Every eager Utopian yearns to be busy, to be doing something, to be rearranging even the smallest details of our shared world. The most irritating members of this breed have law degrees.
A case in point is Rick Young, a rookie lawyer who got a strange idea stuck in his head: everyone in the city of Berkeley, California should be compelled by law to drink only coffee that is organically grown. Or shade grown. Or that comes with a guarantee that coffee farmers were paid a price that made them happy. To Rick’s way of thinking, Berkeley would be closer to perfection if every cafe, restaurant, 7-eleven, diner and bake sale conducted its business according to the dictates of Rick’s conscience.
Citizen Rick began a voter initiative. In Berkeley he had no trouble finding 3,000 kindred spirits who shared his penchant for legislated bullying and the restriction of free choice. Rick’s initiative made it onto the November 2002 ballot; it would have dictated that every cup of java served in the city be either shade grown, organic or Fair Trade. Called Measure O, the proposed ordinance would have made it a crime, punishable by a $100 fine and up to six months in prison, for anyone to sell brewed coffee that wasn’t made from the kind of beans that Rick Young approves of.
Rick had probably been emboldened by the mayor of Berkeley, Shirley Dean, who authored a 1999 regulation that required all coffee purchased by the city to be Fair Trade. But even the mayor was skeptical of Rick’s proposal. “People feel torn,” said Mayor Dean. “They like the idea of drinking an environmentally safe and socially responsible coffee. But there are questions over the restraint of trade.” Not to mention the restraint of individual freedom of choice.
In the town that barred a troop of visiting Japanese Boy Scouts from City Hall because the Boy Scouts of America don’t accept openly homosexual troop leaders, Ms. Dean was sounding downright heretical. Since when did anyone in this left-wing Zion care about the restraint of free trade? Mayor Dean elaborated: “How can we enforce such a law? How will we tell which coffee is certified? You can’t do a taste test. What would this law mean to our business inspectors? How do you balance the socially responsible against the practical?” So, there it was: the mayor couldn’t see how the law could be enforced in a town with more than 300 coffee vendors. If she could enforce such a restrictive ordinance, she would have done so; there was just no practical way to bully the little people.
In Berkeley, the specialty coffee vendors, Peets and Starbucks, offer Fair Trade coffee as a choice. Other cafe owners were angered by the proposed ordinance. “The proposal seems fascist,” said Darryl Ross, owner of several cafes. Mr. Ross recalled how Rick Young the Utopian had earlier threatened a boycott of his business if he did not serve Fair Trade coffee exclusively. “No business wants to be forced to carry a specific brand,” said Mr. Ross, whose cafe across the street from the law school in Berkeley serves nothing but Fair Trade coffee because of Rick Young’s threats.
Mr. Samir Nassar, owner of Brewed Awakening, a cafe that offers customers organic and Fair Trade coffee as possible choices, observed that restricting coffee drinkers to so few choices would increase the price of coffee. He added, “I would say 99.9 percent of my customers are making fun of the petitioner. They think he has too much time on his hands.” Mr. Nassar’s customers were insightful; Mr. Young had been recently laid off from his job at a small law firm. Perhaps he should return to his previous occupations: skiing and leading bicycle tours.
In November, Rick Young’s ballot initiative was defeated. Not even the dreamy progressives of Berkeley could stomach the bitter taste of a law that might deprive them of a budget double latte.
What Is Fair Trade Coffee?
The Fair Trade coffee movement wants coffee drinkers to subsidize the world’s least efficient coffee producers, who are small-plot farmers. Their primary concern seems to be farmers in Latin America; for some reason, the small coffee farmers of Asia and Africa are ignored. The movement people call this subsidy a “partnership” because the expression “rip-off” sounds so harsh. According to the Global Exchange website the goal of the Fair Trade movement is to guarantee to farmers who formed collectives a minimum price of $1.26 per pound for coffee beans ($1.41 per pound for organic beans) regardless of the volatile market. In other words, the coffee movement Utopians believe that it is your responsibility to keep foreign businesses afloat even as those businesses wildly over produce and glut the market with more coffee than the world’s population can consume. Perhaps we should all start bathing in the stuff. Here’s a revealing quote from Global Exchange: “It’s an environmental issue. Small farmers are the best stewards of the land. When you support Fair Trade, you support the environment. Fair Trade farmers don’t have the capital input to clear forests, buy chemical fertilizers and pesticides. They generally grow small plots of mixed-crop, shade-grown coffee organically.”
