The Wall Street Journal
Copyright (c) 1984, Dow Jones & Co., Inc.
Monday, July 2, 1984
Free Food Bankrupts Foreign Farmers
By James Bovard

Food for Peace is probably our most harmful foreign aid
program. Each year the federal government dumps more than $1
billion of surplus commodities onto Third World countries.
This food occasionally feeds people who otherwise would go
hungry, but the usual effect is to undercut poor farmers and
disrupt local agricultural markets.

Food for Peace has always been a bit of a mongrel program,
serving whatever purpose politicians choose at that moment.
Until 1980, it gave surplus tobacco to poor countries! The
program currently helps avert starvation by giving away
Agriculture Department surplus cotton. Food for Peace (also
known as PL 480) is jointly administered by the USDA and the
Agency for International Development, and the two often

Food for Peace originally was designed in 1954 to help the
Eisenhower administration get rid of embarrassingly large
farm surpluses. The original law included a cargo preference
provision requiring half of all PL 480 food to be shipped in
American-flag ships. This provision supposedly helps ensure a
healthy merchant marine for national defense emergencies. But
a 1983 Senate Agriculture Committee report concluded: "Rather
than encouraging the development of improved U.S. vessels,
the program encourages the continued use of semi-obsolete and
even unsafe vessels which are of little use for commercial or
defense purposes." Due to inflated U.S. shipping costs, cargo
preference adds more than $50 million to the program's cost.

Many Americans have the impression that most U.S. food
relief goes to areas hit by foreign disasters or emergencies.
Actually, only 14% of PL 480 food went to such areas last
year, and even that aid is often counterproductive,
disrupting local economies and discouraging governments from
reforming destructive agricultural policies. The usual
routine for other PL 480 programs, as one congressional
staffer described it, is for an AID person to come into a
country, find an excuse for a project and then continue it
for 15 years, regardless of need or results. Many such
programs have fed the same people for more than a decade,
thereby permanently decreasing the demand for locally
produced food and creating an entrenched welfare class.

In the 1950s and 1960s, massive U.S. wheat dumping in
India disrupted the country's agricultural market and
bankrupted thousands of Indian farmers. George Dunlop, chief
of staff of the Senate Agriculture Committee, speculated that
food aid may have been responsible for millions of Indians
starving. Mr. Dunlop and Reagan administration officials
insist that the program no longer puts farmers in recipient
countries out of business, but the evidence does not flatter
their contention.

PL 480 is still often run with the goal of giving away the
most food in the shortest time. The Kansas City Times
reported that in 1982 the Peruvian agriculture minister
pleaded with USDA not to send his country any more rice,
fearing that it would glut the local market and drive down
prices for struggling farmers. But the U.S. rice lobby turned
up the heat on USDA, and the Peruvian government was told
that it could either have the rice or no food at all.

The same type of policy fiascos occur in sub-Sahara
Africa, which received 14% of PL 480 donations in 1983. Most
African governments force farmers to sell their crops to the
government at a third to a half of their market value.
Per-capita food production in Africa has decreased 20% since
1960, and PL 480 donations have helped governments perpetuate
the destructive status quo. The easier it is for governments
to get welfare, the less incentive they have to reform their
own policies.

Haiti is another country wounded by U.S. free food. A
development consultant told the House Subcommittee on Foreign
Operations a few years ago, "Farmers in Haiti are known to
not even bring their crops to market the week that [PL 480
food] is distributed since they are unable to get a fair
price while whole bags of U.S. food are being sold." Where
there is a sharp increase in the supply of food, prices will
inevitably fall and local farmers will be hurt.

PL 480 also is often ineffective in international
disasters when a speedy response is essential. People have
starved while bureaucrats haggled and decrepit boats puttered
across the ocean.

In 1976 an earthquake hit Guatemala, killing 23,000 people
and leaving over a million homeless. But just prior to the
disaster, the country had harvested one of the largest wheat
crops on record, and food was plentiful. Yet the U.S. dumped
27,000 metric tons of wheat on the country. The U.S. "gift"
knocked the bottom out of the local grain markets and made it
harder for villages to recover. The Guatemalan government
finally had to forbid the importation of any more basic

PL 480 aid is divided under three titles. Title I sells
food to countries at concessional prices, roughly 65% lower
than market price. Title II donates food to be used for local
development projects and for malnourished groups. Title III
donates food but only on condition that countries are making
an effort to improve their development policies. Very few
countries have applied for Title III conditional aid, as they
know they will get free or cheap food regardless of what
policies they follow.

