Column: Dispatches from the Edge: Poverty, Aid and Africa: A Devil’s Brew

By Conn Hallinan
Friday July 21, 2006

Once or so a year, the topic of poverty climbs on the agenda for the developed world. This past weekend it barely surfaced at the meeting of the Group of Eight in St. Petersburg, where energy policy (and the Middle East) held center stage. Poverty was a theme at last year’s G8 meeting, and it will likely come up again next year when the United States, Canada, Japan, Britain, Russia, Germany, France, and Italy sit down in Berlin to divvy up the global economy. 

The venues shift, the faces at the table change, but the hard facts about hunger and privation are not much different than they were a decade ago. In some cases they’ve gotten worse.  

• Over 90 percent of urban populations have no access to safe drinking water and, by next year, more than half of the world will live in cities. The slums of Mumbai have more people than the entire country of Norway. 

• One third of the world’s population—2.3 billion people—have no access to toilets or latrines, a major reason for the 13 million annual deaths ascribed to water-borne diseases. 

• Almost 47 percent of children in Bangladesh and India are malnourished. Life expectancy in most of Africa is less than 50 years, and in those countries ravaged by AIDS, less than 40 years.  

Hunger and malnutrition are worse in sub-Saharan Africa than they were a decade ago. 

Back in 2000 the United Nations established a Millennium Development Goal to halve global poverty by 2015. The G8’s enormous wealth, along with its dominance in world trade, was to play the key role in this worldwide assault on poverty and disease.  

But six years into this war on poverty the goals are mired in a devil’s brew of self-serving economic policies, lethargic bureaucracy, and outright disingenuousness. Only South America and the Caribbean are even approaching the Millennium targets.  

Meeting last year in Gleneagles, Scotland, the G8 pledged to prioritize Africa for debt relief, accelerated aid, and increased trade. A year later, most of those initiatives are bogged down in a battle over free trade, as well as by a persistent inertia in delivering on those promises. The only part of the program running on schedule is debt relief, which looks good on paper but translates into very little on the ground. 

Most of the G8 increase in aid—from $80 billion in 2004, to $106.5 billion in 2005—was in debt write offs. Very little of that money went toward upgrading water systems, improving disease control, or increasing food consumption. 

Removing debt reduction from the aid packages, German aid fell 8 percent, and France and Britain’s dipped 2 percent. And while U.S. foreign aid jumped 16 percent, if you subtract Iraq and Afghanistan, it declined 4 percent.  

Debt relief is important and allows countries to divert interest payments toward upgrading their infrastructures, but it is also a cheap way for developed countries to fulfill their aid obligations. 

One of the major roadblocks to improving the lives of billions of people is the refusal of the United States to consider opening its agricultural markets, even as it insists that underdeveloped countries open theirs. This is particularly important in Africa, where 50 percent of a country’s GNP may be in agriculture. 

U.S. crops like corn, soy, cotton, and wheat are heavily subsidized by the federal government, so that U.S. wheat sells for 46 percent below production cost, with corn at 20 percent below cost. If Brazil or South Korea were to try to do the same thing with steel, they would be accused of “dumping” on the international market. 

The G8 members of the European Union (EU) argue that if underdeveloped countries remove their tariffs, those countries will be overwhelmed with cheap U.S. produce, which will drive them out of business, encourage uneven regional development, and do very little to aid the poor.  

Mexico and the North American Free Trade Agreement (NAFTA) is a case in point. Mexican fruit and vegetable exports increased 50 percent under NAFTA, enriching big landowners in the country’s north. But small farmers in the south are being swamped by U.S.-subsidized corn. Some two million farmers have left the land, and 18 million subsist on less than two dollars a day, accelerating rural poverty, and helping to fuel the growth of immigration 

Mexican wheat production has fallen 50 percent, and U.S. imports now account for 99 percent of Mexico’s soybeans, 80 percent of its rice, 30 percent of its chicken, beef and pork, and 33 percent of its beans. When Mexican cattle growers switched from using sorghum to corn because the latter was cheaper, the shift put the former industry out of business.  

While the United States demands the removal of foreign barriers, it maintains tariffs on sugar and cotton, two crops that are, coincidentally, central to the key electoral battleground states of Florida and Texas. 

According to the Financial Times, “new research suggests that the very poorest of the least developed countries (LDCs) could make big gains in exports and growth if the United States followed the EU and opened its markets to LDC.” 

Free trade has been a disaster for most of the developing world. In Latin America, where until recently the free trade “Washington Consensus” held sway, growth from 1987 to 2002 averaged 1.5 percent. To even put a dent in poverty, Latin America requires a growth rate of at least 4 percent or more. 

The EU is also part of the problem. While it has been critical of U.S. intransigence on tariffs, the EU has kept out a number of LDC exports over health issues, and it subsidizes its farmers as well. In all, the developed world hands out nearly $1 billion in farm subsidies each day.  

Food aid policy in the U.S, for which the total 2005 budget was $1.6 billion, is largely dictated by an “iron triangle” of agribusiness, shipping magnates, and charity foundations. Studies demonstrate that the most efficient way to deliver aid is to purchase food locally rather than buy and ship it from the donor country. 

But the United States insists that food aid must come from the United States, be shipped on U.S. carriers and distributed by agencies like CARE and Catholic Relief Services. As a result, 60 cents out of every aid dollar goes for middlemen in transport, storage and distribution.  

Four companies and their subsidiaries, led by agri-giants Archer Daniels Midland and Cargill, sell more than half the food used by the Agency for International Development. Five big shipping companies dominate the transport side of the equation. And relief agencies, like CARE and Catholic Relief Services, generate half their budgets by selling some of the aid food.  

Oxfam has long lobbied for putting cash directly into the hands of local farmers rather than handing it out to agricultural and transport corporations, but most U.S. aid groups support the current system. CARE, however, recently broke ranks and endorsed the Oxfam initiative. 

The recent G8 meeting largely tabled the issue for this year, but the problem is not going to go away. Poverty is an affliction of the underdeveloped world, but the solutions to it lie in altering the policies of the developed world.