Download REFLECTING ON CALLON WITH A CASE OF FAIR TRADE

REFLECTING ON CALLON WITH A CASE
OF FAIR TRADE COFFEE
Julie Whittaker
University of Exeter
University of Exeter
Discussion Papers in Management
Paper number 06/06
ISSN 1472-2939
Correspondence address: School of Business and Economics, University of Exeter, Streatham Court,
Rennes Drive, Exeter EX4 4PU, United Kingdom Tel: +44 (0) 1392 263845, Fax: +44 (0) 1392 263242,
Email: [email protected]
Reflecting on Callon with a case of Fair Trade coffee
Julie Whittaker
Abstract
Michel Callon’s writings on markets offer a new approach for
studying market organisation. In the light of his understanding of
market dynamics Callon has suggested that issues of economic
justice can be re-examined. This paper explores the robustness
and relevance of some of his concepts by applying them to an
analysis of Fair Trade in coffee. Callon’s work gives weight to the
influence of material artefacts in networks, and while this has
relevance for understanding the processes leading to market
development, his explanation of the causes of market change are
limited by an overemphasis on the direct effect of material
factors. This highlights the lack of attention to price determination
in his framework, which proves to be problematic in trying to
analyse just markets, where the rate of exchange is crucial to the
discussion.
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Reflecting on Callon with a case of Fair Trade coffee
Michel Callon, in his recent writings on markets, has argued anew that markets can take
many forms and that society has some choice in how they operate (Callon 1998a,b,
Callon 1999, Callon, Méadel and Rabeharisoa 2002, Callon and Muniesa 2005). Indeed,
the title of his initial book on the subject, The Laws of the Markets (Callon 1998), reflects
his belief that there is no natural market laws, and therefore society can create a diversity
of market processes. In Callon and Muniesa (2005) he suggests that with a new
understanding of the potential diversity of forms, it is relevant to reconsider the ability of
markets to address issues of justice and equity. This is timely in so far as one of the
causes of unease about global market liberalization has been that market values will
dominate moral principles leading to what Baumann (2001:25) has termed the
‘dissipation of responsibility for the distant stranger’. Recent years have witnessed
significant expression of concern about a lack of fairness within international markets,
reflected in the widespread emergence of campaigns for economic justice at the global
level.1 These focus on trading arrangements considered to be biased against the poor
either because of unfair world trade rules or because of the dominance of multinational
companies. Associated with the intensification of public interest in these campaigns, has
been a growth in Fair Trade sales, providing concrete demonstration of significant
interest in markets that appear just. Under Fair Trade arrangements, consumers, typically
in the northern hemisphere, voluntarily purchase products that guarantee a minimum
price for producers that are located mainly in the southern hemisphere. Goodman
(2004:893) has described Fair Trade as the ‘re-linking of production and consumption,
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rising Polanyi-like from the ashes of globalization’. But Fair Trade has been criticised by
economists, for example Lindsey (2004), who has argued that those proclaiming
sympathy for the world’s poor lack understanding of how markets work, and suggests
that Fair Trade measures only exacerbate global poverty. It seems that Fair Trade
highlights some of the keen differences in focus between economic sociologists and
economists, the former being more preoccupied with distributional issues, and the latter
with efficiency criteria. Callon attempts to bridge the divide between sociologists and
economists, by embracing a network approach associated with new economic sociology,
whilst also emphasizing the relevance of economics within the network. Fair Trade
provides an opportunity to reflect upon Callon’s writings on markets, which while rich in
ideas, have some propensity for ambiguity. His view on the relevance of economics
already has been a subject of debate (see for example Miller 2002, 2005, Fine 2003).
Simultaneously, this paper uses Callon’s perspective on markets to try to understand how
Fair Trade initiatives emerged and exist, and to consider whether they are sustainable,
whether they can achieve their long term objectives.
The relevant issues are reflected upon by considering the market for the most widely Fair
Traded commodity, coffee. The paper begins by providing some background to Fair
Trade coffee, and then following, Callon’s approach to the study of markets is reviewed.
Callon argues that markets are inherently unstable as boundaries of markets are
perpetually contested. Reflecting on factors that have caused contestation in the case of
coffee, deliberation is given to what is included within Callon’s definition of overflowing
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effects. At issue is Callon’s presumptions about price determination, and whether concern
for others can be expressed within his framework.
Fair Trade coffee
Fair Trade coffee developed from the impetus of two Dutchmen, who after working on
development projects in Central America for many years, reached the conclusion that
development efforts were wasted without reformation of the coffee market (Pendergrast
2001). Like many agricultural commodities, the world coffee market is characterized by
millions of producers, geographically separated. Under such conditions, prices have been
unstable, and in common with most agricultural commodities there has been long run
price decline. In 1988 the Max Havelaar coffee label2 was introduced in 1988 in the
Netherlands, as the first of many Fair Trade coffee brands launched into conventional
marketing channels with the purpose of improving market arrangements for small coffee
growers. Now there is an internationally agreed certification and labeling system, known
as the Fairtrade Mark that underpins fair trading arrangements for many coffee brands as
well as other products. The creation of this alternative supply chain was original in being
neither an initiative of the commercial sector, nor instigated by governments. Instead the
architecture of the Fair Trade chain was the result of the work of individuals operating in
non-profit organizations, collectively referred to as the Fair Trade movement. A result of
this is that although the designers chose to achieve development objectives via the
market, they appeared to be little influenced by economists’ conceptions of markets,
being primarily motivated to enhance the welfare of the coffee growers. Consequently,
the Fair Trade pricing structure gives emphasis to the needs of producers, providing
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coffee growers with long-term contracts with minimum prices set to cover the costs of
production. Advance partial payments are made to avoid debt, with all transactions
conducted through producer co-operatives. In addition to the minimum price (or market
price if it is larger), a social premium is paid to the growers’ community to provide
opportunities to develop either their co-operative or a community project related to
educational, health or environmental goals.
