Coffee: The Epic of a Commodity

by H. E. Jacob

  We reached Campinas. It was a busy little town, surrounding a central square, known in Portuguese as the “Praça.” All these central squares are children of the Forum of ancient Rome. Pigeons were wheeling round the church, but in Brazil their iris pinions did not contrast with a Mediterranean sky. The birds disappeared beneath a pergola, under whose shelter three vigorous women were doing laundry-work in a stone basin. A couple of vultures lumbered across the marketplace. We were not in the Campagna, where civilization has prevailed for thousands of years, but in South America, subject to the unceasing menace of birds and beasts of prey.

  Hiring a taxi in the square, we drove out through the plantations. The air was sultry-sweet, and the breeze that whistled past the windshield, rustling in the hood, was like the Föhn made odorous by jasmine and orange-blossom. The last building we passed as we left the outskirts of the town was the Botanical Institute, whose creation has been the life-work of an Austrian scientist named Dafert. It is one of the most important experimental stations for the study of sub-tropical agriculture.

  Then, for a long time, there was nothing to be seen but coffee-trees. One forgot that they were trees. So bent and laden were they that they seemed, rather, an endless herd of cattle. We saw few men. They wore white shirts, wide open at the neck, and broad-brimmed straw hats. Their trousers were tucked into high boots.

  “A defence against serpents,” explained Hennig. “Many thousands of Brazilians die every year of snake-bite; it is extremely dangerous to go barefoot in this country!”

  At length we reached the lodge, a roughly built frame-house. When we had left the taxi, two slender half-breeds, wearing clean, white raiment, conducted us by garden-paths to the planter’s villa, a three-storied building. But for certain peculiarities of the colonial style of architecture, one might have thought it one of the fine country houses lying between Nice and Cannes.

  The walls of the building were covered with a purple-flowering Bougainvillaea. Where barely half a century ago the primeval forest had stood intact, the power of money and of labour had charmed into existence a fragment of the Riviera.

  Octaviano Alves de Lima was reclining in a long-chair on the veranda when we were announced. He knew what I had come to ask about, and sprang to his feet exclaiming: “There is no such thing as overproduction! O fantasma da superproducção não existe! Overproduction is a phantom of the imagination! The pundits at the Coffee Institute should read Henry George and learn that the Brazilian crisis is wholly due to protectionism. Free trade would instantly solve the coffee-problem!”

  “Then you don’t think that there is too much coffee?” I asked, in astonishment.

  The white-clad millionaire waved his hand in the negative.

  “O café reclama expansão, exige novos mercados consumidores. Coffee needs expansion, and new markets for its consumption.”

  I objected. “Surely the production of coffee needs to be restricted; at any rate until new coffee-consuming countries have been found.”

  “Per a derrubada da barreira alfandegeria!” exclaimed Octaviano Alves de Lima. “By throwing down tariff barriers! Why do the Russians drink no coffee? Could they not buy millions of sacks from us? There is no over-production; it is tariffs that are the root of the mischief.”

  “Do you want to go to war with Russia?” I inquired. “How are you going to compel the Russians to buy Brazilian coffee?”

  “Easily enough,” answered Octaviano. “The Russians want to export their own produce. Brazil need merely enter into a satisfactory commercial treaty with the Soviet Union. We shall willingly pledge ourselves to take Russian grain, if they will take Brazilian coffee in exchange.”

  “An excellent idea,” said Hennig. “You scratch my back, and I will scratch yours! But it won’t work so far as Russia is concerned.”

  “Why not?” asked the fazendeiro.

  “Because consumption does not depend exclusively upon tariffs and prices. The Russians have their own habits. How can you compel people who have been accustomed to tea for centuries to drink coffee instead? Even if you abolish tariff barriers, you will still have this obstacle in your path. It is much easier to make tea than to make coffee. You put your tea in a teapot and pour boiling water upon it, and there you are. Lots more than that to do before you can make drinkable coffee! No one knows it better than you. Coffee is not for Russian peasants or for Chinese coolies.”

