The Taste of Many Mountains

by Bruce Wydick

  “Well,” Sofia explained, “what I mean is this: Before globalization, the poor mostly suffered in silence. They plowed their fields with their animals. They had their children. They died young. And nobody outside of their village knew about it, or felt responsible for it.”

  “What’s your point, Sof?” Rich was interested. Indeed, all of them were interested.

  “I think some of the rancor over globalization, in a way, is a cognitive issue. What I mean is, before globalization, that peasant family suffered alone; they owned their own poverty. But now suppose globalization offers a member of that family a chance to earn a slightly higher wage making something for rich people in industrialized countries. Obviously, if he takes the job, the former peasant believes he is better off, otherwise he wouldn’t have preferred the new work over the old work, and the consumer in the rich country is better off because he pays a lower price for his good, since it now costs less to produce.”

  Sofia continued, “But now with globalization, the person in the rich country is indirectly paying the wage of the person in the poor country. He is involved. In a sense he now owns the poor man’s poverty. Now whatever he makes each day comes from the rich man’s wallet. No different for peasants who grow coffee for people in rich countries to drink.

  “Are the poor man and the rich man better off because of globalization? Yes, they’re both a little better off but, at least for now, the poor man is still very poor. And while not quite as poor as he used to be, the gap between the rich man and the poor man is still glaring, and a source of guilt for the rich man. ‘What have I done,’ he says, ‘that I have caused this man to be so poor?’ And of course he must be causing the poor man’s poverty since it is he who is paying him.”

  The group pondered this thought for a few moments.

  Then Gary looked at Sofia. In the pregnant pause Angela could see the question leaving Gary’s mouth well before it did. Like herself, Gary had to know. And somehow in the last few minutes the question itself had appeared to become more important than slaying the bull. “So if the rich man isn’t causing the poor man’s poverty, then what is?” he asked.

  “I don’t think we know the answer to that question yet,” she said. It was time for Sofia to eat her fajita. “But trying to answer it is why I love economics.”

  CHAPTER 18

  Angela

  ANGELA AND SOFIA SAT IN ONE OF THE TATTERED SEATS OF A chicken bus as it lumbered through the rugged western highlands, dropping elevation at nearly every turn, finally merging back on the Pan-American Highway. After weeks of helping Rich and Alex with interviews and gathering coffee production data in San Pedro Necta, one fact had become obvious: almost none of the profit made from some of the best arabica hard bean in the world was accruing to the cultivators of this premium coffee. They had interviewed hundreds of them. Most of these families lived huddled together in a single-room mud hut. Their children were malnourished and taken out of school to work, their families broken up through the economic necessity of migration. Nearly all of them lived in poverty or on the edge of it. Where were the coffee profits going?

  While Rich and Alex continued to collect data from the growers, Angela and Sofia followed the coffee to the next link in the value chain: the headquarters of the fair trade cooperative Café Justicia in Guatemala City. There they would look for clues that might help them to understand where all the coffee profit was going.

  They had learned from José-Ernesto that Café Justicia was one of the larger exporters of fair trade–certified coffee in Guatemala, collecting the coffee from its member cooperatives and selling it all over the globe. The office in the capital marketed the crop that its members harvested.

  The bus arrived in Zone 5 of Guatemala City, a roughly hewn, rundown area, even by Guatemala City standards. Aged concrete buildings with faded paint lined the streets, their facades stained with years of exposure to fumes from diesel-belching buses. Few of the pedestrians on the streets wore the traditional Guatemalan clothing except for a few campesino women who apparently had come into the city to beg with their infant children. Compared with the rural charm of San Pedro Necta, they found the general atmosphere of the city to be dirty, crowded, and stressful.

  Angela and Sofia walked several blocks from the bus station with their backpacks, following the crumbling sidewalks to the co-op headquarters. On top of its scruffy location, the office was not as nice as they expected for such a large operation. A burly security guard cradling a shotgun greeted them at the door and let them in. A young, professional-looking ladina woman at the reception desk regarded the backpacking students with a curious smile. After they explained their business, she invited them to have a seat in the waiting area and a cup of coffee from a pot that was brewing on a nearby table.

