Cocoa and Chocolate, 1765-1914

William Gervase Clarence-Smith

• Publisher: Routledge
• Year: 2003
• Topic: Economics
• eBook ISBN:
  9781134607778
• Subtopic: Historical Geography
• Index: Economics

Cocoa and Chocolate,1765-1914 focuses on the period from the Seven Years War, to the First World War, when a surge of economic liberalism and globalisation should have helped cocoa producers to overcome rural poverty, just as wool transformed the economy of Australia, and tea that of Japan. The addition of new forms of chocolate to Western diets in the late nineteenth century led to a great cocoa boom, and yet economic development remained elusive, despite cocoa producers having certain advantages in the commodity lottery faced by exporters of raw materials. The commodity chain, from sowing a cocoa bean to enjoying a cup of hot chocolate, is examined in Cocoa and Chocolate, 1765-1914 under the broad rubrics of chocolate consumption, the taxation of cocoa beans, the manufacture of chocolate, private marketing channels, land distribution, ecological impact on tropical forests, and the coercion of labour. Cocoa and Chocolate, 1765-1914 concludes that cocoa failed to act as a dynamo for development.

1
THE COMMODITY CHAIN

Studying a commodity chain is like cutting a cross-section through history (Gereffi and Korzeniewicz 1994; Topik and Wells 1998; Mintz 1985; Roseberry et al. 1995). The focus on a single product engenders a concentrated beam of light, illuminating hidden corners of the past, revealing unexpected connections between apparently discrete phenomena, and testing general theories against irreducible particularity. The main concern here is to understand the wealth and poverty of nations, using the cocoa-to-chocolate commodity chain in the liberal era as a litmus test for theories of economic development.

The nature of this commodity chain is best explained by extending Appadurai’s metaphor that commodities have a ‘social life’ (Appadurai 1988) to the idea that they also have a life cycle. Borrowing a title from a popular book on coffee, the life cycle of cocoa went ‘from plantation to cup’ (Thurber 1881). As chocolate was principally drunk rather than eaten before 1914, this is an apt summary of the chain that led from sowing a cocoa seed to the final enjoyment of a cup of hot chocolate.

In its ‘youth’, cocoa was a small and handsome tree, raised in hot and humid equatorial lands, and subject to the vagaries of tropical climates and diseases. The ways in which it was grown, and the economic advantages that rural areas derived from it, only partly depended on the skills of cultivators. The social relations regulating access to land, labour and capital, together with the mental models of social groups, profoundly affected this stage of the commodity chain. Cocoa might be grown on large estates, with slave labour, and as an intense monoculture. Free smallholders might also tend clumps of trees dispersed through the forest, which an outsider would not recognise as agriculture at all.

In ‘middle age’, cocoa took the form of fermented and dried brown beans, which could only be stored for about a year in the tropics before deteriorating. These beans were used as small change in Mesoamerica, giving rise to the quip that in this instance money really did grow on trees. More usually, sacks of beans of between 50 and 100 kilos were taken to workshops and factories. Far from being in an impersonal market place, these precious sacks were caught up in a network of social and political institutions, which determined how they were traded, transported and taxed, often in journeys that took them halfway around the world. Each agent in the chain attempted to maximise tolls, rents and profits, in the series of transactions that nudged sacks along from field to factory.

In its ‘old age’, cocoa was transformed once again, acquiring the name of chocolate. The British confusingly refer to many chocolate beverages as ‘cocoa’, but this book follows the traditions of the Spanish-speaking world, reserving the term cocoa for the raw material and semi-manufactures, and the term chocolate for what is consumed. To make chocolate, the beans were roasted, ground, and mixed with sugar and other ingredients. Chocolate might then be further transformed into a multitude of products by the beverages, confectionery and baking trades. Once ready for sale, chocolate was subject to more taxes, and passed through another network of wholesalers and retailers. Then chocolate ‘died’, in the act of being consumed.

The origins: producers, the state and development

At the beginning of the commodity chain, the chief question is why cocoa cultivation seems to have failed to generate economic ‘take-off’. BulmerThomas (1994) notes that Latin American countries faced a ‘commodity lottery’, resulting from the specific characteristics of commodities and the contexts in which they were produced and traded. Embroidering a little on his thesis, one can say that the ideal agricultural staple yielded numerous forward and backward linkages, significant transfers of technology and skills to other sectors, and a supply of foreign exchange. Sold on the local market, the crop eliminated imports and lowered the cost of living, and thus the wage rate. In terms of the wider economy, it yielded ample revenues for a developmental state, and good incomes for entrepreneurs willing to invest locally. More widely still, the ideal staple did not damage the environment.

