of child labor in the plantations that supply their cacao. For example, early on in the video, Patrick, a VP of European distribution for Barry Callebaut stated that the practice of using child labor/slaves had been abolished since 2008. Later, Ali Lakiss, a CEO of SAF Cacao, echoed that sentiment and added that after many investigations no children had ever been rescued from plantations and there were 0 cases of child slavery reported, to his knowledge.

Later on in the video, we find out that Interpol had very recently rescued 65 children from East African plantations, and arrested 8 traffickers. Ali Lakiss admits he was aware of this recent activity, which runs completely opposite of what he said earlier. He admits there is a problem, but goes on to express how detrimental it would be "to the entire world" if the chocolate industry was forced to change or stop production.

I think one of the reasons child labor persists in cacao plantations is aversion to change. If a company can make millions/billions using their current business model, it is easy to continue business as usual and scary to consider changing. According to the documentary, plantations are paid 1 euro/kilo of cacao bean by the washing/processing plants, and the processing plants are paid 2 euro/kilo of processed cacao by distribution companies. After an end user company, such as Nestle, uses the cacao, they are able to turn that same 1 kilo into 40 chocolate bars. The profit margins for these transactions appear large, and it would not be in Nestle's best profit-interests to alter course.

Another issue is the fiduciary duty that American companies have to their stock holders. An American company is legally bound to maximize shareholder interests and maintain profit motive. The ultimate goal of a corporation is to make as much money as they can, which increase the net worth of a company, which in turn increases stock value and shareholder interest. By this principle, pursuing any course of action that may reduce corporate value /stock value, such as paying more for cacao in the case of the chocolate companies, could be construed as negatively impacting the bottom line. It can actually be argued that stopping child slavery at the plantations is illegal, in terms of fiduciary duty to shareholders! The problem is inherent in the capitalist structure, and more complicated than U.N. mandates could possibly hope to correct.