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Kerry Howley looks at a twisted foreign aid policy that helps U.S. shippers and farmers at the expense of the developing world.
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|9.28.05 @ 4:28PM|#
"Dumping" food may be a bad idea, so wouldn't dumping cash be just as bad an idea? Kind of like boosting the US economy by pumping our more tens and twenties? People wind up with more cash, but wealth doesn't change one bit.
|9.28.05 @ 5:57PM|#
The total wealth of the world won't change, but the distribution of the wealth will. In this case, the redistribution is between nations, and the wealth moves from the US to the needy country.
Sending money seems to be much better than sending goods, especially if they have a comparative advantage in the production of the good.
I think it falls under the old adage. If you must subsidize, subsidize the consumer and not the producer.
|9.28.05 @ 6:21PM|#
MikeP,
Sorry, but I don't really buy your point.
Poor people need food. So the first question is "Why can't they get it?" It's a supply-and-demand issue, as they always are. If the simple answer is "they don't have food because they can't afford it", give them cash and then they can buy it. OK, from whom will they buy it? Local growers? Or is the fact that there is no local supply to speak of part of the problem? And merely giving them cash is a temporary solution. If you have no way to use any of that cash as an investment of some kind, that cash can not go to work for itself to perpetuate any wealth. A person creates his wealth by supplying something to someone - and that someone supplies another with something. Cash is only a convenient method of transaction, it is not wealth in and of itself. Allow people to supply something and they can create wealth. Most people can at least supply their labor, but in many of the poorest nations there is no freedom to supply labor to anyone except the government - typically as a soldier.
Handing out cash to people is an eventual dead end if they can't put any of it to work as some kind of income producer. The proper subsidization is to allow the consumer to also be a producer - "Give a man a five dollars and feed him for a day; allow a man to earn five dollars and feed him for a lifetime."
|9.28.05 @ 7:17PM|#
Russ D,
Cash is only a convenient method of transaction, it is not wealth in and of itself.
I disagree here. Cash is wealth. Or -- even if you restrict "wealth" to capital goods or to consumables -- it is fully interchangable with wealth.
Handing out cash to people is an eventual dead end if they can't put any of it to work as some kind of income producer.
Misusing wealth is a risk whether that wealth is handed to you for nothing or produced by your own hands. How the wealth got into the farmer's hands may correlate with how well he uses it, but it does not dictate how well he uses it.
For example, if every person in developing nation X is given $100, they'll spend it on assorted things like food. Even modulo the local inflation that will result, locally producing farmers will have more cash than they had after the last harvest. Perhaps they will have enough surplus to purchase tractors to improve their productivity for the next season.
The dollars may fritter away due to poor consumption choices, poor investment choices, or theft by kleptocrats. But the dollars were wealth when they were taken from the US economy, and they were wealth when they were given to the economy of country X.
|9.28.05 @ 7:32PM|#
I should also note that the article treads close to mercantilist ground.
Back in the 1980's when Japan was "dumping" DRAM and the like into the United States, the free marketeers' response was (1) to suggest that the Japanese powers-that-be were being stupid, (2) to try to keep the US powers-that-be from responding in a protectionist manner, and (3) to imply that US consumers should enjoy the cheap stuff while it lasts.
Now the US powers-that-be are (1) being stupid by transferring wealth from the US to developing nations in the form of food. But what of (2) and (3) for country X? What makes this case different?
|9.29.05 @ 10:15AM|#
For example, if every person in developing nation X is given $100, they'll spend it on assorted things like food. Even modulo the local inflation that will result, locally producing farmers will have more cash than they had after the last harvest. Perhaps they will have enough surplus to purchase tractors to improve their productivity for the next season.
The dollars may fritter away due to poor consumption choices, poor investment choices, or theft by kleptocrats. But the dollars were wealth when they were taken from the US economy, and they were wealth when they were given to the economy of country X.
Mike, this is a case of missing the trees for the forest. If every person is given X dollars and they spend it all on food, what do they have after they've spent all the money and eaten all the food they bought? They'll be right back where they started.
There's no reason for the farmers to increase their yield because the people who bought last year's crop have spent their money already. They're gonna buy tractors to increase a yield no one can buy? Then they'll have to give the food away!
It's one thing to say "poor investment choice" but that's the essence of the problem - they have no investment choices! Are most of the people allowed to invest in anything? Are they allowed to own property that they could use to produce something someone may want? Are they allowed to trade their services for other services? Wealth is the ability to produce, not the wherewithal to consume.
You can't put food stamps in the bank. Your section 8 housing voucher can't be used as a down payment on real estate. Even the workfare programs start off on the wrong foot because work is equated with some kind of punishment. Being a wage slave may suck, and maybe the ultimate goal is to work for yourself, but in the poorest nations is starting your own farm or your own business something people are even allowed to do? It's one thing if people don't want to invest in themselves, it's another when they aren't allowed to.
|9.29.05 @ 2:11PM|#
It's one thing to say "poor investment choice" but that's the essence of the problem - they have no investment choices!
I suppose that is the answer to my What makes this case different?
When Japan dumps semiconductors on the US market, the US makes better and cheaper computers. When the US dumps corn on the X market, X eats the corn.
Wealth is the ability to produce, not the wherewithal to consume.
It seems that your issue is not that cash or food is not wealth. Rather it's that consumables given to certain societies will only be consumed.
I'll still take the position that the essential problem there is with the society and its political economy's inability to use the transfer productively, not with the the giving of food or money per se.
|9.29.05 @ 5:39PM|#
I'm far from an economic expert on international trade, but I have sailed on the US Merchant ships that are surviving on this trade.
The poverty on both sides of this trade was astounding (the only real difference between the longshoremen in Mombasa and Lake Charles was that the workers in Mombasa were generally much younger -15 to 20- and there were maybe one or two white guys in Lake Charles).
Furthermore, after speaking with the Kenyans, they (the poor, starving, majority) claim to never see the food aid, giving credibility to the accusations of corruption and theft in the program.
I'm reminded of the "Give a man a fish..." proverb, and while these poor people are starving to death, they are not the ones reaping the benefit of the aid programs.
Another amusing aid anecdote; the grain is shipped to all these countries in 50lbs burlap sacks with a patriotic red, white, and blue "USAID" stamped prominently on them. The North Koreans unload these sacks into a warehouse on the pier where the USAID sacks are emptied into CPRNK sacks. The sacks are then returned to the ship, with a strict accountability for all of them. Hysterical.