Economics, Taxes and Spending

Feeding the world’s poor through efficient markets: A step in the right direction

Image Credit: USAID Africa Bureau (Public Domain)

Image Credit: USAID Africa Bureau (Public Domain)

Providing disaster aid to the poorest people in the world who have been devastated by natural and man-made disasters has been a staple of farm bill legislation over the past sixty years, reflecting the commitment of ordinary American citizens to helping those who are genuinely in urgent need of help. Whether the children, mothers, and fathers who need American aid are refugees in Darfur or tsunami victims on the shores of the Indian Ocean, they need help quickly. And the monies appropriated for Food for Peace aid need to be used efficiently.

The Royce-Engel amendment to the House 2013 Farm Bill is an important step in the right direction. Under the amendment, up to 45% of the international disaster aid budget in the Food for Peace program, around $600 million a year, would be made available for obtaining the needed food from local and regional markets, instead of through monetization (selling US agricultural products and then using the money for aid) and mandating sourcing of most food aid directly from US sources. As Professor Christopher Barrett and his co-researchers have shown, local sourcing of commodities like maize and rice result in much more rapid provision of food aid to those in need, and allows the budget authorized by Congress to feed millions more people.

The winners from the Royce-Engel amendment are numerous. They include the victims of the tragedies that have created famine and dire need, as well as ordinary US citizens who will feel grateful that, through the efficient use of markets, more people in real need are being helped. Perhaps paradoxically, American farmers also win.

Most farm interest groups have misunderstood what sort of food aid is in their best interests. Sourcing regionally and locally means that the food aid budget will be able to purchase more corn, wheat, and rice to help starving families, increasing global demand for the major crops American farmers grow and sell at world prices in US and world markets. And, as USAID officials have pointed out, many processed high protein foods required for aid, such as peanut butter, would continue to be sourced from the United States because the US is the low-cost source of such aid.

The only entities that would obviously be disadvantaged by the shift to local and regional sourcing are shipping companies registered as American carriers. Such companies often charge excessive freight rates attached to convoluted transportation routes, and change is a good thing. I suspect that most voters do not want taxpayer dollars intended to save lives through humanitarian aid to be siphoned off by mercantile corporations — at the cost of millions of lives. They would much prefer that aid be provided through the effective use of tax funds that exploits the benefits of efficient markets to feed more people.

One thought on “Feeding the world’s poor through efficient markets: A step in the right direction

  1. Why should the US government distribute aid to other countries when charities do a much better job? Whenever government gets involved you see corruption and markets being distorted for political gain.

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