University of Wisconsin Center for Cooperatives
Rural Cooperatives, March/April 2000, pp. 23-24
Published by the Rural Business and Cooperative Development Service
Why U.S. agriculture should support foreign aid
By Perry Letson
"Foreign aid" is a term that often provokes intense debate. However, besides benefiting the needy, U.S. foreign assistance is a wise investment in our own economic fortune. This is especially true when the aid is devoted to agricultural development. American agriculture must look beyond current difficulties and support strategic agricultural aid overseas.
It is well established, though counterintuitive, that broad-based agricultural growth in developing countries boosts ag imports from the United States. When people in developing nations earn disposable income, they spend it on improving their diets. According to the International Food Policy Research Institute, each dollar increase in developing-country farm output leads, on average, to 73 cents in imports from the United States, including 24 cents of agricultural imports from the United States.
Agriculture is a critical engine for a nation's economy because, on average, a $1 increase in ag production generates $2.32 worth of growth in the overall economy. And agricultural assistance works: U.S. investments in better seeds and farming techniques have helped feed an extra billion people in the developing world since the early 1960s.
Exports: key to U.S. ag success
Today, agriculture is the bright spot in a gloomy U.S. balance of payments picture. While large global supplies and weak import demand have in recent years hurt U.S. farm exports, the Food and Agricultural Policy Research Institute projects that over the next 10 years the value of exports will increase by more than 40 percent. In 1998 Secretary Glickman put it succinctly: "Without world markets, the U.S. farm economy goes in the tank."
Wayne Boutwell, former president of the National Council of Farmer Cooperatives and now president of Southern States Cooperative, said in 1996 that "over the next 50 years, 94 percent of the growth in population-based food demand will occur outside the industrialized countries. This is where the battle will be fought for world markets."
While our traditional agricultural markets in Europe and Japan are maturing, developing countries offer accelerated population and economic growth. China's economy alone is expected to triple in seven years! Unless we want to be left behind in global competition, the United States must pursue foreign assistance that conforms to the demographic realities. To the extent the aid is agriculture-oriented, it will be more effective at accomplishing broad-based economic development and more likely to cultivate new customers for U.S. farm products.
Agricultural aid in decline
Yet agricultural aid from all industrialized nations plummeted almost 50 percent in real terms over 1986-96. The United States is leading the decline.
Fifty years ago, the United States provided almost two-thirds of all the foreign assistance in the world. Now we rank last among the 21 industrialized nations (according to the Organization for Economic Cooperation and Development) in percentage of GNP per capita devoted to humanitarian assistance abroad. In actual donations, we rank behind Japan, Germany and France - nations with much smaller populations than the United States. There has been a 40 percent erosion in U.S. aid (in real dollars) over the last decade, and we've closed 28 missions of the U.S. Agency for International Development (USAID) since 1993.
From an agricultural marketing standpoint, this is folly! Other nations - our competitors - are becoming more generous and more strategic with their aid programs as we shrink from our rightful role as world leader.
The actual amount of the federal budget devoted to foreign aid is less than 1 percent. According to a University of Maryland poll, a majority of Americans believe the United States spends 15 percent or more of the federal budget on foreign aid. The same respondents believe the proper amount should be about 6 percent.
Congressional support for foreign aid has ebbed in recent years. Too many Americans misunderstand the win-win aspect of international economic development and are cynical because past aid in certain cases propped up dictators. In general, we Americans say we support the idea of development and humanitarian assistance, and we tend to be generous when disaster strikes. However, citizen support for aid is more a latent value than an urgent, activist concern, and Capitol Hill has consequently treated it as a low priority.
A history of success
There's no denying that U.S. foreign assistance has had remarkable success. Since the inception of the Marshall Plan in 1947, America has provided vital resources, development models (including cooperative forms of business and banking), and critical know-how around the globe. From France, Italy, Germany, Spain and Japan in the post-war era, to Thailand, Chile and Costa Rica in more recent years, foreign aid has brought tremendous gains.
In the 1950s and early 1960s, the four developing countries that received the most U.S. aid were Brazil, Korea, Taiwan and Turkey. Today, we have over $100 billion in trade with each. Now South Korea each year buys U.S. goods that are worth more than all the assistance provided to that nation since 1962.
In addition, there have been astounding benefits to American agriculture: Wheat varieties with dwarfing genes found in Asia as part of a USAID program are now grown on almost two-thirds of the area under wheat cultivation in the United States.
Co-ops: a natural at international economic development
Even with the gains, 800 million people are still chronically hungry, and the world population is increasing by approximately 80 million per year. U.S. farm cooperatives and farm credit banks have a proud history of helping those in need overseas. CARE, ACDI/VOCA and its predecessor organizations - Agricultural Cooperative Development International and Volunteers in Cooperative Assistance - as well as NCBC, NRECA and other organizations have carried the co-op banner to the far corners of the world, creating prosperity and injecting the democratic values and efficiency of co-ops where they are most needed. Today, with world markets beckoning, U.S. farmers can't afford to be isolationist; they must support strategic foreign aid.
There are many ways of looking at foreign assistance. It's investing in people so that they can join the global information and economic order. It's leveraging the limited resources of governments to build indigenous skills and promote private initiative. Ultimately, it's a process of making friends and creating customers overseas in stable political environments customers who have money to spend and look to America as a worthy helpmate and a reliable supplier of quality goods.
Ted Turner says, "We cannot save the United States in the long haul without saving the whole world. We cannot throw up walls at our borders or set tariffs on imports. We cannot escape environmental degradation of our foreign neighbors. Why create refugees when we can cultivate buyers?"
Howard Shultz, CEO of Starbucks, adds, "Supporting global development is not charity - it's an investment. And, it's the right thing to do."
The new world economy is based on democracy and trade: currently, American foreign aid, what there is of it, is becoming more business-oriented, and trade barriers are inevitably coming down. The United States must be engaged overseas to prepare for a future in which more and more customers will have names that are harder and harder to pronounce. A future in which diseases more easily become pandemics; a future in which we'll eventually discover that an enormous amount of the world's vital genetic diversity is reposed across our border in remote rain forests or on mountain terraces.
More than money
Seat-of-the-pants economists may say that private investment in the developing world has soared in the past few years from $30 billion in 1987 to near $200 billion today and that this massive infusion of money will make all the difference. Right? Unfortunately, no. In most cases, it only makes the rich richer. The vast majority of this private investment went to a mere handful of nations - less than three percent went to all sub-Saharan Africa. Private investment will not bring about broad-based global economic prosperity. There must be government and civil society intervention to make aid equitable.
Whether it's helping to organize smallholder farmers in Malawi to capture market share from colonial-style plantations, or teaching marketing to bakers in Romania, or bringing cooperative banking back to Poland, people-to-people, private enterprise-based development assistance is inexpensive in the long run especially if it helps avert crises. The prosperity it brings will pay off manifold for market-hungry American agriculture.
We, as a people, must not miss the opportunity to be good leaders, to be good businessmen and to be good period. If we're serious about finding new markets, about creating new business opportunities for American companies in this competitive environment, we must recognize that we have a vested interest in helping the developing world - especially in agriculture.
Opinions expressed by guest columnists in Rural Cooperatives magazine do not necessarily represent those of the U.S. Department of Agriculture.