Apparently the Fair Trade farmer is the ideal farmer because he is too poor to afford fertilizer or pesticides, which means that his crop will deplete the soil of nutrients and be ravaged by hungry insects. The perfect wage for the Fair Trade farmer would be just enough to keep him producing coffee inefficiently, year after year, without allowing him to accumulate enough capital to purchase more land, or fertilizer or pesticide, all of which would increase his crop yield and his bank account, or, God forbid, allow him to purchase a chainsaw. The Fair Trade folks are encouraging subsistence farming; they have cast the small farmer in the role of Noble Savage With a Hoe. They are infected with the same romantic delusion that Europeans first caught from Jean Jacques Rousseau. Karl Marx became infected and he passed along the romantic delusion to the Chinese communists who made a cult fetish of the simple (and forever poor) peasants. The ability to endure hardship is a virtue, but there is no nobility in grinding poverty.
At the Transfair USA website we are told that “Coffee is the second largest trade commodity in the world, next to oil. If consumer demand can be created around this product, it can be replicated to other farming products that affect different ecosystems of the world, thereby improving the preservation of biodiversity.” Apparently, the issue of Fair Trade coffee is just a trial run in preparation for many future movements that will encourage or bully us to pay artificially higher prices for other inefficiently produced farm products.
The Fair Trade subsidy is a stupid idea. If everyone who produced something was guaranteed a minimum income for producing that something, “regardless of the volatile market,” then everyone would be encouraged to produce that something. To guarantee a good price for a farm product is to guarantee that it will be over-produced; it’s a formula for wasteful glut.
None of this concerns the coffee warriors. The Global Exchange website declares that “To become Fair Trade certified, an importer must meet stringent international criteria; paying a minimum price per pound of $1.26, providing needed credit to farmers, and providing technical assistance such as help transitioning to organic farming.” And: “We believe in a total transformation of the coffee industry, so that all coffee sold in this country should be Fair Trade certified. . .” They joyously proclaimed that “Starbucks recently announced that they will brew Fair Trade coffee once a month. Now we need to demand that they offer BREWED Fair Trade Coffee of the Day - - every week!” Where will this end? They want to control the entire coffee industry like little coffee commissars. Why are they seeking a total transition to Fair Trade coffee? So that coffee importers (capitalists) will be compelled to train, subsidize and grant credit to inefficient collectivized farmers in what is sometimes called the developing world. This is not a wise development. The Soviet Union had boundless resources, but it fell apart because of its compulsion to subsidize preposterously inefficient enterprises and guarantee rewards to people who weren’t employed at useful pursuits.
The Global Exchange website says that “a group of socially responsible investors will attend Proctor & Gamble’s annual shareholder meeting on Tuesday to warn company executives and fellow shareholders that Folgers may soon become synonymous with overseas exploitation unless the giant coffee company takes immediate steps to guarantee a living wage to the families harvesting its coffee beans.”
The “socially responsible investors” were not identified by name. Anyone can become a “socially responsible investor” by buying a single share of stock the day before a shareholder’s meeting and then showing up with a manifesto and a bullhorn. Their warning served the purpose of alerting the executives of Proctor & Gamble that their company was about to be exploited by socialist Utopians who want the company to guarantee farmers $1.26 per pound for coffee beans, even if those farmers drive the market price of coffee beans far below $1.26 per pound by growing far too much of the stuff. Try this thought experiment: Imagine a child handing an adult a preposterous wish list. That’s the Fair Trade movement.
The Fair Trade gang felt an urgent need to press the shareholder’s petition. As they said, “Coffee normally trades on the commodity markets for about $1 a pound. The international price is now 49 cents a pound and the price slump is ruining many of the 20 million farming families around the world who depend on the crop.” They go on to enumerate the jobs lost in Latin America, which only add up to one half of one percent of the 20 million farming families cited above, which hardly warrants the adjective “many.” The percentage of families affected would be even less, since it is probable that in coffee-growing regions some families lost more than one job per family. In any case, these job losses are the best indication that the coffee industry has recklessly over-produced its product. In Mexico, Nicaragua and El Salvador farmers took to the streets demanding government support. They should have been given bread and a stern admonition to stop growing coffee beans. People can drink only so much of the stuff.
