The Price of Liberalization: Smallholder Coffee Producers in the Era of Globalization

Coffee is the second most traded commodity in the world, and it is one of the leading exports for eighteen sub-Saharan African countries. Seventy percent of coffee is grown by smallholder farmers. As global trade of coffee has grown, have smallholder coffee farmers benefited from increased internationalization of their economies? Liberal economic theory suggests that pressures caused by the internationalization of an economy widely affect preferences, institutions, and policies. This essay examines whether smallholder coffee farmers have wanted or been able to benefit from free trade and whether they support institutions that support greater free trade. Liberal economic theory emphasizes that producers and consumers change preferences as a result of internationalization of economies, so the response of smallholder farmers should be similar in all coffee-exporting countries. This essay finds that the theoretical model requires modifications for fully understanding coffee producers’ preferences. Increases in retail prices were not reflected at the farm gate level. Moreover, the theory does not account for variables such as the International Coffee Agreement, international financial institutions, and fair trade, which influence price signals and opportunity costs.