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Monday, May 26, 2008

The Tragedy of the Farm Bill

This past week, an enormous tragedy passed America by unnoticed. It scarcely registered on news headlines; when it did, the stories failed to provide any strategic analysis or consider long-term implications for security and development. This tragedy will set back global development efforts; it threatens to crack the global trade system, which is one of the pillars of the global economy and the engines of peace among and between nations; it will fan the flames of rivalry between the developed and developing worlds, and fuel myriad conflicts; it will worsen the crisis of escalating food prices and hurt the poor. The tragedy I speak of is the passage of the 2008 Farm Bill, with overwhelming support in both the House and the Senate--a $309B monstrosity that represents everything wrong with Washington.

HOW FARM SUBSIDIES WORK

To understand the development and security implications of the Farm Bill, it's first necessary to understand how subsidies work. A subsidy is "a form of financial assistance paid to a business or economic sector. This can be used to support businesses that might otherwise fail or to encourage activities that would otherwise not take place." Government subsidies sometimes have a role--for example, by supporting critical businesses like airlines or promoting research and development within the energy industry--but they can also be used to unfairly tilt the market in favor of American business, by giving it an edge over foreign products. Under World Trade Organization rules, this is a form of protectionism and usually illegal. It is also a form of "unfair" trade.

For example, let's suppose that American farmers can sell sugar for $1.50 per pound (a hypothetical number). Because of their production costs, that's the lowest price they can set and still make a profit. Now let's suppose that production costs are cheaper in Brazil, and Brazillian farmers can sell sugar for $1.00 per pound. Which would American consumers rather buy? The Brazillian sugar, of course; it costs less. Importing Brazillian sugar will harm a few thousand American sugar farmers, but the cost savings will be tremendous and will be distributed across the entire American population. The savings will strengthen the overall economy, and create more jobs in different sectors. Brazil's economy will also grow stronger; large volumes of sugar exports will bring in lots of profit, which can be reinvested in local infrastructure, education, and new industry. As Brazil's economy grows, its wealthier citizens will buy more American products, improving their quality of life and strengthening the American economy. As trade expands there will be adjustment costs as wealth shifts from one sector to another, but in the end, everybody wins.

Now let's introduce a subsidy. We've already established that, in this example, American farmers can sell sugar for $1.50 per pound and Brazillian farmers can sell sugar for $1.00 per pound. Let's suppose the US Congress passes a farm bill, authorizing a subsidy of $0.75 per pound of sugar for American farmers. For every pound of sugar American farmers produce, the US government (and the taxpayers) pay $0.75 of the price. This allows American farmers to drop their selling price from $1.50 to $0.75 per pound--cheaper than the Brazillian competition. This will keep the American sugar farmers in business, but at enormous cost. US taxpayers will foot a tremendous bill. Brazil--and other sugar exporters--will be effectively shut out of the US market, because they cannot compete with subsidized prices. Their own economies will grow at slower rates, so will be less likely to import American goods. The net effect on the American and global economies is negative; the only winners are a small group of American farmers.

The American government has insitutionalized these agricultural subsidies through previous farm bills. These beneficiaries, however--who are not mom-and-pop farmers, but wealthy families earning an average income of over $220,000, with net worths of over $2 million--are a powerful Washington lobby. Through shrewd lobbying, and cynical dealings by Congress, they have managed to line their pockets with subsidies that are bad for the American and global economies. The 2008 Farm Bill takes these scandalous subsidies to new heights.

THE CONSEQUENCES

Harm to the American economy. Americans will pay billions in tax dollars to rich American farmers; according to The Economist, sugar provisions alone will cost $1.3 billion over the next ten years. Furthermore, Americans will pay an extra $2 billion a year in higher sugar prices. Multiply these effects across a variety of crops, and you get costly market distortion that harms the overall American economy.

Harm to developing nations. For years, opponents of "free trade" have criticized US hypocrisy; while the US tries to pry open foreign markets, it keeps high barriers in place to block cheaper imports from foreign countries. So long as the US keeps its agricultural subsidies in place, developing countries that rely on agricultural exports are effectively shut out of the US market. This severely curtails their potential for economic growth. Advocates of "fair trade" should be outraged by the Farm Bill, because it is utterly unfair; while throwing generous benefits to a small group of wealthy American farmers, it harms poor farmers across the rest of the world.

Sustained higher food prices. At a time when food prices are soaring (see my previous post) and threatening to destabilize parts of the developing world, the Farm Bill pours fuel on the fire. Market-distorting subsidies keep food prices high, and insitutionalize economic inefficiency.

