Even most development assistance fails the poor and hungry

With kind permission from Peter Rosset of the Institute for Food and Development Policy (or FoodFirst.org as it is also known), chapter 10 of World Hunger: 12 Myths, 2nd Edition, by Frances Moore Lappé, Joseph Collins and Peter Rosset, with Luis Esparza (fully revised and updated, Grove/Atlantic and Food First Books, Oct. 1998) has been reproduced and posted here. Due to the length of the chapter, it has been split into sub pages on this site.

Finally, even most development assistance fails to help the poor and hungry. Only 18 percent of U.S. bilateral aid is even called development assistance. How is this development aid spent? During the 1960s and early 1970s, much of it went to install infrastructure (power plants, transportation and communication facilities, and the like) benefiting mainly businessmen, landlords, and others in an economic position to take advantage of such facilities. In the late 1970s and early 1980s, the trend was more toward smaller-scale projects, including agricultural credit programs and the development of small and medium-size businesses. But even these smaller-scale projects failed to reach the poorest, concluded a major study by the World Bank and the International Monetary Fund.⁴⁹

This general finding was borne out by USAID’s own program evaluations. One report reviewing twelve years of small-farm credit programs noted that benefits were highly skewed against the small farmer and the landless poor.⁵⁰ The reasons for this failure were clear enough-very few of the poor had titles to farms large enough to satisfy the requirements of a credit application. Since the majority of rural poor in most third world countries are landless, even the best farm credit program could never help them.

In the 1980s and 1990s a major trend has been to promote nontraditional exports. In Central America, for example, USAID has been pushing farmers into hopelessly competing for volatile niche markets by promoting new export crops. These Non-Traditional Agricultural Exports (NTAEs) range from passion fruit and broccoli to macadamia nuts and melons and have been vigorously advanced through massive foreign aid subsidies and fierce pressure on local governments. Central American farmers and governments now find themselves saddled with risky agricultural ventures that have destabilized traditional production of food crops for local consumption. The net result is deepening poverty and economic insecurity in agricultural communities throughout Central America. In stark contrast to USAID’s stated aim of stabilizing Central America’s economies, NTAE programs have intensified the inequities between small farmers and wealthy landowners.⁵¹

A 1983 USAID project in the Guácimo district of Costa Rica offers a poignant yet not atypical case in point. Investing money, credit, technical assistance, and marketing expertise, USAID encouraged poor farmers at the El Indio land settlement to switch from traditional yellow corn production to cocoa, tuber crops, and ayote squash for export to the growing Latino market in the United States. In the project’s first season, farmers were provided with imported, disease-free seed, a full-time extension agent, and an advance purchase contract. The incomes of the farmers who participated soared in the first year, up to forty times more per acre than their neighbors who continued growing corn.

But just one year later, the El Indio venture began to unravel. The NTAE project no longer provided seeds, there was no marketing contract, and the extension agent was employed only part-time. Still, enticed by the previous year’s success, more farmers took the plunge. The results were disastrous. Crop prices dropped as global competition heightened. Due to the low-grade seeds used the second year, much of the harvest was hit by disease-discouraging buyers from all but a small portion of the crops. Half of the farmers defaulted on their credit, and the forty who persisted defaulted in the following year.⁵²

The El Indio experience and many others like it provide a cautionary tale of the pitfalls of pushing exports at all costs. Promoting capital-intensive crops for unproven markets, NTAE projects are a high-stakes gamble for peasants. Small farmers face hurdles at every step along the way.

In Guatemala, for example, the initial investment to plant nontraditional export crops ranges from five to fifteen times higher than that for traditional corn and beans.⁵³ Crossing this barrier means taking out risky credit and loans that frequently have interest rates biased against poor farmers and can easily lead to losing the farm after a bad harvest.⁵⁴

The fate of small farmers in the nontraditionals industry has been similar to their fate with traditional exports and in the Green Revolution. Nontraditionals are expensive to produce-requiring enormous quantities of pesticide, fertilizer, and technical expertise, favoring larger, better capitalized producers. Because these are perishable products, small farmers are often unable to place their produce in Northern markets with quality standards, giving the edge to the giant fruit companies.

Unable to compete with better-financed growers, and heavily in debt because of high production costs, many small farmers have been driven out of business by trying to produce nontraditional exports. At the same time, chemical pesticides and fertilizers have seriously degraded the productive capacity of the soil in many regions and contaminated the environment.⁵⁵

Growing corn and other basic staples is no longer profitable either, due to the flooding of local markets with cheap grain via free trade, and to cutbacks in price supports and marketing imposed by structural adjustment programs. As a result, small farmers have migrated to cities and to developed countries in huge numbers, fleeing the policy-driven collapse of rural livelihoods. The winners under current policies have been, first and foremost, international companies able to compete in the emerging global food system, and the net losers have clearly been the rural poor and the environment.

While the poor may not be the chief beneficiaries of development assistance projects, one group that does benefit handsomely includes the U.S. corporations, consulting companies, and universities that get USAID contracts. An independent study found that 29 percent of U.S. development assistance was 100 percent tied to purchases from companies in the United States-an amount greater than the total of U.S. assistance to sub-Saharan Africa.⁵⁶

Funds for aid pass though many hands before reaching the supposed beneficiaries. So the question we must ask is, How likely is it that resources channeled through the powerful will help the powerless?

The already better off are positioned to capture a disproportionate share of any economic gains offered by development aid. And with their new resources, they can often further tighten their grip over land and other productive resources, thereby worsening the plight of the poor. Thanks to a bribe to a technician, an irrigation pump earmarked for a cooperative of poor farmers in Bangladesh winds up belonging to the village’s richest landowner; he graciously allows his neighbors water from the new well in exchange for a third of their harvests. The pump and the added revenue give the waterlord the incentive to take over more land by foreclosing on the small farmers in debt to him. Thanks to his heightened prosperity, the landowner can now buy an imported tractor, eliminating desperately needed jobs for the village’s landless families.

This and similar scenarios, endlessly repeated, entrench the already well off and add to their incentive to fight demands for democratic control over productive resources. In many countries, rich landowners are known to hire thugs to intimidate and even murder villagers who dare to protest or organize self-help cooperatives.

Only projects that reinforce the poor’s initiatives to tackle the extreme inequalities in power within the village have a chance of improving the lives of the majority. However, most governments are unlikely to look kindly on such activities, for fear of antagonizing powerful elites.

But we hesitate even to use this space to question the possibility of government-sponsored development projects helping the poor within elite-dominated societies. To do so may mislead, for it is so easy to lose sight of the big picture.

No matter how sensitively designed the aid project, prospects for the poor majority-whether they will have land, jobs, food, and economic security-hinge largely on forces outside their villages. To whom is their government accountable? To whom are international bankers who make loans to their government accountable? And what about the corporations dominating trade in their country’s exports? Such questions point us to what we call the iceberg. Foreign aid is only the tip.