Food aid : a cause of development failure or an instrument for success?

141 Tg THE WORLD BANK E CONOMIC REVIEW, VOL. 3, NO. 1 39-65 Z[AN. VWZl Food Aid: A Cause of Development Failure or an Instrument for Success? T. N. Srinivasan The role of food aid in furthering the economic development of poor countries and in alleviating the adverse effects on the poor of structural and sectoral adjustment programs is discussed. A simple analytical framework for evaluating the incentive and welfare impact of food aid is suggested. Domestic and international markets for food historically have been subject to severe distortions, leading to ever-growing food stocks in some, mainly rich, countries while in others, largely poor, many cannot afford to consume enough food. The possible impact of distortion-free global food markets is sketched. The use of surplus food for payment of wages in rural works programs has often been proposed as a means to create productive assets while alleviating poverty. Using an applied general equililbrium model of the Indian economy, it is shown that a well-designed and efficiently implemented food-for-work program can virtually eliminate abject poverty in India at a modest cost. Experience with food aid in several other countries is also briefly discussed. This article is concerned with food aid, its role in furthering the economic development of poor countries and in alleviating the adverse effects on the poor of structural and sectoral adjustment programs that many developing countries are undertaking. Some of this ground is well covered in the voluminous litera- ture on food aid (Hopkins 1984, 1987, Mellor and Ezekiel 1987, World Food Programme 1983, 1985, and Wallerstein 1980, to mention only a select few). For an iconoclastic analysis of hunger, see Lappe and Collins (1977). Before discussing food aid, a few remarks on aid in general may be appro- priate. While any form of aid from one agent (individual, household, nation) to another is an unrequited transfer, the donor may often expect or receive some favors from the recipient in other forms (for example, political conces- sions or support). Furthermore, in a world with three or more agents, terms- of-trade effects can make a transfer from one agent to another beneficial to the transferor and not to the transferee. Some have suggested that developing The author thanks Jagdish Bhagwati, Uma Lele, John Mellor, Ijaz Nabi, and two anonymous referees for comments on an earlier draft. An earlier version of this article was presented at a conference on foreign aid and economic development cosponsored by the World Bank and the Institute for Contem- porary Studies, San Francisco, and held at Tufts University European Centre at Talloires, France, September 13-17, 1987.