Worsening the global North-South divide. Agricultural subsidies are an enormous source of contention between the global North and South--which roughly correlates to the most developed countries (the US, the EU) and the least developed (Africa, Latin America). Economists and policymakers in the global South blame US/EU subsidies for many of their development problems. By accelerating the subsidy program, the US is sending a hostile message to the global South. It is further eroding what goodwill might still exist toward America. Over time, developing countries in the global South will be less inclined to trade with the US, and will look for trading partners elsewhere. This should be particularly alarming to US policymakers, at a time when new centers of power are emerging (such as China) to contend with the US.

Derailing World Trade Organization talks and threatening the international trade system. For all the criticism it's faced from left-leaning activists, the WTO is a remarkable organization that has helped insitutionalize a global trading system. Most of us take the fruits of globalization for granted, but many of these gains would have been impossible without the WTO and its trade rules. Today, the WTO is facing a crisis. The "Doha Round" of negotiations between countries has shipwrecked on several divisive issues, along a fault line running between North and South. At the center of the crisis is Southern resentment over US/EU agricultural subsidies. Doha is nearly dead already; unless the US and EU budge on subsidies, the entire global trading system could unravel. This would be a disaster for those who care about global peacebuilding. Trade is one of the strongest glues that binds countries together; if the global trade system collapses, the economic and political fallout could contribute to conflict around the world.

The Farm Bill furthers the scandalous US support for ethanol. This requires another article in itself, but the allure of ethanol is a thoroughly--debunked myth; it owes more to the Farm lobby and Congressional politics than any real benefits to the US. Corn-based ethanol requires as much energy to produce as it saves over conventional fuels, and the massive shift of farmland away from food and towards ethanol production has contributed to soaring food prices. The ongoing Congressional support for ethanol borders on the criminal, but the Farm Bill throws even more market-distorting subsidies towards ethanol production. This will accelerate the rise in food prices and distract US policymakers from more viable alternatives for sustainable energy.


Confirming accusations that America practices hypocritical foreign policy. This lies at the heart of the Farm Bill. Agricultural subsidies are one of the worst examples of "unfair trade." At a time when America has tried to sell itself on a vision of promoting liberal democracy, the overwhelming bipartisan support for the Farm Bill sends a clear message: we don't mean what we say. We'll liberalize YOUR markets, but we'll do whatever it takes to shelter ours. When such crooked legislation passes both the House and Senate with enough votes to override a Presidential veto, I can't blame leaders in the developing world who feeling cynical about negotiating with the US.

IN SUMMARY

The 2008 Farm Bill is criminal. Unfortunately, the economics are not intuitive, and the high costs to US and global citizens are distributed far and wide. The general public does not usually understand these silent killers, which is why we entrust these complex issues to elected, representative politicians. I fear for the future of our country, when a dysfunctional Congress so blatantly ignores sound policymaking, in favor of throwing pork to a wealthy, self-interested lobby. Over the long run, reforming US agricultural policy is one of the best investments we can make in a better collective future; unfortunately, our country seems determined to sprint the opposite direction.

FURTHER READING

"Farm subsidy bill is a fiscal nightmare" by Rep. Jim Matheson, Salt Lake Tribune
"A Harvest of Disgrace", The Economist

Tuesday, May 20, 2008

The Continuing Tragedy of Burma

Gareth Evans, President of the International Crisis Group--a respected NGO that provides analysis and recommendations on preventing violent conflict--wrote an op-ed in The Guardian last week called Burma/Myanmar-Facing up to Our Responsibilities. He considers whether the refusal of Burma's junta to allow aid into that country constitutes a "crime against humanity" in the wake of Cyclone Nargis and whether the world has a "responsibility to protect."

Seventeen days after the cyclone, and seven days after Mr. Evans wrote his article, the aid trickling into Burma is still paltry. The death toll is climbing; according to one BBC article today, it stands at least 78,000. What makes this number so appalling is that the majority of casualties are due not just to the cyclone, but to the government's feeble and self-interested response. The tragedy is largely a silent one; because of Burma's inaccessibility to reporters, and the focus on the more transparent humanitarian crisis in China, the Burma crisis has fallen off the headlines. The full scale of the tragedy will not be known for months. By then, Burma's helpless population will have paid a staggering price.

