The same can be said about the negative ecological impacts of the modernization of coffee production, which was never on the radar of the ICA during the quota years, even while it has emerged as a key issue at the ICO today. With the introduction of the “Green Revolution” in the 1970s, chemical-intensive, monocrop production under full-sun conditions grew substantially, covering 30 to 40 percent of Latin America’s coffee lands by the start of the new millennium. The most efficient coffee economies led the charge, with full-sun cultivation taking over 68 percent of Colombia’s and 40 percent of Costa Rica’s coffee land. The negative ecological impacts have included the destruction of tropical rainforests; declines in the biodiversity of trees, birds, animals, and insects; environmental pollution; and increased soil erosion. The decline of natural predators to coffee pests has left crops increasingly vulnerable to major outbreaks of la broca and coffee leaf rust that can devastate entire national coffee industries. Workers and farmers have been exposed to a variety of chemicals – through direct contact and through the pollution of local groundwater – which have been implicated in certain cancers, birth defects, and other illnesses.16
Conclusion
In the final analysis, the ICA could not address the deep historical and structural roots of inequality and social and ecological injustice in the coffee industry, nor was it intended to do so. From the start, the mission of the ICA was to prop up prices in a manner that benefited the wealthy coffee elite (who had more coffee to sell and more extra income to make) as much as it did smaller farmers and workers. And yet, the ICA was still more socially efficient and “pro-poor” than the free trade regime that has followed. With the end of the ICA, collapsing prices and dramatic price swings brought about two decades of chaos for thousands of poor farmers and workers while the coffee elite continued to survive under intense price competition, and in many instances thrive. With this in mind, the actual, messy history of the ICA offers two very important lessons for anyone concerned about human development in the coffee industry.
First, the ICA provided higher and more stable prices, allowing for better working and living conditions for millions of coffee farmers and workers. While free trade economists have often objected to this, asserting that the ICA prevented necessary diversification into other economic activities, it must be remembered that better employment does not always exist and other commodities face the same global competitive pressures as coffee. Second, the ICA reveals the power of collective action to achieve its stated aims around higher prices. While collective action was ultimately limited and eroded by wider pressures stemming from a highly competitive and uneven capitalist economy, ceding to these pressures in the post-ICA era has only made things worse for the poor and most vulnerable. This raises questions around whether or not more, rather than less, collective action is ultimately required to address the root causes of historically derived inequality and the impacts of cutthroat competition. The history of the ICA suggests that collective action is both possible to attain, under the right political conditions, and more socially efficient than all-out global competition.
CHAPTER FOUR
Coffee unleashed?
The collapse of the ICA ushered in two decades of chaotic price swings and crises for coffee farmers and workers. As described in chapter 3, coffee indicator prices bottomed out in the early 1990s, recovered somewhat in the middle of the decade, then reached their darkest period from 1998 to 2002, during which time prices dropped as low as 45 cents per pound. This sparked layoffs, bankruptcy, declining incomes, and migration, and intensified hunger and poverty for tens of thousands of poor coffee families. It was not until 2007 that coffee prices recovered, spiraling upward until 2011. They then declined again, to around $1 per pound by the end of 2013, only to begin to shift upward in 2014 in response to a major drought in Brazil. Free traders and their opponents have offered dramatically different assessments of these turbulent years. To free traders, market turmoil has been part of necessary processes of adjustment, required to throw off the shackles of market “intervention” and get on the right course toward full-fledged market liberalization. To opponents, the years of instability following the collapse of the ICA and culminating in the coffee crisis are frequently evoked to demonstrate the chaotic impact of state withdrawal from the coffee industry.
The latter view paints a generally accurate picture of the key dynamics underpinning the coffee crisis. The end of collective action among coffee states through the mechanisms of the ICA intensified market volatility and fuelled price speculation. After decades of overproduction, the removal of supply quotas unleashed a flood of beans onto the global market. Oversupply was then exacerbated by a production boom in Brazil combined with the unanticipated growth of traditionally minor coffee exporters, led by Vietnam. Since the early 1980s, coffee production in Vietnam had been gathering steam. When prices for Robusta beans temporarily spiked from 1995 to 1998, Vietnamese coffee farmers eagerly ramped up production, responding to what the World Bank has termed a “uniquely favorable set of developments in the world market for coffee.”1 The favorable conditions were then quashed by Vietnam’s own un-precedented growth, swamping the coffee market with unanticipated supply and triggering a collapse of global prices. In only two decades, Vietnam had climbed from relative coffee obscurity to the world’s second largest exporter, surpassing the export volumes of long-standing second-place leader Colombia. Had the ICA been in place during the 1990s, Vietnam’s rapid entrance would likely have been better managed and its tumultuous impact – for farmers internationally and in Vietnam – significantly dampened.
