Food Aid – for Agribusinesses and NGOs Jayati Ghosh

Several decades ago, Teresa Hayter wrote a book called “Aid as Imperialism”, which outlined how foreign aid was used by rich countries to further the interests of big businesses based in their own countries, and served to destroy productive capacities in the recipient countries. Since then, the world has changed greatly. Foreign aid has become an insignificant part of international capital flows; developing countries as a group are now exporters of capital to the developed world; even the World Bank and IMF receive more from developing countries as repayment of past loans than they are currently giving out in new loans; imperialism has taken on new even more devastating attributes which make its earlier use of aid as instrument seem like child’s play.

But then, the more things change, the more they remain the same. While foreign aid may have dwindled into insignificance in quantitative terms, it is still being used in the same cynical ways. But now the packaging is more slick and effective, and there is tremendous media hype surrounding even the smallest and most conditional transfers of aid resources.

Thus the recent G-8 package of debt relief for highly-indebted African countries was presented as a major act of generosity by the governments of core capitalist countries, even though it was only a partial forgiveness of debt that had multiplied over the years not because of any fresh aid, but simply by piling on interest. And the package forced poor African countries to open up their economies even more to capital from the North, by privatising utilities and essential services such as water and sanitation.

Now there is fresh evidence of the cynical and exploitative attitudes surrounding the provision of supposedly “humanitarian” aid, in the controversy around food aid from the United States to famine stricken regions in Africa. Parts of sub-Saharan Africa have experienced very severe drought this year, which has destroyed harvests and rendered populations in countries in Malawi extremely vulnerable to potential starvation. The problem is more acute because these same countries have been forced by the World Bank to dismantle their own food buffer stock programmes, so they have no internal mechanism to protect their people and feed the hungry in times of shortage.

The current law in the US stipulates that all food aid provided by the United States Agency for International Development (USAID) has to be grown by American farmers and mostly shipped on United States-flag vessels – and therefore handled by American agribusiness companies. This massively increases costs and delays the provision of food to needy areas, since the food has to be shipped long distances. Some rich country governments, such as Canada, have already taken the decision to buy at least some of the food aid locally, so as to reduce costs, be able to buy more food for the aid programme and also provide some help to local African farmers.

A similar proposal has been made by some within the USAID programme, faced with growing evidence of long delays in the provision of food aid in emergencies. The US government proposed to provide one-fourth of the food aid through locally purchased supplies, which would dramatically increase the speed of response, the most critical variable for effective famine relief. This meant that that most of the food aid would still be procured from US farmers and companies, but at least some would be provided quickly and more cheaply at times of urgent need.

This proposal has met with immediate opposition, from both expected and unexpected sources. According to a recent article in the New York Times (12 October 2005), “the administration’s proposal has run into opposition from three interests some critics call the Iron Triangle of food aid: agribusiness, the shipping industry and charitable organisations”.

The opposition from business interests is very predictable. Although local purchase of food aid is meant to help American farmers, in reality the benefits go to the large agribusinesses that control the trade. US government records show that only four companies and their subsidiaries, led by Archer Daniels Midland and Cargill, sold more than half the $700 million in food commodities provided through the USAID’s food aid programme in 2004. The shipping industry is also a major beneficiary: just five shipping companies received over half the more than $300 million spent to ship the food aid exported in that year.

But the real surprise is the opposition from NGOs dealing in aid – after all, surely charitable organisation concerned with helping the poor should be the most concerned about getting the food to the affected people as quickly and cheaply as possible?

Not so, apparently. A recent book on the political economy of food aid established the often unsavoury role played by supposedly well-intentioned NGOs. In their book, “Food Aid After Fifty Years: Recasting its Role,” Christopher B. Barrett and Daniel Maxwell show how at least seven major US-based international NGOs, including Catholic Relief Services and CARE i, depend on food aid as a major source of not just relief activity but also income. Food aid accounted for between one-fourth and half of their budgets in 2001.

While these NGOS distribute food in poor countries, it is less well known that they have also become grain traders, selling substantial amounts of the donated food at a profit in local markets in poor countries, in order to generate funds for their anti-poverty programs. This is obviously a very inefficient way to finance anti-poverty or development programmes, given that at least 50 per cent of the cost of such food aid is spent on transport, storage and administrative costs. Yet because of this process, such NGOs now have a major vested interest in perpetuating this inefficient and unduly expensive system.

This is why the Coalition for Food Aid, which represents 16 non-profit groups, has also opposed the proposal, and is not even willing to allow 10 per cent of US food aid to be purchased locally. The most they will agree to is a small pilot project, paid for only with additional appropriations, not money from USAID’s core budget.

It is a strange world indeed, when even those “charitable” organisations ostensibly oriented towards helping the poor are involved in a nexus that clearly damages the interests of the recipients. Clearly, the aid world is as murky as ever, with just as much bad news for the citizens of developing countries.