Absolution in your cup: the real meaning of fair trade coffee.

OAKLAND, CALIFORNIA, 1990: A mundane meeting of coffee cognoscenti dissolves into a spectacular clash of personalities. The Specialty Coffee Association of America (SCAA) represented an undeveloped but rapidly growing industry, a loose collection of young entrepreneurs just learning the gourmet coffee trade. The three-day conference was meant to hash out pretty dry stuff: where to buy raw beans, where to store them, how to ship them--the nuts and bolts of a gourmet industry in its infancy. A day into the meeting, roaster Paul Katzeff burst into the hotel lobby with dozens of fellow protesters, banging drums and shouting about Salvadoran death squads. They underscored the message by pouring a dozen "buckets of blood"--watered-down red paint--on the steps of the Claremont Hotel.

The demonstration was, in the words of one participant, "calculated to produce rage." Another recalls an audience half stupefied, half infuriated. "We just wanted to talk about coffee," he explains.

Katzeff wasn't the only overcaffeinated maverick trying to inject political controversy into the industry, but he was by far the loudest. A strong supporter of the Nicaraguan Sandinistas, Katzeff earned notoriety in 1986 by suing President Ronald Reagan, Vice President George H.W. Bush, and Attorney General Edwin Meese over the embargo on Nicaraguan goods, a policy he considered illegal. He had defied the sanctions by shipping Nicaraguan beans through Canada, carving deep rifts into the turf of the then-new gourmet coffee world. By 1990, he was insisting on an industry-wide boycott on coffee from El Salvador, where landowners stood accused of stoking civil war. He was, says former SCAA chief Dan Cox, a "walking time bomb."

Today it's legal to buy coffee from Nicaragua but illegal to trade with Cuba, so Katzeff sells an "End the Embargo" dark roast with Che Guevara's image on the bag. Katzeff has done as much as anyone to force social concerns into the coffee market; 15 years after he dumped mock blood on the steps of the Claremont, politics and gourmet coffee are inextricable. "I went from being a pariah to being an icon," he told me with characteristic understatement--and to some extent, he's right. Roasters like Katzeff have transformed politics into yet another marketable attribute, pitching a clean conscience alongside a clean flavor. The phrase "Fair Trade coffee" has percolated into the vernacular, and the label it represents pervades the business at every level.

If the movement has shed some of its intensity since those heady days of conference crashing, you can chalk that up to the complacency of success. Fair Trade certification, intended to raise the living standards of coffee farmers in Nicaragua and elsewhere, has grown into a complex bureaucracy and an industry in itself. Starbucks, the longtime Enemy No. I of the FairTrade crusaders, agreed to purchase a limited amount of Fair Trade certified coffee days before a planned protest in 2000. The company bought IO million pounds in 2005. In 2003 Dunkin' Donuts agreed to make all of its espresso drinks certified. Nestle, one of the biggest coffee companies on Earth, launched a FairTrade line in October 2005; the same month, McDonald's agreed to test Fair Trade in 658 outlets. High-end specialty coffees are the fastest growing sector of the industry, and FairTrade is the fastest growing specialty coffee; demand for it has ballooned by around 70 percent annually for the last five years.

You'd think this confluence of social responsibility and double lattes, good business practices and lefty politics, would make Katzeff a happy man. But he and a growing number of roasters say the Fair Trade movement has lost its way. The movement has always aroused suspicion on the right, where free traders object to its price floors and anti-globalization rhetoric. Yet critics from the left are more vocal and more angry by half; they point to unhappy farmers, duped consumers, an entrenched Fair Trade bureaucracy, and a grassroots campaign gone corporate.

Stream of Conscience

The Fair Trade label was born in the Netherlands in 1989 under the brand name Max Havelaar, taken from the tide of a 19th-century novel about oppressed Javanese coffee plantation workers. When the company came to the U.S. a decade later, the American branch billed itself TransFair USA. TransFair's stated goal is simple: to ensure that farmers get a decent price for their beans, and to let consumers know it. By cutting out predatory middlemen and selling a clear conscience at a premium, coffee idealists hoped to achieve humanitarian goals by capitalist means.

