Beyond the Food Aid Band-Aid

Washington is dramatically expanding food-aid programs as world prices spiral out of control. But the problem goes much deeper than that.

Last Thursday the Bush administration proposed a dramatic increase in American foreign assistance in response to the wave of global crises caused by rapidly rising food prices. Speaking at the White House, the president announced that he was seeking $770 million from Congress to support food-aid and development programs. These funds are in addition to the $200 million in emergency food assistance which the administration made available two weeks ago. Together with existing appropriations, the two measures will push the total amount the United States will spend on international food aid through 2009 to nearly $5 billion.

There is no denying the fact that, as observed by President Bush in his speech, "in some of the world's poorest nations, rising prices can mean the difference between getting a daily meal and going without food." According to the World Bank, food prices around the world have risen some 83 percent in the last three years. Exacerbating the shock, prices on some basic staples have spiraled in a matter of weeks. For example, the price of Thai grade B rice has risen from under $400 a ton at the beginning of this year to more than $1,000 earlier this week.

And soaring prices represent more than a humanitarain tragedy: they threaten to cause massive economic and political instability. Last week, World Bank Presdient Robert Zoellick warned that already some one hundred million people have been pushed back into poverty. Violent food riots have erupted in Africa, Asia and the Caribbean. Haitian Prime Minister Jacques-Edouard Alexis was ousted three weeks ago after demonstrations against the climbing price and scarcity of food. In one somewhat-comic attempt at self-inoculation against a similar fate, Egyptian President Hosni Mubarak ordered his army to stop drilling and start baking bread to ease shortages in the Cairo megalopolis.

There is no shortage of identifiable culprits for this mounting crisis. One is a sustained drought in Australia. But as Zoellick rightly declared, "This is not a natural disaster." William Tucker has noted in the Weekly Standard that biofuels, especially ethanol, bear a heavy responsibility. A full one-third of the American corn crop gets turned into ethanol thanks to a fifty-one-cents-per-gallon subsidy-cum-federal-tax-credit-and, to add insult to injury, the process produces a net energy loss. In his book Starved for Science, Wellesley College professor Robert Paarlberg shows how donors motivated by a romanticized view of traditional farming and an ideological bias against genetically modified crops have compounded the problem.

The food-aid policies of the world's developed countries, while laudable, are also to blame. A case in point: the U.S. government releases food aid that comes exclusively from wheat, corn, sorghum and rice grown by American farmers. While those facing starvation will undoubtedly be grateful for the food irrespective of the source, it's ludicrous to ship food halfway around the world while famine is imminent and oil prices are hovering around $110 a barrel. Furthermore, under law, American food aid must be transported on U.S. vessels, increasing the proportion of aid consumed by overhead.

Even without the extra costs of cargo shipping, buying staples on the American market undermines the economies of poorer countries-in the one area where their poverty might lend them a small comparable advantage, farming. In this year's State of the Union address, President Bush proposed an initiative that wold allow some food assistance to come from local farmers. While the commonsense measure would affect only 25 percent of U.S. food assistance, it has yet to gain much traction on Capitol Hill.

And while all these measures are welcome, they do not address a fundamental problem: subsidies for farmers in developed countries. These policies do more to retard food security-and general economic progress-in poor nations than almost anything else.

Right now approximately one-third of American farms receive direct subsidies from the federal government in programs involving cotton, corn, rice, soybeans and wheat. The money is not distributed equally: about three-quarters of the subsidies are collected by 10 percent of those receiving subsidies, each with an average net worth of $2.5 million a piece-five times that of the median American household.

Even the subsidy to the one non-foodstuff among the "big five," cotton, has a direct impact on global welfare. Cotton accounts for at least two-thirds of agricultural revenues in some of the poorest countries in the world-places like Benin, Burkina Faso, Chad and Mali. If this subsidy, which costs taxpayers between three and five billion dollars annually, was eliminated, world cotton prices would increase by 6-14 percent, while West African cotton farmers in particular would see a 5-12 percent increase in their incomes. That would substantially increase the living standards of some ten million people. The extra $46 to $114 per family annually may sound small, but that amount is the equivalent of school tuition for two children and ordinary healthcare for an entire family. It should also be added that the cotton subsidy makes a special mockery of American foreign assistance: last year, Burkina Faso received approximately $18 million from USAID, but handouts to American cotton farmers drained at least $40 million from the country's economy.