According to the Wall Street Journal, global food prices have risen over 80% in the past 3 years. Citizens of the bottom billion countries spend over 60% of their income on food. That amounts to trouble. And indeed recently there have been ‘food riots’ in these countries, not to speak of starvation and the continuing crisis of world poverty.
As spelled out in several major newspapers here and here, food shortages are the result of multiple causes: recent droughts in Australia, Morroco and S. Africa and poor conditions in other important agricultural areas, escalating prices for oil, fertilizer and seed, and increased demand from emerging economies like India and China. In addition to these, many foreign ministers are pointing towards a political cause: the U.S. ethanol biofuel policy. The U.S. mandates that by the year 2017, 15% of road fuel used in this country come from ethanol. It subsidizes corn farmers for this. Sounds relatively harmless and perhaps even beneficial for the environment, except for the fact that corn isn’t the most efficient product to convert into ethanol, sugar cane is. In the face of that, what is our response? This: sugar cane ethanol imports into the U.S. (primarily from Brazil) are taxed to the tune of 25%. In addition to that economic puzzle, diverting corn to fuel production raises world corn prices (the U.S. is responsible for 50% of the world’s corn production).
Showing his sensitivity to the situation, Senator Charles E. Grassley (R-IO) (as quoted in the New York Times) “called the recent criticism of ethanol by foreign officials ‘a big joke.’ He questioned why they were not also blaming a drought in Australia that reduced the wheat crop and the growing demand for meat in China and India.
'You make ethanol out of corn,' he said. ‘I bet if I set a bushel of corn in front of any of those delegates, not one of them would eat it.’”
Evidently, Grassley can’t distinguish natural causes from political ones, and rich delegates from the world's poor. One could blame droughts in one sense (as a causal contributor), but not in the moral sense (moral blame), as one can with political shenanigans. Clearly, he has a political agenda to push, and I don’t know the merits of that agenda to judge, but to perversely suggest that corn is primarily a fuel product and not a food one--that is the big joke, one for which the world's poor are paying the price.
Tuesday, April 15, 2008
Politics and hunger
Tuesday, March 25, 2008
The difficulty of aid
Acbar (the coordinating body for 94 NGO’s), a Kabul-based organization, will report today that aid to Afghanistan is “wasteful and ineffective.” (For their press release, go here.)
Why? In large measure, donor countries have been negligent in their aid. According to the report, the largest donor, the U.S., has managed to distribute only half of its pledged aid ($5B of $10.4B); although, other countries, like Canada, Japan and Italy, have been more efficient. In explaining the wastefulness of aid, the report points out some usual culprits like consultant salaries and corporate profits (accounting for an estimated 40% of total aid!?). Equally important, the report acknowledges that underspending is connected to the problematic conditions in Afghanistan: government corruption, lack of know-how in using donated resources and security issues. This accounts for why too much aid ends up funding political and military budgets rather than aimed at poverty-reducing measures. In turn, the recognition of these conditions demotivates donors.
These reflect many of the considerations Paul Collier discusses in his book, the Bottom Billion. Although Collier does not explicitly refer to Afghanistan as a bottom billion country, it meets the criteria he lays out: plagued by conflict, poor governance, being landlocked and the abundance of natural resources.
As Acbar and Collier both point out, we need not despair. The solution cannot be to withhold aid until, miraculously, conditions improve, because conditions won’t improve without aid (up to 90% of Afghanistan’s public spending is funded by aid). The solution is to use the aid effectively. This requires, among other things, studying and understanding the current conditions so as to know to whom, when and how much to give.
This may be too obvious to point out, but evidently knowledge does not form the present basis for aid distribution. We might wonder why. Is it that such knowledge is difficult (too difficult?) to acquire? Or does corruption play a role in ensuring that such knowledge does not see the light of day? Or?
Monday, March 17, 2008
Some remarks on Paul Collier's The Bottom Billion by MT Nguyen, NYC
The numbers for poverty-related deaths (deaths from easily curable disease and famine) are staggering. I won’t cite specific numbers, since such numbers rely on complex methodologies which appear to change from researcher to researcher. But, it is not, I don’t think, contentious to put the ballpark number in the millions. So, we have in our world millions of preventable deaths. The idea that these are preventable deaths poses a whole host of questions and problems. Preventable at what cost? Who should bear the responsibility? For those willing to bear the responsibility, what precisely should be done? One might think that shifting wealth from the developed world to the undeveloped world would be sufficient if only the amount of wealth is sufficient. Is this true?
It is a documented fact that Americans are givers. A recent study on charitable donations by the Giving USA foundation reported that Americans gave around 295 Billion dollars in 2007. We can’t know the motivation behind the donations, and this might make a difference to our overall assessment of our nation as charitable and generous. But we do give. Why doesn’t it seem then that much has changed? Is it not enough? The amount of American charitable giving is incredible considering that some estimate it would require only 300 billion/year to arrest severe poverty in the world (understood as living under $1US/day). Even less is required (very roughly, $150 billion/year) if, as it is in the Millennium Development Goals, the target is poverty reduction by half by 2015. By that measure, we Americans alone give enough. So, what’s the problem?