  Octaviano Alves de Lima made no answer. Our host and Hennig lighted cigarettes. A mulatto woman served us with coffee. After a while the fazendeiro ended the silence.

  “All tariff barriers must be broken down,” he repeated obstinately. “Free trade must become worldwide. Immediately. Yes, immediately.”

  That word “immediately” haunted me. I asked Senhor Alves de Lima how he thought free trade in coffee could be inaugurated “immediately.”

  He looked at me in astonishment. Where was the difficulty?

  “If prices were left uncontrolled, if they were to be determined by nothing but the haggling of the market, would they not fall so low that the majority of planters would be compelled to close down?”

  “Of course! So much the better. Thus you would get restricted planting, which is universally regarded as a desideratum.”

  “Then only those who could produce for a market in which knockdown prices prevailed would escape bankruptcy?”

  Alves de Lima smiled.

  “That is the fundamental law of economic life,” he said. “The fittest survive. Anyone whose production is too costly is forced out of the running.”

  I suppressed the obvious retort that capital punishment was a rather harsh measure for producing at too high a cost. O fantasma da super-producçao não existe? Certainly, if only a few survivors were left upon the battlefield, over-production would come to an end. Still, so merciless a “Darwinism” was uncongenial to me.

  “The fittest.” Who are the fittest? Octaviano was a Croesus. Perhaps he was one of the few planters who would have been able to survive the crash; to keep his head above the waters of insolvency until, through ruthlessly reduced production, his coffee would again become marketable at a paying price. But what about the millions who would be slaughtered on the economic battlefield? Was this a solution?

  The tropic night fell swiftly. The orange-coloured sun had dipped below the horizon. We strolled through the garden, our nostrils assailed by sweet scents. Flowers fertilized by night-flying insects were pouring forth their perfume as a nightingale pours forth song.

  Our host’s lovely garden was further beautified by the statues of Italian gods and goddesses. They were watching over a marble reservoir, filled with clear water.

  Beside this reservoir we said farewell. In the quickly gathering darkness, Octaviano, wearing white drill, reminded me somehow of a Roman proconsul. His words had been reasonable enough, but the reasoning was that of an extremely rich man.

  “Of course Octaviano is absolutely wrong,” said Carlos, when we had taken our seats in the train for the journey back from Campinas to São Paulo. The brightness of the starry heavens showed that we were on a lofty plateau. As the train gathered speed, the wind blew chill through the window. “Octaviano is mistaken when he believes that, as soon as the Brazilian government ceased to maintain prices, most of the planters would abandon their plantations.”

  “Still,” I said, “if prices were to fall as they must, the planters could not go on paying wages to their workers.”

  “All the same, very few of the fazendas would be abandoned. A man will stick to his land so long as he has a roof over his head, enough food to keep him from starving, and a little live-stock. Rather than quit his plantation, he would introduce a profit-sharing system.”

  “Profit-sharing?”

  “Certainly. If the Chinese tin barons were able to work with their coolies on a profit-sharing system, the Brazilian coffee barons could do the same. In times of crisis, they could pay a portion of the profits instead of paying straight wages. We must not under
estimate a planter’s love for his land. The smaller the plantation, the greater the affection! The land has been secured at a heavy sacrifice. Will it be lightly forsaken?”

  That seemed to me psychologically sound.

  “Do you think,” I asked, “that the owners of comparatively small plantations would grow rice and other cereals, without allowing their coffee-trees to perish? That they would hold on to coffee in the hope that prices would rise some day?”

  “I am sure of it.”

  I was watching the coloured illuminated advertisements as we passed through the outskirts of São Paulo.