While much of the coffee crisis can be attributed to a lack of collective state action to properly manage the world coffee economy, however, this should not be confused with a general lack of state involvement in the market. While states were no longer working collectively to buttress prices, they did continue to manage the rules and regulations required for the exchange of coffee in a capitalist world system, and individual states continued to seek to gain advantage over others in the interests of economic statecraft. The end of the ICA was not the end of state regulation, but rather a shift from a degree of collective state action to intensified competitive coffee statecraft. It was, in fact, individual coffee statecraft that played a central role in Vietnam’s coffee boom and its global ramifications. The centrality of the state to Vietnam’s coffee industry was emphasized by a 2004 World Bank report, which stated that the Vietnamese government:
has for decades been an integral part of the coffee sector’s development. Not only have policies and regulations governed the sector, but government has also directly participated in every aspect of the coffee industry. From input and credit markets to production, processing, and marketing, its influence has been all-encompassing. Government is the primary and most influential institution by far, and has created nearly the entire sector’s other institutions.2
Thus while it is true that Vietnam’s rapid entrance into the coffee market played a major role in causing the coffee crisis, its entrance did not occur strictly out of spontaneous market forces of supply and demand. Rather it emerged out of a conscious effort by the Vietnamese state to promote coffee statecraft. Seeking to take advantage of a history of cultivating modest amounts of Robusta beans, which are well suited to the growing conditions of the Central Highlands, and of mounting interest in Robusta among major coffee roasters, who had improved processing technologies allowing them to better blend bitter Robusta beans with Arabicas, the Vietnamese state sank substantial resources into promoting coffee exports. The result was extraordinary export growth for the country, amounting to an annual average of 29 percent from 1981 to 2001. The centrality of the state to this growth serves as a telling case revealing the continued and unavoidable role of statecraft in shaping coffee markets, even in the era officially dominated by “free trade.” This suggests the need to rethink dominant assumptions about the relationship between the coffee market and the state in the era of globalization
.
Colonialism and capitalism in Vietnam
To understand the current role of coffee statecraft in Vietnam, it is necessary to reflect briefly on its historical dimensions, which have significantly impacted the way it has been integrated into the world system. As highlighted in chapter 2, the widespread shift from growing agricultural products primarily for family and local consumption toward growing products predominantly for sale as commodities on global markets does not just emerge spontaneously, but requires the right political and social conditions to bring such a massive reorientation about. In the coffee world, these conditions have historically been created through hundreds of years of colonialism, slavery, and imperialism, leading to the development of an economically integrated world system, in which coffee is one important global commodity among others. True to these global patterns, in Vietnam, the existence of export-oriented coffee farmers did not just appear in response to market forces – millions of peasants deciding of their own volition that they would rather grow coffee for export than continue growing food for their own use – but rather were created through a long historical process managed by states.3
Like that of much of the coffee world, Vietnam’s integration into the world system, initially as a producer of primary commodities, was driven by European colonialism. From 1887 to 1954, Vietnam was colonized by the French Empire, whose primary goal was to extract cheap commodities from Vietnam through the creation of a plantation economy. During the colonial period, the French devoted their efforts to many commodities, including opium, salt, rice, tea, rubber, pepper, and coal. Coffee was also grown on a relatively small scale and was only of minor interest to the French in Vietnam. To produce these products, land was forcibly taken from its original inhabitants and turned into huge plantations that were granted to French settlers and local collaborators. The rural majority were either left landless through this process, forced to work as “free” laborers on plantations under terrible conditions to survive, or were compelled into tenant farming on small plots, under highly unjust terms. The Vietnamese were also subject to forced labor, directed and overseen by the colonial state, which frequently involved a couple of days per month working on French plantations or building colonial infrastructure.
The French were eventually forced out of Vietnam in 1954 after a decade-long war and a national liberation struggle led by the Viet Minh, a coalition of Communist and nationalist groups. As the French pulled out, however, the United States moved in. Fearing the popularity of the Communist party, which was in charge of North Vietnam and likely to win unification elections scheduled for 1956, the United States threw its support behind a relatively unpopular South Vietnamese government, leading to the Vietnam War between North and South from 1954 to 1975. To the United States, an officially Communist and nationalist government in Vietnam posed a threat to its territorial logic (the perceived need to “contain” Communist expansion during the Cold War) and its capital logic (the necessity of promoting private property and expanding the process of global market integration initiated by the French). The war ended in 1975 with the Communists politically victorious and Vietnam united as one independent country. The United States had, however, attained victory in defeat, leaving behind a country devastated by decades of conflict that had claimed millions of lives, destroyed infrastructure, and wrecked the national economy.
