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One of the world’s biggest charities, CARE has taken a bold and huge step in a positive direction by announcing that they’re walking away from $45 million a year in US food aid money.
Since much of the federal funding for Africa comes from selling tons of American farm products in African countries, the thinking is that the system actually hurts many of the people it is supposed to help, and that it’s plagued with inefficiencies.
Here’s how it works in a process called “monetization”:
Under the system, the U.S. government buys the goods from American agribusiness, ships them overseas on mostly American-flagged carriers and then donates the goods to the aid groups. The groups sell the products in poor countries and use the money to fund their anti-poverty programs there.
Not all charities operating in Africa agree with CARE’s take, but the thought that all was not kosher … that “converting American commodities into cash for development was a case of ‘the tail wagging the dog,’ with domestic farm policies in the United States shaping hunger-fighting methods abroad” … is gaining strength and winning over converts.
Since even the US Government Accountability Office (GAO) has concluded that the system is “Inherently inefficient”, CARE must be on to something.
As CARE spells out in its “White Paper on Food Aid Policy”, it would make a heck of a lot more sense to buy food locally or regionally in the developing world rather than continue to go about doing it the backwards way it’s being done to, “… (i) to reduce costs, delays and market distortions brought about by “tying” food aid to domestic procurement programs in the donor country and (ii) to increase procurement flexibility while providing economic opportunities for small farmers in countries where purchases are made.”
Good thinking!
Announcing that the organization will “transition out of monetization” … the sale of food aid as a way to generate cash for humanitarian programs in countries where people are often starving … by the end of September, 2009, CARE insists it will employ the concept ONLY when it can be sure that the food being exchanged for cash will actually reach the people who need it.
Their reasoning for backing out of monetization?
1. Experience has shown that monetization requires intensive management and is fraught with risks. Procurement, shipping, commodity management, and commercial transactions are management intensive and costly. Experience has shown that these transactions are also fraught with legal and financial risks.
2. Monetization is economically inefficient. Purchasing food in the US, shipping it overseas, and then selling it to generate funds for food security programs is far less cost-effective than the logical alternative – simply providing cash to fund food security programs.
3. When monetization involves open-market sale of commodities to generate cash, which is almost always 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.
Or, at least that’s the polite and official answer to the question: Why rock this boat?
One of my favorite lines in the White Paper is: CARE takes the position that food aid should not be used to enable a donor to establish an unfair commercial advantage and must not create disincentives to local production and markets.
Well, amen to that.
Having reform for food aid to Africa fronted by an organization like CARE is a huge step in the right direction, and I applaud them for taking this greedy, pushy bull by the horns and doing its part to put it out of other peoples’ misery.
It is so far beyond the time when good hard looks have needed to be taken at the flash that so often never gets to substance in the aid world … or that has so many bites taken out of it on the way that there’s far too little left for those who are touted to be the raison d’etre for the flash in the first place.
Contrary to popular understanding, groups like CARE … and the UN … are not supposed to be about cushy jobs, First Class flights, big offices, chauffeured Town Cars and Armani suits, and if those who have all that stuff can’t manage to fulfill their real mandate to feed, shelter and otherwise care for the poorest on our planet, there is no reason for them to exist at all.
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Amen, Sandra!
I freely admit that my brain is the last to wrap around any concept of business or economics, but wouldn’t America be spending LESS money by donating cash then buying food in America and then additionally paying for shipping and care (i.e. refridgeration or time constraints or whatever). So, couldn’t less cash spent on shipping and care translate into a “savings” on food aid to other countries or, ideally, more cash going to more direct aid?
Gee! That makes SO much sense!
There may be a teensy problem with the agribiz people, though. As I understand it, they’re rather used to overcharging for products they don’t have to do a thing to sell, therefore in the process setting a market rate that will impact their subsidies for not growing food they won’t sell so that they get top dollar for nothing.
Barbara Kingsolver rallies a lot of facts to support the same position CARE is taking in her new book, “Animal, Vegetable, Miracle.” It makes for interesting reading.
She’s one of my favorite writers! Thanks for this ‘heads up’, Virginia. I’ll be ordering her book very soon.
So, you get an A on accounting. There sure would be more goods to be distributed.