In terms of linkages, narrowly conceived, cocoa ranked rather low. There were few backward linkages, as simple hand tools sufficed for cultivation, and rare attempts at mechanisation of field operations failed. Forward linkages were potentially more substantial, and yet were often disappointing. Even new transport links were not of much significance before 1914, as a relatively high value-to-bulk ratio favoured pre-industrial modes of transportation. The mechanisation of primary processing, often attempted, rarely enjoyed much technical success, and generally failed economically. Chocolate factories represented the greatest forward linkage, promising skilled employment, a stimulus to the maintenance and manufacture of machinery, a lower cost of living in chocolate consuming countries, and export revenues. There were more chocolate factories in tropical countries before 1914 than is usually appreciated, but fixed capital formation was generally low, and they never exported on any scale.

The bright side to this picture was that low inputs and imports were a tremendous advantage for poor countries chronically short of capital and foreign exchange. However, this advantage was lost when intensive production on estates was attempted. As there were no economies of scale in cultivation and primary processing, such estates pushed up the import bill and leaked profits abroad, with no compensating increase in productivity.

From a dependency perspective, international power relations should have cheated ‘peripheral’ governments and entrepreneurs of most export proceeds (Gereffi and Korzeniewicz 1994:2–3, 17–50). However, Western governments did not intervene with the intention of reducing the price of cocoa, even though their fiscal and protectionist policies at times depressed demand for chocolate, especially before 1850. At other times, supply and demand worked well, and cocoa provided bountiful returns. Paradoxically, it was planters based in the tropics who did the most to reduce returns from cocoa exports, through misguided attempts to force up prices in the short term.

Bad governance was more of a problem. Independent states were prone to squander money deriving from the ‘golden bean’, whereas colonial authorities lacked vision as to how to invest the proceeds. Harmful policies included failing to protect the forest, favouring estates, allowing labour coercion, discouraging savings, restricting immigration, allowing cartels, and interfering in marketing. Over and above all this, many governments taxed heavily and indiscriminately, while failing to provide essential public goods.

The ability of cocoa to generate a steady flow of capital for the wider economy suffered from marked price volatility. The root cause was sharp variations in supplies, a problem common to all tree crops. Vulnerable ageing cocoa trees fell victim to sudden and unpredictable natural disasters, causing prices to shoot up. This incited producers to plant new trees in a rush, but there was a lag of several years between planting and full production, longer for cocoa than for many other tree crops. Prices thus stayed high for some time, provoking a surfeit of new planting. This eventually led to gluts and brought prices right down. If producers then compensated by ceasing to plant, the cycle moved in reverse, eventually pushing prices up to dangerously high levels again. This endogenous cycle might have levelled out over time, as producers learned to anticipate its effects, helped by better communications and more transparent markets. Unfortunately, exogenous factors kept setting it off again, not least when attempts were made to boost prices by withholding stocks or limiting planting.

Another liability of cocoa was its voracious appetite for virgin forest, possibly greater than that of any other tropical tree crop. Pioneer cocoa cultivators clearing virgin forest held the trump cards. They benefited from fertile virgin soils, further enriched with the ashes of burned vegetation. The initial clearing of the land could be quite expensive, but this was offset by sales of timber and firewood. Few weeds grew in recently cleared soils, giving young cocoa seedlings a good start in life, and such lands enjoyed low concentrations of the many pests and diseases specific to cocoa. When large expanses of forest remained standing within the region, rainfall may also have been more abundant and better distributed across the year. Producers seeking to replace decrepit old trees in the same location faced a diametrically opposed scenario, necessitating substantial and costly additional inputs of labour and capital. Even planting cocoa in lands previously used for other crops was rarely successful. Land could be left fallow for twenty years or more, but forest regenerated slowly and incompletely, and it was usually more economical to use it for other crops or for pasture (Ruf 1991; Ruf 1995; Clarence-Smith and Ruf 1996).

The existence of this ‘forest rent’ had unfortunate consequences, in terms of both markets and ecology. Cocoa cultivation was effectively a wasting asset, rather like mining, and the cocoa frontier was driven restlessly along, sometimes ‘jumping’ huge distances from one continent to another. This exacerbated uncertainties in supply, contributing to price volatility. In the longer term, cocoa represented a threat to the very existence of the tropical forest, and thus to gathering activities, biodiversity and climate. To be sure, the ecological impact of the cultivation of cocoa and other tropical tree crops has only recently reached a crisis point, but negative effects were experienced in limited areas as early as the eighteenth century, notably in small tropical islands (Grove 1995).

