Every Plot Leads Back to the Templars

Energy independence and aid to Africa.

What's the connection?

Farm subsidies.

There's been a lot of discussion about the G8, even though it was overshadowed a bit by the London bombings. In particular, Blair led a push to expand Western nations' giving to African nations, as well as expand their debt relief (which is, effectively, just another sort of aid). This led to a lot of (self-)congratulatory speechifying (including from Bush, who neglected to mention that, while he talks big on AIDS, his administration has appropriated only a fraction of the funds they've promised, and in fact fought Congress when they wanted to appropriate more). It also led to a lot of hand-wringing over the impact of aid.

While I'm not as ruthless about aid as Becker and Posner are, they have a point. I count myself as a liberal, and favor social welfare programs for those who need them, that doesn't excuse them from the need to be well-crafted and there is a such thing as aid-dependence, both on the micro scale of individuals and the macro-scale of nation-states (hence my harping on Thomas Friedman's unfortunately-named "golden trampoline" metaphor).

Contra Posner especially, I don't think the evidence favors cutting Africa off entirely - there are still problems there that can be solved or at least abated in part through well-designed external aid. For instance, high on The Copenhagen Consensus' list of worthy aid investments were anti-HIV/AIDS programs. But the moral of many analysts' stories seems to be that the process of international aid to Africa needs to be changed so that it more effectively designed to help Africa help itself (and no, in most cases, straight up "tough love" in the form of ending all aid doesn't seem to be an effective way of doing that).

This brings us to farm subsidies.

One of the tragic ironies of Africa, famine-prone area that it is, is that it has the capacity to grow food to support its population and maintain a fairly thriving agricultural sector - in theory. There are a number of reasons that, despite this, Africa remains poor and has frequent famines. Some of these are, like the general problems with African aid, are matters of corruption and misrule, as well as governments using food access as a means of suppressing dissent.

But part of the problem is Western farm subsidies.

The whole point of capitalism is supposed to be the phenomenon of comparative advantage. If you can produce widgets more cheaply than I can, you will do so, sell them more cheaply, and drive me out of the widget business. I will, in turn, find something I can do more cheaply and efficiently than anyone else. At the end of the day, everyone produces the thing that they can produce more efficiently than anyone else (at least, adjusting for transport costs), and everyone benefits. Of course, it doesn't work quite that simply in reality, but that's the basic idea - and its the basis of, for instance, pushing for expanded free trade agreements like CAFTA. The problem is that if you don't allow free trade, then tariffs and subsidies will artificially increase the price of some goods. If I can produce a widget for $1 and you can do it for $0.50, but my customers have to pay a $2 tariff to buy yours, they're going to buy mine. At the end of the day, people are poorer, because they have to pay more for their widgets.

Farm subsidies have a similar effect to tariffs. If it costs American and European farmers $1 to grow a bushel of wheat, but our governments pay $0.50 of that, they can sell it for $0.50 cheaper and still make a profit. Meanwhile, farmers who don't receive subsidies are screwed. The result being that African farmers can't compete against American and European agricultural products. Even though it's cheaper to grow (say) cotton in West Africa, it's cheaper for West Africans to import from us, because we subsidize our cotton farmers so heavily. At the same time, we've pressured their governments to drop tariffs that might counter our subsidies in the name of "free trade."

The result is a particularly perverse situation with respect to aid. Blair crowed about giving an extra $25 billion to Africa, but made only vague gestures about reducing British farm subsidies. The result is worse than just giving handouts that remove the drive to do for oneself. It's the macro-scale equivalent of if our welfare system said, "look, we're happy to give you a handout, but if you try to get a job, forget it - the government will pay half the salary of other workers, so even if you'll work for a bare subsistence wage, it'll be more expensive to hire you." We're effectively blocking Africa's agricultural sector from becoming self-sufficient so that it can't compete with our farmers.

Which brings us to energy independence.

The counterpoint is, of course, "hey, I care about African farmers as much as the next guy/gal, but we should protect our own first!" One response I have is: fine, but then stop pressuring them to lower tariffs, and let everyone be insular and protect their own. I think real free trade would be the best thing, but a protectionist even playing field would be better than the current lopsided situation.

But the other response is: a lot of Americans feel that way, but you're being duped. 80% of U.S. farm subsidies go to large (500+ acre) farms, including giant factory farms maintained by agribusinesses like Monsanto. They don't protect a valuable American way of life: they're corporate welfare. Much like with the estate tax (which never touched the American Gothic family farm), large corporate interests have managed to convince many Americans that this sort of aid goes to help the struggling family farm. It's simply not true, but it plays so nicely to our cultural myths that it works very well.

And the new version of this push is energy independence. Even some green activists I've met sing the praises of ethanol and biofuels. But the dirty secret is that it takes more oil to produce ethanol than the energy we get out of it. Yes, ethanol burns cleaner. But that's entirely irrelevant, since it takes 29% more BTUs of fossil fuel to produce a BTU of ethanol than we get out of it. So you're burning those dead dinosaurs and lining those Saudi pockets anyway. And you're adding several billion dollars of your own money to corn subsidies - most of which, again, goes to pay off large agribusinesses.

And meanwhile, we actually increase our dependence on foreign oil. And a lot of that money gets plowed back into the lobby for increased subsidies. And then we pat ourselves on the back for tossing a couple of bucks for hydrogen fuel and weep over those poor, starving Africans.

This sounds like a ramble, and it is. But I guess the moral of this story (besides letting me harp on the aid to Africa issue) is simple: there are people out there who profit from lots of other people not seeing the connections between things. They're counting on you saying, "alternatives to oil? Great! Saving the family farm? Great! Starving Africans - hey, didn't we just give them billions? Poor guys, but it's not our fault."