Reforming U.S. Assistance to Invest in Development

Ethiopia is one of the countries caught in the grip of the global hunger crisis.

A ride across Ethiopia’s vast countryside does not reveal the endless patches of parched earth that one might expect to see in a country struggling to feed its people. In many areas of the country, the soil is rich and farmers have a surplus of crops on their hands. Corn, the country’s principal cereal crop, grows as tall as anywhere in Iowa.

What one finds in Ethiopia that one doesn’t see in Iowa are broken road networks and no way to transport the food from crop-rich areas of the country to those where food is scarce. Ethiopia also has enough water to irrigate the entire country, but irrigation systems are expensive to build and the cash-strapped government does not have the capacity to build enough of them. Most farmers water their crops the way their ancestors did a millennium ago, by waiting for the rains to come—rains that are more erratic in the new millennium due to the vagaries of climate change.

All roads in Ethiopia lead to Addis Ababa, the bustling capital where antiquity meets modernity at almost every intersection. Herders with their livestock walk down city streets as buses careen around corners with American pop music blaring from the windows. For urban poor people, many of whom have migrated from rural areas, the reality is that jobs are scarce and life is no easier.

In an unobtrusive glass building, the Ethiopia Commodity Exchange (ECX) is another example of where antiquity meets modernity. The ECX, which opened in April 2008, is attempting to provide Ethiopia’s 10 million small farmers, who produce 95 percent of the country’s crops, with more reliable information about prices and access to much broader markets for their products.

The ECX was started with $21 million, most of it provided by donors. Inside the ECX trading pit, where buyers and sellers gather to make deals, with electronic screens pulsing updates of commodity prices, one could forget that crops in this country mostly get to market on the backs of donkeys. “The biggest revolution of the exchange is that our farmers will start to think national and global instead of local,” the head of the ECX, Eleni Gabre-Mahdin, told the Wall Street Journal on the eve of its opening.¹ Gabre-Madhin, a former World Bank economist, saw her country’s future on a visit to the Chicago Board of Trade. Just as the Chicago Board of Trade transformed U.S. agriculture, Gabre-Mahdin believes the ECX can do the same for Ethiopia’s. The country is Africa’s second-largest producer of corn, but only 30 percent of what is grown in Ethiopia gets to market. In a normal year, Ethiopia produces enough food to feed itself and more. But because of the impediments to internal marketing, like impassible roads, the country struggles annually with food shortages and regularly receives U.S. food aid.

From 2006 to 2008, U.S. food aid shipments to Ethiopia were worth $708.5 million.² The United States also provides Ethiopia with development assistance, but in 2008 approximately 80 percent of U.S. poverty-focused development assistance—roughly $400 million—is going to fight HIV/AIDS. Only 6 percent supports agriculture programs.³

A country like Ethiopia, one near the bottom of the global Human Development Index, can and will develop if it gets the support it needs. To make the ECX pay off for small farmers, a lot still needs to happen: repairing the country’s infrastructure, recruiting technical expertise, and educating farmers about how to do business in a new way. These are not small steps, but in the long run they could reduce and eventually eliminate the need for those massive food aid shipments.

Addis is a long way from Chicago in many respects, but innovative development strategies have a knack for reducing the distances between vastly different countries. The United States benefits, as does the entire world, when a poor country like Ethiopia finds its own path to progress. In a troubled part of the world like the Horn of Africa, the ECX is a reminder that good things are also happening there, and that real progress on development is often closer than it appears.