Tuesday, May 20, 2008

Capitalist Markets and Food Shortages

From the BBC we read that six million children in Ethiopia are at risk of acute malnutrition following the failure of rains, the UN children's agency, Unicef, has warned. The WFP estimates it needs to raise $147m (£75m) to tackle Ethiopia's needs. Aid workers say the money just is not arriving, with donors concentrating on the disasters in Burma and China.

Ethiopia for most of the past three decades has survived on millions tonnes of donated food and millions of dollars in cash. It has received more emergency support than any other African nation in that time. Its population is increasing by 2m every year, yet over the past 10 years, its net agricultural production has steadily declined. Even in good years, some 5m people need food aid just to survive.

Why, with so much international support, have things gotten worse and not better?

Foremost is that any large-scale intervention by definition distorts local economics.
"We import huge amounts of grain from abroad. So this will inevitably affect the internal production and markets," said the Deputy Prime Minister Addisu Legesse.
When foreign aid lands, local prices collapse, and farmers who have managed to produce a surplus find their crop is virtually worthless. They have no money to pay for seed or fertiliser for the following year.

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