Vol. 42, No. 3-4 (Fall-Winter 2017)
Of Coffee, Cartels and Communism
Colleen E. Haight
San Jose State University
U.S. concerns regarding the spread of Communism in the Americas in the 1950s and 1960s led to Congressional support of a coffee cartel whereby participating producer countries in the Americas voluntarily restricted coffee exports with the goal of increasing price levels. The intent by coffee producing countries was to stabilize the wide natural swings in the coffee market in order to mitigate the pronounced business cycles inherent in the coffee industry. For the U.S., the main concern was to promote economic stability, reducing the potential for the spread of Communism. The method employed, a voluntary export restraint, ordinarily has the effect of increasing the quality of an exported product. However, in this case, it had the effect of artificially suppressing quality levels of the imported coffee, leading to very low supplies of high quality beans. As fears of Communism disappeared and the cartel dissolved, the increased supply of quality coffee allowed for the tremendous expansion of the specialty coffee industry in the 1990s. This paper seeks to examine the transition in the coffee industry, and attempts to answer more fully why there has been a sudden and dramatic expansion of the specialty coffee market segment, which is so much in evidence today.