The missing links: traders and shippers

The intermediary stages in any commodity chain are usually the most obscure (Laan 1997). There are several published histories of cocoa plantations and chocolate manufacturers for the period before 1914, but those on intermediaries are few and far between (Greenhill 1972; Greenhill 1996; Harwich Vallenilla 1996). Historians attracted to the world of intermediaries have rarely looked at their role in handling a single commodity. Thus a magisterial study of eighteenth-century Bordeaux has a single passing reference to cocoa, leaving the reader to guess who dealt in this commodity (Butel 1974).

Too little is known about the peddlers and storekeepers who bought cocoa beans, or the muleteers, boatmen, cask-rollers and porters who brought them to commercial centres. The same can be said of the merchants who exported beans, and the shippers, who usually hired their services but sometimes owned the cargo. However, even less is known about commercial networks in importing countries, and their ramifications overseas. Merchants, or dealers, bought cocoa to sell to manufacturers, sometimes selling beans that they had not yet acquired. Brokers did not own beans, but earned a commission by arranging sales, sometimes representing both sellers and purchasers. Agents acted for one of the parties, usually chocolate manufacturers (Dand 1993:97–100).

Intermediaries were potentially vulnerable to being cut out by producers of either chocolate or cocoa. Chocolate manufacturers sometimes purchased beans directly, and occasionally invested in plantations. Conversely, owners of some large estates marketed their beans, and one enterprising Surinam planter set up a chocolate factory in the Netherlands (Schrover 1991:183). However, complete vertical integration was rarely attempted and never successful. Even the adoption of intermediary functions by manufacturers or planters was relatively uncommon, as the economic logic of specialisation told against the practice.

From the information available, accusations of speculation at intermediary levels in the cocoa chain were rarely well founded before 1914. There were attempts to corner the market, and further research would probably unearth more examples, but barriers to entry were low and competition was intense. Indeed, traders and transporters may have been the most efficient links in the commodity chain. Only when estate owners intervened to push up cocoa prices from the 1890s was there major malfunctioning in the market.

Intermediaries were open to accusations of collusion and speculation, because they formed small and tight knit communities of trust. Given high risks and delayed returns, problems which were only slowly and incompletely resolved before 1914, the question of agency was crucial. Relying on ethnic and religious norms, communities threatened members with exclusion, equivalent to ‘social death’. Once the danger of untrustworthy agents was reduced, the costs of doing business fell. However, the widespread notion that competition was thereby eliminated is false. No entrepreneurial community could survive unless it encouraged fierce rivalry, not only with other specialised communities, but also within its own ranks (Dobbin 1996).

The end of the line: manufacturers and consumers

Accusations of cartelisation have been as frequent, and somewhat better documented, at the stage at which cocoa beans were turned into chocolate. Small workshops prevailed initially, and large Western chocolate companies only began to emerge from the 1850s, exploiting new economies of scale in roasting and grinding. They produced finished chocolate, cocoa butter and cocoa powder, the latter two sold to other manufacturers. Unsweetened plain chocolate was bought by a plethora of confectioners and bakers, many of them self-employed.

This process of concentration did not automatically entail collusion and cartels. The only exhaustively studied national chocolate industry is that of Britain, where the three largest firms reached agreements on pricing and advertising, assisted by close ties between inter-related Quaker manufacturers. However, these agreements were limited in scope and not very effective prior to 1914 (Fitzgerald 1995). Moreover, the links between British firms were exceptional in their intensity, and were not replicated in the chocolate industries of the Netherlands, Switzerland or the United States (Schrover 1991; Heer 1966; Brenner 1999). The existing evidence points to equally loose connections in other countries.

Chocolate was subject to unpredictable whims of fashion, much affected by competing products. The Western temperance movement was a powerful ally, springing originally from Protestant strictures against ‘demon alcohol’. However, the temperance movement also favoured tea and coffee, and other non-alcoholic beverages were popular in some corners of the globe. Technical change played a part in the never-ending competition for market share, albeit a lesser one before the 1880s than is generally claimed. Product diversification and advertising, the latter precociously developed in the case of chocolate, had equal roles to play, although both were costly and risky strategies.

Chocolate was prey to fiscal pressure and protectionist regulations. Customs duties on cocoa beans and sales taxes on prepared chocolate were crushing in the mercantilist era, as luxuries were deemed fit to bear a heavy burden. Although liberalisation began to gather pace from 1765, it suffered a temporary reversal in the wars of the end of the century, and its tempo was highly diverse, both geographically and chronologically. The temptation to tax this discretionary item in people’s consumption was always there, only tempered by a fear of political unpopularity.

