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Why U.S. Might Be Perpetuating Global Poverty

By   /   August 19, 2011  /   Comments

Given the immense aid that the U.S. provides poor countries throughout the world, it sounds odd to say that the U.S. might be perpetuating global poverty. However, there are unintended consequences that come with directing food to impoverished areas. Additionally, it is assumed to not be in the interest of U.S. jobs to level the playing field in agriculture. Those are the two main reasons why we might be the problem, rather than the solution.

Consider what’s going on in Africa with the Purchase For Progress (P4P) program that’s being financed by the United Nations, as reported in the July 28th, 2011 edition of Bloomberg Businessweek. Through financing that is partially supported by U.S. taxpayer dollars, former ex-Bush administrative official, Josette Sheeran, is leading efforts to help African farmers be a more productive player in global agricultural markets.

The P4P program has developed exchanges whose focus is to make it easier for farmers in Uganda and South Sudan farmers to find sellers for their corn and coffee. They are also receiving training on the latest techniques that will boost the yield and quality of their crops. Through improved methods, they are gaining more access to credit.

However, a deteriorating fiscal situation in the U.S. is threatening the future viability of this program. With U.S. government retrenchment on its way, there is concern that funding will be adversely affected. Its defunding receives popular support from Americans, who believe that Congress must address domestic interests over foreign interests. Therefore, the political cost for maintaining funding of global poverty initiatives is high.

Another troubling issue is the unintended consequences of food aid efforts. One would think that our generosity is moderating a crisis, rather than continuing it. Surprisingly, that is not the case because the shipping of free food to these countries makes it impossible for local farmers to compete.

Ironically, it is currently not in the best financial interests of Americans to undue this culture of dependence. Like other rich countries, our U.S. Congress continues to finance farm subsidies that help maintain the livelihood of farmers and boost the profitability of agribusiness industry. While their efforts are undermining the laws of efficient markets and competition worldwide, it helps maintain the living standards of many vulnerable American farmers.

Then we need to look at how shipping and commodity traders would be impacted by decreasing food aid. In order to deliver excess food produced from the U.S., shipping firms, like Liberty Maritime, are compensated for their efforts. It is estimated that these efforts support about 33,000 shipping-related jobs. Transitioning to commodity trading, firms, such as Archer Daniel Midland, profit immensely from food-aid contracts. Terminating these contracts could lead to revenue losses of up to $1 billion in commodity and shipping industries, according the U.S. Department of Agriculture.

How should the U.S. proceed? First, we must recognize that it is mutually beneficial to help countries across the world lift themselves up out of poverty. Easing poverty will make it easier to establish better governments and institutions. Achieving this will help root out extremism that are interested in increasing terrorism that threatens lives everywhere, including the U.S.

We can accomplish that by supporting programs built out of self-sufficiency, rather than dependency. P4P is superior to food-aid programs because we can eventually see a time where countries can wean themselves from global reliance. However, we must acknowledge that we must forsake our self-interest to make this a reality.

In America, we say we value liberty and justice for all. Let’s ensure that value extends beyond our borders. We must advocate fair trade policies that will enable foreign food producers to compete on a level playing field. While it will undoubtedly disrupt labor markets in the U.S., we do have an educational and institutional system that can transition our citizens to alternative economic opportunities.

Yes, there will be job losses in agriculture, shipping, and trading from minimizing food-aid contracts, but we must also realize that many more jobs would be created through raising prosperity across the globe. As incomes in Africa, Asia and Latin America rise, that means more opportunities to sell our goods and services to them.

Meanwhile, rich countries have the wherewithal to support their citizens as they seek to update their skill sets through unemployment benefits, welfare programs, and education grants. On the other hand, the poor in many countries simply wallow in hunger and extreme poverty due to insufficient governmental systems.

As Americans, we need to think about how improving the well-being of poor countries is actually in our best interests. Think about a world safer from potential destruction as extremism is defeated. Think about the moral implications of an economic system where the rich and prosperous countries take advantage of the less fortunate countries. Think about how your circumstances could have been different if you were born on a different continent and whether you could overcome the same odds. Americans, just think …

Aaron Johnson is the assistant Professor of economics at Darton College, where he also serves as director of the small business management program. He publishes a blog at econprofaj.blogspot.com.
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Owner / Editor / Writer

Tom Knighton is the publisher of The Albany Journal. In November, 2011, he became the first blogger to take over a newspaper anywhere in the world. In August of 2012, he made the difficult decision to take the Journal out of print circulation and become an online news agency, a first for the Albany area.

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