TransFair USA certifies Fair Trade products and audits the chain of custody from producer to finished product, verifying that Fair Trade standards are met by everyone along the line. But it relies on the Fairtrade Labeling Organizations International, a global group based on Bonn, Germany, to certify coffee farms. TransFair is one of 20 members of FLO, an umbrella organization that has channeled ideas about social cooperation into pages upon pages of mind-numbing certification standards. The FLO defines a fair farm as a family farm that is a part of a large democratic cooperative. Farms cannot be "structurally dependent on hired labor," which means that hiring even one laborer year-round makes a farm ineligible for certification. Even more controversial is the cooperative requirement. Rather than deal with individual farms, the FLO exclusively certifies large cooperatives composed of hundreds of small land-owning farmers, each with a single vote on how to best spend the Fair Trade profits.

The organization charges between $2,000 and $4,000 to check out a cooperative, plus annual recertification fees and a small percentage of the price of each pound of coffee. The benefits, for those that pass muster, are not insignificant: a guaranteed price floor of $1.26 a pound to Fair Trade retailers--more than double the going rate for beans globally--and a stable price in a famously volatile market.

The Fair Trade apparatus is intended to mitigate a system that seemed especially cruel just as the movement was gaining steam. Until 1989 the price of coffee was relatively stable, held in place by an international agreement that imposed both import and export quotas. That year, as the Cold War ended and stability in producing countries was less of a priority in consuming ones, the pact--known as the International Coffee Agreement--dissolved completely. When supply and demand kicked in, new producers from Vietnam to Papua New Guinea were free to try their hand at the coffee game, drastically redrawing the java map. The resulting glut sent prices spiraling downward. By autumn 1992 coffee cost 50 cents a pound--a level, according to Fair Trade marketer Global Exchange, that's comparable to prices in the 1930s.

Counterintuitively, as prices were plunging for coffee farmers, middle-class Americans were learning to pay double or triple what they once had for a single cup of joe. The major coffee companies--Sara Lee, Kraft, Procter & Gamble, and Nestle--were paying less than they had for years, and the quality of their products, connoisseurs complained, was getting progressively worse. Around the same time, specialty companies such as Green Mountain started buying high-quality beans and pitching coffee as a luxury good rather than a commodity. A "specialty revolution"--the Starbucksification of America, driven by latte-toting yuppies--spawned a massive market for pricey brewed java. By 1998 Starbucks could plan on opening a store a day, and the satirical newspaper The Onion ran a story headlined "New Starbucks Opens in Rest Room of Existing Starbucks."

As they grew in numbers and influence, it was the small, quality-obsessed specialty roasters who absorbed and perpetuated the Fair Trade ethos, thus distancing themselves from the big four, which continued to pay rock-bottom prices for low-quality coffee. Against the backdrop of schizophrenic prices, in the face of a glaring gap between impoverished Third World farmers and affluent First World consumers, Fair Trade advocates sold a vision of socially just consumption. Men like Katzeff began to travel abroad to source beans, and the industry's inequities started to emerge: Farmers were being squeezed by middlemen, known as coyotes, so that even the dismal profits from cheap mass-produced coffee failed to reach them. Growers lacked basic information about what their crop was worth, how to maximize production, and how to market their beans, and it was to the coyotes' advantage to keep it that way. Fair Traders, by contrast, sought a direct relationship between coffee farmers and coffee drinkers: clean, just, transparent transactions.

Fair Trade's pioneers sought the one best way to reform this culture of abuse, and they settled on a bucolic vision of small farms working for the collective good. The system would serve growers who formed cooperatives of small family farms. Such organizations represent only a very narrow swath of the world's 25 million coffee farmers, but as the FairTrade brand has grown, the eligibility requirements have not budged. The result is a marketing machine meant to spread wealth across class divides that in practice draws sharp lines between winners and losers.

Co-Opting Equality

Gregorio Martinez grows coffee on 30 hectares of land in Lepaera, Honduras, where he lives with his wife and four children. In 1998 Hurricane Mitch destroyed his crop, leaving him deep in debt; by 2004 he was set to lose his farm to foreclosure for lack of $800.That same year, he sent a bag of beans to the Princess Hotel in San Pedro Sula, where a U.S. nonprofit was hosting a contest known as Cup of Excellence. Martinez took top honors, attracted attention from buyers, and auctioned off his crop for $19,500. In his acceptance speech, he expressed relief that he would be able to pass his farm on to his family rather than the bank.