These pricing arrangements in effect redistribute income within the supply chain. This is
a clear aim of Fair Trade which operates on the presumption that mainstream coffee
companies receive too great a proportion of returns from the retail coffee market. Ponte
(2002) and Gilbert (1998) provide evidence that there has been a decline in the proportion
of income received by producers from the supply chain over time and this has led to the
opinion that liberalisation and deregulation of the coffee market in the early 1990s
encouraged a buyer-led commodity chain (Ponte 2002, Raynolds 2002, Ponte and Gibbon
2005). The sense of injustice to coffee growers, associated with this arrangement,
appeared greatest with the significant slump in coffee bean prices in 2001, when low
bean prices were not translated into lower retail coffee prices, leading to the conclusion
that company profits benefited whilst growers suffered (Oxfam 2002).
Fair Trade schemes3 not only provide price guarantees, they also develop trading
partnerships which are based on principles of dialogue, transparency and respect.
Producer co-operatives are encouraged in order to develop capacity, with coffee growers
becoming part of a business team rather than merely commodity suppliers. The assurance
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of a long-term partnership provides security and the chance for growers to engage in long
term planning with others in the commodity chain as equal partners. Such an approach
not only addresses economic issues but also has a role in restoring dignity. In addition
Fair Trade products are considered to be a means of expressing concern about the current
unfairness of world trade rules. For example, the Fairtrade Foundation (2002) suggests
that buying Fair Trade coffee will ‘signal our support for much wider change in the
economic relationships between rich and poor countries’.4 In effect, Fair Trade coffee is a
product that embodies a set of principles, and it provides a means by which concerns
about economic justice can be materialized and demonstrated through purchases.
Callon on markets
Michel Callon considers that the organisation of markets increasingly is a subject of
public debate. To date, interest in Callon’s writings on markets (Callon 1998a,b,1999)
has focused principally on the performative role of economics in formatting the economy
(see Aspers 2004, MacKenzie and Milo 2003, MacKenzie 2004, Miller 2002, 2005). But
Smelser and Swedberg (2005) identify that Callon makes another contribution to new
economic sociology with his emphasis on the material, the non-human, in network
relations, a relevance derived from his work in actor-network theory (ANT).5 This
appears a constructive contribution given that markets are about humans exchanging
goods, which even when they are services typically have a material component and
furthermore, given anthropological research that suggests that objects have a social life
(Appadurai 1986). Even so, Callon (1999:183) initially considered markets to be a test
for ANT because the latter ‘was developed to analyse situations in which it is difficult to
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separate humans and non-humans…whereas the market is diametrically opposed to this
situation; everything is delimited and roles are perfectly defined’.
However, with
reflection he argues that ANT can contribute to an understanding of markets because it
can explain the emergence of rational calculative actants which enable the delineation
and alienation that is required for exchange.
Callon’s work has affinity with Granovetter (1985) in focusing on networks, and
disputing the duality imposed by analyses that assume the economy and society to be
distinct, with either society conditioning the economy, or the economy conditioning
society. Such positions are problematic because they imply the agent is homo clausus, in
the Eliasian sense (Elias 1994) being either an over-socialised homo sociologicus,
conditioned by conventions and culture, or an under-socialised homo economicus,
constrained by individualistic passions. Instead, Callon and Granovetter perceive the
agent to be homo apertus, part of a network of actors, each of whom is open to influence
and simultaneously influencing others. In effect the network configures ontologies
(Callon 1998, 1999). When asserting that the economy is embedded in social relations,
Granovetter not only accentuated the role of human agency in shaping markets, rather
than being dupes to social conventions, he also refuted the tenet of neo-institutional
economics that institutional arrangements are solely the result of efforts to maximise
efficiency, arguing that they can be designed also to meet social needs. Significantly,
Callon does not give emphasis to this latter point, but stresses the relevance of the
material, in shaping markets. Effectively he not only dismisses the dualism between
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economy and society, but also discards the division between human and non-human
actors.
A key element of Callon’s thesis is that while individuals can be influenced by all kinds
of relations between human and non-human elements within the network, in choosing to
engage in a market, the buyer and seller at the point of transaction, become temporarily
alienated from the network entanglements; they make a rational calculation and
exchange, and in doing so are momentarily disentangled.6 Markets therefore are
distinctive in being calculating collective devices, with material artefacts and established
procedures necessary for constructing calculative agency (Callon and Muniesa 2005) in a
ANT like fashion. For goods to be exchanged they need to be qualified, made comparable
or differentiatable from other goods, and this requires material elements. Callon contends
that economics, rather than being dismissed by sociologists, should be recognised as a
technology which helps to create the tools that establish a market within a network.
