Rather than dumping agri surplus, why cant they just give it to charity

Stabshauptmann

A friend of mine asked why couldn’t the EU just give away all the excess food produced in the EU to charity (I think the EU pays farmers not the produce the food now/sets production quotas rather than buying surpluses but lets imagine for arguments sake that we’re back in the 1980s).

Obviously too much supply would lower the price, so intervention storage ala the 1980s was to get the prices at a certain level. His point was however that if you gave the surplus away to those who wouldn’t pay for it anyway then that shouldn’t effect the equilibrium price.

I'm sure I've heard this bandied about before but cant remember the counter

Two that popped into my head
• Consumption by charities contributes to the current equilibrium
• Introducing that much produce to a market free of charge would create a dependence / destroy local farming and do more harm than good.

Anybody got a more cohesive explanation

ArmaniJeanss

Did your friend mean charities in the EU or outside the EU (Africa etc)?

If its the former then I think there is a belief (which some would say is incorrect) that there is no legitimate demand for this charity food in Europe, that everyone has a fair wage/social welfare which allows them to feed themselves to an acceptable level.

Outside Europe (specifically Africa), it becomes hugely expensive to transport out food mountains to the people who undeniably need it. And as you said it can destroy local farming to have free stuff dumped into his region.

leninbenjamin

yup. you've pretty much answered yourself in your post. It was done in the past and found to have very negative effects, aid is supposed to help you help yourself, but aid in the form of food typically makes the recipient become dependent on it. in essence it lowers the price of the goods to economically unsustainable levels and generally does more harm than good.
of course in times of crop-failures-leading-to-famine etc. it can become necessary and would be wrong not to, but it is important that food aid is a short term measure only.

someone with a background in welfare economics will probably be able to expand further on the issue

oh and a few links:

http://www.sarwark.org/writings/2007/06/kenyan-economics-expert-stop-foreign.html

http://mises.org/story/1715

i don't know how reliable they are, but they make for interesting reading at least.

eamonnm79

In a give people a rod rather than a fish way, why not send them the farmers who can help give them agricultural expertise. Less farmers in Europe would mean less european produce. It would also allow their fallow land to gain nutriants and mean less pesticides (oil) would be required when they get back.
The other scandal is the price of raw materials v machinary.
The price of agricultural vehicles has increased a lot quicker than Raw materials in Africa.
The reason for this is very simple. The markets are controlled by the first world.
Curruption is the biggest problem in africa.
In my opinion the coffee/cotton/banana/gold/zinc copper etc. growing countrys need to get together in the Same way Opec did in order to gain controll of the price they get.
This will not happen however as Most African governments are in the Wests pocket, as the west are their arms suppliers.

Africas only chance to get out of its basket case is a couple of decades of protectionism in my opinion.

leninbenjamin

eamonnm79 wrote: »

In a give people a rod rather than a fish way, why not send them the farmers who can help give them agricultural expertise. Less farmers in Europe would mean less european produce. It would also allow their fallow land to gain nutriants and mean less pesticides (oil) would be required when they get back.

wtf? what kind of daft notion is this? yeah send the farmers, who cares if they have families to feed, kids to put through college etc.

bloody hell...

muaz jalil

I come from a third world country although we are not facing any severe food crisis like Africa. I have two questions: 1) If people in Africa are starving and don’t have effective demand then what local market are we destroying. Abstract principle and anecdotal references to previous failures are well and good but has anyone analyzed the net benefit accrued to such people from aid and the net cost due to probably Market distortion and dependence on aid

My second question: why do farmers in EU and NA have surplus production which the government has to dispose off later? I am reading Galbraith’s Affluent Society where he ponders over the grave ill of sanctifying production, where it is a worthy aim for its own sake. Hence my post is going to be slightly biased and tainted, my apologies.

My logic is if the government in develop world can forecast their annual agricultural surplus, which I think is possible, then what’s the harm of food aid. I mean its going to be consistent. The usual argument posited against aid is that it is risky as it depends on donor’s discretion rather than market forces within the recipient country and obviously the recipient country is in a lower bargaining position, hence it is receiving aid, thus having no recourse if donor stops donating. Although from a logical point of view it is justifiable and it might happen but empirically I doubt so. Bilateral or multilateral Aid flow to developing countries over the last decade has been much more stable or less volatile than market performance of those developing countries. Hence I don’t see why develop country cannot give food aid unless of course forecasting surplus is said to be impossible, which again is doubtful. My pedantic discussion at the moment ends here.

eamonnm79

leninbenjamin wrote: »

wtf? what kind of daft notion is this? yeah send the farmers, who cares if they have families to feed, kids to put through college etc.

bloody hell...

You make it sound like I am suggesting conscription. Im not. I think with such a noble cause though, it could be sold to younger or single farmers if packaged correctly. Its only an Idea.

Time Magazine

eamonnm79 wrote: »

Africas only chance to get out of its basket case is a couple of decades of protectionism in my opinion.

