19.2.07

Money Doesn’t End Poverty

While not synonymous, poverty and starvation are plights of common origin; that is, where you find one, you will usually find the other. Contrary to many posited views, however, the simple solution to poverty is not wealth any more than the simple solution to starvation is food. US social welfare programs have demonstrated that fact over its 61 year history (from conception in 1935 to reform in 1996). In short, Roosevelt’s New Deal (under which the US welfare program was born) proved a major impetus in the perpetuation of trans-generational poverty.

In the same vein, fiscal meddling by the IMF and World Bank have shipwrecked nations through their policies, usually anti-capitalistic: the presence of money doesn’t end poverty. In fact, quite the opposite, as seen in the case of Argentina. For those unfamiliar with the IMF and World Bank both serve as the world’s largest lenders to nations with “short-term credit crunches.” Recipients of these loans must adhere to the policies of these lending institutions—policies which historically have caused as much harm as good, environmentally as well as socially and economically.

Enter the biotech age of Genetically Engineered Organisms (read “crops). First introduced in 1996, GEOs accounted for approximately 1.09 million acres worldwide, largely in the US. That number has increased to nearly 200 million acres today. In 2006, it is estimated that “in the US…89% of the planted area of soybeans, 83% of cotton, and 61% maize was genetically modified varieties.” Ignoring for a moment issues of intellectual property—such as surrounded Monsanto’s Roundup Ready ® corn—the economic ramifications of GEO crops are massive. Higher resistance to certain pesticides, blights, or temperature swings do in fact allow crops to produce higher yields, upwards of 10% in most cases and as high as a 50% increase in yield in others.

The immediate response of most westerners when they hear such staggering reports is amazingly optimistic, assuming that such a pronouncement of higher yields is a declaration on the end of starvation. Such a response is truthy at best, and often completely incorrect.

This is where the Doha Round of the World Trade Organization’s talks comes in to play. In a recent article titled “Peter Mandelson says that a global trade deal is doomed unless the American President backs it today,” The Times reporters David Charter and Tom Baldwin suggest that the global impact of the WTO proposal is $287 billion by 2015. Frankly, that’s not much. Assuming (the huge assumption) of inflation rates at a meager 2-3% globally together with current population growth models, there will be 7.5 billion people in the world by 2015, of which 3.5 billion or more will be impoverished (living on less than US $2-3 per day).

Initially one might suppose that $287 billion divided by 3.5 billion is still an increase of $82 per year, per individual. If only such were the case. Unfortunately, it is at this point that GEO crops, government farm subsidies, international tariffs, population increase, poverty and starvation merge into a nexus of counteraction. Many western countries—the US included—offer tax subsidies to homeland farmers. This allows for a nation to ensure continued food production while maintaining a normalized (and affordable) level of commodity pricing. Governments internally purchase excess production of crops at set levels, only then to sell them off to other nations at discounted rates (discounted to national prices as well as international prices). In response to cheap crop imports, a government may add steep tariffs to these goods. In a country of relative size, such tariffs offset most of the economic impact these cheapened goods have on gross domestic production (GDP).

Not so impoverished countries. Even steep tariffs allow for the flooding of a market with goods from western countries, with negative impacts on already-fragile national economies of these second- and third-world countries. Remember, the presence of food doesn’t end starvation. In this case, quite the opposite: the flooding of small nations with surplus commodities actually bankrupts farmers who otherwise would depend upon the sale of their own crops. This ultimately drives them into further poverty and, eventually, death by starvation.

The removal of tariffs and subsidies has ramifications on socialized nations—whether that socialization is greater or lesser. In short, while the removal of tariffs and subsidies may grant some poorer nations a more-even footing, developed countries have so far structured the agricultural industry upon the presence of these monies. But this still does not take into consideration that while GEOs are increasing yield internationally, they are also increasing yield locally, creating a wash effect.

Case in point: Brazil increases produce of corn nationally, accomplished in large part to GEO. In order to capitalize on this surplus, Brazil depends upon the removal of subsidies in the US. Removal of those subsidies in the US—and other developed nations where large GEO crops are grown, producing internal surplus—results in a downward pricing structure of corn in the US. This in turn drives down the demand and value of Brazilian corn. Such a process could happen for one country or several or a conglomeration of countries without much economic impact, but never worldwide. Somewhere, the excess of corn would utterly impoverish local production in another country—actually creating poverty leading to starvation instead of eradicating it. Or to borrow the twisted adage, “Man does not live by Cornbread alone.” The issue becomes more complex when one realizes that subsidies and tariffs are actually two sides of the same issue, neither of which ultimately solves the issue of overproduction; therefore, the removal of either or both does not end surplus (and all its ramifications).

Consider now the brash supposition put forth by Peter Mandelson, that an embrace from President Bush is all that stands between global poverty and global peace, and one begins to see that such a un-thoughtful supposition is not only truthly and lofty but deadly and destructive. Even if Bush agreed to the $8 billion cut in subsidies, the EU does not have a track record of agreement—for those who remember the intramural dissention within the EU over this very issue several years back.

Far and beyond a simplistic removal of subsidies and tariffs, broad reform—slowly implemented—would have to take place: Reform which undercuts the driving engines of modern capitalism, marked by its rampant consumerism. Western and First-World countries are known for their high-cost of labor and low cost of goods. In Second- and Third-World countries, quite the opposite. Until the cost of labor and goods is more normalized, the increase of goods—even in the form of crops—cannot have the desired effect of eradicating poverty and starvation. Until the US and other First-World countries recant their compulsive consumerism, Second- and Third-World countries cannot bear the economic fruit of higher production. And until these and/or other solutions to national imbalances are taken into consideration, the current motions by the IMF and World Bank on the matter of poverty should not only be viewed with a wary eye by all nations alike, but dismissed in kind as policies that undermine stability.

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