The Foreign Service Journal, March 2012

30 F O R E I G N S E R V I C E J O U R N A L / M A R C H 2 0 1 2 F OCUS Office, which the foreign affairs committees of Congress approved because the respective agriculture committees stonewalled reforms to permit local purchases using food aid. This account can be used for local purchases of food, cash vouchers for the poor to buy food locally, and market interventions to mitigate price increases. Building on this model, if family incomes decline in a fragile or failed state where a large portion of the popula- tion is already impoverished, market interventions should be considered as a way of mitigating the effects of the price increases. (Of course, this should only be done in emer- gencies, because keeping prices low will discourage farm- ers from producing more food.) Auctioning off food aid in such countries will help stabilize local prices, drawing hoarded food into markets. The resulting drop in prices would then give more of the population access to food markets. Free food distribution should be the last, not the first, option aid agencies consider. • Fourth, eliminate lavish U.S. government subsidies to convert grain into biofuels such as ethanol. Toward this end, policymakers should distinguish between biofuels produced from corn and those produced from sugar cane and other non-grain crops, which are not essential to food security. For instance, import tariffs on ethanol currently prohibit the entrance of Brazilian, sugar cane-based ethanol into the American market, even though it is much more energy-efficient than the corn-based ethanol pro- duced here. Such trade-distorting mechanisms amount to a staggering $7 billion a year. Finally, the U.S. government should rescind its own subsidies for rice, corn, wheat and other grains, and press other countries to repeal theirs as well. Export restrictions being implemented around the world might be entirely rational responses at the country level, but their combined effect raises food prices. According to the International Food Policy Research Institute, export restrictions have adverse effects on net food importing countries. They also send perverse signals to farmers that their markets are ar- tificially small, limiting production. While price controls temporarily reduce prices for con- sumers, they also reduce the revenue that farmers receive for their agricultural products. As a result, they serve as a disincentive for farmers to produce more food at times when it is most needed. Developing countries with some institutional capacity should therefore also consider im- plementing conditional cash transfer schemes to provide short-term aid to poor farmers. Mexico’s PROCAMPO program is one successful example of this approach. Averting the Worst Consequences The link between food price increases and absolute poverty cannot be emphasized enough. The best way to break that link is through long-term development pro- grams, with a 20-year time horizon, that stimulate eco- nomic growth. More funding should be put into USAID economic growth programs proven to work. In addition, more resources should go to democracy and governance programs, which build strong institutions with functioning accountability and feedback mecha- nisms in developing countries, particularly in fragile and failed states. However, these programs cannot produce the kind of sustainable results over the short term demanded by Congress, the White House, the U.S. national security apparatus and what I call the Counter-Bureaucracy — the group of federal and congressional agencies that reg- ulate and control the bureaucracy: the State Depart- ment’s Director of Foreign Assistance and Office of the Inspector General, the Government Accountability Of- fice, the Office of Management and Budget, and con- gressional oversight committees. One reason the 30-year effort that sustained the Green Revolution — which produced its most dramatic results in the noncommunist countries that bordered Mao Tse-tung’s China — was so successful is that USAID had much greater flexibility in those days over the use of foreign aid dollars. The agency was relatively independent from diplomatic and national defense pres- sures, and the counter-bureaucracy had not yet been in- vented. If the global economy does not significantly improve (or fall into another recession, as the World Bank warns may take place in 2012) and unemployment rates con- tinue to rise in poor countries that lack effective safety nets, then the confluence of high urbanization rates, high food prices and widespread unemployment could have potentially devastating political and security con- sequences. Donor governments should respond to the current global spike in food prices for purely humanitarian and ethical reasons. But when governments cannot keep their own populations from starving in a famine, that fail- ure may cause massive social and political upheaval.