  “There is another respect in which Alves de Lima misunderstands the situation. The advocate of free trade forgets that the Brazilian currency is bolstered up by the price of coffee. When the coffee-crash occurred in São Paulo, it coincided with the general crash in Wall Street. Because the international financiers were in it up to the neck, we could raise no more loans. The price of coffee having fallen too low, the balance of trade was against us. The milreis fell on the foreign exchanges, and we began to export our gold reserves. . . . No, it would be madness to let the price of coffee take its own course, as the freetraders demand. Brazilian exports would steadily diminish, and therewith our currency would be undermined. We must try and discover new forms for the state control of economic life. Only in that way can our country be saved from ruin.”

  25

  Envoy

  NEXT day, Hennig told me how the quemada system had been introduced. Like all cultured Brazilians, he hated the destruction of coffee in bonfires, and knew that it was preposterous. If any had a better plan to suggest, they must bring it before the Coffee Council.

  As yet, however, nothing had been found to replace this detestable method.

  I was tired and distrait. “A god is being burned,” I should have liked to say. “The god and sustainer of most of the Brazilians. Are you burning him because he has become too great? Are you burning him because he has deceived his votaries? Is not this pure mythology?” But I kept my thoughts to myself.

  Our conversation grew transcendental.

  We were strolling hither and thither through the town. Suddenly Hennig broke off with the words: “Where had we got to? I mean, to what point in Brazilian economic history?”

  “We had reached the collapse of the Defesa, in 1929. This is April 1932. Little is known in Europe as to what has happened in the interim. Nothing more than conflicting newspaper reports. It is impossible to form a clear picture from them.”

  “No, there is something better than that available,” said Carlos Hennig. “The London and Cambridge Economic Service has published a memorandum about recent happenings. I will order a copy for you.”

  Next afternoon, the pamphlet was brought to me in the hotel. The author’s name was I. W. F. Rowe.

  From it I learned that when, in 1929, the Defesa collapsed, and there was imminent danger that a huge harvest would be poured into the market, a certain Charles Murray came forward with a proposal to solve the joint problem of “coffee and currency” at one stroke. His scheme was as simple as it was bold. The chief wonder was that no such proposal had ever been mooted before.

  The export value of the coffee-crop, said Murray, was estimated in 1930 at one-third more than it had been in 1929. To maintain the old price would endanger the stability of the currency. “But,” said Charles Murray, “besides that, if we keep the price of coffee at its former level, the whole crop will, once more, be extremely lucrative. This will lead to further plantation, and the situation will grow steadily worse. Now we find that consumption throughout the world is increasing, steadily though slowly. High prices, strangely enough, do not check the growth of consumption; whereas (and that is still more remarkable) low prices do not markedly stimulate consumption. Consumption, therefore, does not play the part attributed to it by free-trade philosophers. But that is a side-issue. Our immediate object must be to find means: first of bringing back the gold-price of coffee to its former level; and, nevertheless, secondly, of avoiding any stimulus to the planters to extend the area of plantation. On the contrary, it is indispensable that they should make so little out of their coffee as to incline them to reduce plantation. Apparently there must be discovered some effective way of diminishing supply, since it is excessive supply which forces down prices. Well and good; but how is all this to be managed?”

  Murray’s plan was that for the following two years every sack of coffee should pay an export tax of one hundred per cent ad valorem. In that case, he calculated, the gold price would, after six months, attain the level of the preceding year, whereas the planters would receive only the present lower price, and would, as a psychological consequence of this, proceed to restrict production. The revenue derived from this export tax would provide the government with funds for the purchase and destruction of the surplus crop. After the glut had been reduced by destruction of surplus coffee and after the production of coffee had been restricted, the export tax could be withdrawn, and the price of coffee be left to adjust itself freely in accordance with liberal principles. This scheme was to run for only two years.

  When it was bruited abroad in Brazil that Charles Murray had suggested such a plan to the Coffee Institute, there was a storm of indignation. Everyone knew that, since the collapse of the Defesa, the Institute had been on the lookout for a new economic scheme—but this one would never do. The planters threatened revolution. To appease them, Whittaker, the new minister for finance, made an agreement with the United States to exchange Brazilian coffee for American wheat, and he was able to buy the harvest at a fairly good price.