Roughly a quarter of Title II donations go for the Food
for Work (FFW) program. FFW recipients receive food in return
for working on labor intensive projects. These projects are
supposed to be designed to increase agricultural

But workers often labor to improve the private property of
government officials or of large landowners. An AID analysis
of FFW in Bangladesh, which has the largest number of FFW
projects, concluded that FFW "results in increased inequity"
and "strengthens the exploitive semi-feudal system which now
controls most aspects of the village life. . . ." Workers
were underpaid, and the government of Bangladesh used U.S.
wheat for other purposes and paid laborers with poor quality,
infested wheat. A 1975 Food and Agriculture Organization
report concluded that FFW projects in Haiti "have extremely
deleterious effects on the peasant communities and cause
great erosion of the reservoir of mutual service
relationships of the traditional peasantry."

In many areas, rural residents neglect their own farms to
collect generous amounts of food for doing little or no work
on government-supervised projects. FFW has, like food stamps
in the U.S., contributed to a shortage of agricultural labor
at harvest time.

Much of the donated food is targeted for school food or
health programs for mothers and their children. AID claims
that this prevents displacement of local production and
reduces malnutrition. But an AID audit of targeted assistance
in India, which has the largest program, concluded, "The
maternal/child health program has not improved nutrition and
the school feeding program has had no impact on increasing
school enrollment or reducing the drop-out rate. . . ."
Another AID audit concluded that "program methodology in
Kenya (and elsewhere in Africa) creates an unlimited demand
for food. . . . The long-term feeding programs in the same
areas for 10 years or more have great potential for food
production and family planning disincentives. . . ." In other
countries, such as Haiti, the local AID office has never even
attempted to determine the impact of PL 480 food on
recipients' nutritional status.

If the USDA really believes that giving food to the poor
has no effect on local farmers, then presumably Agriculture
Secretary John Block would not object if the European
Economic Community sent over a billion pounds of surplus
cheese to feed all the hungry Americans they hear about.

Recipient governments often sell PL 480 food and use the
proceeds for various doubtful purposes, such as buying arms.
Mauritius insisted on receiving only the highest quality rice
-- and then used the donated food for its hotel trade. In
other cases, food aid is squandered because of government
price controls. According to one former AID official, bread
is so cheap in Egypt that American PL 480 wheat is baked into
loaves and fed to donkeys.

When food aid does not undercut local farmers, it often
replaces food that the recipient country would have purchased
on international markets anyway. One analysis found that
almost 90% of PL 480 donations to Brazil simply replaced
grain that nation would have purchased from the U.S. and
other grain exporters. The General Accounting Office reports
that many countries have decreased their commercial purchases
from the U.S. while continuing to receive PL 480 handouts.

Not only does PL 480 hurt Third World farmers, it also
helps perpetuate floundering U.S. agricultural policies. USDA
price supports have led to the government accumulating a huge
wheat stockpile and billions of pounds of slowly rotting
dairy products. PL 480 gives congressmen a
respectable-looking vehicle for disposing of the evidence of
our farm policy failures.

Opposition to food aid is widespread among even liberal
activists -- the same groups that often favor handouts on
principle. The Canadian Council for International Cooperation
recommends that "except in cases of emergencies, food aid be
abolished." Laurence R. Simon of OxfamAmerica, a liberal
self-help development agency, concludes: "We haven't seen
convincing evidence that food aid can be effectively employed
as a development resource." Tony Jackson, author of "Against
the Grain" and a former AID consultant, believes that food
aid almost never does more good than harm, except during
disaster relief.

PL 480's main beneficiaries are American farmers and the
U.S. merchant marine. PL 480 has bankrupted poor farmers,
encouraged the welfare ethic in recipient countries and
squandered billions of tax dollars. If this is our
humanitarianism, God help the Third World if we ever decide
to get rough with them.

Mr. Bovard is a free-lance writer in Washington.


7/27/84 Wall St. J. (Page Number Unavailable Online)
1984 WL-WSJ 223965
The Wall Street Journal
Copyright (c) 1984, Dow Jones & Co., Inc.
Friday, July 27, 1984
Letters to the Editor: Does Food for Peace Stunt Growth?

James Bovard's "Free Food Bankrupts Foreign Farmers"
(editorial page, July 2) contains misconceptions regarding
the Public Law 480 Food for Peace Program.

