Neoliberal globalization and the coffee crisis (1990-)
So where exactly does the coffee dollar go? In the developed world, every dollar spent on coffee is divided among the following: coffee growers, coffee traders, coffee processors, coffee roasters, coffee sellers, states and transnational corporations involved in the chain. Yes, thats a long, long chain, which often leads to the key question – how much is the farmer who is growing these beans for us really getting in return for all his toil and handwork? As the popularity of coffee and coffee shops has grown worldwide in recent years, so has another trend – ‘globalization’, which has greatly affected growers and distributors. It is deeply upsetting to see the exploitation of coffee, which was once considered as the wine of the Sufi gods, becoming a mere symbol of the marxist ‘commodity fetishism’ in the past century. When coffee drinkers consume their brew, they must learn to acknowledge and connect with its origin and efforts of the producers. The true price of coffee is often lost within the realms of the deviously doomed supply chain – leaving the farmers with the bare minimum.
As ‘plantation coffee’ emerged 200 years ago, coffee soon became a globalized commodity. Coffee plantations are created by cutting down forests – therefore the spread of plantation coffee led to tropical deforestation – Brazil’s Atlantic Forest (in 1800), and more recently the Ivory Coast deforestation. The wave of monoculture high-yield hybrid coffee plantation (single crop per field), use of agrochemicals to restore fertility and yields, and immense commoditization of coffee in the past has not only led to the alarming climate change and lapse of the precious biodiversity, but in actuality has also divorced us from the real taste of coffee. Today what we taste is not the real terroir (like other specialty products) in our cups, but rather ingest capitalism in a mere capsule. “A politically regulated world market that prevailed from the 1960s through the 1980s was more fair or coffee growers, than is the current globalized market controlled by the corporations”.
Neoliberalism has largely supplanted earlier models of economic development rooted in state regulation of markets and international trade, a project whose origins date to the Bretton Woods conference of 1944 to plan a post war global economy. Bretton Woods endorsed Keynesian policies conferring a primary role for economic management on central governments, upholding controls on international transfers of capital to further national goals of investment and social welfare. As independence movements swept colonized regions of the globe following WW-2, newly installed national governments installed Keynesian measures to regulate their countries involvement in the global economy. Promoting industrialization at home through state-led investment, developing countries also pursued regulation to ensure more stable markets for their exports. The term fair trade first time arose during this time to encompass an agenda amongst the United Nations member states favoring more equitable exchange between the developed and the developing worlds. Arguing that the global South’s reliance on primary product exports placed it at a disadvantage relative to the industrialized North, developing nations in the United Nations Economic Commission on Latin America (ECLA) and UN Commission on Trade and Development (UNCTAD) lobbied for commodity controls ensuring “fairer” prices for primary product exporters of the south. Hence, the fair trade movement in its earliest incarnation was opposed in principle to the deregulation embraced by later neoliberal policies.
The journey of “fair” trade
With the expansion of neoliberalism the need for fairer international trade has become ever more pressing to many people in the postcolonial world. Free-market policies have brought millions of small-scale farmers into competition with industrial agriculture, which enjoys greater productivity because of its technological advantages as well as subsidies in form of tax credits and price supports in the developed countries. Usually unable to compete in the deregulated markets with (much) larger corporate farms, household based farmers either confront the alternatives of plummeting earrings or a withdrawal from commercial farming altogether. National governments throughout the developing world face new pressures to export goods and generate foreign exchange, further glutting the global markets for traditional export of crops and depressing farmers receipts below their costs of production. The abandonment of longstanding multilateral efforts to regulate commodity prices, such as International Coffee Agreement (ICA) and Lomé Convention, has forced producer prices for many commodities to unprecedented lows.