Marketing and accountancy practices, for example, have been developed from
economics, and they enable the calculative process. He does not believe that individuals
are born psychologically endowed like homo economicus, but argues that for markets to
exist, homo economicus has to be created, ‘formatted, framed and equipped with
prostheses which help him in his calculations and which are, for the most part, produced
by economics’ (Callon 1998a:51). Provocatively he states that the ‘economy is embedded
not in society but in economics’ (1998a:30). However, in Barry and Slater (2002),
Callon argues that he is not trying to bolster economic arguments, but acknowledge that
economic discourse has a bearing on calculative market practices. He regards economists
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and their texts as only one group of actors that influence markets, that other actors also
have a sway, determining what they want to include within a calculation, and how values
are computed (Callon, Méadel and Rabeharisoa 2002).
Callon’s starting position has appeal because it both recognises that agents operate within
an open system which configures their ontologies, so takes a broad view as to what
influences behaviour, yet also demarcates the market as a unique entity within a network.
Slater (2002: 248) argues that Callon’s ideas help economic sociology to move on from
two ‘impossible alternatives’ that either ‘the market is absolutized as abstraction or it is
dissolved into culture’. Nevertheless, inevitably there are questions still begging. For
example, which aspects of economics are relevant for understanding and designing
calculative agency, and can they be separated easily from a market ideology based on
self-interest and price signals? Specific to this paper, is the question of whether markets
can be established and persist when distributional goals are prominent. The case of Fair
Trade also raises the issue of whether prices set to cover producer costs are sustainable
over time? With regard to Callon’s work, these questions highlight two areas for
examination. The first concerns the range of factors he considers can be included within a
market decision, and the second relates to his understanding of the role of prices.
Taking things into account
Callon recognises that for calculation to be achievable, there have to be limits on the
elements within the network which are actually taken into account. He gainfully
introduces Goffman’s concept of framing (Goffman 1971) to theorise that the arena for
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market operations is but a framed portion of the network (Callon 1998a,b). Within the
social sciences, framing is primarily considered as a cognitive and linguistic device, a
schema which enables the processing of information to generate meaning. Callon,
consistent with the rest of his work, emphasises the material aspects of framing arguing
that investment is required to make relations visible and goods calculable, and ultimately
determine what is taken into account in a decision to exchange. Although not very
distinct within his writings, he identifies two dimensions of framing. First, in (Callon
1998a) he highlights the infrastructure that is required to define the goods as calculable
things, delineating their qualities, a process referred to as objectification. Associated with
the process of objectification is singularisation, which is the means by which consumers
become attached to the objective properties of a product, such that it acquires a calculable
value. However, in his discussion on framing in Callon (1998b) he gives greatest
emphasis to the material aspects of property rights, as factors that frame market
decisions. Certainly property rights are a vital aspect of a calculative market, determining
to whom the results of calculation can be attributed (Callon 1998a). They define legal
entitlements, and provide necessary bedrock for market exchange. Nonetheless, as argued
below, this does not preclude individuals from bringing other factors into the frame of
their transaction decisions. Callon tends to overstate the relevance property rights, insofar
as he neglects of other relevant factors that may be taken into account within a market
setting. Consequently he can appear to set limits on the new universe of potential forms
of market organisation that he claims his explanation of markets heralds.
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Critical to a construal of Callon’s position is the interpretation of his idiom, overflows.
Callon argues that although framing is a requirement for market exchange, any frame is
permeable, it can never encompass all market impacts because of the complex
interconnectedness within a network. Life in the network beyond the frame ultimately has
an influence. The result is that market exchange inevitably leads to effects that overflow
beyond the boundaries into other parts of the network. Since overflows are typical,
market frames are always open to contestation. Therefore market instability is the norm,
as actors seek to reframe the market boundaries to accommodate the overflow effects.
However, Callon seems to constrain the factors that can cause reframing by aligning his
term of overflowing effects with the economists’ term of externalities (Callon 1998a,b).
This is limiting as externalities have a precise meaning within economic theory. They are
the impacts of economic activity on a third party which are not taken into account by the
economic decision maker, and are not reflected in their prices. Such impacts can be either
positive (in which case no impetus for change) or negative. As suggested by Callon,
pollution problems provide many illustrations of negative externalities. For example, if a
chemical company disposes of waste material into a river without regard for the impact
on the quality of river water extracted by a brewery downstream, it will affect brewery
costs and profits. Alternatively, an externality may affect the well-being of individuals,
e.g. nitrous oxides emitted from cars causing respiratory problems. The crucial aspect
about externalities is that there is a direct non-monetary effect on a third party’s welfare,
resulting from a lack of clearly defined property rights. In the examples given the
externalities occurred because it was not defined in law who had rights to use the river
and the atmosphere. Clearly, when there is public objection to the pollution, the
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government can intervene, property rights can be redefined, and the market, in Callon’s
terms can be reframed. While externalities fit neatly with Callon’s standpoint because
they entail a material impact, a problem is that the factors that lead to market
reorganisation are not solely externalities; they frequently revolve around distributional
issues. These are not covered within the externality definition, which as Callon rightly
notes is centred on efficiency concerns (1998b:247). To elaborate the point, consider a
supermarket that achieves new economies of scale, so lowering its costs and leading to
lower shop shelf prices. The detrimental effect on the profitability of small high street
shops is not an externality, as the impact is pecuniary, it is reflected in the market and it is
not a material effect.7 Therefore, an implication of Callon’s association of overflows with
externalities is that distributional effects are never a reason for market reframing. If
Callon is aiming to be prescriptive here, then he seems to align himself with the
economists as this is clearly in line with much of their advice that improving efficiency
should be the only objective of policy. If instead, Callon’s intention is to be descriptive,
then he is factually wrong, as the historical reality is of frequent attempts to reorganise
market operations for distributional reasons, as the case of coffee illustrates.
