A World Food Reserve

MAC/WFY

Page-52

0230_553559_09_cha05

194570. Early Attempts: FAO's Pioneering Work

conducted in India by an FAO team from its economic, agricultural and nutrition
divisions under the leadership of Mordecai Ezekiel (FAO, 1955a) The study used
an early version of what later became known as the `two-gap model', a foreign
exchange gap and a food gap, to simulate the effects of food aid.

The results of

the study exceeded expectation (FAO, 1985a, p. ix). They showed in detail how
the enormous capital represented by food surpluses could be used to finance a
general expansion of investment programmes. Specific projects were set out as
illustrations of where food aid could be distributed in kind, such as education
programmes, milk marketing schemes, and food-for-work projects involving addi-
tional labour, as in road building, irrigation works, and reforestation and soil
erosion control. Examples were also given of how developing countries might
use their own domestic food surpluses for self-help, community development
programmes.

The study concluded that if food was used to put under-employed labour to

work in building infrastructure, it could contribute as much as one-fourth of the
investment costs. To give an indication of the possible magnitudes involved, it
was estimated that assistance to the individual projects identified added up to
an average annual additional investment of $135 million, absorbing $73 million
of surplus products on an average over four years. It could also ease the foreign
exchange gap resulting from the lag in responsiveness of domestic agricultural
supply to rising demand in the initial stages of development. Recognizing the
limitations of these approaches, the study also explored the preconditions for
avoiding damaging side effects on domestic agricultural production and on trade.

The originality of the study was twofold. There was a systematic distinction

between the use of food surpluses for individual development projects and for
general development programmes. And the emphasis was on the use of surpluses
as an addition to the capital resources of a low-income country for financing
its economic development, and not from the negative viewpoint of disposing of
burdensome surpluses of high-income countries. Critically, the study also provided
a rationale for the `marriage of convenience' between surplus disposal and devel-
opment assistance at the very time that the US food aid programme was being
institutionalized through the enactment of Public Law 480 (Rattan, 1996, p. 185).

Ezekiel conveyed the results of the Indian pilot study to the academic

community at an International Wheat Surplus Utilization Conference at South
Dakota State College in Brookings, South Dakata in 1958 (Attiga et al., 1958).

The holding of the conference was itself an indication of the serious situation that
had been reached regarding wheat stocks in the United States. Since the Second
World War, American agriculture had been characterized by what was called a
`structural imbalance' between its productive performance and the ability to sell its
total output at prices high enough to bring it fair returns on its human and phys-
ical investments. This situation made it necessary for the government to initiate
various price-support measures designed to maintain adequate returns to farmers
regardless of the actual supply and demand situation in the free market.

At the time of the conference in 1958, US agricultural surpluses represented

a total inventory of over $7 billion. To give some idea of the magnitude of

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Useful links	A World Food Reserve MAC/WFY Page-52 0230_553559_09_cha05 52 194570. Early Attempts: FAO's Pioneering Work conducted in India by an FAO team from its economic, agricultural and nutrition divisions under the leadership of Mordecai Ezekiel (FAO, 1955a) The study used an early version of what later became known as the `two-gap model', a foreign exchange gap and a food gap, to simulate the effects of food aid. 22 The results of the study exceeded expectation (FAO, 1985a, p. ix). They showed in detail how the enormous capital represented by food surpluses could be used to finance a general expansion of investment programmes. Specific projects were set out as illustrations of where food aid could be distributed in kind, such as education programmes, milk marketing schemes, and food-for-work projects involving addi- tional labour, as in road building, irrigation works, and reforestation and soil erosion control. Examples were also given of how developing countries might use their own domestic food surpluses for self-help, community development programmes. The study concluded that if food was used to put under-employed labour to work in building infrastructure, it could contribute as much as one-fourth of the investment costs. To give an indication of the possible magnitudes involved, it was estimated that assistance to the individual projects identified added up to an average annual additional investment of $135 million, absorbing $73 million of surplus products on an average over four years. It could also ease the foreign exchange gap resulting from the lag in responsiveness of domestic agricultural supply to rising demand in the initial stages of development. Recognizing the limitations of these approaches, the study also explored the preconditions for avoiding damaging side effects on domestic agricultural production and on trade. The originality of the study was twofold. There was a systematic distinction between the use of food surpluses for individual development projects and for general development programmes. And the emphasis was on the use of surpluses as an addition to the capital resources of a low-income country for financing its economic development, and not from the negative viewpoint of disposing of burdensome surpluses of high-income countries. Critically, the study also provided a rationale for the `marriage of convenience' between surplus disposal and devel- opment assistance at the very time that the US food aid programme was being institutionalized through the enactment of Public Law 480 (Rattan, 1996, p. 185). Ezekiel conveyed the results of the Indian pilot study to the academic community at an International Wheat Surplus Utilization Conference at South Dakota State College in Brookings, South Dakata in 1958 (Attiga et al., 1958). 23 The holding of the conference was itself an indication of the serious situation that had been reached regarding wheat stocks in the United States. Since the Second World War, American agriculture had been characterized by what was called a `structural imbalance' between its productive performance and the ability to sell its total output at prices high enough to bring it fair returns on its human and phys- ical investments. This situation made it necessary for the government to initiate various price-support measures designed to maintain adequate returns to farmers regardless of the actual supply and demand situation in the free market. At the time of the conference in 1958, US agricultural surpluses represented a total inventory of over $7 billion. To give some idea of the magnitude of back to top Next page
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