The liberal era as a unit of study

The age of liberalism is of special interest because it provided cocoa’s best chance of acting as a dynamo for development. The gradual freeing of commodity markets, the growing mobility of labour and capital, and an ever more stable single currency (gold), offered cocoa producers a chance to benefit from rising Western consumption of chocolate, itself driven by the impact of free trade. To be sure, the extent to which this opportunity was seized was conditioned by a gap between the liberal ideal and the reality on the ground, but it mainly reflected the ability of historical actors to grasp this prospect.

The onset of the liberal era was not clearly marked. Reforms in the Spanish empire, by far the largest cocoa producer at the time, began in a small way with the accession of the Bourbon dynasty in 1700. However, it took humiliation in the Seven Years War of 1756–63 to give Spain a new sense of urgency. The 1765 Spanish decree on colonial trade is thus taken as the starting point for this book. To be sure, reforms went into reverse with the outbreak of the French Revolutionary Wars in 1793, and recuperation after the wars was painfully slow. Free trade did not really prevail until the middle of the nineteenth century, and its triumph was incomplete. The doctrine was increasingly questioned from the 1880s, although some of its fruits continued to develop up to 1914 (Capie 1994).

Another reason for focusing on the century and a half from 1765 to 1914 is a curious gap in the historiography of cocoa. Much has been written about pre-Columbian cocoa, the Spanish destruction of the Mesoamerican economy, Baroque Europe’s love affair with chocolate, and the Iberian privileged companies of the eighteenth century. A slowly thickening fog then falls over historical writing, becoming most dense during the depression of the 1820s to the 1840s, and only dissipating slightly during the subsequent partial recovery of the world cocoa market up to the 1870s. Indeed, cocoa forms one of the greatest gaps in the post-independence economic historiography of Latin American commodities (Bulmer-Thomas 1994:36). At the same time, the spread of cocoa to Africa and Asia prior to the 1880s has been neglected. The great boom of the 1880s to 1914 has been better covered, although the world’s first specialised cocoa journal, Der Gordian, was written in German, and thus remains a neglected source for many authors from cocoa-producing countries.

The existence of this ‘black hole’ is particularly unfortunate, for the commodity chain altered dramatically in this era. As the volume of cocoa production increased prodigiously, techniques of cultivation actually became less intensive. Whereas cocoa was mainly grown by slaves on estates in 1765, coerced labour was fading away by 1914, and it looked as though estates were going the same way. The individual merchant, controlling the chain from the purchase of beans to final sale, was replaced by a host of specialised intermediaries. Productive units evolved from small pharmacies and workshops into large mechanised factories, employing thousands of people. In the West, chocolate was transformed from a heavily taxed luxury for wealthy aristocrats into a moderately priced item in the weekly budgets of industrial workers. This process was quickened and deepened as chocolate became widely consumed as a food.

These tumultuous changes were accompanied by great shifts in the geographical location of cocoa production. The Iberian conquest of the New World had already spread cocoa cultivation from its Mesoamerican origins to northern South America, turning Venezuela into the world’s main producer. The onset of the liberal era witnessed the triumph of Ecuador, with the Brazilian Amazon jostling for second place. As the nineteenth century wore on, a trio of New World territories challenged for the number one spot: the Brazilian state of Bahia, Trinidad, and the Dominican Republic. A greater threat came from Africa. The Portuguese island colony of São Tomé and Príncipe briefly became the world’s largest producer in 1905, and The Gold Coast [Ghana] took a sustained lead in 1911. However, confident predictions that the Asia-Pacific zone would prove a formidable contender failed to materialise at the time.

Geographical shifts in output were paralleled by equally revolutionary changes in the spatial distribution of consumption. Following the Iberian conquest of the New World, consumers were mainly located in southwestern Europe and the lands bordering the Caribbean, with the Philippines as a distant outlier. This pattern only began to change from around the 1860s, as industrialisation and urbanisation turned the northern zones of America and Europe into the largest industrial transformers of cocoa ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of illustrations
• Preface
• Acknowledgements
• 1: The commodity chain
• 2: The consumption of chocolate
• 3: Taxation, regulation and war
• 4: The chocolate industry
• 5: Commercialisation and credit
• 6: Access to forested land
• 7: Modes of cultivation
• 8: Coerced and free labour
• Conclusion: lessons from the past
• Appendix 1: cocoa prices
• Appendix 2: cocoa exports
• Appendix 3: cocoa output in selected countries and decades
• Appendix 4: weights, measures and currency
• Appendix 5: maps
• References