Trouble is Brewing

According to an article by John Walsh in the Independent, we spend more on coffee in a year than we do on our electricity bills. Amazingly, half of the cups of coffee are drunk in franchised coffee shops. Not by me; though these exist in Leicester, I prefer more economical establishments.

            The problem, allegedly, is that the price of coffee beans has doubled in the last year. The boss of Starbucks, Mr Howard Schulz, is whingeing. The cost increase is not due to a shortage of supply, but to the actions of speculators, the mysterious force which the media would have us believe is the cause of all human misfortune. He claims that a ton of money will be made, and the farmers won't get any of it. He is probably right that the farmers won't benefit, but the idea that speculation invariably leads to profit should have been exploded by the collapse of Wall St a mere few years ago. In speculative bubbles, there are big winners and big losers. For some reason, Governments seem now to believe that the taxpayer should reimburse the losers, provided that they were rich enough to start with.

            This process has been going on for a while. Martin Luther King described it as "socialism for the rich and rugged free enterprise capitalism for the poor." We have been here before, and I wish that, instead of grumbling, Starbucks would show a bit of initiative and deal direct with the coffee growers, and leave the speculators squealing in horror. Starbucks have the muscle to burst this bubble.

            More to the point from the customer point of view, "Starbucks ... didn't [raise prices].... then again it is already charging £3.45 for a venti white caffe mocha. But it knows it cannot hold out for long, because ... demand for coffee is increasing." How can a respectable journalist publish this nonsense? How much of the price of Starbuck's coffee is due to the price of beans? You can still buy a whole jar of coffee at the supermarket for the price of one cup at Starbucks and its imitators. Mr Schulz has already pointed out that the problem isn't a shortage anyway, so increasing demand will probably not have much effect. There is a long way to go before the price of beans becomes a significant cost-driver for the coffee shops, or the restaurants which try so hard to sell you a drink if you order a meal. If prices rise in Starbucks, it will be because Mr Schulz thinks we are stupid enough to pay.