Jean-Baptiste Say is most famous for a “law” in which he is misquoted. Say is credited with the realization that production necessarily creates consumption, as in when you produce something, you are simultaneously creating the means through which to consume. Let’s say you make tables, in all likelihood you are doing so to create a mechanism of exchange. As long as you keep making tables, you also make more mechanisms for exchange. So, according to Say, over-production is theoretically impossible, as any hypothetical over-production means another commodity is being under-produced, in which case the market will eventually equalize production automatically. This notion was the driving force of supply-side economics for close to a century.
During the laissez-faire heyday of industrial capitalism, Say’s notions were considered gospel. These ideas were later both simplified, and strongly refuted by John Maynard Keynes, who synthesized Say’s Law into the more quotable “supply creates its own demand.” Keynes saw some fundamental flaws in Say’s Law: namely that it only really holds true in a barter economy. In the real world, sometimes people hold onto their money, (savings, or delayed consumption) causing legitimate production gluts which are a destabilizing force in the economy. Keynes argued that we do not live in a barter economy, but a monetary economy. Because of the “animal spirits” that govern investment, he argued that it was demand that mattered in an economy more than supply.
Around ten years ago, the specialty coffee industry was sounding much like a more chilled out Jean-Baptiste Say. “A rising tide lifts all boats!” was the most common saying around specialty coffee, and shops and roasters were coming up with novel ways to share the love like the disloyalty card idea that was bandied about in various coffee circles. The idea was simple: if customers drink more good coffee, they will want more good coffee. If more people want good coffee, then we all win. It was a gloriously simple idea, and one that had my full support at the time.
Perhaps what myself and others didn’t foresee at the time was a shift away from building demand, and instead a shift to a rapidly increasing supply. We didn’t foresee that advances in technology and information sharing would make it MUCH easier to make good coffee than it was a decade ago. We didn’t foresee that wages would stagnate across the industry, pushing ambitious coffee workers out of stable and established companies, and increasingly pressuring them to start their own enterprises. We didn’t anticipate multi-nationals mimicking specialty trends, and we certainly didn’t foresee the importance of brand as a signifier of quality in lieu of consistent consumer taste preferences.
Today, we have some of the same thought-leaders who were utilizing the “rising tide,” metaphor with full devotion, warning of a turning point. In our much lauded coffee meccas of Melbourne, London, and Portland, specialty coffee business owners are very rightly worried about the real possibility of over-saturation. Perhaps after all, Jean-Baptiste Say will be right. Perhaps there is no real point of saturation, and as long as we continue to deliver a good product, demand will be there to meet us. Of course, there is also the very real possibility that specialty coffee is due for a severe disruption, and that our course of expansion cannot continue in the way it has. Either way, there are fare too many livelihoods on the line to not have this serious discussion sooner rather than later.