Coffee market instability
Coffee is a valuable cash crop for around 25 million smallholders, who need to earn a
living from small patches of land. Furthermore, for the low-income countries where
coffee is grown, it is often a critical source of foreign exchange, sometimes accounting
for over 50% of total export earnings. There is long history of price variation and price
decline for coffee and because of the dependency of both poor farmers and whole
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economies on this cash crop, the question of how the coffee market might be organised to
ameliorate the distributional effects of price instability and decline, has been a subject of
contestation for decades. A major attempt at market reframing to stabilize prices was an
inter-governmental effort in the early 1960s. This was because during the Cold War there
was a fear in western economies that price instability in coffee dependent economies
would lead them to Communism. As a result the International Coffee Organisation (ICO)
was founded and a market system heavily dependent on government intervention, in the
form of a quota system, introduced (Ponte 2002). However, after nearly four decades this
form of market organisation collapsed, because it proved costly, the political threat
removed, and market liberalization was the zeitgeist. Producer countries were advised by
international agencies such as the World Bank and the IMF, to dismantle marketing
boards and reduce government influence on commodity prices, leading to greater price
instability once again. It was the perceived negative impact of this on small vulnerable
coffee growers which gave impetus to the to development of the Fair Trade movement
(FTM), to bring into being a new type of supply chain, and campaign for more
widespread change.
The story of the coffee market since the early 1960s demonstrates how the limitations of
one form of market organisation gave birth to another; from free market to ICO quotas,
back to free market, and then for some producers, to Fair Trade. Callon’s terminology of
overflowing effects leading to market reframing would seem to have relevance for
expressing such developments. However, since neither price instability nor political
change, nor concern for the less economically fortunate, can be defined as externality
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effects, to apply the expression of overflowing, it is necessary to clarify that its definition
extends beyond externalities, to include any spillover effects from market activities that
are perceived to have a detrimental impact.8 This may be Callon’s intention, given his
claim that the notion of externality denotes ‘all the connections, relations and effects
which agents do not take into account in their calculations’ (Callon1998a:16). This
description is an incorrect economic definition of an externality, but is broad enough to
include distributional issues. Clarification of Callon’s position is required by seeking for
evidence elsewhere in his writings that might indicate that issues of justice can lead to
market change. A leading question is, whether Callon’s framework allows for interests
other than the self to be included in market decisions.
Calculating for whom?
Although Callon recognises that the relationship between two transacting partners can
have relevance in an exchange, but his focus is on the social connections that ease
economic transactions, rather than human relations that motivate duty or altruism. For
example, when there is market uncertainty he appreciates that it can make sense to take
account of whom you are trading with, and it can be an advantage to establish long-term
trusting trading relationships (Callon 1998a). However, what is at issue with regard to
Fair Trade, is whether Callon’s framework can encompass market arrangements that
privilege an individual or group on the grounds of compassion and altruism. There
appears to be some haziness within Callon’s writings on whether he assumes that human
actors always act out of self-interest, when operating in the market. The fact that Callon’s
agents live within an evolving network confers a broad view of what influences
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behaviour, that an individual’s preferences are not static, and that unlike homo
economicus are not derived from an innate self, unswayed by the world around. They are
open to influences from all parts of the network. Nevertheless, by stating that the tools
derived from economics are an important influence on the network, indeed that homo
economicus can be created in the market, and that the economy is embedded in
economics, there is an implication in Callon’s work that within the market setting at least,
self interest is the expected pattern of behaviour. But then his position is tempered by
comments that other members of society can decide what to calculate and how. In a
certain respect, this can be viewed as no different from the neo-classical economic
position which does effectively allow for any preferences to be expressed (see
Hargreaves-Heap 2001 for an interesting discussion). Although the term calculating has
Machiavellian overtones, concern for others can be included within a calculation. A
consumer can be inclined towards ethical purchases, goods which are not bought solely
for the pleasure of individual consumption but also for the beneficial effects it brings to
other agents. For example, a consumer may be motivated to purchase solar panels for her
property because she wants to make a contribution to limiting carbon emissions, to
reduce climate change risks to future generations. Some economists consider this to result
in a warm glow effect that contributes to utility, and therefore there can be an element of
satisfaction from this action to the purchaser. Curiously though, Callon (2005) suggests
that an individual will buy environmentally friendly products only if the relevant aspects
of the environment are considered within the market frame. Given the emphasis he gives
to market reframing as involving the internalization of externalities, this is a precarious
statement because it insinuates that there are no voluntary purchases of environmentally
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friendly products, and thereby that the only social obligation in market exchange is to act
within the law of property rights. However, before presuming that Callon’s framework
does not allow for such purchases, it is relevant to recall that his concept of market
framing, although stressing the delineation of property rights, does include also product
definition, and this could embrace the ethical credentials of a product. Therefore, in spite
of ambiguity caused by the overemphasis on reframings associated with externality type
ethical purchases, even though this is not entirely obvious from all his work.