  Sofia looked down into the sugar bowl. “Angela, have I shown you the special sugar additive we use in Latin America to fully enhance coffee flavor? Here, look . . .” Sofia mischievously opened the lid to the sugar bowl. Looking down, Angela saw that its contents resembled an ant farm with a rather breathtaking population density. Angela repressed a small scream, and they opted to take their coffee black.

  Worn furniture was scattered throughout the waiting area. Plastic seats of different colors adorned the room. Burlap coffee sacks bearing the names of different Guatemalan harvest sites covered the walls. As Angela peered into the main area of the office, the lone sign of twenty-first-century commerce she noticed was a huge flat-panel computer screen covered with coffee price quotes.

  They had an appointment with Gustavo Morales, the marketing manager for the cooperative. About twenty minutes after their scheduled appointment time, Gustavo came out to the waiting area. He turned for a moment to talk to a secretary, and above his shirt collar the ripples in the back of his husky neck resembled a pack of hot dogs. He was a portly ladino, middle-aged and buzz-cut bald, wearing a tight-fitting suit with a loose tie. As he approached to greet them, Angela noticed that he left his top shirt button open under the necktie to relieve some of the pressure.

  “Don Gustavo, thank you for agreeing to meet with us.” Sofia shook hands with Gustavo, followed by Angela, which gave her hand the feeling of being enveloped by a giant beanbag. Angela quickly glanced at his silver wedding ring, which was easily as big as the ring on a keychain but still appeared to be cutting off circulation.

  He looked at Angela. “Guatemalteca?” he asked.

  “Originalmente. Sí.” Angela smiled. She was becoming more comfortable saying it. He ushered them toward his office. The cacophony of a dozen phones ringing at once filled their ears. The people on the other end of these phones, he explained, were either sellers or buyers negotiating coffee deals.

  Initially Gustavo seemed harried. After sitting down in his leather seat, he began their visit with a quick but obvious glance at his watch. Angela thought that perhaps he was tired of doing interviews with curious students who kept him from answering his phones, and who weren’t buying or selling coffee. Even so, they began to pepper him with questions about his link in the value chain, and the international market for fair trade coffee. He interrupted them several times to answer his phones.

  “Don Gustavo, I don’t mean to be blunt,” said Angela, smiling, “pero que haces todo el dia?” But what do you do all day? Gustavo’s demeanor began to thaw and he seemed to understand the point. They were students who had learned theory after theory about the nature of markets, but genuinely wanted to understand how it all actually worked.

  His face was a smiling potato. “Ladies, I studied business economics at Universidad Rafael Landivar in Guatemala City many years ago. I know how to speak your language. Now that you know this, I must tell you,” he announced almost in a whisper, “I am a real-world incarnation of la mano invisible.”

  “What do you mean?” asked Angela.

  He was happy to fill out his thought. “I am Adam Smith’s invisible hand here in Guatemala. Or at least a little finger of it.” He held up the portly index fing
er on his right hand in front of his eye and wiggled it back and forth for them for visual emphasis. “You know that graph people study in economics, where that supply curve intersects with the demand curve at what we call P?”

  They nodded. “Yes, the first thing every new student in economics learns is that P is the price where supply meets demand in a free market. It’s the price that clears the market, where there is neither excess supply nor excess demand,” replied Angela.

  “Pues . . .” He paused for dramatic effect. “I am P.”

  Angela and Sofia looked at each other, and Sofia decided to run with it. “So, what does it look like to be la mano invisible?”

  Gustavo kept it going. “It doesn’t look like anything, of course. As the invisible hand, I am invisible.” They laughed at his joke.

