Yup, Charity Begins At Home
by sarabeth at 6:00 am on January 6th, 2006 in
Economy
Haider Rizvi has an eye-opening story about huge inefficiencies in the US food aid program. The short version (all quotes are from the article):
We spend more than a billion dollars each year on food aid.
“The current system demands that food aid be grown in the U.S. and shipped in U.S. vessels and by U.S.-based aid organizations”.
We could save both money and lives by buying the food from local farmers and markets. This would also contribute development benefits, “which would in turn support local economic growth and help stave off future crises.”
“(According) to a recent article published by the Wall Street Journal, the U.S. government brought corn to people in northern Uganda at $447 per ton when it could have purchased from farmers in the south of that country for just $180 dollars per ton.” Assuming local purchases would on average cost half of what we spend under the US-US-US policy, the food aid program could save more than $500 million a year.
The main reason why “Congress is not willing to embrace the proposal for reforms” seems to be that “American producers, processors, and shipping companies rely” on the current policy. At a time when the Bush administration finds it necessary to cut back on basic food-clothing-shelter programs for the needy in order to keep budget deficits at a manageable level, we are subsidizing these “American producers, processors, and shipping companies“ to the tune of more than $500 million a year. And we are unwilling to trim these subsidies even though it would save not just money but lives too.
The biggest irony, in my view, is that only a fraction of this $500 million actually ends up in the pockets of these American producers, processors, and shipping companies as profits or net cash flow. If we computed this subsidy component, and just paid it out as a direct subsidy, and then made food aid purchases in local markets, we would still save hundreds of millions of dollars. Direct, explicit cash subsidies would be much more efficient than the current system. So the real waste is coming not because Congress insists that American producers, processors, and shipping companies get their pound of flesh from our food aid program, but because Congress wants the subsidies to be invisible.
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