Fair Trade goods are comparable to environmentally friendly products in so far as
consumers voluntarily purchase them, it is merely that concern for other humans rather
than concern for the environment is objectified and incorporated within calculations.
However, there is also difference. The raison d’être of Fair Trade is not directly related to
the physicality of the product (although as Fair Trade has evolved more attention has
been given to product quality). Instead, the main focus of Fair Trade is the rate of
exchange. Therefore, whereas the voluntary purchase of environmental goods is
compatible with a free market, within current Fair Trade schemes, there is an element of
price fixing. Although the final product on shop shelves can be sold at whatever price the
retailer chooses, a minimum price is guaranteed for the producers of the raw product, in
this case coffee beans. This is anathema to liberal minded economists, unsupportive of
pricing arrangements based on distributional criterion, but sociologists may view such
price agreements as merely a continuation of the history of market operations based on
social conventions. To consider whether Callon’s insights can help to bridge the gap
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between understandings of economists and sociologists, requires reflecting on Callon’s
understanding on pricing arrangements.
Price determination
Callon views price agreement as being a peaceful means of resolving conflict between
opposing buyers and sellers (Callon 1998a:3). Price resolution is aided by a range of
collective calculative devices (see for a full discussion), amongst them accounting
practices and pricing tools, which help to attain a monetary expression of the value
(derived from entanglement) which enables the disentanglement required for exchange
(Callon 1998a, Callon and Muniesa 2005). For Callon, calculation does not solely
involve quantitative procedures, but also judgment areas of where there is uncertainty.
Therefore, his definition of calculation is a form of reckoning involving both quantitative
and qualitative data that might be paraphrased as ‘weighing things up’.
Another dimension of price determination is the process through which buyers place bids,
and sellers respond. Callon and Muniesa (2005) argue that various systems can be applied
in exchange encounters, and different ‘algorithmic configurations’ can lead to different
final prices. For example, the price achieved through a Dutch auction, may be differ from
one achieved through open bidding. Callon and Muniesa stress the role of material
devices in price determination, referring in particular to automated systems on stock
exchanges, but consistent with a network approach, they acknowledge that buyer/seller
relationships can have a bearing as well. An outcome of this is that at a given point in
time and space, a commodity can be sold at different prices to different buyers. Drawing
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on research by Kirman (2001), they cite the Marseilles fish market as an example, where
the same species of fish are sold at different prices to loyal and disloyal customers.
Nonetheless, at the aggregate level, when quantities sold are reduced, then the average
price rises; the law of demand holds. The conclusion reached by Kirman (see also Härdle
and Kirman (1995)) is that observations made at the aggregate level should not be used to
make deductions of what happens at the micro level. At the aggregate level it might
appear that sales and purchases are totally price dependent, but analysis at the micro level
indicates that interactions are not solely price based. The reason given for this is that
individuals have imperfect information on overall levels of supply and demand.
Therefore buyers and sellers can gain from implicit contracts which guarantee sales and
purchases, even if price to one party might seem disadvantageous compared to the
average market price. In effect, the agents involved in the partnership have weighed up
the benefits of repeated exchange.9 The existence of implicit contracts leads Kirman (an
economist) to the conclusion that markets are much less predictive than might be
presumed in some economic forecasts. However Callon seems to view price uncertainty
as being adequately dealt with through the calculative relationships between buyers and
sellers and the result is no significant instability within the price system. For example,
Callon et.al., (2002: 194) state ‘One can find multiple socio-technical devices that are
designed by economic agents, which ensure the distribution of cognitive competencies,
and which constantly and finely tune supply and demand.’ In reality, price variation can
result from four related reasons. First, close links between buyers and sellers do not
always exist, secondly, aggregation from individual firm to industry level can lead to
unpredicted effects, thirdly, production cannot always be controlled so actual output
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diverges from planned output, fourthly, (though not typically in the case of coffee)
demand can be capricious.
Uncontrollable environmental events such as disease and frost are at the root of price
instability in the coffee market, but their impact has been compounded by the thinness of
network ties, which contributes to aggregated effects that are detrimental. Because
production of coffee beans is by a large number of geographically dispersed small
growers, knowledge of consumer requirements and production strategies of competitors
is far from perfect, and there is heavy reliance on price signals. This lack of ties and nonprice information has meant that when disease or frost severely impacts on coffee
harvests as they regularly have done, they have had particularly destabilising effects. The
reduced supply leads to upward movements in price, and in an atomistic market, this
typically encourages new plantings. Two years on, when the bushes bear fruit, the
increased production results in significantly lower prices. Therefore prices fluctuate.
Because coffee consumption is fairly insensitive to price change, price reductions are not
fully offset by greater sales, and so income instability is closely associated with price
instability. Another consequence of limited network ties has been that price fluctuations
have occurred along a declining long run price trend. The tendency for the production of
coffee to increase and put downward pressure on prices over time is the result of
individual producers and producer countries calculating in isolation that expanding their
own supply will be profitable. Often governments have provided planting subsidies to
harvest foreign currency, with expansion plans based on an assumption that prices will
not change, or at least will not fall below a level which makes the expansion unprofitable.