Martinez owns a small family farm and produces a high-quality coffee, but none of his beans carry the Fair Trade label. His farm isn't part of a cooperative, a Fair Trade nonnegotiable that disqualifies small, independent farmers, larger family farms, and for that matter any multinational that treats its workers well. "It's like outlawing private enterprise," says former SCAA chair Cox, who now serves as president of a coffee consulting company. "What about a medium-sized family-owned farm that's doing great, treats their employees great? Sorry, they don't qualify." In Africa, many coffee farms are organized along tribal, not democratic lines. They're not eligible either, a problem that has prompted some roasters to charge cultural imperialism.

One can argue, as Katzeff does, that FairTrade spurs disempowered growers to form cooperatives, creating islands of democracy in often autocratic regimes. Others challenge the assumption that encouraging farmers to form cooperatives is an efficient way to leverage the premium consumers are paying for social justice. "Co-ops can be just as corrupt as any organization," says Cox. In a system meant to eliminate middlemen that pitches itself as a direct connection to growers, co-ops add a level of bureaucracy between consumer and producer. Explains Cox: "It's not the farmer who is getting that $1.26.The co-op decides what the farmer is going to get." A corruptly managed co-op, like a coyote, can mask the real price of coffees from individual farmers.

Yet TransFair, roasters say, has based well-funded public relations campaigns on the idea that only FairTrade coffees are traded on a transparent, abuse-free basis. "They drew a very deep line in the sand about this issue," says Mark Inman, president of Taylor Maid Farms, a coffee roaster based in California. "They secured quite a bit of money for a P.R. campaign, and the P.R. campaign came out with: Fair Trade is good, and everything else is bad."

Global Exchange, an international human rights organization and Fair Trade retailer, has adopted this stance in its marketing and politicking. In 2002 it pushed Measure O, a Berkeley ballot initiative that would have legally required that all brewed coffee in the city be certified as FairTrade, organic, and shade-grown. In defense of the measure, the group's Web site declares, "Almost all coffee that isn't Fair-Trade, shade-grown, or organic exploits workers and our environment."

That assumption, absorbed by at least some of the coffee-drinking public, drives roasters and retailers nuts. They say the idea that coffee without the Fair Trade label is based on coercion penalizes independent farmers who don't conform to the Fair Trade vision. (They also say consumers who drink only Fair Trade coffee are missing out on some of the best roasts available.) Nick Cho, owner of Murky Coffee in Arlington, Virginia, says customers often ask whether his coffee is Fair Trade, but quality-conscious coffee shops like his would never deal in coffee bought for less than $1.26 a pound. He finds the very suggestion that he's dealing in cheap beans grating. "You don't walk into a four-star restaurant and demand to know whether they pay their chefs minimum wage," says Cho.

Specialty coffee roasters have always paid above-average prices, but that hasn't stopped activists from launching smear campaigns against high-end retailers who resist the Fair Trade model. In 2000, activist groups including Global Exchange launched an attack on Starbucks that has left the company stained with a reputation for mistreating farmers. Yet given its size, Starbucks likely has done far more than the Fair Trade movement to improve the lot of coffee growers in the 25 countries from which it purchases coffee. Starbucks buys 2.2 percent of the world's coffee production, and its infamous growth fuels demand for high-priced specialty coffees. In 2004 it bought that coffee at an average price of $1.20 a pound, slightly below the $1.26 FairTrade pays but more than twice the average price for beans on the global commodity market.

Among the litany of complaints roasters voice about TransFair, cost is most resented. Roasters and retailers must pay the company to be registered as legitimate purveyors of Fair Trade goods. Organic labels cost about two cents per pound of coffee; TransFair demands ten, and there are controversies about how the money is being spent. "TransFair went on an all-out attack against Starbucks," says Taylor Maid Farms' Inman. "Do I care whether Starbucks participates in Fair Trade? Absolutely not."

Meanwhile, the nonprofit denies that it spends retailers' money attacking corporations. "We don't pursue corporate accounts," says TransFair's Nicole Chettero, "They come to us."

Nearly every major roaster I spoke to was pitching a pet coffee charity, a favorite solution to producer penury. Katzeff has started a series of "cupping labs," training centers where farmers are taught to detect nuance in the taste of the coffees they're growing. There's also Coffee Corps, which sends coffee experts to Rwanda and elsewhere to teach farmers how to jack up the quality of their crop; Coffee Kids, which funds education, health care, training, and microenterprise programs for coffee farmers; Grounds for Health, which screens coffee farmers for cervical cancer. The list goes on. Many see these as more efficient ways to help some farmers without penalizing others. Yet though a few roasters have left, many stay with TransFair because certification, however flawed, sells.

