s another round of UN meetings concludes, people living in poverty the world over are still counting the cost of the pandemic. While all the talk will inevitably focus on ‘building back better’, the foundation fissures that COVID-19 forced open need new tools, stronger materials, and innovative engineering to fix. If we are serious about doing this, we have to address the lack of viable incomes for billions of people globally.
Poverty is not an accident. It is the outcome of unjust policies, unbalanced markets, disproportionate value distribution, and an overall devaluing of the human condition. It cannot be ‘solved’ with charity alone. The touchstones on which international development rest—philanthropy, input provision, technical assistance, market support—are powerful amplifiers in a functioning system, but they are not the foundation for sustainable livelihoods and dignified lives.
Facilitating this requires economic infrastructure. It means focusing on equitable compensation. Paying a little more for goods and services now will save humanity from paying a much higher price in the months and years ahead and increase the resilience of billions to future disasters.
This is particularly true in agriculture, which represents the primary source of income for the majority of the world’s poorest people. Farmers continue to suffer, with a lack of institutional safeguards. Those responsible for arguably the most essential products on Earth remain trapped in endless, unnecessary poverty cycles. These cycles will not be broken until we address the low prices paid for the highly valuable items that countries like the United States import by the boatload.
In the Northern Triangle, the migration crisis’s epicenter, there is arguably no crop more important than coffee. Guatemala, Honduras, and El Salvador, together with Mexico, produce about 20% of the world’s Arabica coffee and are significant exporters to the United States. In Guatemala, coffee farming is the largest source of rural employment, representing 40% of the country’s agricultural GDP. However, prices below $1 per pound since mid-2017 have resulted in significantly declining exports and left large parts of the agricultural labor force without work and incomes. When looking at coffee market prices against migration trends, the numbers track closely. Based on return figures from the International Organization for Migration in 2018, the highest deportation numbers from the United States and Mexico overwhelmingly originated from coffee producing areas of Guatemala.
But the problem is not the profitability of the coffee chain, rather how value is distributed among the different actors. The U.S. coffee market is worth around $100 billion. That’s more than five times what all the world’s coffee producing countries earn from the crop combined.
After the liberalization of the global coffee market, producers’ share of coffee’s final retail price fell from 20% to around 7%. In real terms, the average market price since 2018 is roughly two-thirds less than it was in the 1980s—equivalent to the 1985 minimum wage of $3.35 reduced to $0.83 today. Household income from coffee has been slashed in half, despite global coffee production nearly doubling over this period, and demand increasing significantly. As a result, millions more families now live in poverty.
Such profound lack of profitability has ramifications, among them food insecurity, lack of education and access to healthcare, as well as gender inequality. Downward pricing pressure has also had severe consequences for millions who depend on coffee for seasonal employment, with workers forced to take severe pay cuts, as farm owners are unable to pay decent wages. This has directly resulted in a growing number of human rights violations, including child and forced labor.
No amount of aid, or the projects and programs it funds, will change this until there is trade and market reform. These billions of essential workers must be able to earn a living income from the very commodities that fuel our American economy. In the case of coffee, less than a quarter-a-cup extra would enable some 12.5 million smallholder farmers to make a living income.
As the world recovers from a truly global crisis, let’s harness consumer interest in putting their dollars where they do good and tackle the root causes of the problem such as extractive procurement policies. Until we can ensure that the people who produce the products we all know and love are properly compensated, poverty levels will continue to go up, making a dignified life and security in the face of a disaster a mere pipedream for billions of people the world over.
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Ending Poverty Starts with Pricing
Antigua, Guatemala. Photo via Pixabay.
October 6, 2021
Solving poverty requires us to tackle root causes rather than rely on charity. In the agriculture sector, where the falling value of coffee has led to inhumane working conditions, we can harness consumer interest to tackle poverty's root causes, writes Heifer International's Pierre Ferrari.
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s another round of UN meetings concludes, people living in poverty the world over are still counting the cost of the pandemic. While all the talk will inevitably focus on ‘building back better’, the foundation fissures that COVID-19 forced open need new tools, stronger materials, and innovative engineering to fix. If we are serious about doing this, we have to address the lack of viable incomes for billions of people globally.
Poverty is not an accident. It is the outcome of unjust policies, unbalanced markets, disproportionate value distribution, and an overall devaluing of the human condition. It cannot be ‘solved’ with charity alone. The touchstones on which international development rest—philanthropy, input provision, technical assistance, market support—are powerful amplifiers in a functioning system, but they are not the foundation for sustainable livelihoods and dignified lives.
Facilitating this requires economic infrastructure. It means focusing on equitable compensation. Paying a little more for goods and services now will save humanity from paying a much higher price in the months and years ahead and increase the resilience of billions to future disasters.
This is particularly true in agriculture, which represents the primary source of income for the majority of the world’s poorest people. Farmers continue to suffer, with a lack of institutional safeguards. Those responsible for arguably the most essential products on Earth remain trapped in endless, unnecessary poverty cycles. These cycles will not be broken until we address the low prices paid for the highly valuable items that countries like the United States import by the boatload.
In the Northern Triangle, the migration crisis’s epicenter, there is arguably no crop more important than coffee. Guatemala, Honduras, and El Salvador, together with Mexico, produce about 20% of the world’s Arabica coffee and are significant exporters to the United States. In Guatemala, coffee farming is the largest source of rural employment, representing 40% of the country’s agricultural GDP. However, prices below $1 per pound since mid-2017 have resulted in significantly declining exports and left large parts of the agricultural labor force without work and incomes. When looking at coffee market prices against migration trends, the numbers track closely. Based on return figures from the International Organization for Migration in 2018, the highest deportation numbers from the United States and Mexico overwhelmingly originated from coffee producing areas of Guatemala.
But the problem is not the profitability of the coffee chain, rather how value is distributed among the different actors. The U.S. coffee market is worth around $100 billion. That’s more than five times what all the world’s coffee producing countries earn from the crop combined.
After the liberalization of the global coffee market, producers’ share of coffee’s final retail price fell from 20% to around 7%. In real terms, the average market price since 2018 is roughly two-thirds less than it was in the 1980s—equivalent to the 1985 minimum wage of $3.35 reduced to $0.83 today. Household income from coffee has been slashed in half, despite global coffee production nearly doubling over this period, and demand increasing significantly. As a result, millions more families now live in poverty.
Such profound lack of profitability has ramifications, among them food insecurity, lack of education and access to healthcare, as well as gender inequality. Downward pricing pressure has also had severe consequences for millions who depend on coffee for seasonal employment, with workers forced to take severe pay cuts, as farm owners are unable to pay decent wages. This has directly resulted in a growing number of human rights violations, including child and forced labor.
No amount of aid, or the projects and programs it funds, will change this until there is trade and market reform. These billions of essential workers must be able to earn a living income from the very commodities that fuel our American economy. In the case of coffee, less than a quarter-a-cup extra would enable some 12.5 million smallholder farmers to make a living income.
As the world recovers from a truly global crisis, let’s harness consumer interest in putting their dollars where they do good and tackle the root causes of the problem such as extractive procurement policies. Until we can ensure that the people who produce the products we all know and love are properly compensated, poverty levels will continue to go up, making a dignified life and security in the face of a disaster a mere pipedream for billions of people the world over.
