Coffee and Capitalism

This post is actually brought to you by a sponsor! Coffee By Gillespie is a great site for meeting your coffee needs. If you use Coupon Code “madphilosopher”, you can get 10% off, and it sure beats Starbucks.

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For all of my “complaining” about our sorry state of affairs in today’s statist and war-driven global society, I really wouldn’t choose to live in any other time in history. I kinda’ brought this up in my post righting Robert Reich’s horrifying mistakes and propaganda, but it bears repeating. Just today, I rode my personal self-powered chariot to my climate-controlled workplace, pooped indoors, performed ancient and arcane rituals off of printed media while wearing fine silks, ate foods imported from around the world, listened to several academicians and musicians performing for my satisfaction, and now I’m sipping on a beverage that 10th century kings murdered people over (and my version is infinitely better-tasting than theirs could ever hope to be). In just one day, I’ve accomplished nearly everything that King Louis the 14th had in his entire life… and I managed to do it on a shoestring budget.

That’s right, this post is another love-letter to capitalism. But this one, in particular, is brought to you by that most popular of drugs: coffee. Those of you familiar with the Tuttle Twins or Leonard Read will likely recognize what I’m about to say about this most amazing beverage.

As far as I can tell, coffee has the same origin story most of my favorite foods has: some people were hungry and decided to eat something they probably shouldn’t have… and after a few tries, found a way to eat it that didn’t result in a painful and sudden death. In this case, burning the seeds of a certain berry tree and making a tea out of the burned seeds. Between the caffeine in the seeds, the appetite-suppressing qualities of the beverage, and the fact that it tastes better than the nasty water and ales that the people of the time had to drink, it caught on pretty quickly. I can’t blame them.

Of course, unless you lived in Ethiopia at the time, you’d have to buy coffee from merchants who had the foresight to bring something like burned seeds up to Europe or wherever you happened to live at the time. That type of service would take a long time and it was fairly expensive. Ultimately, only the aristocracy had the ability to pony up the cash to buy the beverage, and only those with the social connections to the proper merchants even had access to a supply of these burned seeds. The workers (peasants) were relegated to drinking the fermented sewage which passed as ale at the time and had very little variety in what was available. This wasn’t a failure of capitalism, mind you, it was merely the stage of development Europe was at in it’s long, slow, climb out of the natural state of man (that is to say, abject poverty).

Of course, if someone wants something and someone else has it, a deal can always be struck. In this case, the demand for coffee was realized as quickly as something could be realized with old-school trade caravans. The fact that certain “brands” of coffee were in higher demand than others, as well as the fact that the demand of coffee relative to other commodities, encouraged farmers in areas able to grow coffee to make more and better coffee. Due to the profit margin associated with the supply and demand, people produce more and better coffee and, as it begins to meet the needs of foreign consumers, the price of this precious beverage actually decreases… until, in the 20th century, the phrase “that and a nickel will get you a cup of coffee” became commonplace. If that phrase doesn’t make sense or if you’re too young to remember it, it means that the “that” being referred to is worthless. Oh, and coffee is super cheap.

Of course, the coffee that was typically priced at a nickel was the cheap American swill that companies like Folgers produced. As a matter of fact, when American soldiers were in Europe during the World War, the coffee makers in Europe were astounded when the soldiers would take their delicious Turkish espresso and add a bunch of water and cream to it to essentially ruin the coffee to the point that it resembled the stuff they were used to back home. With the sudden boom in consumer communication technology following the fall of Berlin, the markets became much more efficient, and Europeans began drinking American swill and Americans began drinking espresso.

In my lifetime, this intercommunication of markets and shifting demands has created what I consider to be one of the “seven (consumer) wonders of the market”. The beverage I’m contentedly and lovingly sipping while writing this post is not your granddaddy’s coffee, just like the weed your stoner cousin is smoking isn’t your granddaddy’s weed. The market has produced a wide array of incredibly potent and delicious (mostly) harmless drugs at a reasonably affordable price, due entirely to the price-finding mechanisms and consumer demand. If it weren’t for capitalism, none of us would have tasted coffee, let alone, created the awesome stuff I’m drinking right now.

As anyone familiar with the marketplace will tell you, there’s always certain trade-offs one can (and even must) make when making an exchange. In this case, if you want convenience, you go to Starbucks (or the state-monopolized dispensary if you’re looking for weed) and pay a convenience premium. If you want the good stuff, you have to know the right people, whether it be the hole-in-the-wall coffee shop or that one stoner who sells pot out of the back entrance of a warehouse, which is a little less convenient, but it’s got much better bang for the buck.

After drinking Coffee By Gillespie and taking a look at their website, I’m comfortable claiming that this is a place that you can get both the convenience (and trustworthiness) of a Starbucks and the quality of that hard-to-find word-of-mouth shop without paying a premium. So far, my favorite roast/source is the “Tanzania Mbeya Highlands Peaberry”, but I haven’t tried all of the samples yet. Of course, my favorite type of coffee is the high-altitude, wet-washed, dark roasts, so this is likely to be my favorite of all the samples, anyway. It’s not as dark as some of the other roasts I like, but it’s got a certain sweetness and acidity to it that you can’t get in a darker roast.

