Economic Inequities and Market Forces: The Unseen Drivers of Child Labour in the Cocoa Sector

Economic Inequities and Market Forces: The Unseen Drivers of Child Labour in the Cocoa Sector

Child labour in the cocoa sector is a topic that has garnered significant attention, often framed as a moral or ethical issue. However, this framing tends to overshadow the economic forces that contribute to the perpetuation of child labour. As economist Ha-Joon Chang aptly puts it, "People in poor countries are poor not because they are lazy or have the wrong kind of culture, but because they cannot realize their potential due to their adverse economic institutions" (Chang, 2008). This blog aims to shed light on the economic inequities and market forces that drive child labour in the cocoa sector. We will explore the global trade imbalances, the role of multinational corporations, and the economic structures that perpetuate this issue. By examining these economic drivers, we can better understand the complexities of child labour and develop more effective strategies for its eradication.

Question: How can an economic lens help us better understand the complexities of child labour in the cocoa sector?

"In a world where child labour is often a symptom of economic injustice, we must look beyond mere moral judgments to understand the underlying currents. The plight of child labour in our cocoa fields is not just a story of ethical lapses but a saga deeply rooted in economic inequities and market forces. It's a narrative where global trade imbalances and corporate manoeuvres cast long shadows over the innocence of childhood. To truly emancipate these young souls, we must unravel and reform the economic structures that ensnare them. Our mission transcends ethical outrage; it demands economic transformation for the soul of our cocoa communities.'" - Kwame Asamoah Kwarteng

The Global Trade Imbalance

The global trade landscape is often skewed in favour of developed nations, creating a cycle of dependency and poverty in developing countries. In the cocoa sector, this imbalance is glaringly evident. According to the United Nations Conference on Trade and Development (UNCTAD), while 75% of the world's cocoa is grown in Africa, less than 5% is processed there (UNCTAD, 2016). This means that the majority of the economic benefits from cocoa production—such as processing, manufacturing, and retailing—are accrued by developed nations.

This imbalance is not merely a result of market forces but is often perpetuated by trade policies and agreements that favour the interests of developed countries. For instance, subsidies provided to farmers in developed nations can distort global prices, making it difficult for farmers in developing countries to compete (Rodrik, 2011).

The consequences of this trade imbalance are dire. It perpetuates poverty in cocoa-producing countries, making child labour an economic necessity for many families. The inadequate local processing and manufacturing by “indigenous investors” also means that these countries are unable to move up the value chain, further entrenching economic disparities. This is crucial as while value addition in Ghana and Ivory may have increased, the value-adding firms are all foreign investment. Again not criticising foreign investment but in a sector bedevilled with inequality, you would expect that there a direct benefits of these investments to the farmers and the producing countries. However, as I explained in this article, these investments while they increase our GDP on paper, do not have any significant economic impact in practice in the lives of cocoa farmers and producing economies, hence not helping with the eradication of child labour they so proclaim is their prime objective in their press and reports.

Question: How do global trade imbalances contribute to the perpetuation of child labour in the cocoa sector, and what policy changes are needed to address this imbalance?

The Role of Multinational Corporations

Multinational corporations (MNCs) wield enormous power