PL 480 does not, as Mr. Bovard asserts, "undercut poor
farmers and disrupt local agricultural markets." When the
program was initiated in 1954, recipients included Germany,
France, Italy, Poland, Yugoslavia, Greece, Spain and Norway.
The program did not destroy their agricultural economies and
the will to grow food. In fact, several of these countries
now contribute food through the EEC for similar programs.
Also, a study by Dr. H.W. Singer of the University of Sussex
found that in India -- long the largest recipient of food aid
-- "theoretical analysis gives no proof that food aid, if
properly handled, has serious disincentive effects on food

India illustrates the effectiveness of food for work
programs. In 1976 CARE introduced FFW projects there. These
mostly involved soil conservation, flood protection,
irrigation and school construction. Initially 235,000
recipients in hundreds of projects consumed 71,000 tons of PL
480 wheat. This program continued through 1979 and in its
peak year, 1977, had 1,180,000 recipients in food for work
activities that resulted in the distribution of 297,000 tons
of wheat. CARE was able to end its participation when two
very successful crop years made it possible for the
Government of India to take over the program with its own
resources. CARE's food for work programs have now been made a
regular part of the Sixth Five-Year Plan. It is expected to
generate 300 million to 400 million mandays of work annually.

Mr. Bovard said that the U.S. Agency for International
Development in Haiti "has never attempted to determine the
impact of PL 480 food on recipients' nutritional status."
Actually such a study is being conducted by Joel Cotton for
AID and the first phase has been completed.

Contrary to Mr. Bovard's assertion, a study by Prof.
Frederick Bates of the University of Georgia showed that
there was, indeed, a food shortage associated with the
earthquake in Guatemala in 1976. Also, instead of grain
prices dropping at the time, as Mr. Bovard claimed, prices
increased. The Bates study was far more comprehensive and
rigorous than the impressionistic Jackson piece cited later
in the article by Mr. Bovard.

Also, far from having food "dumped" on it, India today
purchases food when needed in the international commercial
market and is increasingly supplying its maternal/child
health program and midday meal program from its own
resources. The government is scheduled to take over this
program completely within 10 years.

Philip Johnston

Executive Director


New York


Public Law 480 embodies humanitarian, development, export
promotion, and foreign policy objectives. These objectives
have been and are being met.

Under Title I, contrary to Mr. Bovard's understanding, the
U.S. provides long-term (20-40 years) credit at concessional
interest rates (2% to 4%) to facilitate purchases of U.S.
agricultural output at market prices by friendly developing
countries. The food is sold locally, with the proceeds used
to fund economic development. Since Title I generates local
(often non-convertible) currencies, it is difficult to see
how, without taking the notion of fungibility to absurd
lengths, Mr. Bovard imagines these monies being used by
governments to buy arms.

As to food production disincentives, the law requires the
Secretary of Agriculture to determine that distribution "will
not result in a substantial disincentive to or interference
with domestic production or marketing. . . ." Title I
agreements contain a series of "self-help measures," tailored
to the situation of the recipient country, which spell out
specific actions to be taken to foster economic development.
These measures are not always easy or painless; they often
encourage price decontrol, market reliance, added attention
and resources to the private agriculture sector, and
elimination of consumer subsidies.

Title I is highly prized by food-deficit developing
countries that lack the foreign exchange to meet food needs
through normal commercial imports. The food deficit might be
chronic and self-reliance might be a generation away, even
with the proper help. In other cases, a normally self-reliant
country may need short-term help to deal with a natural or
man-made disaster.

Title II donates food to the world's neediest. Even here,
though, every effort is made to maximize the contribution to
development of this humanitarian program.

Title III is similar to Title I, except that it calls for
added policy reform or other developmental progress in
exchange for a multi-year food aid commitment and forgiveness
of the food-aid debt. Since the enactment of Title III,
however, Title I's economic development conditions were
toughened, and the difference between the developmental
impact of the two Titles has lessened markedly.

Mr. Bovard suggests that U.S. food aid has hampered
agricultural production overseas, and that somehow, without
food aid, countries would be motivated to produce more
domestically. The fact is that a real hunger problem exists
in the world today, which even Mr. Bovard cannot wish away.

Food aid has not prevented the dramatic increase in food
production in the developing world over the past few decades.
Population, unfortunately, has increased even faster.
Developing countries' import needs (commercial purchases plus
food aid) total about 95 million tons per year. The U.S.
sells about 40 million tons to the developing world, and
provides somewhat over five million tons in food aid. It is
hard to argue that the five million tons is a significant
disincentive to domestic production.


Denis Lamb

Deputy Assistant Secretary

Trade and Commercial Affairs

State Department