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Foreign Aid: Famished for Credibility

By Jens F. Laurson and George A. Pieler

There’s been a good deal of blowback against Wikileaks, but who didn’t enjoy the juicier parts of the disclosures? 

Among them is the revelation that the US used foreign aid to essentially buy votes for last year’s Copenhagen summit on climate change.  It’s a useful tale that reminds us why everyone should drop their illusions about foreign aid.

Many sincere aid advocates perceive it solely as a means of alleviating poverty and preventing starvation. But that’s not quite so.  Aid is first and foremost an instrument of national policy, and often serves as a convenient cover for the hypocritical policies of many aid-giving nations. 

Consider the perennial scandal of agricultural subsidies. The EU and the US, equally egregious offenders, send billions of dollars to their own farmers for reasons rooted in domestic politics, usually excused on grounds of national security. With a worldwide food trade that easily provides basic sustenance for the vast majority of people in the developed world, the quaint notion of self sufficiency seems amusing – or would, if it weren’t used to justify so much death and disease.

The truth is that robust support for domestic food production in the developed world puts developing countries in a vise-like grip.  It undermines their ability to produce for export markets in the vital agriculture sector, where ­–  in a truly open market – they would have a competitive advantage. On top of that, subsidized food exports from OECD nations to the developing world hamper the indigenous agricultural market in less-advanced nations. Ironically, nothing starves so many people as providing free food.

Subsidizing domestic agriculture to the tune of some $252 billion – the amount OECD countries devote to such subsidies – while claiming to assuage foreign suffering with comparatively meager amounts – for example, $27 billion in aid for African countries – is like bopping somebody on the head, then offering a couple of aspirins. For purchase, of course.

During last November’s G20 summit in Seoul, numerous ways to reduce food price volatility were discussed.  As always, the prospect of freer trade in agricultural goods was on the table, along with cutting developing country constraints on food exports,. Yet these approaches have been under consideration since the Doha Round of trade-opening negotiations began in 2001. Nothing has happened then, and nothing happened at this G20 meeting, either.

When the hot global debate is about currency wars – not good for the developing world, either – agricultural trade and aid seem like pre-crash concerns. They’re not: in a recession, food aid is a more critical issue than ever. When there is less wealth being created, those with the least have the most to lose.

But if every crisis is truly an opportunity, is there a silver lining in the agricultural aid-trade conundrum? With the developed world facing tight fiscal restraints for the foreseeable future, is there not a stronger-than-ever case for cutting the vastly expensive farm subsidies and pressing harder for opening the doors to agricultural imports from less developed regions in Africa, Asia, and Latin America?  When food subsidies are really aimed at quality-of-life concerns – keeping cows contented on quite pastures, stocking our upscale markets with organic Belgian endive – they should be decoupled from production controls and the size of landholdings. 

Savings from harmful agriculture subsidies will ease pressure on hard-pressed national budgets, and surely help the aid-giving, market distorting nations achieve a bit of moral clarity. A little bold action from the developed world can increase wealth everywhere, from Fiji to the Falklands, based on the simple, time-tested principle of comparative advantage. Unless we break the aid-dependency-donor-complacency nexus, food-haves and have-nots will remain exactly where they are today. Are we really prepared to live with that? 

Jens F. Laurson is Editor-at-Large of the International Affairs Forum.  George A. Pieler is an attorney and graduate of the Woodrow Wilson School.

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Anonymous's picture
The why and wherefore of farm subsidies


While the authors' motivation of alleviating world hunger is laudable, and it is indeed silly for wealthy nations to proffer so little in foreign development aid, I have a fundamental disagreement with the tenor of this article. Despite the US subsidy programs' being an easy target for international aid advocates, the programs do have a logic and a reason for being. I don't agree with the authors' implication that concern for national security and food sovereignty is somehow a quaint, primitive vestige of a pre-globalized world. Indeed, the conditions of abundant fossil fuels and general world peace and good will that have allowed widespread trade in food are by no means assured in the foreseeable future. Opening wealthy country markets to Third World agricultural exports could have a slight benefit for poor country farmers, but I have yet to see solid historical evidence of any country's developing primarily based on agricultural exports. Even today's wealthy nations that are large agricultural exporters (the US, France, etc.) developed by protecting their national agriculture, industry, and trade, and only after consolidating a powerful position in the world did they open up their borders. Even without subsidies, a highly-mechanized US farmer working hundreds or thousands of acres of one crop is better able to survive through low per-acre profits than is the typical small Third World farmer (even though the former's per-acre productivity is actually very low and inefficient compared to the latter). This means that opening wealthy countries to poor country ag products would not confer a comparative advantage on the poor country farmers for most staple crops. Such comparative advantage would exist mainly for specialty, luxury, niche, or tropical crops like mangoes, quinua, out-of-season vegetables, acai berries, or tea. Because these crops are not staples or even remotely necessary to rich country inhabitants, demand for them is fickle and highly elastic. Hardly the bases upon which to construct a prosperous society! So it would seem that the real key for Third World development isn't for wealthy countries to protect their own agriculture less, but rather to allow poor countries more autonomy and sovereignty to ensure their own food security, through a mix of protecting national production and allowing some imports. You can read more about the whys behind US farm support policy in this excellent short article from RAFI USA: http://www.rafiusa.org/docs/Farm%20Bill%20Tree.pdf
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