Can We Feed the Hungry More Efficiently?
The amount of food delivered by United States aid programs has declined by more than 50 percent over the past five years, due to rising transportation and business costs.
State Department and Office of Management and Budget have been lobbying to convert some of the food aid to cash grants for years, and the White House seems to be listening. Congress is due to pass a new farm bill this fall, and Senator Tom Harkin (D-Iowa) has proposed a tiny pilot program to award one hundred million dollars in cash grants over four years. Sounds like a good idea? Well some people don’t think so. No surprise, the program is opposed by shipping companies and agribusiness giants, such as Archer Daniels Midland. But it might surprise you to know that it also opposed by nongovernmental organizations (NGO) such as Feed the Children and the American Red Cross. The United States donates the food aid to the NGO 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. The sale of food aid to generate cash for humanitarian programs is known as monetization.
CARE and Catholic Relief Services, first and second in money raised through the current system of monetization, say they recover only seventy to eighty percent of what the United States paid for the commodities and shipping. Care has announced that it will phase out of the program, no longer accepting food aid from the program. Care explained that the three major problems with monetization are first, monetization requires intensive management and is fraught with risks. Procurement, shipping, commodity management, and commercial transactions are management intensive, costly, and fraught with legal and financial risks. Second, monetization is economically inefficient. Purchasing food in the United States, shipping it overseas, and then selling it to generate funds for food security programs is far less cost-effective than the logical alternative of simply providing cash to fund food security programs. Third, when monetization involves open-market sale of commodities to generate cash, which is usually the case, it inevitably causes commercial displacement. It can therefore be harmful to traders and local farmers, and can undermine the development of local markets, which is detrimental to longer-term food security objectives.
There are a lot of issues for Congress to consider in this years farm bill. Eliminating hunger in an efficient way ought to be its top priority. Senator Tom Harkin (D-Iowa) proposed pilot program will only consume a small portion of the total bill’s funding, but it is a program that could help us down the path to government that is more efficient.
Food Aid Reform
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