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However, if many countries independently raise output then the aggregate increase in
supply can reduce returns to all. A recent example of this was the severe slump in coffee
prices in 2001, which can be attributed largely to the promotion of low cost coffee
growing in Vietnam and expansion in Brazil (ICO 2004).
The materialisation of Fair Trade
Although Callon’s framework has limitations in explaining the factors that gave impetus
to Fair Trade initiatives, his interest in the linkages between actors (including the nonhuman) gives his work an edge in understanding how new markets come into being. He
argues that the key to understanding new market forms is to appreciate what are the
entangling, framing and disentangling processes involved (Callon 2005). In the case of
Fair Trade, the Fair Trade movement (FTM) has sought to principally differentiate
products by the favourable trading arrangements with primary producers. To signal this
to consumers, every accredited Fair Trade product has the internationally agreed
Fairtrade mark on its packaging, which comprises of a logo and the maxim 'Guarantees a
better deal for Third World Producers'. Accordingly, the product is objectified and
distributional issues brought into the market frame. The FTM fosters a connection
between coffee producers and consumers with promotional literature focusing at least as
much on the producers as the product. Visual images and script contribute to the process
of singularisation by encouraging consumers to positively relate to growers.
In contrast to the proponents of unrestricted markets who engage the attention of a
network of policy makers with a discourse based in neo-liberal economics, the FTM has
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used various literary inscriptions in the form of reports,10 web pages and campaigning
newsletters to persuade a network of coffee consumers of the case for alternative trading
arrangements (see Raynolds (2002) for further detail). When the movement was young
and resources scarce, the message was conveyed almost solely through NGO
campaigning networks, and through church based organisations where the appeal for
trade justice resonated with the message of the gospel. Thus it was possible to target a
group of consumers with established sensibilities towards helping those in difficult
economic circumstances. This group of consumers provided an initial base from which
the Fair Trade became established, with early sales of Fair Trade coffee made from NGO
outlets (charity shops and mail order) and from churches. In the UK case, in 1994, the
FTM established a company, Café Direct, to extend sales into supermarkets.
Consequently, through the increased availability of the product, and the use of more
conventional media channels, such as newspaper adverts and magazine articles the case
for Fair Trade was made to a wider audience. A few years later, Café Direct decided that
in order to significantly expand sales, it needed to reposition itself in the market as a
premium product since research conducted in 1998 revealed that although buying Fair
Trade goods made people feel slightly better about themselves, ultimately they wanted to
purchase a good tasting product.11 From a production perspective, promoting quality was
entirely complementary with Fair Trade arrangements, because providing a reasonable
bean price is a necessity for guaranteeing quality coffee.
Bean quality is in part
determined by the maturity of the coffee cherry when it is picked and when growers
expect a low return for their crop they will harvest a coffee bush only once collecting
cherries of varying maturity. If the price is higher, growers can afford to pick just the
22
mature cherries, returning to the bush later in the season for the rest. Café Direct now
objectifies its product and promotes it on both its ethical and taste qualities with the
slogan ‘Excellent Café, Direct from the growers’.
Evolving outside the normal channels of commerce, using an unconventional business
model, Fair Trade coffee provides a clear example of a product emerging from a network,
co-produced by consumers and enabled by non-human objects. Callon names this process
of co-production, the economy of qualities (Callon, Méadel, and Rabeharisoa 2002). Fair
Trade products were able to gain a critical mass of support in early stages by operating in
networks where there were strong ties between actors holding sympathetic values, while
less ethical consumers provided the drive for higher quality. The FTM has used a variety
of media to communicate a different narrative on what is appropriate market conduct, and
to a degree has begun to change the dynamics of power, by altering social opinion of
expected company behaviour.12 The movement has achieved a degree of success in overriding the neo-liberal market argument that any exchange is freely entered into, outcomes
are the result of abstract market forces, so responsibility cannot be ascribed to any agent,
therefore companies are under no social obligation to consider the circumstances of their
suppliers. Instead the FTM have developed a message that challenges the indifference to
human consequences of liberalised markets. In particular it confronts the distributional
consequences of the free market by arguing that questions of power and responsibility
should not be ignored. Callon’ network approach which stresses the role of material
devices is appropriate for reflecting on how such novel market arrangements came into
23
being. However, it needs to be deliberated whether Fair Trade arrangements are
sustainable over time?
Overflowing Fair Trade coffee
Fair Trade sales have risen significantly in recent years, but it remains a small market
niche. An ambition of the FTM is that this is changed by persuading large coffee
companies that dominate final coffee sales to adjust their mode of operation. By
producing a product with distinctive moral credentials and developing a customer base,
there has been a degree of pressure on large companies to change.13 However, some
predict that an expansion of Fair Trade would result in excess unsold coffee, what might
be termed an overflowing effect. Lindsey (2004:9) in a report for the Adam Smith
Institute argues that ‘Those who single out companies as scapegoats and advocate halfbaked schemes to prop up prices may have the best of intentions, but they are not really
helping.’ His reasoning is that if the principle of paying growers a minimum price to
cover costs of production was to be extended to the whole coffee market it would
exacerbate the problems of oversupply. Such a viewpoint, based in neoliberal economics
assumes that decisions are based solely on market price information, and does not take
into consideration that other ties within the network might reduce the disparity between
levels of production and consumption, for example, an arrangement whereby the price is
negotiated for a limited amount of beans.