  “In many ways, actually, it is true. I sit here in my office, hidden from everyone, matching supply with demand. I am both the doula who nurtures my coffee beans to the market and the midwife who consummates the birth of an international coffee transaction. I, along with hundreds, maybe thousands of other people like me, establish the international price of coffee in every second of every hour of every day of every year. There is not a single coffee-growing peasant across the world who is not affected by the international price of coffee set by myself and my colleagues.”

  Gustavo paused momentarily for reflection. “But to put it in more mundane terms . . . I spend nearly all of my day on the phone.” The two women laughed at Gustavo’s self-deprecating charm.

  Not being able to help himself after this mild letdown, he started up again, pointing to one of the half dozen computer monitors in his office. “You see that screen over there? That screen gives me forecasts for weather in Brazil, Colombia, Vietnam, Ethiopia, and other important coffee places around the world. Every time I see that good weather is forecast in Brazil, I sell como loco at the highest price I can right that minute, because you know what? In only a few minutes, maybe less, the world coffee price is going to drop. I have to protect my growers.”

  He continued, “And every day I pray for bad weather in Brazil. Every day I say, dear God, let there be drought in Brazil, or hurricanes, floods, pestilence, mudslides, lightning storms, Exodus-like insect attacks—anything—because you both know very well that when supply goes down, price goes up, and this brings better returns to the growers in my association. I also wish for these calamities in Vietnam, Colombia—everywhere they grow lots of coffee,” he laughed. “Except of course Guatemala.”

  “Well, Gustavo, we have now pinpointed who to blame for global climate change,” said Sofia. “We’ll be sure to notify the authorities as soon as we return home.”

  Gustavo smiled. “Quieren saber la verdad?” Did they want to know the truth?

  They certainly did want to know the truth, especially Angela.

  He moved his head closer to theirs, feigning like he was going to share his deepest secret with them. “The truth is that my prayers are good prayers—for all the growers.”

  “What do you mean?” asked Angela. “How can praying for storms and pestilence and lightning and horrible things across the globe be good for coffee growers?” There was a short silence that Sofia broke.

  “Because it’s a Prisoners’ Dilemma,” she said, revealing the secret before Gustavo did.

  “What?” asked Angela. Gustavo grinned and slowly nodded in agreement with Sofia.

  “Remember the game you were taught in undergraduate economics, or political science, or psychology? I think they teach it everywhere now,” said Sofia.

  Angela remembered. “Yes, the Prisoners’ Dilemma. Two suspects are apprehended after a big theft, but the police don’t have any direct evidence to convict them. So they take them down to the station and put them in separate interrogation rooms. Each is told separately that if he alone confesses to the crime, he’ll get to go free, but the one left who doesn’t confess will get, like, ten years in jail. If they can both keep silent, they can only be charged with trespassing and get a few months in jail, but if they both confess, they get five years. However, each prisoner realizes that no matter what the other one does, it’s better for him to confess. So in the end they both wind up confessing and get five years in jail when they could have had only a few months.” She paused. “So what does this have to do with coffee?”

  It was Gustavo who answered. He looked at them solemnly, revealing the mystery in low tones. “The bad weather keeps the prisoners silent.”

  Angela saw it now. “Yes—it’s the irony of bad coffee weather for producers. Given the lack of sensitivity of consumers to coffee prices, coffee growers would be better off collectively if they would all reduce their supply. But whether the other coffee producers reduce their supply or they don’t, each affects the world price so insignificantly that he wants to market as much coffee as he can. Because they all think this way, there is oversupply, and everyone loses. Individual rationality leads to collective irrationality—just like John Nash demonstrated.”

  Sofia finished up for Angela. “And if there is poor coffee weather around the world, as long as it isn’t concentrated too much in one place, all the producers are better off than if there had been perfect weather and a worldwide bumper crop. It’s like nature’s dark side doing the job of enforcing a cartel for coffee growers.”

  “And the prisoners are better off,” summarized Gustavo.

  “Yes . . . the prisoners . . . are better off,” muttered Angela to herself.

