The Economics of Food Aid
Very interesting story in the NYT about how the international charitable organization CARE is turning down $45 million in food aid from the U.S. government. They are concerned that sales of the food overseas–which charitable groups use to finance their activities–may undermine local farmers:
Under the system, the United States government buys the goods from American agribusinesses, ships them overseas, mostly on American-flagged carriers, and then donates them to the aid groups as an indirect form of financing. The groups sell the products on the market in poor countries and use the money to finance their antipoverty programs. It amounts to about $180 million a year….
The Christian charity World Vision and 14 other groups, which call themselves the Alliance for Food Aid, say that CARE is mistaken; they say the system works because it keeps hard currency in poor countries, can help prevent food price spikes in those countries and does not hurt their farmers. Not least, they argue, it also pays for their antipoverty programs.
But some people active in trying to help Africa’s farmers are critical of the practice. Former President Jimmy Carter, whose Atlanta-based Carter Center uses private money to help African farmers be more productive, said in an interview that it was a flawed system that had survived partly because the charities that received money from it defended it.
Grist for the mill in the ongoing debate about whether nations in African need more aid or more business development–and how, if aid is to be part of the picture (as it surely must be), what the best way to provide it is.
A piece in the WSJ last year talked about the same issues and the downside of U.S. Governemt policy in this area, but that was before CARE made its decision. When the NYT and the WSJ agree, that is perhaps reason to think, at least. Personally I think CARE made the right choice. I hope an informed public will support them.
I am not an economist, but as the Times article points out, the American products involved are often heavily subsidized. So American agribusiness is getting subsidized, American prices are being held artificially high, and African farmers are being undercut (if CARE is correct). If this is charity, it looks like it may only be charity for American agribusiness.
Charity it is for the farmers, shippers and others as it was for the banking industry when they practically ruined banking by aggressively illegal tactics. The CEO of Citibank, recently, brazenly bragged about how he deserves his money and superiority, not noting how the government helped his company when it was wallowing. The bankers are in trouble again and let’s see how much welfare they get this time.
But the worst and despicable crime is how the world’s poor are neglected because of greed. Very few seem to be moved that 5,000,000 children a year do not make it to the age of five because they lack basic food and medicine. There is a “Humanae Vitae” for you. It does cry to heaven.
Here is a striking example of where charity is big business and how so many make a living off the backs of the poor. What is painful is that the farmers are so strongly entrenched that it would be like revising the constitution to change this immensely wasteful program.
Very meaningful are the words of one of the former vice presidents of Care: “They recalled that the senior vice president, Patrick Carey, who has since died, cautioned them that leaving the system would be like “an act of partial suicide” for the nonprofits.
Care should be praised. They did something very few organizations do. They put the served people above the servors.
The NYT article said that Catholic Relief Services has not made the same decision as CARE. I believe that CRS is a very responsible organization that I happily support. I’m more than willing to give them the benefit of the doubt, at least for now.
I believe, though I’m not certain, that CARE’s decision is similar to the policy OXFAM America has followed for some years, in not using government food. Among other things, that has led to OXFAM being downgraded on sites like Charity Navigator, because it makes them look as if they spend far more on program expenses than is in fact the case; I wonder if CARE will suffer the same hit.
No doubt someone more familiar with the economics of charity can straighten me out if I’m wrong.
It seems to me from the Times article that there are good arguments on both sides, and it would be premature to bless one and condemn the other.