Aid Abroad and Rules at Home

Stephen DeAngelis

August 17, 2007

Official Development Aid (ODA), more commonly known as foreign aid, seems like it should be a straight forward matter — aid is provided where people need help. Nothing, however, is quite that simple. ODA must be budgeted for and, as we know, the budget process is a political process. Farmers in Kenya know that all too well [“Kenyan Farmers’ Fate Caught Up in U.S. Aid Rules,” by Celia W. Dugger,” New York Times, 31 July 2007]. In the past, food aid was provided by sending U.S. raised products to areas in need. There is certainly nothing sinister about that. U.S. agricultural products are world class. We have them in abundance (we even subsidize farmers to limit production so that crop prices don’t fall). It makes perfect sense to send surpluses of U.S. crops to feed hungry people in areas of need. But as I said earlier, nothing is quite that simple. Dugger writes:

“As the United States Congress debates an omnibus farm bill, it is considering a small change that advocates say could make a big difference to the world’s hungriest people: allowing the federal government to buy some food in Africa to feed the famished, rather than shipping it all overseas from America. The Bush administration, with odd-bedfellows support from liberal Democrats, has called for allowing the purchase of some food in poor countries to quicken responses to emergencies.”

That, too, sounds like a good idea. Hungry people should be fed as quickly as possible. But there is a fear among U.S. farmers that such programs will take much needed money out of their pockets and send it overseas. And farmers vote. Farmers in other countries vote as well. In Kenya, the hungry are the people caught in the middle of politics.

“[Last year] the Kenyan government objected to the importation of American corn because the country was awash in a bumper harvest that had caused corn prices to plunge. The result: American officials, prohibited by law from buying the corn locally, could not deliver it. As the impoverished families waited in vain for sustenance from the American heartland, malnutrition among the youngest children worsened and five people died of hunger-related causes. … Across Africa, the United States is more likely to give people a fish — caught in America — that feeds them for a day than to teach them to fish for themselves. Since last year, for example, the United States has donated $136 million worth of American food to feed the hungry in Kenya, but spent $36 million on agricultural projects to help Kenyan farmers grow and earn more.”

The irony, of course, is that almost every American child can recite the old proverb, “Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime.” It would be easy to point fingers, therefore, and say, “Practice what you preach.” Again — nothing is that simple. Dugger’s story is not about good guys and bad guys. In fact, in this case there are no bad guys. Politicians in both the U.S. and Kenya were trying to do the right thing by their own citizens, but rules got in the way. The Bush administration and the Democratic Congress deserve credit for recognizing the dilemma and trying to do something about it.

When I write about development, my primary focus is on Foreign Direct Investment (private investment) not Foreign Aid (government investment). One of the reasons is that ODA continues to shrink in importance compared to FDI when it comes to development. Dugger reports, for example, that the U.S. Agency for International Development (USAID) is dropping Kenya from the countries it is going to help because there are other countries in even greater need. Development-in-a-Box™ focuses on “teaching a man to fish” not providing him a fish. It is not an aid program, but business development process. Of course, the most effective aid programs have the same focus. There are times, however, when relief is much more important than development — like at the height of a famine or following a natural disaster. Dugger’s story is about the latter — relief as the precursor to development. She tells the story of those who benefited from an irrigation project.

“Ikai Moru, 19, still recalls the hunger that gnawed at her and her mother as they chopped down thorny acacia trees on their tiny plot, hoping one day to reap a bountiful harvest from the parched earth. She watched her mother grow thinner and paler, and finally sicken and die. ‘My mother was a very hard worker,’ Ms. Moru offered in a brief epitaph. Through sheer grit, the 2,000 families finished the irrigation system last year and are successfully farming. But long-term projects to help Africa’s rural poor feed themselves are chronically underfinanced, charities say. … Such efforts are dwarfed by the epic scale of the need. Viewed from a prop plane buzzing like a mosquito overhead, the irrigated land here shimmers as a tiny oasis in a vast, dun-colored landscape. With the guidance of the Christian charity World Vision, which implemented the project, the families hacked an irrigation system from the barren landscape with machetes, hoes and shovels, clearing 1,000 acres and digging 99 miles of canals along the Kerio River. Ms. Moru will soon be feeding her four younger brothers and sisters with an abundance of sorghum and corn harvested from their half-acre farm, fulfilling her mother’s dream. … Their success was all the more extraordinary given this desiccated region’s history as a graveyard for well-intended foreign aid efforts to help the Turkana tribe, mostly nomadic herders, escape punishing cycles of drought, hunger and death. The participants themselves credit a man who gave them fortitude when they faltered: Daniel Mwebi, a Kenyan engineer who managed the project here for World Vision. From 1992 to 2004, he lived for much of each year in this remote place, far from his wife and children. He said he had been determined to avoid the mistakes of earlier aid projects that relied on heavy earth-moving equipment and diesel-run pumps that required costly fuel, expertise and maintenance. So he designed a very basic system and trained the Turkana in the masonry, carpentry and welding skills they needed to keep it running. The earthen irrigation systems — built in two United States-financed projects — are powered only by gravity and the sweat of the local people. … The success is noteworthy, but the families’ sacrifices also illustrate the risks of an American food aid system that is designed to benefit domestic agribusiness and shipping interests and enmeshed in an intricate framework of farm subsidies.”

