In the late 20th century, a movement developed around the world known as "fair trade." This movement was started by charitable groups in developed countries who recognized that many producers of commodities in undeveloped countries were at a major disadvantage in the modern, open globalized free trade environment. Large multinational groups and powerful monopolies often exploited primary producers' lack of economic and political power resulting in severe hardships and questionable trading practices that were highly favorable to the rich, powerful groups.
The key advantage of fair trade is the principle of the fair price paid to the producers of certain commodities in underdeveloped countries. Fair trade organizations and buyers undertake to pay the producers a fair price that, while recognizing market realities, also recognizes the right or need of the farmer or grower to make a profit from their labor and resources. This usually means paying more for the commodities than would otherwise be necessary under a purely profit-maximizing model. This is reflected in the price paid for by the consumer in the developed countries who are prepared to pay a premium for knowing their purchase has been ethically sourced.
Providers or producers of fair trade goods must agree to abide by certain minimum standards of ethical and humane labor practices. Decent working conditions must be provided and trade unions are recognized. In this system workers have rights and protections that can be absent in other systems where the extreme poverty and the imperative to make money can often lead to degrading and dangerous labor conditions. Child labor and forced labor is not allowed and discrimination on the basis of gender, caste or religious grounds is banned.
Another advantage of the fair trade system is the stability it provides for farmers and producers. Instead of being subject to the vagaries of international commodity markets and boom and bust cycles the fair trade system provides a near-guaranteed income. This allows them to provide for their communities far better and to plan ahead, make improvements to their operations and invest in equipment and practices to improve productivity without fear of the investment suddenly becoming unaffordable.
Fair trade organizations pay a premium on top of the fair price so that the primary producers at the source of production can provide benefits to their wider community as a whole. This provides benefits for a much wider group than just those directly involved in the production and these benefits have a positive effect for years to come. Projects such as improved sanitation or health care, new schools or educational resources and other such community projects are examples of this type of activity.