Nonetheless, even where some form of
contract is attractive, the extension of Fair Trade pricing conceivably would be too
formulaic to suit all players. Negotiating prices to encourage a long term trading
partnership is significantly different from having prices determined institutionally by the
24
Fair Trade formula. Furthermore, there is the conceptual problem that if all coffee was
bought under Fair Trade arrangements, there would be no world market price to base the
Fair Trade price upon. Therefore, the arithmetic of the Fair Trade payment system is not
effectively transferable to the whole world coffee market, such a market organization has
overflowing effects. However, this is not necessarily a serious concern, given that there is
evidence that the actual price is not the most important aspect of Fair Trade. Some Fair
Trade producers have indicated that the ability to engage in a long-term business
arrangement is more significant than prices.14 Fair Trade can be an opportunity to
demonstrate skills, witness the following comment from a coffee grower. ‘We don't want
the consumer to try our product because we are poor, because we have problems. The
image we want to present to you is that we offer a high quality product and we are a
sustainable organization.’ (Blanca Rosa Molina, CECOCAFEN, Nicaragua).15 The
building of partnerships is considered to be a less controversial aspect of the Fair Trade
supply chain than the Fair Trade pricing system, (Oxford Policy Management and
Sustainable Markets Group 2000, Lindsey 2004). Examples of good long term
partnerships already exist outside Fair Trade between roasters of speciality coffee and
growers. Nonetheless, the FTM has been instrumental in developing the capacity of some
growers to respond to consumer requirements for improved bean quality and develop
business acumen so they can play a strong role within a partnership. It would seem to be
this aspect of Fair Trade that is more likely to be sustained over time. Such an approach,
when there is an imbalance of power, is dependent on a respectful relationships and is
redolent of the argument made by Sayer (2004) that factors such as the interests,
25
commitments, moral dispositions and characters of participants should be included within
a market frame.
It follows that Fair Trade as it currently exists, perhaps should be viewed as having an
intermediate role, no longer being required once development objectives are met. Indeed
Fair Trade itself could be conceived as being a temporary socio-technical device,
something that is a means towards achieving fair trading relationships, rather than being
an end in itself.
Conclusion
Opinions have differed between economists and others on whether Fair Trade initiatives
can effectively address concerns about inequity within international commodity markets.
Callon’s writings on markets are interesting in this regard because he argues that both
economics and economic sociology have relevance for understanding how markets
operate. He recognises that people live in a constantly evolving network which shapes
their values and determines what is produced, and stresses the role of non-human
elements within those processes. In particular, he emphasises the significance of sociotechnical devices which translate economic ideas into actual market activity. Thereby
Callon emphasises the performative role of economics. However, while arguing that
economic concepts have significance in real markets, Callon also proposes that other
actors, with their ideas and values, can have a role in shaping markets, and that issues of
justice can be addressed. Essentially he perceives economics and its associated tools as
providing the necessary equipment for the calculations required for market exchange, but
26
other actors have an opportunity to determine what should be included within a
calculation and how values should be established. An object acquires value from network
entanglements that give it substance and meaning, but a calculation is required to
translate the value into a monetary equivalent for exchange.
Callon contributes to our understanding of the processes that establish use value and new
markets through his explanation of entanglements and framing, but study of the coffee
market identifies that his analysis does not go sufficiently far to develop an explanation
for exchange value. In effect, he does not adequately explicate price determination.
Though Callon and Muniesa (2005) provide a discussion on algorithmic configurations
which enable the process of reaching a price, no attention is given to a fundamental
determinant of price, the degree of scarcity. This seems to be the result of a presumption
in Callon’s work that typically there is close co-ordination between production and
consumption decisions such that supply and demand always match at a price that is
comfortable for both of the bargaining parties. Therefore price volatility is not an issue
for him.
This discussion on prices is important for understanding Fair Trade markets, for it is the
variability and overall decline in commodity prices that led to the establishment of Fair
Trade initiatives, and reasonably under such natal conditions, the price to be received by
producers became a central feature of the Fair Trade market design. Focusing on prices is
also central for reflecting on the differences between economists and sociologists, for
prices send important signals, but also have distributional consequences. Interestingly, for
27
economists, market instability is synonymous with price instability, but in Callon’s work
market instability is anything but price related.16 Neither does he give attention to
declining prices. This is somewhat curious particularly given that Polanyi discussed how
price instability and decline can be factors that prompt market reorganisation, in his book
The Great Transformation (Polanyi 1957), a text Callon refers to (1998a: 2). The cause of
Callon’s omission may be that his main aim is to stress the importance of the material
within networks. This intent leads him to disregard the conditions where there is actually
a deficiency of material conduits to communicate the information which facilitates price
stability. Intriguingly though, given his emphasis on non-human actors, there is also a
failure to appreciate that the material can be a direct player in determining price levels.
Specifically, if there is an increase in supply of a material product, for example coffee
beans, the price is likely to fall and the converse when supply is lower than expected,
because price acts as a rationing device. Callon does not discuss this. Instead, he
accentuates the connections that exist between buyers and sellers which can result in
differing prices between differing pairs of actors, for the same commodity at a given
point in time (Callon and Muniesa 2005). While this may be so, it is likely that such
relationships are sometimes mediated by overall conditions of supply relative to
requirements. Adopting a network perspective, we can consider A and B who trade with
each other frequently, trying to agree on a price. To some extent they may be bound by a
combination of loyalty and self interest to maintain an established trading partnership.
