Food aid and impact on developing economy
People are hungry, not for lack of food. Enough food is available to provide at least 4.3 pounds per person a day worldwide: two and half pounds of grain, beans and nuts, about a pound of fruits and vegetables, and nearly another pound of meat, milk and eggs. Appallingly enough, now eight hundred fifty million people worldwide are suffering from chronic malnutrition. Ironically, we are in hunger amidst abundance of food.
Food aid is usually free, subsidised, or below market prices, which undercuts local farmers, who cannot compete and are driven out of jobs and into poverty, slanting the market share of the larger producers such as those from the US and Europe. Highly mechanised farms on large acreages can produce units of food cheaper than even the poorest paid farmers of the Third World. When this cheap food is sold, or given, to the Third World, the local farm economy is destroyed. When hunger's roots are to be found in the inability to purchase available food, and in the lack of access to available food, then such food "aid" doesn't do much for addressing such issues.
First World countries can afford food aid as they have surplus as a result of huge agri-based subsidy and provide the hungry nations the "generous assistance." Europe subsidises its agriculture to the tune of some $35-40 billion per year, even while it demands other nations to liberalise their markets to foreign competition. The US also introduced a $190 billion dollar subsidy to its farms through the US Farm Bill, while inexorably criticised any other nations' protectionist measures. Such is the double standard of the developed countries that it forces developing nations, through the Western-dominated WTO and IMF, to open up their economies when their agriculture sector is the most subsidised in the world.
In Jamaica, some 3,000 poor dairy farmers are being put out of business because of unfair competition from heavily subsidised European milk dumped on their market. The subsidies on the 5,500 tons shipped annually cost the European taxpayer $3 million. Many of the farmers are women running their own small businesses. They are literally throwing away thousands of litres of milk from overflowing coolers. Many are leaving the industry that has supported their families for decades.
In 1986, Haiti imported just 7,000 tons of rice, the main staple food of the country. The rest was grown in Haiti. In the late 1980s, Haiti complied with free trade policies advocated by the international lending agencies and lifted tariffs on rice imports. Cheaper rice immediately flooded in from the United States where the rice industry is subsidised. By 1996, Haiti was importing 196,000 tons of foreign rice at the cost of $100 million a year. Haitian rice production became negligible. Once the dependence on foreign rice was complete, import prices began to rise, leaving Haiti's population, particularly the urban poor, completely at the whim of rising world grain prices. A hungry nation thus turns hungrier.
The International Relations Centre (IRC) notes the profit motive behind food aid dumping: "Agro-exporters such as Cargill and Archer Daniels Midland, which provide one-third of US food aid, and US charity organisations such as Care, World Vision, and Catholic Relief Services, which account for four-fifths of food aid delivery, directly collaborate with and benefit from this" food aid policy.
When US levels of assistance last boomed, under Ronald Reagan in the mid-1980s, the emphasis was hardly on eliminating hunger. In 1985, Secretary of State George Shultz stated flatly that "our foreign assistance programs are vital to the achievement of our foreign policy goals.". But Shultz's statement shouldn't surprise us. Every country's foreign aid is a tool of foreign policy. Whether that aid benefits the hungry is determined by the motives and goals of that policy -- by how a government defines the national interest.
Aid is used as a lever to impose structural adjustment packages on the third world. Since the 1980s, US foreign assistance worldwide has been conditioned on the adoption of structural adjustment packages designed by the WB and IMF. Making a grant or loan conditional on some action being taken by the recipient is called "conditionality." Conditionality works by "tranching" economic assistance packages -- that is, dividing the total sum to be donated or loaned to a recipient country into a series of smaller disbursements to be made over time, called tranches. Before each disbursement is made, the recipient must make policy changes spelled out in the "covenants" of the aid agreement that they must sign with USAID.
Between 1982 and 1990 nine US economic assistance packages provided to the Costa Rican government contained 357 covenants that made disbursement conditional on more than twenty structural changes in the domestic economy. These included eliminating a grain marketing board that assisted small farmers; slashing support prices for locally grown corn, beans, and rice; allowing more imports from the United States; easing regulations on foreign investment and capital flows; and complying with specific clauses in similar agreements signed with the WB and the IMF. Such conditionality works in a carrot-and-stick fashion.
The Food for Progress program, another type of food aid, was created in 1985 to reward governments who undertake structural adjustment programs. According to the enabling legislation, Food for Progress was "designed to expand free enterprise elements of the economies of developing countries through changes in commodity pricing, marketing, import availability, and increased private-sector involvement." In other words, food is once again being used as a lever to open markets for US-based corporations.
Of the 850 million hungry people worldwide, a third of them live in India. Yet in 1999, the Indian government had 10 million tons of surplus food grains: rice, wheat, and so on. In the year 2000, that surplus increased to almost 60 million tons -- most of it left in the granaries to rot. Instead of giving the surplus food to the hungry, the Indian government was hoping to export the grain to make money. It also stopped buying grain from its own farmers, leaving them destitute.
The farmers, who had gone into debt to purchase expensive chemical fertilisers and pesticides on the advice of the government, were now forced to burn their crops in their fields. At the same time, the government of India was buying grain from Cargill and other American corporations, because the aid India receives from the World Bank stipulates that the government must do so. This means that today India is the largest importer of the same grain it exports. It doesn't make sense -- economic or otherwise.
While it costs approximately $400 to send a ton of food to Africa. IFAD estimates that for $200 it can enable small landholders to produce a ton of additional food for each year for a lifetime (US House Select Committee on Hunger, 1985). Aid needs to be rethought and restructured, not necessarily withdrawn. But that will require fostering the political and economic changes necessary to make it possible for food aid to really make a difference. To solve their food problems, Third World countries must become more inward looking and increase incentives to producers while protecting the lowest income consumers. Further, food aid must be made a small part of a country's overall food strategy, should primarily be used to multiply the opportunities for productive work and should be more strictly attuned to seasonal needs.
The news headline: "Eyes on relief, no heart for work" in The Daily Star on December 5 alleging that the labourers of the Sidr affected area are giving up the little works available, choosing to line up for hours to obtain relief materials instead, did not surprise me. It is just the signal of a greater catastrophe as an upshot from the foreign "food dump" and a more ruinous sequential events to follow to further cripple our impoverish economy if the food aid continues prolong.
Poverty and hunger are not just simple economic issues then; they are results of complex factors and decisions and aspects of a political economy; an ideological construct. Food aid, even though it is a worthy cause in emergency, does not help impoverished nations if lasts longer; rather it hurts them. The giving of free food can undermine an agriculturally-based developing economy. The free food hurts local farmers. They cannot earn enough money from their crops because people are getting food for free. This hinders an economy and allows poverty and dependency on other nations to continue.
Dr Zulfiquer Ahmed Amin is a Physician and Specialist in Public Health Administration and Health Economics.