Imperialism in the Twenty-First Century. John Smith
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much higher can be estimated by considering that a barista typically obtains 60 shots of espresso per pound bag of coffee, that is, approximately 15¢ per shot. Adding another 15¢ for milk, sugar, and a disposable cup, the $3 retail price represents a 900 percent markup over the cost of its ingredients.73
It is notable that the trend toward ever-higher markups has continued whether the world market price of coffee is rising or falling. The period between 1975 and 1989 was marked by increasing overproduction and falling world prices, despite the operation of the International Coffee Agreement, established in 1962, which attempted to protect both producers and consumers from wild fluctuations in coffee prices through a complex system of quotas and the use of buffer stocks. Driven by ideological opposition to interference in free markets, the coffee-swilling nations torpedoed the agreement in 1989. The 1990 to 1999 period duly saw wild fluctuations in the world market price of coffee, which finished the decade even lower than it started, reaching rock bottom in 2002, 83 percent below its 1980 level. In 2002, coffee exporters earned a total of $5.5bn, to be shared among export companies, governments, and an estimated 125 million coffee farmers and their families. Ignoring the slice taken by exporters and governments, this works out to $44 per person per year, way below the $1.25/day that the World Bank defines as “extreme poverty.” Oxfam reported that “there has never been such a dramatic collapse in the coffee market,” and urged immediate action to mitigate the devastating effects on coffee producers and coffee-producing nations, pleas that were completely ignored.74 During the first decade of the new millennium coffee prices recovered from their historic lows, tripling in value by the decade’s end, yet the markup in the imperialist nations and therefore the contribution of coffee to their GDPs continued to rise. By 2010 coffee had been swept up in the “commodities supercycle,” fueled by increasing demand in China and other new consumers and also by speculative financial flows driven by ultra-low interest rates in the main imperialist economies. Having tripled between 2002 and 2010, in a matter of months the market price of coffee doubled again, reaching a thirty-four-year high in March 2011, only to fall 60 percent by November 2013 as speculators took their profits. An unprecedented drought in Brazil, the world’s biggest producer, provoked an 85 percent rise in the world market price in the first four months of 2014, amid accumulating evidence that capitalism-induced climate change is already wreaking havoc on tropical agriculture and ecosystems. These wild gyrations have terrible consequences for coffee producers, but they create immense opportunities for speculation and profiteering for imperialist coffee monopolies and financial speculators.
The real human cost of the imperialist-dominated global coffee market cannot be grasped by mere statistics, however. The destruction of the International Coffee Agreement in 1989 played a crucial but almost completely unacknowledged role in the creation of the conditions for genocide in Rwanda. This poor African nation relied almost exclusively on coffee for its export earnings. As the world market price of coffee plummeted so did the Rwandan economy, bringing famine, hyperinflation, and government collapse down on the heads of the Rwandan people. When the Rwandan government begged the IMF for emergency assistance, the latter duly responded with a stingy loan and a savage structural adjustment program that only intensified the misery and insecurity of the Rwandan people.75 Isaac Kamola, in the aptly named The Global Coffee Economy and the Production of Genocide in Rwanda, adds that “these economic stresses created the conditions in which state-owned enterprises went bankrupt, health and education services collapsed, child malnutrition surged and malaria cases increased by 21 percent.”76 Michel Chossudovsky, in The Globalization of Poverty, comments that “no sensitivity or concern was expressed [by the IMF] as to the likely political and social repercussions of economic shock therapy applied to a country on the brink of civil war…. The deliberate manipulation of market forces destroyed economic activity and people’s livelihood, fuelled unemployment and created a situation of generalized famine and social despair.”77 Apart from these and a few other exceptions, it is shocking the degree to which the causal role played by the destruction of the International Coffee Agreement and the IMF’s imposition of brutal austerity in Rwanda’s genocide has been ignored, both in the copious Western media coverage of the terrible events of 1994 and in the academic literature generated by it.
Coffee differs from the T-shirt and the iPhone in one important respect: unlike the other members of this profane trinity, coffee does not arrive in the consuming nations as a finished good, already bagged and labeled and ready for sale. Part of the gross value-added captured by coffee retailers within the imperialist countries production therefore corresponds to the roasting and grinding of the dry cherries, and also, in the case of coffee consumed in cafés, the production labor of the barista. Yet this does not change the overall picture. Roasting and grinding coffee beans, in contrast to their cultivation, is not labor-intensive, one reason why the imperialist monopolies that dominate the global coffee economy have not been tempted to outsource this production task. Another reason is to ensure that monopoly power remains concentrated in their hands: the big markups and juiciest profits are in the processing of the raw beans, unlike in the clothing industry, where the big markups are obtained from the retailing of finished garments, or smartphones, where Apple’s fat profits arise from patented technology as well as branding and retailing. Those who cultivate and harvest the coffee receive less than 3 percent of its final retail price.78 In 2009, according to the International Coffee Organization, the roasting, marketing, and sale of coffee added $31bn to the GDP of the nine most important coffee-importing nations, more than twice as much as all coffee-producing nations earned from growing and exporting it—and, as noted above, this does not include the value-added captured by cafés and restaurants.
Just as, according to the economists and accountants, not one cent of Apple’s profits comes from Chinese workers and just as H&M’s bottom line owes nothing to super-exploited Bangladeshi workers, so do all of Starbucks’ and London-based Caffè Nero’s profits appear to arise from their own marketing, branding, and retailing genius, and not a penny can be traced to the impoverished coffee farmers who hand-pick the fresh cherries. In all of our three archetypical global commodities, gross profits, that is, the difference between their cost of production and their retail price, are far in excess of 50 percent, flattering not only Northern firms’ profits but also their nations’ GDP.79
Squeezing wages allows markups to increase. Thus UNCTAD reports that “clothing, footwear, textiles, furniture, miscellaneous manufacturers (which includes toys) and chemicals all experienced import price declines (relative to U.S. consumer prices) over two decades of more than 1 percent per year on average, or 40 percent over the period 1986–2006.”80
THIS CHAPTER’S INVESTIGATION INTO THE SOCIAL relations embodied in three global commodities yields some important paradoxes and anomalies requiring further analysis and a series of distinct dimensions that need to be investigated separately before they can be brought together in a synthesis, a theory of the latest stage of capitalism’s imperialist evolution. Together they shape the book’s overall structure, and can be resolved into seven themes that will be addressed in the following sequence:
1. THE GLOBAL SHIFT OF PRODUCTION TO LOW-WAGE COUNTRIES. The T-shirt, the iPhone, and the cup of coffee are representative examples of the universe of global commodities, i.e., the products of global value chains and globalized production networks. Chapters 2 and 3 turn the telescope around, so to speak, and survey the transformation and global shift of production that these archetypical commodities are representative of. Chapter 2, “Outsourcing, or the Globalization of Production,” analyzes neoliberal globalization’s most important transformation: the globalization of production processes, discovering its antecedents, its proportions, its qualities, its dynamism, and its driving force: the hunger of Northern capitalists for low-wage labor corralled in Southern nations. Chapter 3, “The Two Forms of the Outsourcing Relationship,” continues the study of global outsourcing by analyzing three aspects of particular importance: the differences and similarities between the two forms of the outsourcing relationship—“in-house” and the increasingly favored “arm’s length” relations