Mwebi was wise. My colleague Tom Barnett likes to point out that many development projects seek to provide a “six sigma solution” when a two sigma solution is more than sufficient. As I pointed out in an earlier post about reconstruction woes in Iraq [Iraq Reconstruction Hits Roadblocks], training and sustainable maintenance are critical. That brings us back to the current efforts to modify the U.S. aid rules now being used. As I pointed out earlier, foreign aid and domestic politics are inextricably connected.

“Members of Congress who favor the current system say the support of influential commercial groups is needed to sustain political support for food aid. They warn that ill-timed purchases of food in Africa in times of scarcity could send food prices higher, harming poor consumers. But critics in Congress contend that the United States could feed far more people more quickly if it could buy surplus food in Africa. It might also help boost the incomes of African farmers, by providing a market for their crops, they say. The Bush administration is now trying to change the law so that up to $300 million of food can be bought in poor countries during emergencies. The Senate Agriculture Committee chairman, Tom Harkin, Democrat of Iowa, where growers and landowners got $1.58 billion in corn subsidies in 2005, is advocating a $25 million pilot program to test buying food in poor countries for both emergency and long-term aid. Even that modest proposal is meeting stiff resistance from farm state legislators. The House Agriculture Committee’s version of the farm bill includes no such pilot. The committee chairman, Collin C. Peterson, Democrat of Minnesota, said of his members, ‘They’re still of the mode that this should be American products we’re using our tax dollars to provide them.’ Mr. Peterson’s district got $367 million in corn subsidies in 2005, according to government data analyzed by the Environmental Working Group, a nonprofit research organization.”

The Environment Working Group is trying to stigmatize Congressmen who oppose the rules change, but that is probably not fair. Politicians are elected to represent their constituents’ interests and you can hardly vilify them for doing so. Hopefully, however, the greater good will be seen by enough members of Congress that a compromise can be reached. In the long run, the only win-win solution will include both the continued provision of U.S. products and the development of indigenous agricultural sectors in impoverished nations.

The relief organization CARE has now weighed in and is apparently walking away from what it sees as a troubled U.S. food aid program [“CARE Turns Down Federal Funds for Food Aid,” by Celia W. Dugger, New York Times, 16 August 2007]. The reason for CARE’s decision is the same concern discussed above — that food aid can undermine local farmers and devastate local economies that remain entrenched in an agrarian society.

“CARE, one of the world’s biggest charities, is walking away from some $45 million a year in federal financing, saying American food aid is not only plagued with inefficiencies, but also may hurt some of the very poor people it aims to help. CARE’s decision is focused on the practice of selling tons of often heavily subsidized American farm products in African countries that in some cases, it says, compete with the crops of struggling local farmers. The charity says it will phase out its use of the practice by 2009. But it has already deeply divided the world of food aid and has spurred growing criticism of the practice as Congress considers a new farm bill. ‘If someone wants to help you, they shouldn’t do it by destroying the very thing that they’re trying to promote,’ said George Odo, a CARE official who grew disillusioned with the practice while supervising the sale of American wheat and vegetable oil in Nairobi, Kenya’s capital. 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.”

I’m not alone in believing that CARE’s decision is ill-advised. Yesterday in his blog Tom called this an Aid Tail Wagging the Dog. CARE’s concern for local farmers is certainly justified, but a compromise solution must be found that both promotes local agriculture and helps feeds the hungry using surpluses from developed nations that also have agriculture sectors to be concerned for. Instead of helping find that compromise, CARE’s decision could anger politicians and generate an unwelcome backlash that ends up hurting the poor and hungry more than anyone else. Dugger writes:

“Neither the Bush administration nor members of Congress are looking to undo the practice, which has gone on for more than a decade. In fact, some of the nonprofit groups say it has worked well and are pressing for sharp increases in the amount of American food shipped for sale and distribution to support development programs. 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.”

I am sympathetic with CARE’s objective to create self-sustaining indigenous businesses. As I noted above, that is also the goal of Development-in-a-Box.

“CARE says it will try to raise money to replace the lost revenues from philanthropies and other donors, and by making its own aid programs profitable. One of those programs could be seen in action one recent afternoon in the Kenyan village of Poche. CARE has helped local women bypass local middlemen to sell pineapples at better prices in Nairobi’s big supermarkets, 10 hours away by road. One woman, Doreen Amimo, a 52-year-old grandmother, has seen her weekly earnings rise to $18 from $11. She can now afford to feed and clothe an orphaned niece and nephew. … These farmers are selling their fruit to a small company, Vegcare, that CARE and a Kenyan company started with an investment of $170,000 in 2005. Vegcare advises farmers on how to grow pineapples that meet supermarket standards, buys them and trucks them to a wholesaler in Nairobi that supplies Nakumatt, a Kenyan supermarket chain. CARE’s idea is that a profitable business is more likely than a charitable venture to survive when foreign aid runs out.”

The current posturing and finger pointing is unlikely to produce any productive results. There is certainly some altruism involved in aid programs, but there is also a lot of self-interest (national, business and NGO self-interest). That reality simply can’t be ignored as this discussion moves forward. The solution is going to require both vision and leadership. Some very influential people are caught up in the debate including former President Jimmy Carter and Bill and Melinda Gates, whose foundation is working with the Rockefeller Foundation to improve Africa’s agriculture sector. Let’s hope they can help provide calm and rational leadership in seeking a solution that works.