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F O R E I G N S E R V I C E J O U R N A L / M A R C H 2 0 1 2
F
OCUS
Office, which the foreign affairs committees of Congress
approved because the respective agriculture committees
stonewalled reforms to permit local purchases using food
aid. This account can be used for local purchases of food,
cash vouchers for the poor to buy food locally, and market
interventions to mitigate price increases.
Building on this model, if family incomes decline in a
fragile or failed state where a large portion of the popula-
tion is already impoverished, market interventions should
be considered as a way of mitigating the effects of the price
increases. (Of course, this should only be done in emer-
gencies, because keeping prices low will discourage farm-
ers from producing more food.) Auctioning off food aid in
such countries will help stabilize local prices, drawing
hoarded food into markets. The resulting drop in prices
would then give more of the population access to food
markets.
Free food distribution should be the last, not the first,
option aid agencies consider.
Fourth, eliminate lavish U.S. government subsidies to
convert grain into biofuels such as ethanol.
Toward this
end, policymakers should distinguish between biofuels
produced from corn and those produced from sugar cane
and other non-grain crops, which are not essential to food
security. For instance, import tariffs on ethanol currently
prohibit the entrance of Brazilian, sugar cane-based
ethanol into the American market, even though it is much
more energy-efficient than the corn-based ethanol pro-
duced here. Such trade-distorting mechanisms amount to
a staggering $7 billion a year.
Finally, the U.S. government should rescind its own
subsidies for rice, corn, wheat and other grains, and press
other countries to repeal theirs as well. Export restrictions
being implemented around the world might be entirely
rational responses at the country level, but their combined
effect raises food prices. According to the International
Food Policy Research Institute, export restrictions have
adverse effects on net food importing countries. They also
send perverse signals to farmers that their markets are ar-
tificially small, limiting production.
While price controls temporarily reduce prices for con-
sumers, they also reduce the revenue that farmers receive
for their agricultural products. As a result, they serve as a
disincentive for farmers to produce more food at times
when it is most needed. Developing countries with some
institutional capacity should therefore also consider im-
plementing conditional cash transfer schemes to provide
short-term aid to poor farmers. Mexico’s PROCAMPO
program is one successful example of this approach.
Averting the Worst Consequences
The link between food price increases and absolute
poverty cannot be emphasized enough. The best way to
break that link is through long-term development pro-
grams, with a 20-year time horizon, that stimulate eco-
nomic growth. More funding should be put into
USAID economic growth programs proven to work. In
addition, more resources should go to democracy and
governance programs, which build strong institutions
with functioning accountability and feedback mecha-
nisms in developing countries, particularly in fragile and
failed states.
However, these programs cannot produce the kind
of sustainable results over the short term demanded by
Congress, the White House, the U.S. national security
apparatus and what I call the Counter-Bureaucracy —
the group of federal and congressional agencies that reg-
ulate and control the bureaucracy: the State Depart-
ment’s Director of Foreign Assistance and Office of the
Inspector General, the Government Accountability Of-
fice, the Office of Management and Budget, and con-
gressional oversight committees.
One reason the 30-year effort that sustained the
Green Revolution — which produced its most dramatic
results in the noncommunist countries that bordered
Mao Tse-tung’s China — was so successful is that
USAID had much greater flexibility in those days over
the use of foreign aid dollars. The agency was relatively
independent from diplomatic and national defense pres-
sures, and the counter-bureaucracy had not yet been in-
vented.
If the global economy does not significantly improve
(or fall into another recession, as the World Bank warns
may take place in 2012) and unemployment rates con-
tinue to rise in poor countries that lack effective safety
nets, then the confluence of high urbanization rates,
high food prices and widespread unemployment could
have potentially devastating political and security con-
sequences.
Donor governments should respond to the current
global spike in food prices for purely humanitarian and
ethical reasons. But when governments cannot keep
their own populations from starving in a famine, that fail-
ure may cause massive social and political upheaval.