Chocolates Bittersweet Economy

Chocolate’s Bittersweet Economy

Issues involved

The main issue discussed in this article is that of illegal child labor in the cocoa industry in the South Western Ivory Coast, Africa, mainly illustrated with the example of the small village Sinikosson. 70 percent of all cocoa beans are grown in Africa, and 40 percent alone in the Ivory Coast, making it the number one profit of the country. Villages lack electricity, running water, health services and schools, and the cocoa harvesting season is a rough climatic challenge where children work under brutal conditions.

Outside of Sinikosson, children, mostly under the age of ten, wield cocoa plants with machetes, handle pesticides and carry heavy loads at the cost of their education, health, and with severe consequences such as frequent work accidents. The parents of the children cannot afford school fees and hence, the children have to help feed the family, which prevents them from getting a proper education and harms their physique at an early age. Officially, Ivory Coast law bans child labor and the official working age is eighteen. However, there are several reasons and factors of why children still do not have the possibility to go to school and spend their time with hard labor instead.

Causes

Essentially poverty is the main reason for child labor in the Ivory Coast cocoa industry. If prices of cocoa are high, farmers can afford an education for their children. With incomes low, parents depend on government to provide for education, which in turn depends on the fiscal system fed by taxes from citizen's income. A vicious circle. Cocoa prices have been declining in recent years because of corruption and poorly planned economic liberalization. And if cocoa prices should rise in the next couple of years as a consequence of increased demand in China, India and other emerging markets and an increase in financial speculation on natural resources, who can be so sure that the Ivory Coast small cocoa producer will benefit from it? Some time ago, President Felix Houphouet-Boigny who has ruled over Ivory Coast from the late 50s to the mid 90s brought immigrants from the neighboring countries to Ivory Coast to produce cocoa, but without giving them a legal status. Through the cocoa planting, Ivory Coast became one of the most prosperous and stable countries in Africa, but President Houphouet-Boigny spent the profits on prestige projects such as the largest basilica in the world, instead of setting up education and social services, as well as giving subsidies to the farmers. This shows that in view of living conditions markets and prices, politics and governance are one complex issue that cannot be dealt with separately. In addition, Civil War broke out between 2002 and 2004, in which all the profits of the cocoa industry went to armed forces, creating misery for the common people. Cocoa quickly became a conflict resource called “Blood Chocolate”. Now after the war, Cocoa farmers are trapped in their villages since corrupt police demands bribes to let them pass and market their products in the cities markets. During the Civil War, child labor also increased, but it was almost impossible for organizations to monitor.

On the other hand, governmental bodies now collect three times as much taxes and money from the cocoa sector than before, but little money is spent on infrastructure and education. This is due to an even greater problem. According to Transparency, an NGO dealing with global corruption, the Ivory Coast government is ranked as one of the most corrupt governments in the world.

This leads back to the cocoa industry system itself. Big cocoa exporters such as Cargill, Archer Daniels Midland, Burry Callebaut and Sat-Cacao, do not own plantations themselves, but buy beans from middlemen called �pisteurs’ and �treton’. These middlemen own warehouses and flatbed trucks with which they travel deep in the jungle to buy cocoa from the small independent farmers. Hence, the big exporters are not directly involved with the issue of child labor, but more the government and the intermediaries who control the supply chain, profit margins and thus also income. This is one of the reasons why, in this case, corporate governance has not yet stretched out to the issue of fair prices and legal working conditions for the cocoa producers.

Financial support in the form of providing finance via credit does not seem to help either. Cargill, one of the big US companies provides working capital to buy fertilizers and private credit to support living but payback becomes a problem when prices fall. This might lead to increasing profits on Cargill's side, but also produces write-offs and misery. A debt burden tightens the budget in families and education becomes a dream from Nirvana. Children are put under even stronger work pressure and this is how financial assistance turns into supporting an illegal system. If farmers run the risk of not being able to pay, they get arrested without legal assistance. Cargill denies the wrongdoing, as they make their suppliers sign statements that no child labor is involved. However, they do not seem to have installed what one could call a social certification mechanism including on-site inspection and control. Trusting the local wheeler-dealer network by making them sign commitments seems like entrusting the crocodile with the protection of the BBQ steak rack and appears to be slightly naive to say the least. Ultimately, it must be the well-to-do western consumer who bans child labors by refusing to buy from marketers who are not "save hands" when it comes to child labor. And serving the client's needs is, after all, precisely what successful marketing is all about. This is how a fair farm gate price of cocoa becomes part of the corporate marketing strategy irrespective of any CEO's personal ethics. This will be the day when Cargill and the other exporters, will view their present indifference to price as income to make a living for suppliers as textbook economics from an unenlightened past where hip marketing to win the young who are part of a global media community was unknown.

Solutions provided in the article

After it became public that child labor still existed in the Ivory Coast cocoa industry, US congress-man E. Engel and Senator T. Harkin introduced a certification concept that companies would have to wean themselves from child labor and certify that they had done so, after the industry fought a labeling system for chocolate, where child labor produced chocolate was indicated. Now, there is public reporting by the African government and third party