The problem is that money alone is not sufficient. There are structural impediments to the correct use of aid. The main lesson I take from Paul Collier’s fine book is that practical judgment, informed by acute sensitivity to the particulars of the situation, makes all the difference to the fine line between successful and failed aid. If eradicating poverty is the goal, the primary question is not whether or not we should give, rather the problem is when to give, where to give, what to give, and how much to give. At least this is Collier’s contention specifically with regard to aid to the worst off.
Collier refers to the worst off with his coinage ‘the bottom billion’. The phrase is not just a rhetorical nicety; it has a real referent and economic significance. The bottom billion persons live in countries (58 of them by his count, including many African countries but also Laos, Haiti, Bolivia, Cambodia, Burma and n. Korea) with characteristic features, features which are the main project of the book to describe. The economic significance is that these countries, unlike the countries housing the other 5 billion inhabitants of the world, are in economic decline. Collier is a firm believer in the power of economic growth to improve the quality of life. One point the book tries to impress is that economic decline (negative absolute growth) implies misery, violence and finally death.
His explicit thesis is that bottom billion countries are caught into ‘traps’ which undermine aid and other efforts at economic reform. They are, in order of explication, the conflict trap, the natural resource trap, being landlocked and poor governance. These are isolatable conditions but they each bear significant relationships to one another. I won’t try to describe, let alone assess, Collier’s treatment of these traps. My aim is merely to mention a couple of the interesting and striking claims he makes. It is important to keep in mind that the conclusions he draws are meant to apply primarily to bottom billion countries.
The conflict trap refers to the ongoing civil wars and coups that afflict these countries. It would appear obvious that conflict would undermine economic growth but along with his colleagues, Collier has tried to uncover the deeper reasons for this connection. We might have speculated that poverty leads to conflict because the motivation to war is grounded in the desire to rectify domestic injustices (political or economic). According to Collier, this is simply not the case. There is no correlation between civil conflict and political repression, economic inequality or ethnic antagonisms. Rather, the startling thesis is that conflict arises in impoverished countries in part because rebellion is cheap: the impoverished youth are easily recruited. Additionally, the likelihood of civil war is increased significantly if the country happens to be rich in natural resources, which resources can be used to finance the conflict. More perniciously, corporate financing becomes available in exchange for promises of future deals should rebels succeed.
That access to natural resources should be undermining is counterintuitive yet well established. Apparently, economists have known about this phenomenon for some time. They call it Dutch Disease. Basically, the wealth gained from natural resources crowds out a country’s other export industries, which industries are instrumental to future growth. This is most significant for bottom billion countries since for them the exportation of cheap labor is one of the primary avenues for economic growth. The problem goes deeper than that, and one of the unexpected pleasures of reading Collier’s book is his discussion of natural resource wealth (what is called ‘rents’) and its effects on political competition. His discussion is ingenious.
Wealth accumulated from natural resources affects the use of power in a democracy. By reducing incentives to scrutinize government action (less taxes are required), instead of using infrastructure investments to gain votes, those in power or those who vie for power focus primarily on bribing community leaders. Those who fail to do this lose elections. Bribery of course requires cash, illicit cash. Typically, various checks (a strong judiciary, a free press, etc.) would make obtaining such cash costly. In their absence, an absence facilitated by monies gathered from rents, the politics of patronage becomes almost irresistible. This is bad for growth. What’s better? Strictly in economic terms, autocracies do better than democracies under such conditions. However, autocracies, in turn, undermine growth as well. To sustain power, especially when the autocrat’s support base is small relative to the overall population, resort to excessive patronage once again leads to waste. This is why having natural resource wealth is a trap; the most accessible political options are both suboptimal.
The trap explains why indiscriminate wealth transfers cannot be a general solution. Either a resource rich nation rebuffs the conditions usually tied with such transfers, or else it ‘accepts’ them only to use the wealth solely to further the hold on power. One solution Collier offers is that, instead of transferring money, aid should take the form of technical assistance. Reform requires knowledge, and this is precisely what bottom billion countries lack (because the educated have emigrated to developed countries). But even this form of aid is not beneficial unless it is offered at the right time. The country must be already prepared to use the skills imported. What he says here can be said, I think, about all forms of aid:The problem is not the overall insufficiency of technical assistance but rather that it is organized so as to be unresponsive to [sic] country circumstances. In the parlance of the agencies technical assistance is supply-driven rather than demand-driven. The assistance is poured into the same places year after year without much regard to political opportunities…Technical assistance needs to be reorganized to look more like emergency relief and less like a pipeline of projects.
This may seem obvious, but evidently our aid institutions are not set up to be flexible in the required way. The chief lesson of Collier’s book is that in order to be true benefactors, we need to have a detailed empirical understanding of the conditions under which suffering peoples exist.
There are many other fascinating and helpful discussions in Collier’s book. I have taken up only one small thread, and strongly encourage others to explore this important contribution to see for themselves.