Under these conditions, despite its formal devotion to “Communism,” the Vietnamese government soon turned away from efforts to promote collective ownership and toward the transition to a capitalist economy managed by a state elite. Confronted with economic stagnation and hyperinflation in the post-independence years, and blocked by its own authoritarian structure and resistance to open participation and democratic input, the Communist government initially proved ineffective at economic planning, leading to corruption, fraud, and declining political legitimacy. This was made worse by continued and persistent pressure from the United States and its allies through economic statecraft. The United States kept up a trade embargo for two decades and did not normalize relations with Vietnam until 1995. Other Western allies, along with the World Bank and International Monetary Fund, applied constant pressure on Vietnam to liberalize its economy and privatize state assets, offering bilateral and multilateral loans in exchange for commitments to neoliberal reforms and to the pursuit of export-oriented agriculture to earn foreign exchange to meet debt payments. Throughout the 1980s and 1990s, Vietnam’s state elite increasingly warmed to this process, and a capitalist logic became entrenched within state policy. This does not necessarily mean “free trade” – in terms of evenly eliminating protectionist barriers – but rather state policies limiting how and when the state can directly intervene in “economic” matters.4 This requires formally separating the economic from the political realm through the institution of private property.
The Vietnamese state began a gradual transition toward private property rights in 1981, passing a law permitting individual households on cooperative farms to manage their own plots, if they agreed to provide a specified share of their output to the cooperative and submitted to conditions determining the quantity and nature of the crop. Wider reforms were then initiated in 1986 under the banner of “Doi Moi” (“economic renewal”). This included a broad array of changes aimed at a staged dismantling of collectives, the privatization of state assets and institutions, and the gradual liberalization of markets. In the agriculture sector, Doi Moi entailed intensified efforts to encourage small farmers to switch from growing food for local use to export crops. It also involved new initiatives to deepen and expand semi-private property rights. In 1993, the state passed legislation allowing farmland to be designated to individual households for 20 years for annual crops and 50 years for perennial crops, subject to approval by district-level people’s committees. It also allowed the land to be traded, inherited, and used as collateral for loans. This was followed in 1999 by the Enterprise Law, which laid the groundwork for the expansion of the private sector through the intensified privatization of state-owned enterprises (SOEs), which dominated the Vietnamese economy from the 1970s to the 1990s. These processes of privatization, private property development, and further global market integration are ongoing to this day, and form the background for the emergence and growth of the Vietnamese coffee sector.
Building coffee statecraft in Vietnam
Just as the general emergence and development of export-oriented farmers on semi-private land in Vietnam did not appear out of market dynamics on their own, the same is true for the more specific emergence of coffee as the crop of choice for hundreds of thousands of these farmers. The French first introduced Robusta coffee beans to Vietnam in the nineteenth century on a relatively small scale, which was how things remained until the 1970s. At that time, most Vietnamese peasants knew little about coffee cultivation and certainly did not have extensive access to timely information on global market trends. Given this, how did smallholders even weigh the prospects for growing and selling coffee, determining its local processing needs and its marketing and distribution networks? The state took the leadership role in this regard. As Vietnamese policy makers gradually succumbed to a capitalist logic, promoting the expansion of a capitalist economy, they also had to remain attuned to the state’s territorial logic, seeking to ensure that the specific needs of the Vietnamese state were met and its interests were defended in competition with other capitalist states.
The two logics dovetailed with each other as the process leading toward the large-scale adoption of coffee unfolded. If the state was going to promote semi-independent farm household production, what would the new farmers grow? This is no simple question with a clear answer. Viable crops had to be determined to promote rural incomes, and by extension state taxation and revenue. Even as the state turned increasingly toward promoting urban, industrial growth, rural areas still had to be kept stable to dampen protest or rebellion and slow the flow of rural-to-urban migration. By the 1970s, Vietnam had emerged as one
of the world’s largest rice exporters, a position that it still holds today. Economic stability, however, required a degree of diversification and not all regions had land and climate suited to rice production. New export options were also required to meet the needs of the emerging private sector – trading and processing companies needed commodities to trade in, banks needed people to lend to, and domestic industries needed consumers to sell to.
In this context, coffee statecraft emerged as a main goal of the Vietnamese state, centered on the provinces of the Central Highlands, in particular Dak Lak, which had soil and climate conditions well suited for Robusta beans and a history of growing small amounts of coffee. Dak Lak was also strategically significant. During colonial times, it was the location of many large French plantations, and during the Vietnam War it was a main area of conflict, controlled by the US-backed South Vietnamese, who took various measures to compel settlement and increase commodity exports from the region. After the war, the victorious North appropriated the former French plantations and expanded agricultural production through deforestation, creating hundreds of new state farms and cooperatives. Not all the land used for the new farms was taken from colonial oppressors, and the state also unilaterally seized indigenous land, traditionally held in common. Several New Economic Zones (NEZs) were declared in Dak Lak in the 1970s, and the state initiated a major resettlement program that brought hundreds of thousands of new settlers into the region. The resettlement program flooded the region with groups loyal to the government, most of them ethnic Kinh farmers; as a result of the resettlement, within three decades, Dak Lak was transformed from a province with a minority Kinh population to one in which the Kinh were 70 percent. It also provided the state with an escape valve for funneling growing rural populations from relatively poorer and more densely populated areas in the northern and central coastal provinces.
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