"TransFair has by far the best marketing out there for a seal," explains Inman, who is still a licensee of the organization he criticizes. "I'm a member of TransFair only because my clients insisted," says Cox. "It's not because I did it willingly."

Semiotics in Your Cup

It may have a corporate image in the coffee industry, but Fair Trade still cultivates an aura of grassroots revolution on college campuses, where hundreds of student groups have formed to hold rallies and promote the brand. This past November, Vanderbilt undergraduate Blake Richter and 20 fellow students stood outside a Tennessee Starbucks and handed out free Fair Trade coffee while explaining to passers-by their beef with the company: Only a small percentage of Starbucks' purchases are Fair Trade Certified. The demonstration, he tells me, was a "first step" toward more equitable exchange in the area. If handing out free stuff sounds like a pretty mild protest, consider the result: "A lot of people would come by and say, 'I appreciate what you're saying, but I still need my latte.'" Richter adds, "I think we probably increased Starbucks' business that day."

Richter's experience wouldn't surprise many specialty roasters. Since the early days of Fair Trade, many of them have argued that customer loyalty hinges on quality, not the perception of social justice. Fair Trade consumers, in other words, tend to be dabblers who are happy to pay extra for conscience-soothing coffee today, but will eventually go back to the beans they like best no matter what the social pedigree. That may b e for the best: The specialty revolution, with its $4 lattes and emphasis on growing methods, has probably jacked up prices for farmers far more than the Fair Trade movement has. Starbucks buys more coffee each year than gets Fair Trade certified. When consumers become coffee snobs, prices rise, and some of that increase makes it back to growers.

Roasters talk about the wine market, with its highly differentiated prices and well-defined brands, as a model for coffee growers and consumers alike. To some extent, they're already moving in that direction. Coffee, after all, used to be far coarser stuff, liquid energy for a generation of young executives coming off cocaine. "Be a coffee achiever," David Bowie prodded consumers in a 1983 ad campaign. A cup a day was a conduit for caffeine; it was the fact that you needed coffee, not the brand that you bought, that said something about the person you were.

In the mid-'90s, as Starbucks stores popped up in rapid succession and the image of the overworked exec lost some of its appeal, coffee became associated with epicureans rather than workaholics. The luxury item of a leisure class, coffee was suddenly less speed than valium. "Almost overnight, coffee switched its meaning," comments Scott Hamrah, a semiotics consultant and expert in the field of brand identity. "It became the opposite of what it meant before. First it was this stuff that you drank that allows you to be a machine. Then it became this moment of serene contemplation."

Retailers encouraged the switch by providing space for contemplation. As cafes appeared in urban crannies and suburban strip malls, they were stuffed with couches, books, and artwork. Consumers were encouraged to stay, peruse the paper, and ask for a second espresso. The act of ordering became a self-defining ritual; Starbucks developed a faux Italianate patois that made everyone sound like a sophisticate. "It's amazing to me that these terms have become part of the language," Starbucks' Dawn Pinaud confesses in Mark Pendergrast's coffee history Uncommon Grounds. "A few of us sat in a conference room and just made them up."

This "second wave" paved the way for the rise of the coffee connoisseur. Java cognoscenti, and the marketers who sought them, started talking varietals and altitudes. Most significantly, they spoke of origin. In place of French Roast and Breakfast Blend, coffee joints were stocking Ethiopian, Sumatran, Jamaican. For producers, the interest in origin is a step toward developing a marketable identity, which is crucial to expanding their market. "Everybody knows that in this world of branding, if you are a coffee farmer and you are anonymous, you are in the buyer's market," comments George Howell, a businessman involved with the Cup of Excellence competition.

The range of prices between high- and low-quality coffees is still minuscule compared to what you'll find with a highly branded beverage like wine, but it is growing, and consumers have consistently demonstrated that they're willing to pay more for better beans. The best hope for farmers lies with consumers demanding better coffee, not just from Starbucks but from the supermarket shelf. This may be inevitable; a generation weaned on high-quality lattes is not going to turn to instant Nescafe as it grows more affluent. But there are signs that Fair Trade, with its predilection for uniformity, is retarding, not accelerating, that process.

