Cui Bono?

One would expect that American aid to other countries would provide, well, aid. That's not always the case because the aid being given may result in actually harming at least some sectors of the beneficiaries' economy. An interesting article in today's NY Times points to the complications of one kind of aid favored by the US.

CARE, one of the world’s biggest charities, is walking away from some $45 million a year in federal financing, saying American food aid is not only plagued with inefficiencies, but also may hurt some of the very poor people it aims to help.

CARE’s decision is focused on the practice of selling tons of often heavily subsidized American farm products in African countries that in some cases, it says, compete with the crops of struggling local farmers. ...

Under the system, the United States government buys the goods from American agribusinesses, ships them overseas, mostly on American-flagged carriers, and then donates them to the aid groups as an indirect form of financing. The groups sell the products on the market in poor countries and use the money to finance their antipoverty programs. It amounts to about $180 million a year. [Emphasis added]

While the hard currency the NPOs get in the sale of the donated goods is obviously helpful to the recipient country, too often the charitable groups aren't savvy enough to make wise decisions in the complicated commodity markets. More important, however, is the fact that the American farm products being dumped on the foreign market depress the prices the local farmers could get by selling their products.

The real beneficiaries of this government program appear to be the American agribusinesses and the American shipping companies, not the poor in Africa. CARE is taking a courageous and principled stand by refusing the US government aid. I just hope they can replace that source of funds with another, less burdensome one.