There is a part of this that bothers me. I live in CA, suppose I wanted to give an american made car of mine to a friend in Mexico, and I was even going to pay an american driver to bring it to him. Now lets suppose the mexican friend says “No way, a mexican car delivered by my fellow countrymen or forget it.” I would see that as ungracious. If we are giving the money, isn’t it rather silly to say “No, I am holding out for the gift just the way I want it”? John
From what I gather, John, the better comparison would be …
if you bought the car, had it driven to Mexico where your friend was told to sell the car, send back enough of the cash to pay for the manufacture … of a car that, by the way, would not have been made were it not going to Mexico … pay the driver, then use what’s left over to buy himself another car. And all ostensibly because you’re a wealthy and generous guy, and your friend needs a car to continue living, and his continued living means a healthier, safer and generally better world.
Not an exact model of how it works, but closer than yours I think.
CARE isn’t looking at giving gifts the way someone wants them, but in a way that removes big bonuses for rich companies and adds those back onto what goes into AID … sort of more the point, really.
I am confused, I get the part that says they get the proceeds of the US donated goods they sell, and that funds their programs. I don’t see from the post how they are required to reimburse us for the grain we shipped, only that the sale of these donated goods in their country is their usable money.
Certainly we can all get upset about the evil big companies, but what is the focus here, a nice pure gift done the way the beneficiary wants it, or getting money for local programs? Even if they only get 10 mil out of the 45 mil, that is still a lot better than zero. Isn’t there an old saying, ‘beggers can’t be choosey’? John
John,
Read the CARE White Paper linked to for more details than I could fit in the post. I, certainly, was over-simplifying, and it’s not that countries reimburse directly but that they do pay the price.
It seems to me that the issue isn’t beggars being choosey about the 10 mil, but about what happens to the 35 mil in between.
Is it aid in general that you’re opposed to? If so, there is argument against.
CARE seems to be looking toward keeping the aid coming, but more effeciently and with less potential for graft and corruption. I don’t get arguing against that.
I think the aid is great. The program as it is set up is obviously not effecient, if that is the only goal. I guess my concern is that it isn’t the reciever who should be raising stink about the blown 35 mil, its people here in the US. The donee should keep in mind that the alternative to the program done the ineffecient way it is now may be no program at all.
The way it is done now is probably dictated by some US issues. We do have stockpiled grain, bought by the government, we need to move it. Effectively, it costs us money to store it, so the cost of 45 mil of this grain is less than zero to the US. The cost of the same amount of grain in another country is 45 mil, big difference. We always struggle to keep US flag carriers going, again we are taking care of our intersts and killing two birds with one stone, the grain has to get there somehow. We are giving and we are also taking care of us at the same time, is that bad? John
John, it’s not the recipients looking toward changing the system, but the organization. I suspect the “donees” are more than happy with whatever they get … they being the beggars that can’t be choosers.
The organization … a huge multinational whose business is aid … now sees the method of aid as innefficient — and doing more harm than good, partially because it cuts the legs off of local farmers which exacerbates the problem not only by creating more poor, but also by continuing the cycle of too little food. It is well within their mandate to prompt change in practices.
Storage of stockpiled grain and keeping US carriers in business is a matter for others to concern themselves with … not CARE.
I also take issue with your postulation that the cost to the US is “less than zero” in the present system. The cost to taxpayers for agribiz monoculture crops grown to maintain the surplus, plus the subsidies that are part of the system is huge. For the government to compensate itself by selling stockpiles and calling it aid seems disingenuous and a poor way of doing business … except for those reaping a harvest of millions of taxpayers dollars. For them, it’s a boon.
It is indeed a poor way of doing business. One area that is a bit of comparing apples and oranges is the idea of undercutting the local farmer. Yes, that is happening if we send the same type of grain that he produces.
Many of these very poor countries have the misfortune to have very bad soil. There are grains the local people need that the local farmers simply cannot produce. Corn and soybeens are always needed, and yet much of the world doesn’t have the soil to grow those crops. If we don’t ship ours, there aren’t all that many other sources for those countries. John
That would be the proverbial different kettle of fish … sorry about that — you know I can’t help myself … and one I’m sure organizations like CARE take into account.