"FairTrade does not incentivize quality," explains Geoff Watts of Intelligentsia Coffee, who has spent the last nine years training coffee farmers in Africa and Central America. Fair Trade co-ops are composed of hundreds of farmers producing vastly different qualities of coffee. Often their output is blended together for sale to roasters, masking any quality improvements one farmer may have felt motivated to implement. Money then flows back to the co-op, not the individual farmer, and is distributed equally among the members. "There is no reward for the guy who works harder than his neighbor," says Watts. Nor is there much motivation for individual farmers to learn better farming techniques, experiment with new types of coffee, or seek new markets.

The system thus breeds anonymity and mediocrity in a business that desperately needs to focus on branding and identity. Ironically, this mimics the problems brought on by multinationals: Treating coffee as a single commodity, in large undifferentiated lots, prevents any single farmer from excelling and advancing.

Contrast that uniformity with the roasters themselves. Katzeff pitches his End the Embargo beans among a collection of cause-oriented coffees (slogan: "Not Just a Cup, but a Just cup"). In Illinois, conservative "Contra Cafe" hawks beans from former Nicaraguan Contras (slogan: "Wake Up With Freedom Fighters!"). North Carolina's Counter Culture pitches coffee as a "connective force," and Chicago's Intelligentsia Coffee promises gourmet beans "nothing short of profound." It's a dynamic, creative group of entrepreneurs. Farmers doubtless could benefit from a similar plenitude, but Fair Trade is built on a simple dichotomy--fair trade, exploitative exchange, and nothing in between.

The Customer Is Always Righteous

One thing you can say for Fair Trade: Consumers like it. Amid the annoyance of roasters and retailers, FairTrade sales continue to double annually, major corporations continue to adopt the label, and TransFair's harshest critics pay dearly for its seal of approval. Roasters often refer to consumers as "confused," but they--unlike the industry--seem to know exactly what they want.

Katzeff is now among TransFair's critics, but he is also an architect of the social awareness the company sells. The story of the impoverished coffee farmer lifted up by conscientious consumption is a message to which consumers clearly have responded--whether they're going to Starbucks or protesting in front of one. If Fair Trade's methodology has sometimes faltered, its marketing never has.

Coffee is not the only Fair Trade product--there are Fair Trade toys, musical instruments, diamonds, even soccer balls--but it is by far the most successful one. Unlike manufactured products, coffee readily lends itself to a deeply personal, bucolic story of creation and exchange. From planting to picking to roasting to pouring to drinking, there is no step in the process that does not require a human hand. The horror story Katzeff was telling 20 years ago was a simple one for consumers to envision, and the redemptive story TransFair sells--its literature thick with the smiling faces of coffee farmers the world over--invites the consumer to act as protagonist.

"This is seen by many as a direct way by which they can influence the way the world is," explains Lawrence Gould, a London-based consumer markets analyst Fair Trade consumers are buying a story of personal connection, a vision of transparency, and an impression of political influence--not a bad deal for a few extra cents. If the picture of Fair Trade as a poverty panacea is off base, so too is that of the duped, defenseless consumer.

Coffee's long history suggests that its place in any one culture is shifting constantly to meet the needs of the millions who drink it. Today, consumers are driving a market for coffee that transforms the act of drinking into a muted act of rebellion against a centuries-old system of exchange. Yet what is revolutionary about Fair Trade is not the brand's focus on poverty but the suggestion that consumption is a moral response to inequality. "Instead of boycotting the wrong kind of wine or the wrong kind of rice," explains Hamrah, the semiotics consultant, "we can now buy the right kind, the moral kind, and buy more."

Katzeff--compassionate, articulate, and only slightly megalomaniacal--may have been most effective as a salesman pitching righteousness rather than a crusader fighting Central American poverty. The hippie spilling buckets of fake blood may never break bread (or sip coffee) with straight-laced businessmen talking quality, but the consumer has little to lose from a synthesis of strong words and strong lattes. Another Starbucks, a better coffee, a calmer conscience: What caffeine fiend can argue?

"I was a sparkplug," says Katzeff. "I changed an entire industry." He's talking about a revolution in coffee farming, but the transformation he inspired may be more lasting in the minds of coffee consumers in the First World than in the lives of producers in the Third.

Kerry Howley ([e-mail]) is an assistant editor at reason.