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Anyway, now that I’ve got my coffee-snobbishness out of my system, I want to encourage you to support yourself, the economy, the coffea arabica, and this site all at once by going to Coffee By Gillespie and ordering your own bag of ecstasy (the sensation, not the drug) and using coupon code “madphilosopher” at checkout.

Before I let you go, though, I want to just do a quick rundown of the process by which this coffee gets to your door, because it’s a miracle of the market. There’s a guy in Tanzania or Ethiopia, or some other high-altitude tropical region who gets hired to tend some plants and harvest their fruits periodically. The guy paying him has also hired some people to soak the berries in water or lay them out in the sun until the seeds are easily removed. This guy then sells the seeds to a different guy. The guys growing and washing the coffee beans don’t need to know where the seeds are going or why, all they need is to ply their trade and get paid in order to elevate themselves out of poverty.

The guy who buys the seeds hires a crew to roast the seeds. Again, the employees don’t have to know all the intricacies of the market, only that they are getting paid to roast the beans. Then the guy with the roaster sells the beans to a distributor in a first-world country, somewhere. In order to get the beans from the opposite side of the globe, this distributor pays someone else to ship the beans from one side of the planet to the other. Then the distributor distributes the beans either directly to the customer or to a retail outfit. Either way, you then pay the distributor for these irreplaceable beans and consume them.

Looking at that long chain of laborers, and how much money it cost to get it from the dirt in Ethiopia to your stomach, it’s a wonder that it’s only about twenty bucks. Think about the shipping alone! $20 of gas can get my Prizm from one end of the state to the other on a good day… but this giant-ass ship gets your beans across the ocean for far less. It’s like magic! I’ll get into how that can be the case, later. For now, I want to explore even more intricacies. For example, the tools that the coffee farmers use are produced via similar means: from raw materials to finished product, the tool passes through several stages of laborers and exchanges. And the tools used by the roasters, and the shippers, and the distributors. It’s literally impossible, with the current tools at mankind’s’ disposal, to map out every single one of these relationships required to get coffee beans into your stomach and that caffeine into your blood… and that same complexity applies to just about everything else you use and consume, as well.

So, if no one can map out all of these relationships, how can it even happen? Well, that requires us to backtrack through that entire chain I indicated before. You pay a distributor for a particular batch of coffee, whether it be a $7 bucket of Folgers or a $16 package of “Ethiopia Organic Tencho Cooperative” deliciousness (10% off if you use my link and code). This sends a market signal (along with everyone else making these purchases) that there is money to be made in importing these products for less than that price per unit. Someone with enough money to purchase the roasted beans and pay for importation can then make such an investment. Making that investment sends a market signal to the roaster that there is money to be made in buying and roasting the beans for less than the distributor will pay per unit. Again, the roaster and grower see similar signals. At this stage, the grower needs employees. This sends a market signal to employees that there is a certain amount of money to be made for investing the time and work required to grow the beans, which may be a better option than what else is on the employment market.

As before, it’s not just a single channel of communication through the market, either. All the previously mentioned complexity still applies. Either the grower or his employer must purchase tools, which send those signals all they way back to the miners and lumberjacks, for example. This is where entrepreneurs, such as Coffee by Gillespie come in. What an entrepreneur is, at his heart, is someone who sees different resources available on the market and finds a way to mix them together in a new way that provides more value to others than the individual parts would. To (mis)quote Aristotle: “This whole is greater than the sum of its parts.”

All this is only possible, specifically the bag of coffee for $20 despite all of the costs associated with making it and transporting it across the globe, due to economies of scale. It would be impossible to make only one bag of coffee and get it across the globe for less than $2,000, let alone $20. Fortunately, one laborer’s worth of beans produces several hundred bags of coffee and one set of tools can be used by multiple laborers. Ships can carry millions of bags of coffee, and if there isn’t enough coffee to fill the ship, they can fill up the space with other products from other distributors. This profitable sharing of resources is something that’s also too complex to leave up to one central plan or map, it can only happen by individual shipping companies looking at market signals and making the choices that are most profitable for themselves. It just so happens that the efficiency of everyone making such decisions with such information results in all of the amazing products we have at our disposal every day. And the best part is, that guy in Ethiopia whom you’ve never met and never will, would likely have been left to starve to death in the highlands, but has now found employment and a method of survival due to your desire to drink coffee.

I could write and talk all day about all the little details involved in this process, and I sometimes do. I don’t think I’m crazy for that, though, seeing as how Rothabrd and many others have lived their entire lives doing little else than studying and admiring this phenomenon.

Vivat Forum! and Carpe Veritas.

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