OXFAM LOOKING TO REDUCE PRODUCTIVITY OR TRANSFER WEALTH?

Lynne Kiesling

Tim Worstall has a post about an Oxfam proposal to enhance the well-being of small coffee farmers. He links to and quotes an article as saying

Oxfam stated coffee … processors should fund, along with rich-country governments, the … destruction of at least five million bags of coffee stocks,

Tim then does some math and asks how “wealth would be increased by destroying the output of 1.25 million families.” He is concerned about “reducing multi-factor and labour productivity of these people to zero.”

I think Tim’s analysis is too sophisticated. To me, it looks like this: Oxfam thinks that destroying the existing production of 1.25 million families will shift in the market supply curve, raising the market price for coffee for all subsequent harvests. Such a move would create higher revenues for those 1.25 million families. But Oxfam realizes it would be cruel and counterproductive to ask those families to destroy their own produce and bear the loss of income. So they are asking coffee processors, who are all filthy, stinking rich of course, to bear that cost. Transfer of income (I’m a pedant and would say income instead of wealth) from coffee processors to small coffee farmers.

There is no wealth creation in such a suggestion. Seeking wealth creation would require Oxfam and other “fair trade” activists to have a non-zero-sum theory of economic activity. Apparently that’s asking more than they can provide.