Rob's Blog

I’ve recently been getting interested in coffee, and bought myself a grinder, which is pretty much an essential first step in getting the best out of coffee because ground coffee goes stale fast, so it’s highly preferable to grind it right before you brew it.

For beans I went to Has Bean. This is an internet roasting company. They source quality coffee from all over the world, and ship it out to customers the day they roast it. So you get freshly roasted coffee in the post. As far as I know, you can’t get coffee like this in supermarkets. Supermarkets sell whole bean coffee, but it’s bog standard coffee for the masses and it was roasted whenever. Most people think they are getting good coffee but they are buying pre-ground coffee in fancy packaging. It’s not the real deal. The point is it’s a different market: coffee geeks want something a bit special, while your average supermarket shopper is likely to think that splashing out on some slightly more expensive Fairtrade coffee is a good idea.

The man behind Has Bean, Steve Leighton, has other ideas about Fairtrade. He has written an article about why Has Bean do not carry Fairtrade coffees, and a review of the documentary Black Gold, both highly critical of the Fairtrade organisation. His arguments seem to boil down to:

• Fairtrade spend a lot of money on advertising, swanky offices, armies of administrative staff and highly paid executives, which is perfectly acceptable in itself but undermines the idea that Fairtrade is all about helping poor farmers.
• Fairtrade projects the idea that the Fairtrade brand is the only way a farmer can get a good deal: which is not true. They usually get better deals from speciality buyers like Has Bean who pay more for a higher quality product.
• There are no quality checks: Fairtrade coffee charges the buyer a premium for inferior coffee.
• The farmer is not paid enough to be able to invest and increase the quality of his beans, which is not good for him or you.
• Fairtrade does not offer a particularly good price. The retail premium is much greater than the premium that goes to the farmer. The minimum price Fairtrade offer is actually quite low, only enough to subsist on, and much lower than the prices that speciality buyers like Has Bean pay.
• When the market price of coffee goes above the Fairtrade price, farmers can end up tied to the lower Fairtrade price.

This is all interesting because I too have complained about the idea of fair trade. My angle is different: free trade is fair. My bullet points look like this:

• If the price of coffee is too low for people to make a living at it, there is probably a good reason, such as that supply of coffee outstrips demand. There is too much coffee.
• The fair trade movement inflates prices, thereby stimulating extra supply of something which there is already too much of.
• The fair trade movement detracts from the real problem, which is that trade tariffs prevent farmers in poor countries from exporting other crops. They are effectively forced to be coffee farmers even when the coffee price is low.
• Fair trade people are socialists, and only deal with co-operatives, and I have heard anecdotally that family run farms can end up having to join co-operatives to get the fair trade deals they think they need.

On the face of it, Steve and I don’t have much in common. He is a practical guy with the perspective of a speciality coffee roaster; I am a philosophical bloke with a libertarian outlook. But wait a minute. Steve writes:

An issue recently brought to my attention by a member of the trade, is that the commodity markets are the seller’s and buyer’s last resort. Coffees that end up on the commodity market are the surplus of over-production, beans which just aren’t good enough to sell to the speciality market (believe me if they could, they would sell to the speciality market, as this can mean as much as double the price).

So yes, there is too much coffee being produced. That’s why it is a cheap commodity. And Steve’s business is free trade in action. People want good coffee. Has Bean has direct relationships with farmers all over the world. They go out there, talk to the farmers, see how the farm operates and make deals based on the quality of the coffee.

Steve also talks about why it’s not a disaster for people to go out of business, which happens when trade is free:

For instance, in business, if a trader cannot cover costs, then it’s only a matter of time until the bank forecloses and the business is no more. This happens every day all around the world, but we need to look at why this happens. For example, the trader has a product no one will pay the wholesale price for, or, his product is not of a high enough quality to satisfy the market place.

In other words, if you can’t make good enough coffee to get a good price, your time would probably be better spent doing something else. Of course, it would help if you had a wider variety of things to choose from, which is where my criticism of trade tariffs comes in.

The other interesting thing about companies like Has Bean is that they illustrate the power of technology to make people richer: I can buy coffee from an obscure farm in Africa thanks to the power of the Internet. There are hardly any middlemen. Middlemen are always useful, of course, but the Internet removes the need for so many of them, which is a good thing. My middleman roasts the coffee for me. But I suspect the days of ordering green beans direct from farmers are not far away.

So between Has Bean and the internet we have half the solution to the problem of low coffee prices: I can buy non-commodity coffee. The other half of the problem is to get rid of daft injustices like the EU common agricultural policy, so that when coffee farms fail, they can profitably farm something else instead.

By the way, Steve Leighton is highly prolific. Have a look at his blog for more insight into coffee and the coffee market.

It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

So said Adam Smith. And it’s just so self-evidently obvious.

And yet tonight on Question Time, everyone agreed that the absolute worst thing that could happen to the NHS was for private companies could get involved and do things for profit.

People are strange.