Global Exchange, which bills itself as “an international human rights organization,” claims that “Fair Trade certification corrects market imbalances by guaranteeing a minimum price of $1.26 per pound for the small farmer’s harvest.” In truth, it would only encourage an explosive expansion of coffee cultivation. Coffee would soon spill all over the world at artificially inflated prices.
To quote Deborah James, Global Exchange’s fair trade director: “If Proctor & Gamble truly is committed to ethical business practices, as it says it is, then the company should work to improve the lives of thousands of farming families around the world.” Thousands of families? That’s not many. If there are so few families in distress, then they should be encouraged to pursue some other occupation. Once they stop planting coffee the soil will be less depleted, the jungle will return, the birds will be happy. With fewer coffee farmers the world would be a little more like Paradise.
The Organic Consumers Association has sent “thousands of activists” to “protest and leaflet” outside 800 Starbucks outlets in Canada, New Zealand, Israel, England and the United States. They demanded that Starbucks “brew and seriously promote fair trade coffee in all their cafes.” They claimed that Starbucks uses genetically engineered ingredients. They call the company “Frankenbucks.” They obviously prefer foods that are the genetic result of random mutations.
The Presbyterian Coffee Project is modeled on the Lutheran World Relief Coffee Project which involves over 2,000 Lutheran congregations in Fair Trade promotion. According to a PCP blurb, “participants purchased over 25 tons of fairly traded coffee, making an enormous difference for small coffee farmers.” They don’t say which small farmers, but it must be a select few. Twenty-five tons is only 50,000 pounds of coffee. At the Fair Trade price of $1.26 a pound, that’s only $63,000. If that amount were evenly divided among the world’s 20 million coffee farmers it would only amount to one-fifth of a penny per farmer. So the money must be going to a select few farmers in a few approved collectives. Less than one percent of the coffee sold in the United States is of the certified fair-trade variety. A survey by the National Coffee Association found low public awareness of what fair trade coffee was.
The Fair Trade Fallacy
To the anti-globalization geeks, a cheap cup of joe is a reason for hand wringing. They luxuriate in their romantic perception of themselves as noble defenders of hapless Third World peasants who are being victimized by callous corporate capitalists. It’s all rubbish. For the most part, destitute Latin American coffee farmers are being victimized by impoverished Vietnamese coffee farmers.
Ten years ago, Vietnam began to cultivate coffee for the first time. Since then, it has captured 12 percent of the world coffee market. Vietnamese companies export coffee for as little as $300 per ton. That’s 15 cents per pound. Other coffee-producing nations have accused Vietnam of depressing coffee prices with its abundance of cheap coffee. Vietnamese economists say that Vietnam’s coffee prices will remain low because of huge stockpiles. In the 2001-2002 crop year there was a global over supply of coffee of about 5 million 60-kilogram bags of beans. America accounts for one fifth of the world’s coffee consumption, but American consumption has been declining steadily since 1946. So the supply is up and consumption is declining.
The British charity Oxfam decries the free-market system and is advocating a Coffee Rescue Plan. Their plan includes roaster companies paying farmers higher prices and the destruction of at least 5 million bags of coffee beans. It’s not much of a plan. The roaster companies are not charitable institutions and the destruction of stockpiles is just an incitement to grow more coffee.
The activists have exaggerated the amount of profit the roasters are making. What you pay for a cappuccino at Starbucks mostly pays for milk, sugar, seasonings, the cup you will discard, the rent and utilities for the store and the wages of the guy with the nose ring who brews the stuff. The quality of the coffee you are served may have slipped because some companies have taken to blending better quality Latin American coffee with lower-grade Vietnamese beans.
Fools Playing Monopoly
At one time there was something called the International Coffee Agreement, which was a coffee cartel. The United States had supported this cartel as a Cold War initiative to stabilize Latin America. The cartel was fraught with cheaters who tried to take advantage of the artificially high coffee prices that the cartel structure produced. Brazil was a major offender. The United States ended its support of the cartel in 1989. The coffee activists want to bring it back, which is a bad idea. A new cartel would create higher coffee prices for American consumers, including poor Americans. Why make poor Americans subsidize poor foreigners? The artificially high prices would only encourage the cheating behaviors of the old cartel.