  “But what keeps the prisoners from helping themselves?” asked Angela.

  “This I will tell you, if the two of you agree to have lunch with me.”

  Angela guessed that lunch was probably one of Gustavo’s favorite times of the day. As they walked to the restaurant, he told them, “Ladies, did you know that I grew up poor, the son of a maid? But being poor is no excuse for being poor. Do you understand?”

  They nodded, seeming to go at least halfway with the statement.

  “Being poor is a state of mind. My mother and I were poor, but we never really believed that we would stay that way. We had aspirations,” he said as they walked together. “You can never overestimate the importance of aspirations in how people escape from poverty. And look at me now, a coffee-marketing executive discussing international economics with two bright graduate students from the United States. And the day gets even better—later this afternoon I have a meeting with the international coffee buyer from Dunkin’ Donuts.”

  Angela and Sofia laughed. “Well, at least we understand now where we rank in the larger hierarchy,” said Sofia.

  “I want to get back to the prisoners,” said Angela.

  “To understand why the prisoners—and by this I mean coffee growers—live in poverty, I must tell you something of the history of coffee in our hemisphere. You see, in the 1940s the prisoners realized they were killing each other with overproduction of coffee. They understood the dynamics of their dilemma, and how individual rationality among coffee growers was leading to collective irrationality in overproduction and rock-bottom coffee prices. They knew that they had to do something to reduce the supply of coffee on the market, or the growers around the world would ruin each other with overproduction. So the Inter-American Coffee Agreement established quotas for each coffee exporting country. Some people say the United States allowed the quota system to keep Latin America from going communist. That may be so, and I think there is some truth to this point.”

  “So why are things still so lousy for the growers?” asked Angela.

  “The problem is that the higher the prices from the quota restrictions, the greater the incentive to plant more coffee. So the high prices led to greater prosperity among growers, but also to a lot more coffee planting around the world. Then all of a sudden in the late 1950s, prices fell through the floor.”

  “But why can’t growers just abide by the agreement?” asked Angela.

  “Well, the coffee price crash in the late 1950s led to another attempt to limit s
upply—the International Coffee Agreement of 1962, in which coffee-producing countries through the new International Coffee Organization essentially established a coffee cartel with quotas, not only for export countries, but for import countries as well. The agreement was renegotiated every six or seven years, 1968, 1976, and 1983. Even though there was some price volatility during that time, arabica coffee prices never dropped below $1.20 a pound. It worked pretty well in that sense, but it unraveled in the late 1980s during the Reagan presidency.”

  “Why was that?” Angela asked.

  “Well, as we know, your Reagan was no fan of market interventions, and he stocked his negotiating team for the ICA with a bunch of University of Chicago economists—not a bunch of folks naturally sympathetic to cartel behavior and price manipulation. The United States ended up dropping out of the agreement, and prices began their long march downward pretty much all through the 1990s. Then came some good weather—which remember is bad—and the crisis in 2001. Things got really bad, so bad that the United States even decided to rejoin the ICA in 2005 under a Republican administration. That’s bad, let me tell you.”

  Sofia responded, “So for you, calamitous coffee weather in Brazil and other coffee-growing places is a substitute for the good old days of the supply-side reductions of the ICA?”

  “Sí,” Gustavo replied, grinning, but he began to wax philosophical again. “What man fails to do, let God mercifully do instead.”

  Angela chimed in. “This reminds me of a picture I saw in a magazine one time of some Florida orange growers riding bulldozers over a mountain of their own oranges. This was not a crude way of making marmalade. They were actually destroying part of their crop to keep the price of orange juice high. So you’re saying coffee should do something like this to reduce world supply?”

  “To a degree, nothing could be better for growers. In its place, however, has emerged the fair trade movement. Fair trade guarantees a price of $1.31 per pound to growers. In addition to this there is the ten-cent premium that goes to special development projects in the communities of the growers—schools, roads, water systems, and so forth—and a further fifteen-cent premium if it’s organic.”