Chapter 7: Governance as ‘Creative Destruction’
While Chapter 4 documented the unique networked growth of the fair trade, Chapter 5 illuminated that in less than two decades MNCs have found their way into the Fairtrade certiﬁcation system and, via the LIs, are moulding it to their own market interests. These insights demonstrate how using markets to design new institutions for development is subject to quite rapid evolutionary shifts. It highlights the tenacity and power of MNCs to pacify threats to the existing market structure and shape those threats according to the (dominant) institutional rules of the game. In this chapter we explore how the movement’s pioneers (the ‘game-players’) and the broader movement are addressing the growing inﬂuence of MNCs and commercial prerogatives in the Fairtrade system. This helps elucidate the institutional means by which game-players overcome market absorption. According to Schumpeter (1934), entrepreneurs are economic revolutionaries. Their innovations stimulate ‘gales of creative destruction’ which render existing ideas, technologies and skills obsolete and replace them with new market institutions and structures. These gales punctuate the history of economic progress.1 Evolutionary economists liken the innovation process to Darwinian genetic variation to view the market as a mechanism for selecting the ‘ﬁttest’ among competing species (see especially Nelson and Winter, 1982). As in nature, selection mechanisms ‘favour one variety over another, from which one species is eliminated and the other prevails based on its adaptability’. Innovation (genetic variation) is a source of selection pressure, in response to which weaker species adopt the comparatively superior traits of the...
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