The best hope for Third World economies is to become less dependent on commodities, which have been declining since the 1970s. What the poor of the world need is more liberty, secure property rights, restraints on overbearing and capricious government interference, the rule of reasonable laws and lots of genuinely free enterprise. Where possible, all of this would be tailored to comport with local custom. In those places where ingrained cultural values preclude the introduction of these changes, the population must continue to endure the negative consequences of embracing their traditional culture. What the Third World doesn’t need is a continuing dependence on commodity exports. America could help the Third World by eliminating America’s taxpayer-financed farm subsidies. We could also lift tariffs on foreign farm produce.
The same year that the United States stopped subsidizing the International Coffee Agreement cartel, the Association of Coffee Producing Countries, whose members account for two thirds of the world’s unprocessed coffee, reached an accord on export quotas, using OPEC oil export quotas as a model. Predictably, their clever plan came unglued when poor countries with one-crop economies in Africa and Latin America began cheating their partners. The result was a market glut of coffee and falling coffee prices. Fair Trade agreements that guarantee growers an average of three times the going market price can’t fix this mess; it’s misplaced charity; it’s a feel-good pastime for church volunteers. Subsidizing a bad thing will only produce more of that bad thing.
Imagine for a moment that 20 million people were toiling daily to produce blow-molded pink-flamingo lawn ornaments. Imagine that there was a market glut of pink plastic flamingos. Would church ladies and left-wing lawyers be encouraging us to purchase only hand-crafted pink flamingos produced by approved pink-flamingo cooperatives? Would they try to punish us with stiff fines and prison sentences if we bought cheaper pink flamingos at Wal-Mart? Yes! Of course, they would! They live in a world of fantasy. No adult would not suggest forming a Pink Plastic Flamingo cartel; an adult would suggest that some of these workers seek another line of employment. Making lawn ornaments is not an immutable destiny for Third World people. Neither is growing coffee plants.
The world coffee supply has increased 15% since 1990. Here’s how that happened: The World Bank gave fat loans to Vietnam to establish coffee plantations, which now produce vast amounts of second-rate coffee beans. In Brazil and Columbia, farmers who had been cultivating coca, from which cocaine is refined, were encouraged to switch to coffee production. Charities, such as Oxfam, made matters worse by encouraging coffee farmers to produce even more coffee. In other words, a lot of experts were giving a lot of farmers a lot of really bad advice.
In the face of these worsening conditions, many farm owners were able to earn a decent living, pay good wages and provide benefits to their workers. They did this by employing less wasteful farming methods and better management. Many took advantage of the economies of scale: big plots of land can be farmed more efficiently than small plots. But it is only the smallest plots that the Fair Trade movement encourages. The least wasteful farmers are declared too big to qualify for beatification by the sanctimonious Fair Trade snobs.
The added expense to the consumer for Fair Trade coffee is about two and a half cents per cup, but commercial brewers, such as Peets, Starbucks and Costa will charge you about 10 cents extra per cup. Most of that extra 10 cents goes to the brewer, not the farmer. Is it worth it to you to pay that extra ten cents per cup? Sure it is, if you want to encourage the collapse of Third World economies and don’t mind drinking a lousy cup of joe. The quality of Fair Trade coffee, produced on small, nutrient-poor plots of land, tends to be low. The stuff doesn’t taste so good, which is a big reason these small farmers don’t make much money: no one pays top dollar for junk. In the coffee business the words “organically grown” are a euphemism for nutrient-deprived coffee plants that yield tasteless fruit. If Fair Trade coffee were excellent coffee it would fetch a higher price; it wouldn’t go begging for a subsidy.
By making coffee cultivation just profitable enough, the Fair Trade hairshirts and the World Bank are discouraging poor countries from becoming rich the same way the rich countries got rich: industrialization. It’s high time the latte-sucking snobs of the Fair Trade coffee movement faced up to their deep-seated emotional need to preserve a fantasy notion of Innocent Peasants Toiling in Paradise. Every dime they spend subsidizing one-crop economies in the Third World postpones the moment when these nations take that first step toward creating that wealth-generating economic engine that will sever them forever from the need for foreign charity. For the Berkeley hairshirts it will be Paradise Lost.
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Thomas Clough
Copyright 2003
1/24/03