I couldn't disagree more. Their best chance of development comes from having stronger trade ties with the West.

leninbenjamin

David McWilliams wrote: »

I couldn't disagree more. Their best chance of development comes from having stronger trade ties with the West.

actually the evidence points in favour of protectionism. all of the worlds most successful economies would have employed some form of protectionism in their early days.. Japan, U.S., France, Germany etc. all have varying degrees of protectionism of subsidisation of their insudtries at some point. Ireland is one of the few exceptions to the rule, but we had the low corporation tax and the EU common market on our side.

EGaffney

leninbenjamin wrote: »

actually the evidence points in favour of protectionism. all of the worlds most successful economies would have employed some form of protectionism in their early days.. Japan, U.S., France, Germany etc. all have varying degrees of protectionism of subsidisation of their insudtries at some point. Ireland is one of the few exceptions to the rule, but we had the low corporation tax and the EU common market on our side.

Now which country's experience do you think is more relevant to a modern African country looking to develop itself:
a) Japan, US, France and Germany, all of which established themselves in part by taking over land and resources owned by others, and had far fewer potential trading partners at the time of their economic development, and were all at the forefront of global technological achievement (at least after the mid-19th century in Japan's case); or
b) Ireland, a small country which has to contend with larger competitors and so needed to specialise in exports rather than general domestic production, and also needed to import production technology and expertise from other countries to compete in any meaningful way?

That is why trade, specialisation and foreign direct investment (FDI) are so important for undeveloped countries today. Look at the growth of the small Eastern European countries - they followed the "Irish model", as it has become known, and seen quite good results.

Fact is that a country smaller than the UK or Germany can't produce everything it has to consume at home. Even if it wanted to.

Protectionism is a tool used in the Third World mostly to strengthen domestic business elites.

Al_Fernz

Modern famines are not about food supply. They are about poverty, inequality and political corruption.

Fol20

if they sent surplus food to africe it would destabilize the local produce.plus it would make foreign countries dependent on aid

leninbenjamin

EGaffney wrote: »

Now which country's experience do you think is more relevant to a modern African country looking to develop itself:

That is why trade, specialisation and foreign direct investment (FDI) are so important for undeveloped countries today. Look at the growth of the small Eastern European countries - they followed the "Irish model", as it has become known, and seen quite good results.

arguably Ireland's model is the least relevant when it comes to Africa. Ireland had a pretty highly educated workforce and producers have access to the EU common market containing some of the strongest economies in the world. Africa and Ireland's situation aren't really comparable at all, it's folly to think so.

EGaffney wrote: »

Protectionism is a tool used in the Third World mostly to strengthen domestic business elites.

so? are you suggesting it cannot be implemented otherwise?

EGaffney

leninbenjamin wrote: »

arguably Ireland's model is the least relevant when it comes to Africa. Ireland had a pretty highly educated workforce and producers have access to the EU common market containing some of the strongest economies in the world. Africa and Ireland's situation aren't really comparable at all, it's folly to think so.

And the Japanese/US experience is?

leninbenjamin wrote: »

so? are you suggesting it cannot be implemented otherwise?

Pretty much, yes. Since few people hold capital in poor countries (which are incredibly unequal in economic terms), they are going to be the ones who are protected by ANY protectionist programme. The solution is FDI - foreign capital, in other words. Foreign investors do not particularly care about cosy cartels to keep wages for workers down, they care about profit, and that means higher wages to steal those people away...

leninbenjamin

EGaffney wrote: »

And the Japanese/US experience is?

well you were just pointing out that the U.S., U.K., French and German economies were built on the back of their colonies, colonies who had the natural resources to kick start it all, like many African nations. current international trade arrangements benefit the Western World more so than they do Africa, particularly when it comes to exploiting their own resources. it's not uncommon to see African goods processed in the west being resold to them. the majority of the mark-up of course goes to the West, so Africa is in effect losing on it's own resource. hence why some people see protectionism of some form as they only way forward. (and i'm really rehashing what i've been taught here, i've never really had a strong interest in development economics)

and there's no point talking about FDI in relation to Africa, as the region still has very little to offer the companies who might potentially make an impact in the region. it doesn't have the workforce, it doesn't have the market and it doesn't have the infrastructure.

brianthebard

leninbenjamin wrote: »

actually the evidence points in favour of protectionism. all of the worlds most successful economies would have employed some form of protectionism in their early days.. Japan, U.S., France, Germany etc. all have varying degrees of protectionism of subsidisation of their insudtries at some point. Ireland is one of the few exceptions to the rule, but we had the low corporation tax and the EU common market on our side.

US still hugely protectionist wrt agriculture.

Op what surplus are you referring to? This thread would've been relevant 20 years ago but produce has been decreasing for years and strict quotas means there's no incentive to overproduce. So people don't.

leninbenjamin

brianthebard wrote: »

US still hugely protectionist wrt agriculture.

and not just agriculture. aren't they subsidizing their car industry still? i just find it highly ironic that the west preaches free trade and no protectionism when they still enforce multiple forms themselves.