By 1990s, coffee growers experienced the lowest prices in a generation, and the decade witnessed deepening material hardship and even starvation in some coffee-growing regions. Even though, the attendant effects of neoliberal globalization have included massive emigration from rural areas and recourse to dangerous and often exploitative survival activities such as prostitution and production of illegal drugs, many small-scale farmers are unwilling to “go quietly into the dark night”. We have seen many small-scale farmers and cooperative groups around the world are waging a war against the draconian neoliberal measures. It is no coincidence, for example, that the Zapista rebellion in southern Mexico began on the very day that the North American Free mantling of tariffs on cheap US maize, of of NAFTA’s provisions, would decimate Mexico’s small farmers.
“Fair trade is a trading partnership, based on dialogue, transparency, and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South. Fair trade organizations (backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning for changes in rules and practice of conventional trade.” – The Fair Trade Movement: Parameters, Issues, and Future Research. Journal of Business Ethics.
Consumers of fair-trade-certified goods pay substantially higher retail prices for such items as compared to their conventional counterparts, with the difference ranging unto 100% or more depending on product. Such prices are intended to generate greater earnings for family farmers and living. Such prices are intended to generate greater earnings for family farmers and living wages on commercial farms. In addition, a portion of every fair trade purchase is returned to the producer’s organization itself as a “social premium” to be invested in a community project of local design. Fair trade producers are required to satisfy sustainable environment criteria, included restricted pesticide use and practices intended to reduce erosion and maintain watershed. Thus, the contemporary fair trade movement claims to privilege the interests of small-scale producers and the environment over large-scale agribusiness. It does so not through state intervention in commodity and labour markets but by encouraging more ethical consumer choice among the many alternatives made freely available to shoppers by neoliberal globalization.
“At its most basic, the idea behind fair trade is that if consumers pay a little more, the lives of the laborers at the bottom of the supply chain will improve. The movement is most famously associated with coffee — the first batch was sold in a Dutch supermarket in 1988 — but you can now buy fair trade beer, vodka, shoes, guitar straps, smartphones, lampshades, basketballs, chewing gum, boxer shorts, Halloween costumes, spaghetti, and condoms. There are fair trade churches, synagogues, and mosques. You can attend a fair trade university, and you can live in a fair trade town.”
In United States, the marketing of coffee along fair trade lines accelerated in tandem with the Central American solidarity movement in 1980’s. The most prominent of these initiatives, Equal Exchange, developed direct marketing relationships with Nicaraguan coffee cooperatives to offset the Reagan administration’s trade embargo against Sandinista government. North American fair trade groups at their inception focussed mail-order and later online systems of distribution and have only expanded into coffee houses and other retail outlets within the past decade. Supermarket sales remain a small, albeit growing segment of fair trade purchases in United States. In contrast, three European ATOs, TransFair, Max Havelaar, and Fair-trade Mark, were promoting fair trade goods in mainstream supermarkets by 1980’s. Over the following decade, fair trade labelling initiatives proliferated in seven nations of Europe, North America, and Japan, each geared to its respective national national market. In 1977, these organizations sought to coordinate their efforts with the creation of an umbrella group, the Fair Trade Labelling Organizations (FLO), based in Bonn, Germany. FLO is responsible for formulating consistent certification standards for fair trade products among its member organizations creating a unified retail market through labeling and promotion.
In order to receive the benefits of fair trade prices, producers must satisfy an array of criteria by which FLO attests that goods are grown or manufactured under conditions of social equity and environmental sustainability. Certification standards vary according to the commodity and the scale of enterprise that produces it. Small-scale fair trade farmers must belong to democratically run producer’s associations in which participation is open to all eligible growers, regardless of ethnicity, gender, religion, or political affiliation. Alternatively, if fair trade products originate on larger commercial farms, farm owners are requested to abide by the International Labour Organization (ILO) standards affirming the right to association (including union membership), freedom from discrimination, prohibition of child or involuntary labour, and workplace safety. In addition, a host of environmental criteria is applied to the production of fair trade goods, all designed to minimize the impact of farming on watersheds, topsoil, and wildlife. Most fair trade farmers are prohibited from using herbicides and must maintain uncultivated zones adjacent to streams to reduce chemical run-off and soil erosion. Chemical inputs are limited to a narrow range of approved substances and the amounts and frequency of use must be recorded on each farm. These requirements originate by ATO based representatives in developed nations; they are monitored through on-site visits by FLO-Cert (a third party auditing body reputable to FLO) are subject to little or no alteration from farmers seeking certification. In some cases, the standards have been criticized for their apparent arbitrariness and lack of transparency.