However, alternative options are likely to have some influence on the exchange decision
to. Although neither actor may have exact information on overall supply conditions,
nonetheless they are likely to be aware when other agents in the network, C and D, are
28
having problems selling all their goods. Therefore, B knows that if he disagrees with A’s
terms, another seller (C or D) can easily be found, while simultaneously A appreciates
that it will be difficult to find alternative buyers. Therefore external conditions are likely
to have at least some effect on the price negotiations between A and B, with prices
having a tendency to fall when supply increases. The greater the change in supply
conditions, the greater will be the strain on implicit contracts. In the longer, through
network entanglements, tastes might change but in the shorter run if supply increases,
normally the only way that all beans (in the case of coffee) can be sold is for them to be
offered at a lesser price so sales are extended to lower income groups and to existing
coffee drinkers with declining marginal utility.
Sayer (2002:52) in a critique of embeddedness has highlighted insufficient recognition in
new economic sociology that ultimately for some there is an economic actuality that ‘the
bottom line remains the bottom line’. Human agents do not always have control of prices,
and some markets have become ‘systems’, in the sense of operating ‘behind actors’
backs’ (Habermas 1987) and thereby making actors subject to ‘blind’ market forces
(Sayer 2002). Economic history provides countless examples of social conventions and
long term arrangements that have been altered as a result of changes in relative scarcities.
Meanwhile, Callon argues that economics has relevance, but only as a mental construct
that actors collectively materialise. Market regularities have merely ‘the obduracy of the
real’ (Callon 1998a:47). His position has utopian undertones, in that members of society
are considered to have a significant degree of choice and influence in determining how
markets operate.
29
The emergence of Fair Trade, appears to support his case, in so far that it was designed
by actors who dispensed with typical economic thinking to create a new form of supply
chain with an explicit social goal. Callon’s tools also help in gaining an understanding of
how the Fair Trade concept was enabled. However, the impetus for the new market
arrangements (variable and declining prices) cannot be sufficiently explained by his
framework. This is because his theory on price is deficient, and his emphasis on the
causes of market change being related to externality effects is historically imprecise.
Callon chooses to focus on direct material effects on markets but fails to give attention to
material effects that impact indirectly via price changes. Whilst economic discussion that
blithely refers to the laws of supply and demand can accredit actors with too little
influence over their destiny, there is a danger of naivety in assuming that humanly
controlled co-ordination is sufficient to manage prices within acceptable levels.
Nonetheless, even though Callon’s work is not illuminating in considering the
sustainability of the Fair Trade pricing scheme, there is a confluence between Callon’s
view of market arrangements involving close relations between producers and
consumers, and the most likely durable aspect of Fair Trade which is enduring
partnerships. Callon’s application of the concept of framing is useful for considering
how markets might be organized. However, for issues of justice to be addressed
effectively, there needs to be a more complete explanation of what is included within the
frame, and of the determinants of the rate of exchange.
30
Notes
1
These campaigns are internationally co-ordinated by the Global Call to Action against Poverty. This is a
worldwide alliance of a variety of actors including existing coalitions, community groups, trade unions,
individuals, religious and faith groups committed to the cause of ending poverty. They focus on several
issues of which trade justice is one, and others are debt cancellation Details on http://www.whiteband.org/
2
Named after a character in a Dutch novel who protested against the poor treatment of coffee plantation
workers in Java in the nineteenth century.
3
There is an international accreditation scheme for products that meet the Fair Trade standards. When the
standards are met, permission is granted to label the product and describe it as fairtrade (one word).
4
There is a link between low coffee prices and world trade arrangements, in so far as existing trade barriers
exacerbate the problems in the coffee and other commodity markets, by reducing diversification options for
agricultural producers in the southern hemisphere, there is a link between low coffee prices and world trade
arrangements.
5
Actor-network theory now also is referred to as Science and Technology Studies (STS).
6
Callon adopts the expression of disentanglement and its antonym, entanglement from Thomas (1991).
7
In the UK there is currently a debate about the impact of supermarkets on local shops and communities.
Competition policy, based on economic principles does not provide any basis for intervention.
8
There can be positive knock-on effects as well, but these are likely to reinforce the current system of
market organisation and therefore do not prompt reframing.
9
Repeated exchange is a behaviour pattern that is a familiar assumption within economic game-theoretic
models.
10
See for example Oxfam(2002) Mugged: Poverty in your coffee cup and Fairtrade Foundation (2002)
Spilling the beans on the coffee trade.
31
11
CaféDirect's Share Prospectus, 2004.
12
Ponte and Gibbon (2005) also draw attention to how the ‘diffusion of dominant normative paradigms’
(p3) can influence the way supply chains are managed.
13
In October 2005 one of the largest coffee companies, Nestle, introduced a Fair Trade coffee into their
brand range. They said that their decision had been driven by the consumer.
(http://news.bbc.co.uk/1/hi/business/4318882.stm)
14
Quarterly Return, 51, Spring 2004, Newsletter of Shared Interest Society Limited.
15
CaféDirect's Share Prospectus, 2004.
16
Unlike like the literature on embeddeddness, Callon’s vocabulary on markets currently does not seem to
differentiate between levels of reliance on price information and on network relations.
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