  But this expedient was successful for no more than another six months. The fundamental notion of Charles Murray had, at length, to be adopted. The government decided to compel the planters to deliver one-fifth of their total harvest in kind, and this fifth was to be destroyed. The planters raised a cry of fury. Were they to surrender one-fifth of their crops to the government for nothing? And were they, over and above this, to bear the cost of production and transport? No parliament would have approved the plan, and no police force could have carried it into execution. Since, however, something had to be done to prevent coffee becoming valueless, a compromise was reached. Charles Murray’s scheme seemed not so bad after all. In April 1931, a congress from the coffee-growing provinces unanimously accepted the essence of it: the levying of an export duty whose proceeds were to be devoted to the purchase of coffee for destruction.

  “Who, then,” I asked, lifting my eyes from the Cambridge pamphlet, “really paid the expenses of the quemada?”

  “The producer and the consumer have joined forces,” replied Carlos Hennig. “First of all, the exporter pays, since upon every sack that is sent out of the country an export duty of ten shillings sterling is levied. The exporter does what he can to shift this burden upon the shoulders of the planter. The proceeds of the tax are used by the Brazilian government to finance the destruction of surplus coffee.”

  “How many sacks,” I inquired, “does the government propose to destroy?”

  “The Supreme Coffee Council in Rio has pledged itself to destroy within the year twelve million sacks. I believe, however, that this estimate will be exceeded. The coming crop is once more enormous; the planters must export coffee, and for each sack that is exported, ten shillings automatically drop into the treasury. Automatically, therefore, the process of destruction continues.”

  I was dumbfounded as I stared at Carlos Hennig. I found myself repeating the words which the German airman had used three days ago: “The plans of the Coffee Council may be extremely reasonable. All the same, they are preposterous, since they ignore the understanding, the morality, and the sentiment of the plain man.”

  Hennig dropped his eyeglass, and in his turn looked at me with astonishment. He nodded twice, as if in approval, and then restored the eyeglass to its place. For some reason, today, he looked to me extremely old, much older than he had looked the day before in Campinas. His eyebro
ws had worn thin, just as a fine piece of furniture will grow shabby during long years of use. But his countenance was placid, as if he felt glad that it was unlikely he would survive to witness the “regression of the world into simplicity.”

  “What hopeless anarchy!” I thought to myself, as I walked through the streets of São Paulo.

  Yet there was nothing anarchical about the aspect of the town. It was a clean, tidy place, with its white buildings; much cleaner and tidier than most towns I have seen, the towns of southern Europe especially. Tropical cities have to keep themselves clean. Dirt in the tropics gives rise to epidemics. And tropical epidemics entail a very high mortality.

  São Paulo, however, which is a good way south of the equator, on the tropic of Capricorn, does not resemble other tropical towns, at any rate in its central part. Its policemen and taxis, its restaurants and shops, are as spruce as those of a well-to-do town in the temperate zone; and, though the morning sun shone brightly, the atmosphere was pleasantly cool. We were fully three thousand feet above the sea, and at that altitude the tropical heat is tempered.

  For the casual visitor in the business quarter of São Paulo, the errors of the coffee-dictatorship were as invisible as were the flaws of tropical life. The house in the Rua Wenceslau Braz, which since 1906 has been the headquarters of state intervention in the coffee-plantations (though, since the collapse of the Defesa, part of its powers has been surrendered to the Supreme Coffee Council in Rio de Janeiro), looked like an ordinary house of business. Schedules of one sort and another ornamented the walls of the room, and the courteous officials were seated at inoffensive-looking desks. Calendars were also posted up. Some of the employees were ticking away at typewriters. The work was done at an easy pace, as usual among the upper grades of employees in the tropics.