Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Thursday, October 27, 2005

Is It Time to Scrap the Food-Aid System?

When we read about famines, our first reaction is to want to send food. Most of us are caring people who are deeply disturbed by the continuing famine in some areas of the world.

At the same time, when famines recur at frequent intervals and when we despair about whether the famines will ever become a thing of the past, it is time to question the way food-aid is delivered.

"The food-aid equation actually hurts Africa more than it helps," says economist James Shikwati, director of the Inter Region Economic Network in Nairobi, Kenya. "If it was helping," he says, "the problem would be solved by now." In fact, he sees it as fundamentally unethical. "You can't say you're helping people if you're not helping them" break the cycle of famine. African politicians use hunger as a tool to gain votes, he says. Western relief agencies use it to fund-raise. This creates a "manna mentality" where Africans wait for bread "to drop from heaven."

And once again, the system faces a major test in southern Africa, where 12 million people are reportedly on the verge of hunger.
How long will it take for people to realize that raising the height of the social safety net affects people's incentives? Why produce food if others will provide it? Why produce food if others are going to undercut and depress the prices I might receive?
[Update: Gary Becker covers this topic as well in his most recent posting.

But shouldn't price controls also be used in poor countries when they experience a catastrophic shortfall in the supply of a food staple, such as rice or potatoes (the Irish potato famine is the best-known example)? The poorest families may be unable to pay the higher prices, and they could face starvation. Still, I do not believe price controls are a good solution, for they discourage greater production and imports of the scarce food, and they encourage farmers to hoard their food crops. Governments of these countries, and richer countries too through humanitarian aid, should instead become active in buying rice or whatever crop is involved, and reselling that to poor families at lower prices. Or these governments should increase income transfers to the poor that would enable them to pay the high market prices.

In the modern world, famines are caused not be high prices, but by bad governmental policies. Famines are virtually unknown in modern democratic societies. Yet famines and large-scale starvation are still sometimes found in dictatorships, such as in China during Mao's Great Leap Forward. The problem there was not high prices, but Mao's foolish policies. He first caused farm output to fall by his misguided attempt to leap forward,. He then forcibly took much of the limited supply of food from farmers, so that many of them starved to death, in order to feed city populations. In addition, he sold some of the reduced crop of grains abroad for hard currencies rather than importing grains to ease the food crisis.
More people need to see this movie:
. . . . . .
[Why is this fabulous, meaningful movie not available on DVD???]
[thanks to Jack for the link]
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