Fair Trade: Politicization of consumption patterns?
Today, many advocates and sympathetic scholars have identified fair trade as a means of “alternative globalization”/ “impure altruism”, or a mechanism to establish a parallel trading system. The goal of alternative globalization is to create markets that serve the interests of both producers and consumers by setting minimal social and environmental criteria for internationally traded communities. Ethical labels promote a more stable (and mainstream) form of politicized consumption; an everyday mechanism by which citizen-consumers vote with their shopping dollar to influence the behavior of firms and bring about political and social change, bypassing traditional political channels through which they might address the same issues via government regulation.
Consumers are being offered a growing variety of ways to advance ethical and political causes when they are shopping. They can make purchases that support research on particular diseases, supply clean water for poor communities in developing countries, and promote sustainable management of fisheries and forests. Fair Trade certified products offer consumers a way to help improve livelihoods for poor farmers in the developing world. All these forms of politicized consumption effectively bypass the traditional political mechanisms for addressing issues via government policy and regulation. In this sense they can be seen as part of a larger phenomenon defined as “private politics” – that is, individual and collective action aimed at resolving conflicts arising from the behavior of businesses without reliance upon government. A growing theoretical literature in political economy has sought to address this phenomenon and explain why more firms are voluntarily adopting socially responsible practices, including ethical and environmental standards and certification. Studies have focused specifically on Fair Trade coffee and report that consumers are willing to pay a sizable premium for Fair Trade certification (e.g., Loureiro and Lotade 2005; De Pelsmacker et al. 2005). In a recent study Hertel et al. (2009) found that over 75% of surveyed coffee buyers in the U.S. in 2006 said they would be willing to pay at least 50 cents more per pound for Fair Trade coffee versus non-certified coffee (a premium of roughly 16% over the average price of coffee at the time) and more than half said they would pay a premium of a dollar or more.
Is fair trade really fair? A paradox of justice through markets or a niche marketing tool?
While many fair trade activists view consumption choices as a form of alternative globalization or impure altruism, fair trade’s growing retail prominence and redemptive potential are seen as valuable opportunities by many of the same corporations that initially opposed the movement. Today, the likes of big corporates (such as Nestle, Cadbury, Proctor and Gamble etc) that have known for child slavery and food injustice, are resorting to ‘fair trade’ practices, in order to garner competitive advantage over other brands.
To an extent, Fair trade’s future may resemble earlier commercial exploitation of the civil rights and environment movements: initially opposed by major corporations during the 1960s and 70s, both movements have subsequently seen much of their rhetoric and imagery appropriated for marketing purposes. However, fair trade, unlike civil rights and environmental movements, does not wield a political presence or constituent community apart from retail market, hence the risk related to corporate cooptation are correspondingly greater (11). Instead of promoting social justice, fair trade runs the risk of becoming a niche market catering to relatively affluent consumers seeking commodified morality in their purchases.
In 1999, Starbucks, the largest specialty coffee retailer in the United States, was the target of a boycott campaign by the human rights initiative Global Exchange because of its coffee-buying policies. The campaign drew attention to the huge disparities between Starbucks retail prices (between US$10 and $12 per pound of whole coffee) and rising profit margins, on the one hand, and the declining price it paid Central American growers for their coffee beans (then about $0.30 to $0.50 per pound). Following the year of damage informational campaigns that widened the boycott to Starbucks stores in the United Kingdom and Canada, the company announced that it will stock certified fair trade coffee in all its outlets. The resolution of the boycott left many Fair Trade advocates dissatisfied. Claiming that it lacks access to adequate supplies of fair trade coffee to sell in a brewed form (which makes up most of its retail sales), Starbucks relegates fair trade almost exclusively to sales of whole beans.