EGaffney

I never said the growth of the UK etc. was "built on" African resources - just that they undoubtedly helped. Surely if the African goods are going to "The West" for processing and being re-exported, it'd make more sense for the companies to manufacture in Africa? There are plenty of urban centres with cheap labour, and private security in practice makes up for the lack of a police force.

The problem is that FDI is positively discouraged by protectionist policies. Policies which btw are what currently prevail in Africa, it's not like it's a libertarian paradise over there (except Somalia). So "protectionism" isn't a way forward, it's a continuation of failed policies.

The transfer of technology and skills via FDI is the really important thing about increased trade in the modern world, rather than any benefits based on Ricardian economic theory. Note that East Asia sought FDI even while many countries there pursued pretty much protectionist policies - they knew they did not have the right domestic environment to grow industry without international knowledge. The exact same thing applies to 1980s Ireland, though obviously we were at a higher level than those countries and trying to climb to an even higher one.

"The West" engages in protectionism for the exact same reason as poor countries - the protection of special interests. Such as farmers in the EU, and industries in swing states in the US. The car industry is, of course, in Michigan, not Texas or New York. So protectionism happens. But that doesn't mean that we benefit from it.

ArmaniJeanss

muaz jalil wrote: »

I come from a third world country although we are not facing any severe food crisis like Africa. I have two questions: 1) If people in Africa are starving and don’t have effective demand then what local market are we destroying. Abstract principle and anecdotal references to previous failures are well and good but has anyone analyzed the net benefit accrued to such people from aid and the net cost due to probably Market distortion and dependence on aid

My second question: why do farmers in EU and NA have surplus production which the government has to dispose off later? I am reading Galbraith’s Affluent Society where he ponders over the grave ill of sanctifying production, where it is a worthy aim for its own sake. Hence my post is going to be slightly biased and tainted, my apologies.

My logic is if the government in develop world can forecast their annual agricultural surplus, which I think is possible, then what’s the harm of food aid. I mean its going to be consistent. The usual argument posited against aid is that it is risky as it depends on donor’s discretion rather than market forces within the recipient country and obviously the recipient country is in a lower bargaining position, hence it is receiving aid, thus having no recourse if donor stops donating. Although from a logical point of view it is justifiable and it might happen but empirically I doubt so. Bilateral or multilateral Aid flow to developing countries over the last decade has been much more stable or less volatile than market performance of those developing countries. Hence I don’t see why develop country cannot give food aid unless of course forecasting surplus is said to be impossible, which again is doubtful. My pedantic discussion at the moment ends here.

Interesting questions, and I'm no expert.
For your second question why do farmers in EU and NA have surplus production which the government has to dispose off later? I was always
taught that
a) obviously no society which could potentially produce enough food would decide to produce less than was needed.
b) it would also be illogical to produce exactly what you estimated was needed, as you should have a safety net of extra production to cater for 'unknown events' so therefore
c) its logical to overproduce, the question is what is the best percentage that you should overproduce? And clearly the EU does not have the correct answer as it appears we overproduce 'too much'.

eamonnm79

leninbenjamin wrote: »

actually the evidence points in favour of protectionism. all of the worlds most successful economies would have employed some form of protectionism in their early days.. Japan, U.S., France, Germany etc. all have varying degrees of protectionism of subsidisation of their insudtries at some point. Ireland is one of the few exceptions to the rule, but we had the low corporation tax and the EU common market on our side.

Could be wrong but I think Ireland did have a period of protectionism before TK Whitikers Economic plan. Yep Most industrialised powers have a period of protectionism as if they go into global markets while they are weak they get screwed. Its no coincidence that the value of raw materials from africa go down comparative to the finished goods they import (weapons, machinary) go up.

eamonnm79

EGaffney wrote: »

"The West" engages in protectionism for the exact same reason as poor countries - the protection of special interests. Such as farmers in the EU, and industries in swing states in the US. The car industry is, of course, in Michigan, not Texas or New York. So protectionism happens. But that doesn't mean that we benefit from it.

But the point is, that poor countries in Africa dont protect their special interests, due to corruption.

With the world re awakening to the value of comodities, it would be a perfect time for a political movement in Africa to help Gold, Coffee, Copper, Cotton producers etc. get together and set the prices as the Opec guys did.

First world companies spend billions, to ensure that this type of organisation never happens. Your avarage African is just not educated enough/ feels completely helpless. Your avarage African Government is to corrupt to upset the apple cart.

Europeans are complicit in the African Problem because we all know that in many ways we gain from the status quo.
Its evolution, survival of the smartest.

Barrack Obama's Campaign is promising to increase American Protectionism.
"I will reward companies who create jobs in America and impose taxes on those who outsource labour"