Pittsburgh Tribune-Review: “A better brew for Rwanda”

by Don Boudreaux on February 14, 2020

in Archived writings, Doux Commerce, Trade

In my Pittsburgh Tribune-Review column of November 20th, 2007, I wrote about the pacifying consequences of commerce. You can read my column beneath the fold. (Other than below, this column is not available on-line.)

A better brew for Rwanda

Americans are used to hearing bad news from Africa: The fighting in Darfur, corruption in oil-producing countries and the HIV/AIDS epidemic in southern Africa are just a few examples. These problems are real and they deserve our attention.

But something else in Africa deserves our attention and that is Africa’s good news. In some parts of the long-suffering continent, good things are happening and too few people, in Africa and elsewhere, know about them. Consider Rwanda. For many Americans this small, land-locked country is the very image of all that is wrong with Africa. After all, this is the home of one of history’s worst genocides. In 1994, an estimated 800,000 people lost their lives in 100 days of ethnic conflict and terror. The people who lived through this tragedy have physical and psychological scars that might never heal.

And yet, if you travel through Rwanda today you’ll find that something nearly miraculous is happening: People who not long ago were bitter enemies are now working together to build businesses, to improve their lives and the lives of their families and to shape a new and a better future.

The clearest example of the good that is happening in Rwanda comes from the coffee sector. In Rwanda, coffee is grown by low-income farmers who work small plots of land. In the past, the Rwandan government forced these small farmers to grow coffee and to sell their beans to a government-controlled monopoly.

Farmers were paid a set price that was always below the world market price for coffee. The price differential was kept by the government, which relied heavily on the revenue it then “earned” from exporting this coffee.

Before the genocide, farmers had little freedom when it came to producing and selling coffee. They were forced to grow it and they did not benefit directly if they produced good quality coffee. They were forced to sell to a particular buyer and they knew the buyer would pay a set price no matter how good or poor their beans were.

These facts mean that Rwanda’s small coffee farmers had few incentives to work together to do the sorts of things that help businesses succeed: They did not need to market their product because there was only one buyer. They did not need to invest time and effort to improve the quality of their beans because they knew they would be paid a low predetermined price. They did not need to find a way to work together to share costs and risks because there was no benefit to be had from working together.

But today, things in Rwanda are very different. Farmers are no longer required to grow coffee. The old export monopoly has ended. Farmers are free to enter into contracts with foreign buyers and to negotiate prices themselves. The current government, headed by President Paul Kagame, has dismantled much of the old legal and regulatory framework for the coffee sector and has adopted a strategy of economic liberalization.

Liberalization has freed farmers and given them incentives to improve the quality of their beans because they now benefit directly from their efforts.

The change has also given farmers incentives to work together to meet the challenges of competing in a global market.

The results, to date, are nothing short of breathtaking. Rwanda has gone from being a country that produced mediocre coffee to being one of the most exciting producers in the world. Rwandan coffee now routinely places at or near the top of international coffee competitions and, just a few weeks ago, a lot of Rwandan coffee sold for approximately $25 per pound at specialty-coffee auction.

Imagine what this kind of change means for people who live in country with a per capita GDP of less than $300. More than 50,000 Rwandan families have seen their incomes double over the past six to seven years. Talk about a caffeine rush.

The economic benefits of the new specialty-coffee industry in Rwanda are extraordinarily important in a country whose people are still very poor. But Rwandans who work in the coffee sector benefit from this liberalization in another way: The government’s freeing of the coffee market has given farmers new incentives to work together, peaceably, in pursuit of a shared vision — economic betterment.

It’s not clear that the government intended this particular outcome. But whether intended or not, the government’s liberalization is paying many dividends. And one of these dividends — reconciliation — is not only good news, it’s priceless.

*Donald J. Boudreaux is chairman of the department of economics at George Mason University in Fairfax, Va.

Comments

Add a Comment    Share Share    Print    Email

Previous post:

Next post: