Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad streets in New York City, you're Inside the ICE House, our podcast from Intercontinental Exchange on Markets, Leadership and Vision and Global Business, the dream drivers that have made the NYSE an indispensable institution of global growth for 225 years. Each week, we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism, right here, right now at the NYSE and at ICE's exchanges and clearing houses around the world.
Speaker 1:
Now, welcome Inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
It wasn't but a few weeks ago that we talked with ICE's Mike Wittner on this program on the impact that the 30% reduction in energy usage since February has had on the oil markets. Now, the price of a barrel of ICE Brent crude has fallen even further to levels we haven't seen since 1997, back when I was working in the White House.
Josh King:
At the White House, we had another commodity that kept us fueled, and it still works magic after all these years, I'm talking about coffee, another liquid lifeblood of the economy that we process from its raw natural form into a fine-tuned stimulant for getting through the day. The raw supply and related futures contracts, like oil, can be referenced by its geographic region and comes in varieties known for their light or sweetness, or death wish, touted as the world's darkest, recommended to me by my colleague, Ian Wolf, our Head of Broadcast and one of this show's producers, which I then purchased online, had delivered, and made it through a ground bag in less than a week.
Josh King:
If you look at ICE benchmarks and contracts, unlike oil, the commodity of coffee has seen a 20% increase in its price since February as many listeners like me stocked up in preparation for social distancing with our favorite roast. In America and countries around the world, coffee is one of the most popular and beloved drinks, but have you ever wondered how those coffee beans really ended up in your cup in the morning? Coffee beans are grown on farms of all sizes in countries around the world, with the most production coming from Brazil, Vietnam, Columbia, and Indonesia. Our coffee beans have been picked from the B=bush and processed. They're packed in burlap bags and shipped all corners of the globe where they're roasted and packed and eventually ground and brewed.
Josh King:
Like many other commodities, coffee is traded on ICE's futures exchange, where everyone from growers to refiners, to shippers and retailers, buy and sell futures to manage their price risk. Our guest today, Professor Augustine Sedgewick, is the author of Coffeeland: One Man's Dark Empire and the Making of our Favorite Drug, and he's here to talk all things coffee from the bitter to the sweet. Our conversation on the history of coffee, development of the world markets, and the science behind the coffee break. That's all right after this.
Speaker 3:
And now a word from Leslie Stretch, CEO of Medallia, NYSE ticker, MDLA.
Speaker 4:
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Josh King:
Our guest today, Professor Augustine Sedgewick, is author of Coffeeland: One Man's Dark Empire and the Making of our Favorite Drug. He earned his doctorate at Harvard and teaches at the City University of New York. His research on the global history of food work and capitalism has received fellowships from the American Council of Learned Societies, the Andrew W Mellon Foundation, and the Project on Justice, Welfare and Economics at Harvard. He has been published in the History of the Present International Labor and Working Class History. Welcome, Professor Sedgewick, Inside the ICE House.
Augustine Sedgewick:
Thanks very much for having me. I'm thrilled to talk with you.
Josh King:
You are not at City University of New York today. You are, like me, up in the Catskills; you're social distancing in Maine. How's that going so far for you?
Augustine Sedgewick:
We only have about a month of winter left, so things are looking up.
Josh King:
We're having this conversation mid-morning, so it's the right place to start, when I would ask, what kind of coffee are you drinking right now? And what's your favorite brewing method?
Augustine Sedgewick:
Right now, I am drinking the last of a couple bags of Phil's coffee, actually, the west coast, San Francisco based chain that I do a brisk mail order business with even in New York. Phil's, actually, I don't know if you or your listeners will be so familiar with it, but they're actually a chain of cafes. They also do a delivery of the roasted and the ground stuff, but I started drinking it after I first went to San Francisco and tried a Phil's Cafe for the first time. It was the first cup of coffee I'd had in a long time that really made me wake up and take notice, I guess you could say. It's different and I've become hooked.
Josh King:
On the mechanics of book publishing these days, Augustine, I read an excerpt of your book in the Wall Street Journal, or a take on it that you had written, and was immediately intrigued. But I'm wondering since we're all on lockdown, how has this period been for you trying to promote a new book?
Augustine Sedgewick:
I would say the strongest force that's preventing me from really promoting my book is really my two year old son. Credit where credit's due. We're talking only because he's being, basically, detained outside the house for the next hour [crosstalk 00:06:22] and certainly because he is making an unscheduled transition out of his crib, he and I are sleeping in two twin beds that are pushed together. So he wakes up exceptionally early and just casually pokes at me until I wake up, and then first thing we do is out to the kitchen for dad's coffee.
Josh King:
Coffeeland is anchored in the development of El Salvador's coffee industry, but you ambitiously cover the entire global history of the beverage, starting four centuries ago. When did the beverage first appear in the historic record and get its name?
Augustine Sedgewick:
That's interesting. The first coffee was native to Ethiopia, but it was really first consumed as a beverage by Sufi monks in Yemen around the middle of the 15th century. It spread to Europe in the 17th century, and even though it was marked with foreignness and being closely associated with Islam, in particular, it caught on quickly in London, especially.
Josh King:
Augustine, your book covers how coffee and the industry behind it has evolved over time. But I was taken by your description of the first coffee cafe that opened, I think, in 1554 in Syria with its patrons of academics, chess players, late night visitors, and a gathering place for civil society, and in many ways, given that, the average coffee shop hasn't really changed that much, has it?
Augustine Sedgewick:
Yeah. Don't forget people who were the other common patrons of that original coffee shop were people looking for work, so exactly. It will be familiar to us from every Starbucks today. Nevertheless, even though there are some similarities among the role that coffee played in that society and the role that coffee plays in our society has changed dramatically, in part because people have such a different conception of the body now. Originally, coffee was something that many people were very suspicious of and we've developed ways of understanding both it and ourselves that have alleviated some of those suspicions and the confusion and even fear behind them.
Josh King:
What were the suspicions and the fear?
Augustine Sedgewick:
Well, because as you mentioned, originally coffee was consumed as a beverage by Sufi monks in Yemen in the 15th century. Its name was derived from the Arabic word qahwa, which had a variety of meetings, one of which was to make it appealing; other meanings were dark and wine. For that reason, that etymology really suggests the struggles of people to understand what coffee did to the people who drank it.
Augustine Sedgewick:
Their way of understanding that was based on a concept of the body that emphasized bowel balancing four humors, using foods as drugs, and coffee didn't fit neatly within that scheme and coffee, along with tea and chocolate, was really significantly responsible for disrupting that concept of the body as a balance of humors and bringing in a new idea of the body as something that operated on cycles of inputs and outputs, rather like an engine.
Josh King:
So how, if these fears were becoming allayed, how did the beverage then expand to Europe and England, where it arrived, I think, ahead of tea, despite some fits and starts, including the occasional torching of coffee stores as contraband?
Augustine Sedgewick:
Yeah. That's exactly right. In England and in London, especially, coffee was tea before tea. London was a great coffee drinking capital in the 17th century. Even so, although it had its devotees, there were many other people who were not sure what to make of it, and even worried about its effects. For example, London employers could tell very quickly that coffee changed the people who drank it and they were very pleased when their apprentices and clerks would drink coffee rather than the usual beer, because coffee, they said, helped their apprentices and clerks play the good fellows at work and stay awake. On the other hand, women in London at the time thought that men who drank coffee were more likely to be lazy and impotent, so apparently results varied there.
Augustine Sedgewick:
Nevertheless, the widespread acceptance of coffee really didn't come about until significantly later than that, when people began thinking about it as something ... Or really developed a consistent theory about how it changed the bodies of those who drank it, and that really didn't come about until the middle of the 19th century. Although we so closely, and for a long time, have associated with coffee with alertness and work for many centuries, there was no agreement on exactly why that happened or what the consequences of that association were.
Josh King:
Sticking with the historical development of coffee, before we get to our appreciation of the physiological effects on our bodies, when we move from London and England to our side of the Atlantic, most people have heard that coffee usage outpaced tea for some patriotic and revolutionary spirit that led a bunch of Bostonians to launch boxes of tea into the Harbor. I'm from Boston. I visited the original Boston Tea Party ship back as a kid. But is it as simple as the Boston Tea Party? I mean, as you read more about it, as an active protest, the tea party was a little overrated, wasn't it?
Augustine Sedgewick:
Well, it's interesting because coffee certainly could have been the focus of such protests. What changed was ... Although in the 16th and 17th century, many people in England were very interested in establishing coffee colonies in North America or growing coffee in North America, once the East India Company was granted a Royal monopoly and gained access to China's ports, tea flooded British society and swamped British coffee culture for centuries. Now, of course, Britain is a really thriving coffee culture again.
Augustine Sedgewick:
But the truth is that The Tea Party, the colonists really saw coffee ... Coffee, as opposed to tea, became a kind of alternative link to the wider world for colonists who were interested in throwing off Britain's rule. For example, after the revolution, the new United States made important diplomatic and economic connections with France and the Netherlands, both of which were really significant imperial coffee producers, and those connections to empires that were not Britain really helped the United States stand on its feet in the early years of the Republic.
Josh King:
About a hundred years later, you cite that during the civil war, the union soldier would average about five cups of coffee a day, but the obvious irony is that coffee mostly came from Brazil at that point, mostly from slave labor. We've been talking about the spread of consumption, but how did the coffee beans expand from this Yemen monopoly controlled by a small group of merchants to the rest of the globe in terms of where it came from?
Augustine Sedgewick:
Right. It's a very difficult story to trace because a lot of it happened through smuggling and piracy. Although European empires were very interested in establishing coffee plantations in their colonial possessions from the 17th century forward, it was very difficult for them to do so because the world's commercial supply was controlled by, as you say, a relatively small group of merchants in Yemen.
Augustine Sedgewick:
That only began to change once European colonial empires were able to get their hands on actual coffee trees by hook or by crook and transport them to places in the world where they were likely to grow, most especially Java, of course, for the Dutch, and the Caribbean for the British and the French, and also Brazil for the Portuguese. But the way that that transportation happened, the way that the spread of the coffee tree around the world, the spread of coffee cultivation around the world, took place is really shrouded in a secret history of smuggling and adventure.
Josh King:
How did you unpack that in terms of your research? Was the method of transportation to uproot and bring actual trees across the ocean or grow from saplings and seeds?
Augustine Sedgewick:
It looks like it was a combination of both. For that part of my research, I certainly relied on relied a lot on coffee lore. A lot of these things have simply been repeated in books over time and come down through history that way without, in many cases, a solid way of going back to some original primary source and confirming it. For some of these stories, we have to simply feel what sounds true. We have to feel our way through what is surely mythical and apocryphal in some respects, to what feels like might have actually taking place.
Josh King:
I once worked up in Hartford, Connecticut, Augustine, with the descendant of the Hill family. Coffeeland opens with the kidnapping of Jamie Hill in 1979, an act that is directly related to the establishment of the Hill family in El Salvador that began with James Hills' immigration from Manchester, England in 1889. How did you come across the Hill story and the opportunity to visit the coffee empire they built?
Augustine Sedgewick:
Yeah. That's a great question because this is a case, of course, where I was able to go back to the original sources. I was interested in writing a book about coffee because I was interested understanding the deeper history of central American migration to the United States and coffee is indisputably the thing that have linked those societies and places together over time.
Augustine Sedgewick:
I was going to go to El Salvador to do some research, primarily in government archives. Before my trip there, I actually just went down a list of families who had been among the principal coffee exporters from El Salvador during that time and wrote to everyone, and many of them were very, very generous in their responses and inviting me to come look at their documents, and the Hill family were among those. They were extraordinarily generous and invited me to come and look at documents that had been created by the families founder, James Hill, a century ago, and in the process of doing so, I sat in the office that Hill had done up in the style of a London counting house. I opened the folders that hadn't been opened since the last time he closed them. It was a really extraordinary experience to work so closely on understanding the world that he had built while in the world that he had built.
Josh King:
Before we get into the world that he built, just tell us about this kidnapping itself back in 1979.
Augustine Sedgewick:
Yeah. It's an interesting place to begin the story because in some ways it is, as you mentioned, a direct culmination of the politics of coffee and El Salvador, which James Hill, the founder of the family, did perhaps more than anyone else to bring about. His grandson was kidnapped by leftist rebels who were fighting precisely to, after a hundred years of coffee, overturn the essential politics and structure of coffee production in that country.
Augustine Sedgewick:
That was the beginning of civil war in El Salvador, during which rebels tried to change the country's economy, politics, and society by fighting the army, which was funded by the coffee elite in part, in part by the United States, for 12 years. The way that the rebels paid for that war that they made on the coffee economy was in part through kidnappings of members of elite families, such as Jaime hill. It's an extraordinary moment when all those histories come together in a really explosive way.
Josh King:
The founder, James Hill, would become the elder statesman, if not the king, of El Salvador and coffee during his lifetime, but it did not have an auspicious start for him. How did Eel, as his name and reputation earned him that nickname, come to the country and decide to enter the business?
Augustine Sedgewick:
Right. Eel is basically the Spanish pronunciation of Hill and it wasn't exactly a nickname, but it was a name that fit Hill's reputation when he first got there. He was born in the slums of Manchester, England in the late 19th century, and if you were a young man born in those conditions at that time, pretty much the best thing that could happen to you was you could go out into the world and make a living selling the things that Manchester made.
Augustine Sedgewick:
In Hill's case, and for many others, it was textiles. When he was 18, he got a job as a textile salesman in central America and went to El Salvador and married well. Married into a family that had coffee plantations and had additional land where he could develop new plantations. Part of marrying well meant that you'd be tied into these economic and commercial networks that allowed him to develop a business that became over time one of the great coffee dynasties of the 20th century.
Josh King:
Coffee cultivation is a resource and a labor intensive enterprise whose fortune is tied to the global price of coffee. Augustine, when Hill arrived in El Salvador, the New York Coffee Exchange, which is today a part of ICE Futures, it was less than a decade old, but already central to issuing the liquidity needed to fund the global coffee business. Why was the exchange started and why did the New York market quickly establish itself as the commercial capital for coffee?
Augustine Sedgewick:
Yeah. That's a great question. The exchange was started in 1882 in part to try to introduce some stability, through increased liquidity, into a market which had been previously characterized by huge booms and ruinous busts. The founders of the exchange in 1882 were actually among those who had been ruined a handful of years earlier by a huge bumper crop in Brazil that drove prices way down and cost many merchants and traders, not to mention planters, their livelihoods.
Augustine Sedgewick:
The founders of the coffee exchange wanted to guard against that possibility, and the way to do that was to make a market that could be hedged and to make a market that could be hedged, you needed standards. The reason why New York was so important, even in El Salvador, was that New York standards quickly came to shape work on plantations and in coffee mills around the world. The reason New York was so important, of course, was because it was not only the commercial capital of the United States, but the commercial capital of the country that was, at the time and since, drinking the majority share of the world's coffee.
Josh King:
Even today, our Midtown office at ICE features this expansive grading room for determining the standard grades for coffee. It was interesting that while many of the original standards remain initially taste and aroma where not part of the judging process. How did the innovation of canning and the FDA act change how coffee was eventually to be judged and then sold?
Augustine Sedgewick:
Yeah. That's a really interesting story. I'm curious, do you have a cupping room there, or just a grading room?
Josh King:
Where they take little bits of coffee and a spoon of it and spit it out into a spittoon?
Augustine Sedgewick:
Yes, exactly right. Because as your question suggests, that wasn't the way that grading coffee started. When the New York Coffee Exchange started in 1882, coffee was judged simply on appearance, and the way you would judge a coffee's appearance was, you take a sample of it in your hand and you look at how the beans look. Are they uniform, are they large and smooth and have all these external, exterior, superficial markers of cleanness? And then the other way you would judge a coffee at that time was by counting up how many defective beans there were in a sample, counting up how much garbage, literally, there was in a sample of it, and then you would note all the things that were wrong with it, all the defects and all the garbage, and you would subtract it from a perfect standard which didn't really exist, as a matter of commercial practice, and that would be the coffee's grade.
Augustine Sedgewick:
There was no assessment taken of the flavor and aroma of the drink that those beans actually made. That was an innovation that came about, actually, on the west coast of the United States in San Francisco. It began in San Francisco because roasters in San Francisco were doing a lot of business with central America, because of geography, because of the shape of the commerce, the preexisting commerce up the Pacific coast.
Augustine Sedgewick:
Under the standards of coffee appearance, central American coffee actually didn't do very well. It wasn't worth a lot of money. It wasn't judged to be worth a lot of money because the beans were irregular because they were grown on rather smaller plantations on high altitudes. They were small. Those were precisely opposite of the things that were valued on the New York Coffee Exchange, where, incidentally, most business was done with Brazil, which tended to produce large, even, round beans.
Augustine Sedgewick:
In San Francisco, roasters got the idea that if they were disadvantaged by the standard of appearance of the beans, they would invent their own standard, and the standard they began to use is this cupping method that has since become the universal standard. They began to judge coffee, not on the basis of how it looked, but on the basis of how it tasted and how it smelled, and they found that, no coincidence, once central America coffee was judged that way, it began to seem a lot better than it did if it was judged simply on the basis of its appearance. So there was a strong commercial interest for them in the process of revolutionizing the way that people judge and value coffee.
Josh King:
The development of the coffee markets in the early 1900s coincided with the first wave of American coffee drinking that was driven by the development of supermarkets and standardized brands looking to reduce consumer costs. Despite the efforts to decrease the cost of coffee in the United States, the price of coffee actually increased steadily until the depression hit. How was Brazil able to protect the value of its cash crop both before and after 1929? What impact did that have on coffee prices everywhere?
Augustine Sedgewick:
Right. Brazil has always ... It probably still is the leading player in making the global coffee market. Brazil has generally produced, at least for going on 200 years now, Brazil has produced the majority of the world's coffee supply. Brazil certainly could produce much more than that if it wanted to; the challenge has always been the reverse, how to produce coffee in amounts that wouldn't impoverish the people who were producing it.
Augustine Sedgewick:
What Brazil did, at the beginning of the 20th century, was Brazilian growers and the Brazilian government got together and developed a plan that they called the valorization plan, which was designed to buy up Brazil's own coffee, so Brazilians were buying Brazilian coffee, and holding it off the market in order to increase prices. That plan actually had a dramatic impact on the world coffee market, not only in Brazil, but also far away. The fact that Brazilians were buying Brazilian coffee and holding it off the market effectively subsidized the rise of coffee production in places like El Salvador, which I write about, but also many other places around the world as well, because the truth is that coffee production would've been much less profitable, if it, in fact, would've been profitable at all, had Brazil gone at full strength into the world market and coffee.
Josh King:
In Coffeeland, you cover the impact of the 1934 reciprocal trade agreements act, which may not sound familiar to a lot of our listeners, but it really changed how tariffs could be enacted. What was the impact of the act, not just on the coffee trade, but how the nation continues to use its economic buying power to influence our strategic goals and foreign policy?
Augustine Sedgewick:
Right. I'm so pleased to be having this conversation with you guys this morning. This is definitely the first time in book promotion that I've been act asked about the reciprocal trade agreements act. I'm really [crosstalk 00:28:41].
Josh King:
Glad to do it.
Augustine Sedgewick:
Yeah, absolutely. It is really important. It's still with us. It was an important component of Roosevelt's response to the depression because it changed the seat of tariff making power from the legislative to the executive branch, which meant that the executive branch, including the state department, could use tariff making as a foreign policy tool. The reason why the president today can wage a trade war of his own design is because the tariff the executive branch, thanks to the reciprocal trade agreements act in 1934, now has the power to unilaterally raise or lower tariffs by 50%.
Augustine Sedgewick:
For Roosevelt, in the thirties, in the context of the Great Depression, that was an important component of building a supportive coalition, a profitable coalition, around the US economy, especially when it came to negotiating favorable trade agreements with Latin America. Coffee was what Latin America had to sell and what the US had to buy from Latin America, if it wanted the Latin Americans to be able to continue to consume US products, so the reciprocal trade agreements act was an important tweak in the engineering of the global economy in the 1930s that allowed the US to begin to, or allow the US to consolidate, its influence and power economically and politically, not only in the Western hemisphere, but around the world.
Josh King:
After 150 years of American history, Roosevelt had so many things that he had to do in terms of breaking the Great Depression before the onset of world war two. Did he get much pushback as the reciprocal trade agreements act was being put through or, like so many other things, were people rallying behind the executive at that point?
Augustine Sedgewick:
There was opposition to the reciprocal trade agreements act, but it's interesting. It came mostly from people who were worried about the offshoring of manufacturing industries, basic manufacturing industries. There's some evidence to suggest that Roosevelt actually, and his planners, if you want go even wonkier here, his planners in the inter-department committee [crosstalk 00:30:58] on trade agreements were interested in increasingly offshoring basic US industries to Latin America, as a way to build economic relationships between the two places. That would be more mutually satisfactory and also stable over a longer period of time.
Augustine Sedgewick:
There was pushback to the offshoring of those basic manufacturing industries. But I actually argue, I suggest in the book, that coffee was perhaps the first mass consumer product that could have been produced, quote, unquote, domestically, that was offshored to the independent nations of Latin America for political and economic strategy.
Josh King:
Even today, 2020, as you were researching and writing the book, is there any coffee production worth noting in North America, in the United States?
Augustine Sedgewick:
Yeah. I think that's a question that's actually changing right now. I've read some things about ... There's coffee production in Hawaii, of course; there has long been. But I actually read some things recently about the possibility of coffee production in California, even some ongoing coffee production in California, which, fascinatingly, has long been a goal of Californians. In the late 19th century, Californians were very eager to establish coffee plantations and tried to do so for quite some time, but could never really escape the fact that eventually temperatures would fall below a sustainable level and kill off the coffee trees. That, unfortunately, has changed and temperatures now exist within a spectrum that could be amenable to domestic coffee production in California.
Josh King:
So maybe in the future, there'll be some little offshoot of Phil's coffee from San Francisco that includes a domestically produced homegrown in California, be the ultimate fresh coffee for professor Augustine Sedgewick's morning coffee break.
Josh King:
After the break, Augustine and I will delve into the science of coffee and the economics of the coffee break. We'll be right back just after we have a quick cup of coffee. That's right after this.
Speaker 3:
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Josh King:
Welcome back. Before the break, professor Augustine Sedgewick and I were discussing the discovery and spread of coffee from a mysterious ink-like beverage to a global commodity that represents nearly 450 billion dollars in commerce.
Josh King:
In that article that you wrote for the Wall Street Journal, which brought me to you, Professor, you said caffeine is not only the world's most popular mind-altering drug used regularly by perhaps 90% of the planet, but also, as Michael Pollan has noted, the only one that we routinely serve to children. The physiological reaction to coffee was well known for centuries until Friedlieb Runge isolated the compound. The discovery kicked off hundreds of studies to determine its effect and safety. The founders of two NYSE listed company, Kellogg, that's NYSE ticker symbol K, and Post, NYSE ticker symbol, P-O-S-T, were vocal advocates of its ills. Why were they opposed to coffee?
Augustine Sedgewick:
Yeah. That's a really interesting episode in the history of coffee. It speaks to this larger historical trend that shows that for many, many centuries, as you mentioned, people did not agree on what coffee did to people who drank it. There was wide disagreement about coffee's effects and consequences on the body, and that lasted even into the 20th century with Kellogg and Post.
Augustine Sedgewick:
Kellogg, especially in the late 19th and early 20th century, there was an American epidemic of what was at the time called [enervation 00:35:31]. There was a concern that the American individuals, but also the nation as a whole, was becoming anxious and strung out and stressed and not really fully capable of competing in the competition for more, for more territory, and more resources, and more wealth. Some people, including, as you say, Kellogg and Post, blamed coffee for that. They thought that coffee, far from being an energizing drink, was something that made people foggy-headed and over-anxious and generally less productive and capable and hardy than they otherwise would've been.
Augustine Sedgewick:
As to why Kellogg and Post blamed coffee, I think it probably has to do with the fact that they were selling their own coffee substitutes, more than anything else, but they were able to blame coffee because there was already an established fear, or even suspicion, of the beverage.
Josh King:
Another one of our listed companies, Coca-Cola, that's NYSE symbol KO, even found itself in court defending the appearance of caffeine in its soda. What happened and what did the case determine?
Augustine Sedgewick:
Yeah. You're exactly right. That is exactly when the thinking about coffee really began to change and crystallize around the consensus that we now have about caffeine and coffee. Coca-Cola was sued for adding caffeine to its beverages, which seemed to be an additive that was potentially injurious to health. To defend themselves, they sponsored a study through Columbia university that was that set out to end these centuries of ambiguity and determine, once and for all, whether or not caffeine was a boon to work or not.
Augustine Sedgewick:
The professor at Columbia set up this study that really pioneered the use of science and the interest of American business, and both the participants in the study and the scientists who were running it were unaware of who was being dosed with caffeine and who wasn't, so it was double-blind, and this was a really important innovation that's obviously still with us in important ways. What that Coca-Cola study concluded, perhaps not surprisingly, was that caffeine had a genuinely positive effect on the individual's ability to do work within 15 minutes of consuming caffeine. The study observed an increase in the potential for brain or muscle work without any subsequent decline or any subsequent fatigue as a result of that work. The way that that study made caffeine look, which was an image quickly adopted by the coffee industry, was as a kind of miracle drug, a source of instant energy for any type of work.
Josh King:
Coffee growers and their advocates in the US countered the anti-coffee claims and activities by forming what was known as the Joint Coffee Trade Publicity Committee in New York. Many of their activities parallel the work of the Columbian Coffee Federation, what they're doing today, which is what we covered back in episode 44 of this show with Juan Esteban Orduz. What was the purpose of the committee? To continue the work that Coke had tried and stimulate with Columbia?
Augustine Sedgewick:
Yeah. It was to con basically to translate the findings of Coca-Cola study into a study on coffee, and then to translate those scientific conclusions into advertisements.
Josh King:
One of the publications of that committee was titled Coffee as an Aid to Factory Efficiency. It told the story of the transformation of the WS Tyler Company in Cleveland. How did scientific studies and workplace analysis establish this idea of the coffee break as essential to the American workday?
Augustine Sedgewick:
Well, as you know, workplace studies were common. The sociology of the workplace, the science of work, was really established around the turn of the 20th century in the United States because, at that time, there was so much technological innovation, there was so much capital being poured into technological innovation, that the body of the worker itself came to seem as the final frontier of the war for more productivity. The weak link in the system of American capitalism at that time increasingly seemed to be the comparatively fragile body of the American worker.
Augustine Sedgewick:
That's why you get people like FW Taylor, who's studying the motions of workers at work in really minute detail in order to prescribe their most efficient ways of working. As it turns out, Taylor himself was not actually an advocate of coffee drinking. He opposed it just like he opposed drinking alcohol in the workplace because he was primarily concerned with consistency over time. He wasn't exactly sure what type of ... He couldn't control for the effects of coffee on the individual body, and so therefore he didn't want to recommend people drink coffee because he thought it might throw off the calibration of the system as a whole.
Augustine Sedgewick:
This was one reason why the coffee industry, Brazilian coffee growers and American coffee roasters alike, began to think that they needed to promote coffee specifically as a boon for workplace efficiency. It was by adapting the earlier Coca-Cola study to coffee and testing and proving its effectiveness as a work drug that they were able to do so in the twenties and beyond, starting to push for something that eventually workers came to push for also, which was the coffee break.
Josh King:
Speaking of the coffee break, the New York Stock Exchange building at 18 Broad Street has an employee cafe that provides free coffee. It's a nice perk that I miss while I'm social distancing. But you write about the hard economic numbers behind the cost of coffee and the improved performance of the employees, going back to FW Taylor. Why does it make sense for companies to provide not just the break itself, but actual coffee to their workforce?
Augustine Sedgewick:
Right. This was one thing that the coffee industry, specifically the Joint Coffee Trade Publicity Committee, was promoting for actually a century now, which is that they thought that companies should just give away coffee free to their employees because whatever the cost of the coffee itself was and the coffee service was, the companies who gave out free coffee would be repaid many times over with increased productivity, and that can pass the analytical muster at the New York Stock Exchange. There's certainly evidence certainly suggests that it's true.
Augustine Sedgewick:
We have a way of understanding coffee that we've adopted, in part from the coffee industry itself, which is that we judge coffee on the basis of its expected effects on our own bodies, rather than any concept of the effect of our coffee-drinking on others. That's not just true of coffee, that's true of almost any product, but it is indisputably true that we rely on coffee, many of us, including myself, rely on coffee for work, to do work. When work is sometimes the last thing we want to do, there's coffee to help us do it.
Augustine Sedgewick:
Yet we don't think of ourselves as relying on the work of someone else to do our own work. In other words, coffee itself is indisputably the product of someone's work, as well as the source of someone else's, but those who use it as a source of work, don't generally think of, "My work depends on the work of the person who made this thing exist."
Josh King:
We've hinted at it a couple times in our conversation, Augustine, but physiologically, what exactly is coffee doing to us?
Augustine Sedgewick:
One of the most extraordinary things about doing this research has been discovering, has been watching, ideas of the body change over time. As we mentioned, there arose in the middle of the 19th century, a new way of thinking about the body as an engine based on cycles of inputs and outputs that helped coffee make sense as a kind of work drug. We now, of course, have a much finer understanding of coffee's effects in the body and science has penetrated the human body even further, where we know that the caffeine in coffee serves as a kind of blocker of the neurotransmitters that make us feel tired and it serves to boost the neurotransmitters that make us feel good.
Augustine Sedgewick:
But I think my takeaway from looking at this much longer history of confusion over coffee's effects on the body is to say that those conclusions, our contemporary understanding, is provisional. It will certainly change over time and going forward. It may not change in a way that profoundly transforms our sense of what coffee does for us, but it will change, and all this knowledge about the body, it's really much more provisional than we're often encouraged to believe.
Josh King:
Thinking about coffee quality, it brings us back to the 1900s, El Salvador, James Hill, who won silver for his crop in the 1901 Pan-American Exposition. The country competed, and still does, with Brazil by claiming its crops have greater quality over the quantity of Brazil. What separates, in just a small geographic area, central American coffee from the Brazilian crop?
Augustine Sedgewick:
That's a great question. Brazilian crop tends to be grown on relatively flatter land, under full sun, which produces those values in the coffee bean that were most prized under the standards of the New York Coffee Exchange in the early part of the 20th century, like large beans, relatively even, relatively uniform, and all those things were a pathway to getting good coffee prices in the first part of the 20th century, especially.
Augustine Sedgewick:
Central American production is very different from that. It takes place on the sides of relatively steep volcanoes and at relatively high altitudes and under much colder conditions, often under shade, and those conditions tend to produce very different sorts of beans that have very different physical and chemical properties than the Brazilian. Valuing those differences has been the story of the fragmentation of the coffee market for more than a hundred years now.
Josh King:
James Hill introduced, I think back in 1910, a new type of tree that both increased the yields and also the usable acreage in El Salvador. You write that initially his fellow plantation owners were worried about its impact, but in the end, how did it work out?
Augustine Sedgewick:
One of Hill's innovations was to adopt in El Salvador a new type of coffee tree, the Bourbon, and this new tree was hardier than the typical variety grown in El Salvador at the time. It was viewed suspiciously at the time because its produce was a smaller bean varietal; it tended to be less distinctive than the typical trees. But it did have one great benefit, which was that it was hardier than the typical Salvadoran coffee trees, and it could be grown on land that had previously been unsuitable for coffee cultivation.
Augustine Sedgewick:
By adopting this new varietal, Hill was able to expand onto land that was relatively less valued that what had been the prized coffee land, so he transformed more and more of El Salvador's territory into coffee land by adopting this tree. Now, he also had to figure out how to deal with its limitations also, but he did so in part by sending his sons to study at the University of California at Berkeley, where they were worked with the leading experts in agronomy to try to increase the size of the bean of this relatively smaller coffee varietal.
Josh King:
Hill's contact through his sons to Cal Berkeley was typical for central American coffee producers. How did the close connections between the regions impact how the coffee industry evolved in the United States?
Augustine Sedgewick:
Yeah. That's a great question. Over time, Hill came to focus more and more of his family and his business on the United States and specifically on central America. The reason for that was, not only to establish trade routes and physical proximity, but also, the interest in central America, interest by central American merchants, of extending their range down into central America, where they were competing with European merchants. San Francisco merchants wanted to sell the extraordinary produce of California, wheat and fruit and products of all kinds, to as many places in the world as they possibly could, and that meant in part that they had to take the produce of those places, parts of the world, in turn, and in central America, that was coffee.
Augustine Sedgewick:
This is why San Francisco coffee importers developed this method of cup-testing coffee that increased the value of central American beans. But it also helped to, especially over time, strengthen the connections between people like James Hill, who were growing coffee in central America, and people like Folgers and Hills Brothers in San Francisco, roasters who became national chains in the first half of the 20th century, in part by finding value in central America and using their brands to distribute that value across the country as a high quality coffee product that would be distinctive from what people could get from Brazil.
Josh King:
As we wrap up, Augustine, Coffeeland covers over a century of El Salvador's history, not just the growth of the coffee industry, but the societal changes that were forced by geopolitical pressures and the arable land being consolidated under just these few families, supported by a government that was subject to military rule and several coups. Do you think coffee through free trade or other programs can help bring stability and prosperity to the entire population in a way that it didn't for so long?
Augustine Sedgewick:
I think it's an extraordinary opportunity to do that. I mentioned earlier that we have a way of thinking about coffee that primarily focuses on what we expect it to do to our own bodies, our own selves, without really accounting for what our coffee-drinking does to others. I don't think that's inevitable. I don't think it must be that way.
Augustine Sedgewick:
On the contrary, over the past 20 years, we've adopted a metric for understanding the environmental consequences of our behaviors and actions in a new way. I'm talking about the carbon footprint, of course, and this has been so powerful in encouraging people to change and modify their behaviors in ways that will be, in the long run, much more sustainable and better for the planet that we all share. At this moment, we don't have a comparable metric for evaluating the social consequences of our everyday behaviors and the everyday product we run on.
Augustine Sedgewick:
We could use coffee to develop a richer sense of how we depend on each other and therefore how to take care of each other. I think if one thing is suggested by this unprecedented, really unimaginable present moment is that we need a stronger sense of what we owe to one another and how to take care of each other.
Josh King:
How we take care of one another ... Talking about the carbon footprint, Augustine, current projections show that climate will wipe out 50% of coffee-growing plantations by 2050. Do you think some of the ingenuity from producers, nations, and science that led to coffee production's growth might be able to stave that off?
Augustine Sedgewick:
That's a relatively straightforward solution to one part of that problem. It seems very clear that there are many ways to get caffeine and not all of them have to come from coffee. If we can manufacture hamburgers in a lab right now, we can probably do the same thing with things that taste exactly like the most specific and specifically sourced micro-lot bag of coffee.
Augustine Sedgewick:
The impact of climate change on the coffee industry will be primarily a social one. People who have been able to make a living in coffee will no longer be able to do so in the same places, and they'll be forced to go elsewhere or try other things in order simply to provide themselves with the most basic necessities. It's already starting to be the case that part of the really dramatic migrations from central America that we've seen in the last handful of years have been driven by exactly this type of climate change, leading people to seek more secure, better lives, under really desperate circumstances.
Josh King:
So much to think about, Augustine, as we wrap up our conversation, wrap up the morning, look forward to maybe an afternoon cup of coffee to keep us going on through the end of the day during these extraordinary times. Thanks so much for joining us Inside the ICE House, taking a little break from your two year old, and really appreciate talking to you today.
Augustine Sedgewick:
It was my pleasure to be with you. I thank you for having me and most of all, thanks for the really thoughtful questions. It was my pleasure.
Josh King:
That's our conversation for this week. Our guest was professor Augustine Sedgewick. He's the author of Coffeeland: One Man's Dark Empire and the Making of our Favorite Drug, available from Penguin Press on your favorite online retail website or your bookstore, if they allow driving up to the door and picking it up.
Josh King:
If you like what you heard, please rate us on iTunes so other folks know where to find us. If you've got a comment or question you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet us @icehousepodcast.
Josh King:
Our show is produced by Damon Level, Pete Asch, and production assistance from Steven Romancek, and Ian Wolff. I'm Josh King, your host, signing off from the library of the New York Stock Exchange, remote location, Catskills, New York. Thanks for listening. Talk to you next week.
Speaker 1:
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