Burma is a frustrating case for those who wish to do good in this world. Reporters, who could focus public sympathy and international attention on the crisis, are shut out. Humanitarian NGOs are also locked out, and without media coverage, have a difficult time raising relief funds. Western militaries--who are more than capable of infiltrating Burma with unauthorized airdrops or other forms of forceful intervention--can do so only unilaterally (which is not feasible) or with a UN Security Council resolution (which is also not feasible, thanks to the intransigence of Russia and China). As Evans writes, forceful intervention into sovereign states--even in a situation as desperate as Burma's--is a grave matter, with many opponents.

So for the forseeable future, the world will continue on its present course in Burma: doing absolutely nothing. A handful of evil men in Burma's junta have managed to paralyze the collective might of the watching world. Their own people will pay the price.

Friday, May 2, 2008

The Food Crisis as a National & Collective Security Threat

The cover story of the April 19th-24th 2008 issue of The Economist is titled "The silent tsunami: The food crisis and how to solve it." It details an alarming phenomenon, echoed in news headlines around the world, that has world leaders worried: skyrocketing global food prices. According to The Economist, wheat prices rose 77% last year and rice prices rose 16%. This year, the rises are exponential; the price of rice is up 141% since January. The causes vary; factors include the more lavish appetites of wealthier Chinese and Indian populations and the despicable diversion of American crops into the biofuels industry--a move that means big money for farm lobbies, but does virtually nothing for the environment and hurts the poor. In the United States or the European union, higher food prices are an annoyance. Just as Americans find ways to cope with rising gas prices, they will find ways to feed themselves. But in the world's poorest countries, higher food prices might make the difference between life and death. Bob Zoellick, the president of the World Bank, "reckons that food inflation could push at least 100m people into poverty, wiping out all the gains the poorest billion have made during almost a decade of economic growth." With poverty comes economic and political instability. The Economist cites several examples. Cote d'Ivoire's government postponed elections due to violent riots. The prime minister of Haiti resigned over protests from hungry mobs. Egyptian President Hosni Mubarak has ordered his army to bake bread. In the Phillipines, hoarding rice is now punishable by life imprisonment. Expect to see instability and even violence grow worse as food prices continue to rise.

This is the kind of global, interdependent crisis that defines the 21st century. Like other global crises, such as abject poverty, AIDS and global warming, the food crisis will have spillover effects that threaten peace, prosperity, and security around the world. This means that global problems like the food crisis should lie at the heart of Western foreign policy. Unfortunately, old school thinking still prevails in most circles. Rising food prices are viewed as an obscure issue for economists or humanitarian workers, but they are not centerpieces of foreign policy. Such problems rarely, if ever, garner much attention in the national security community. While experts from the World Bank and the UN World Food Program shout from the hilltops, senior military leaders and foreign policy architects are busy behind closed doors budgeting for $200-million air-to-air fighter aircraft and mulling over conventional warfare with China or Iran. Of course, the military must maintain its competency to fight and win major wars, but something is out of balance when America's senior defenders of national security are blind to the trends shaping the developing world--the arena where the US military is most likely, and least prepared, to undertake future operations. Since the end of the Cold War, the world has changed. The US military is adapting, slowly--its growing understanding of terrorism and its recent rediscovery of counterinsurgency theory are prime examples--but it has a long way to go. Unleashing violent force can win tactical victories and defeat conventional enemies, but it cannot remedy the foundational causes of political instability, poverty, disease, sectarian strife, and state failure. A broader understanding of national and collective security is necessary. This new thinking must begin with senior policymakers, and work its way down through military and civil agencies involved in executing policy.

I believe, and will repeatedly argue on this blog, that a General's principal function is no longer to be a "manager of violence" as Samuel Huntington once argued; he or she must be a manager of full-spectrum conflict. He must understand the political, economic, and social roots of conflict, and recommend to his political supervisors comprehensive political, economic, and social solutions. Tomorrow's generals should be able to flip through an International Monetary Fund World Economic Outlook, and be able to predict where tomorrow's conflict flashpoints might be. They should sit down with enviornmental experts at universities and think tanks, to predict security consequences of imminent environmental disasters--such as the pollution and desertification of China's Yellow River, or the water crisis in Jordan. They should commission country-by-country reports of how global warming will effect local environments and economies in coming decades, to predict which countries will thrive and which will not survive rapid transformation. They should understand a world where invading Iraq caused American support to plummet around the world, but where providing tsunami relief caused support in Indonesia to leap from 36% to 60% in just a few weeks. When planning theater-level strategy in AFRICOM, they should consider the value of anti-malarial drugs and mosquito nets with as much seriousness as they consider fighting al-Qaeda in Somalia.


Is the price of food a security issue? Absolutely. Watch for it on the news.

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