Today Starbucks has publicly recrafted its image from being an adversary of fair trade to becoming a supporter of it. In a statement issued in a press release in 2007, Starbucks explains the decision to stock fair trade coffee: “as one of the ways we demonstrate our commitment to small-holds farms, and work to sustain coffee farms. Starbucks and Fair Trade movement share common goals – to ensure that farmers receive equitable price for their coffee”. Despite such claims, seven years after the end of the Global Exchange boycott, fair trade made up only 3.7 percent of Starbucks’s coffee sales, less than Fair Trade’s overall percentage share of the U.S. specialty market.
In my opinion (and of many others), fair trade today can also be seen as a “strategy” of reaping public-relations benefits by incorporating a single fair trade item into a much wider line of products has been seized on by global corporations. Almost like a single straw of good karma in large, large field of demons. Not just Starbucks, but we’ve witnessed the plunge of many large and unjust F&B companies into the grey waters of this so called niche category for corporate benefits. In 2004, Proctor and Gamble, the largest coffee distributor in the Unites States, announced that its specialty Millstone brand would include a certified fair trade selection. Constituting minuscule sales compared to the company’s Folger label, Millstone’s fair trade offering allowed P&G to adopt a mantle of social responsibility without the way it purchases large quantities of its coffee. By 2007, McDonald’s and Dunkin Donuts announced plans to serve fair trade coffee in their stores on the U.S. East Coast, and even Sam’s Club, the warehouse chain of Wal-Mart, had introduced its own brand of fair trade coffee. After fighting against fair trade (and for free market policies) for almost 10 years, In 2005, Nestle abruptly ceased its rhetorical battle with fair trade and introduced its Partners’ Blend freeze-dried coffee into UK supermarkets. Partners’ Blend is identified on its label as “coffee that helps farmers, their communities, and the environment.” Out of more than 8500 products marketed by Nestle, it is the only one to carry FLO fair trade logo. Many critics today feel that to certify a single product without reference to a company’s wider behavior allows corporations with abysmal environmental and labour records to redeem themselves in the eyes of consumers cheaply while leaving most of their other business practices unchanged.
Founder of Dean’s Bean Coffee (and also a recipient of the ‘Nobel Prize of Business’ for promoting fair trade) Dean Cycon’s quote raises some alarming and crucial questions: “Is the goal of fair trade to have every roaster use 5% fair trade coffee, thereby dooming the other 95% of farmers to deepening debt? Or, is the goal to transform the world coffee market to more just system of trade?”
Conclusion and alternatives?
Today the world of coffee has a whole lot of politics and trade methods – all a complex byproduct of each other. On one side while Nestle is adopting fair trade, environmentally and socially conscious roasters (like Dean and many other in U.S.A, Scandinavia and other countries) amongst the developed nations are paying heed to the idea of relationship building (with the small-scale farmers) and going beyond the grey areas of fair trade, by plunging into ‘direct trade’ – which, for most part remains a much ‘fairer’ trade method. While the slowly dilapidating and corrupting fair trade system is constantly opposed by so-called ‘fairer trade’ euphemisms such as ‘specialty coffee’ and ‘direct trade’, the solutions for the larger problem still remain unanswered and unidentified. Having said that, we as consumers need to make every step forward in identifying, purchasing, and brewing nothing but honest coffee to make the coffee world a little better place.
- Grounds for Agreement: The Political Economy of the Coffee Commodity Chain by John M Talbot. PDF Book
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- VICE Magazine. https://news.vice.com/article/fair-trade-free-markets-and-the-bitter-fight-behind-your-morning-cup-of-coffee
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- FLO International Standards. www.fairtrade.net/standards.html
- Standards as a New Form of Social Contract? Sustainability Initiatives in the Coffee Industry. Food Policy pg. 284-301
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- Brewing Justice: Fair Trade Coffee, Sustainability, and Survival. Berkley, University of California Press
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