Fair Trade Reveals Dirty Secret about the Rwandan Genocide

Rwanda provides a powerful study of the negative societal impacts of free market inefficiencies. The genocide of 1994 resulted from a series of events significantly exacerbated by the collapse of the International Coffee Agreement. In 1993, the price of coffee had plunged after the collapse of the agreement in 1989, and from its window of $1.20 per pound, sold at well below $0.80 per pound, with a low of about $0.40 in mid-1992.46 Farmers had to sell their coffee to Rwandex,47 the government controlled exporter, in a monopsony situation.48 Many farmers pulled out their coffee trees to grow other crops because of the low prices.49 The price collapse devastated rwanda’s major source of income, and led to famines.50 In light of difficulties in paying international obligations, in september, 1990, the International Monetary Fund stipulated structural adjustment policies such as currency devaluation and social service cuts, which led to a number of difficult conditions like inflation.

Read more at : http://www.nyu.edu/pubs/anamesa/archive/spring_2008_violence/the-real-price-of-coffee.pdf