Monday, November 22, 2010

Çaliskan, Market Threads

We all know that cotton prices have been soaring. Or do we? Koray Çaliskan’s Market Threads: How Cotton Farmers and Traders Create a Global Commodity (Princeton University Press, 2010) is a fascinating study of the international cotton market. Its theoretical focus is the nature of price and how it is determined in a range of environments, from commodity futures markets to providers of indexed spot prices to the markets for buying and selling the commodity itself. In the process of developing this theme, the author takes us to the cotton fields of Egypt and Turkey as well as to the global markets and individual companies that buy and sell the physical cotton that is used in our cheap T-shirts as well as our 400-thread-count sheets.

Çaliskan challenges the classic model of supply and demand. In its stead he proposes that most prices are “prosthetic devices” that are “made, produced, and challenged by a multiplicity of actors in a market process that happens in a variety of trading places.” (p. 85) These prosthetic prices are trading tools that are used to make actual prices—that is, prices that normally result from bargaining and become contractual prices to buy or sell a certain number of bales of a particular variety of cotton.

If you are at all curious about how cotton is grown and harvested, how it is graded, and how it moves around the world this book is rich in detail. Çaliskan did fieldwork in Turkey and Egypt, sometimes literally working in the fields alongside local farmers. He spent time with cotton traders in these countries as well. He even enrolled in a two-month training program in Memphis, Tennessee, designed for future cotton traders.

A couple of random takeaways. Cotton farmers in Turkey sell their entire crop immediately after harvest to repay the loans they took out (rarely from banks) to grow the cotton; “growing cotton requires farmers to borrow heavily.” (p. 144) As a result, they are forced to sell into a market where prices are depressed. By contrast, as I recently learned, cotton farmers in the United States receive government subsidies to store their cotton until the price becomes more favorable.

Children, sometimes as young as seven, work in the fields performing such tasks as collecting cotton-leaf worm eggs and harvesting the crop. “There is usually no reward for good work, yet mistakes are punished either through defamation, or at times beatings. … An overseer told [the author] that he was warned by the field’s owner not to hit children’s hands, but their backs instead if necessary, for the hands are needed the most. … These small hands are perhaps the cheapest and most abundant labor force behind the making of a commodity for the world market.” (p. 172)

Although the author undertook extensive ethnographic research and shares abundantly, this book is really about the dynamics among the players that determine that illusive thing called price. It demonstrates in vivid detail how essential knowledge and bargaining skills are to finding a price and how far removed from reality the traditional model of supply and demand can be. All in all, an intellectually exciting book which I thoroughly enjoyed reading.

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