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From: The Socialist issue 213, 6 July 2001: Strike Back At School Sell-Offs

Search site for keywords: Coffee - Capitalism - Starbucks - Market - Globalisation

Capitalism's Bitter Coffee

WHAT DO these two people have in common? Howard lives in Seattle, USA, and has just bought himself a $200 million stake in the Seattle Supersonics basketball team. Maria lives in the Eastern Highlands of Guatemala, central America, and has just lost her husband and sons who have gone to Guatemala City in search of work.

Tim Harris

Clearly they are poles apart in terms of lifestyle. But they do have one thing in common. Maria picks the coffee beans that make Howard rich. For Howard is Howard Schultz, chairman of Starbucks, the massive coffee chain which now boasts 4,000 branches (and rapidly rising) around the world.

Millions of small coffee growers in South and Central America, South-East Asia and Africa have watched in desperation as prices for their product have fallen to less than half the figure of two years ago.

According to the charity Oxfam, coffee commodity prices are lower than they have ever been. But coffee can account for up to 75% of some countries' export earnings - the main source of their foreign currency. Consequently, wages paid to those who harvest the 'golden bean' have slumped.

While beans have slumped to 30-50 US cents a pound on the world market, the price of a cup of coffee in a trendy outlet of Starbucks, Costa Coffee or Coffee Republic remains high.

Oxfam calculates that the price of raw coffee exported from producer countries accounts for less than 7% of the eventual cost of coffee to Western consumers. The rest is pocketed by the big corporate traders and speculators.

The bosses' apologia for this global rip-off is that maintaining high prices is a hedge against fluctuating world commodity prices. So much for the 'free market'!

No wonder, then, that first-quarter profits are up 40% for Starbucks, 20% for Nestle. Nestle's coffee profits rose last year to $1 billion, something it attributes to "favourable commodity prices", in other words, screwing the ex-colonial world.

While the best harvest in years, both in terms of quality and volume, is being picked, half the workforce on many coffee plantations have been laid off. Wages for those that remain have been slashed and economic migration has been forced on many desperately trying to escape complete ruin.

GM threat

To add to the plight of smallholder farmers (who grow 70% of all coffee) big companies are keen to introduce genetically modified (GM) coffee beans which ripen at the same time, allowing a shift from labour-intensive to capital intensive production.

According to ActionAid, the GM coffee would be suited to mechanical strip-harvesting on large plantations, making them more productive than small farms (but ecologically more damaging) where berries are hand-picked as they ripen naturally at an uneven rate.

Things have never been good for plantation workers. It has always been the norm for plantation workers to be treated as virtual slaves, with suppression of trade unions, few if any health and safety procedures, for example when the crops are being fumigated, and child labour rife. But now millions feel themselves sinking into an abyss of poverty.

One plantation worker interviewed in Central America told a reporter: "There is no such thing as free trade. We can't make ends meet. Some people are preparing to burn the fields and start growing another crop."

At a time when the United States government is desperately trying to stop the flow of cocaine across its borders from countries such as Colombia, the very madness of capitalism is encouraging the growth of cocaine as a far more profitable alternative to coffee.


THE APOLOGISTS of globalisation, including the UK's New Labour government, talk of its benefits for the people of the ex-colonial world. But what is happening on the coffee plantations represents the reality of globalisation.

The small producers have no say in determining the price of their product. They have to agree to what is offered. There will always be another producer willing to step in if they refuse to sell because they are unhappy with the price.

All the decisions that affect the livelihoods of millions on the plantations of Guatemala, Tanzania and Brazil are taken at meetings in plush offices in Seattle, New York or London.

Jim Stewart, chairman of the $100 million Seattle's Best, likes to claim he is helping the producers.

He boasts that his company sells 'Fair Trade' beans that were bought for more than the market rate. He says: "Globalisation has been great for me. We're doing our part. We've helped them build two schools and a road [in a community in Guatemala] but we're not a church." In other words, he's still in it to make a profit.

Some argue that if production were cut back the problem would be partially solved. With a shortage of coffee reaching the market, coffee roasters would inevitably have to pay more.

Until 1989, an international agreement regulated the volume of coffee exports. Now, it is every country for itself. How long, realistically, would it be possible to hold the line on reduced production? Not very long.

Recently, coffee producers from Colombia, Mexico and central America (members of the Association of Coffee producing Countries) decided to start destroying over one million bags of low-grade coffee to raise prices. A similar scheme was tried last year but failed to sustain higher prices.

It's a case of dog eat dog, with one country after another seizing the opportunity to steal a march on its rivals. And how would the coffee giants respond to having to pay more for their beans? They would pass the increase on to working-class consumers in the West.

Destroying agricultural products because of 'overproduction' shows how crazy this system of capitalism is.

Others have suggested that boycotts of coffee outlets could force the Starbucks and Costa Coffees of the world to give the farmers a better deal. Certainly, a co-ordinated boycott would be a good way of bringing the issue to the attention of more people, and may even force concessions on a short-term basis.

Long-term, however, it would not provide a solution. One youth in Seattle summed up the situation very well. When asked what he thought of sweatshop coffee, he replied: "Everything we buy comes from a sweatshop. This country's economy is based on sweatshops."

And that's the heart of the matter. Just like with every other part of the global economy, until power is taken out of the hands of the multinationals, the terms of trade will always be weighted against the people of the ex-colonial world.

The struggle for fundamental social change requires the linking of movements of the urban and rural workers and small producers in Asia, Africa and Latin America to the working-class in the developed capitalist countries.

The linking of these struggles through an international socialist organisation armed with a socialist programme for jobs, living wages, decent services, land and nationalisation, is the basis for ending the nightmare of capitalism.

In The Socialist Newspaper: Macedonia, Only workers unity can prevent civil war.

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