Malawi Beats Famine by Ignoring Free Market Fundamentalists

It's really pretty simple. In 2002, over a thousand people in the country starved to death. In 2005, they had a famine crisis that had NGOs scrambling. This year, there is a 400 ton surplus of Corn (maize) much of which is alleviating the hunger in neighboring Zimbabwe.

So, what happened? The government ignored the free market fundamentalists, who are less idealogical than Osama bin Laden, and they did the right thing.

To quote Paul Harvey, and now, the rest of the story.

"What is different [this year] is the access to inputs," explained Patrick Kabambe, permanent secretary in the Ministry of Agriculture and Food Security. "People are so poor they use recycled seed and no fertilizer. They can't meet their needs that way and they grow no surplus. People sink deeper and deeper into poverty. It's a vicious cycle. We had to do something."

Starting in 2006, and on a larger scale this year, the government distributed coupons to low-income farmers to allow them to purchase 50-kilogram sacks of fertilizer for 950 kwacha($7) rather than the market price of 4,500 kwacha. As a result, the average farmer's yield jumped to two tonnes a hectare from 800 kilograms.

Malawi had this program throughout the 1990s, but in 2000, donor nations insisted that they scrap the program, saying that it "distorted the market".

Some blame fell on poor rains, but it was also true that the 75 per cent of the population who are subsistence farmers could not afford either fertilizer or seeds.

That left them vulnerable to what the development industry calls "shocks" - such as one household member contracting HIV or malaria and being too sick to farm - leaving them with too little to eat and forced to sell items of value to survive. At the same time, larger farmers and traders capitalized on the poor harvest by stockpiling, while the government made decisions that were both ill-advised and corrupt, and mishandled the national strategic grain reserve. The next few years were a disaster.

And the cost?

The fertilizer subsidy cost the government $62-million - 6.5 per cent of the total government budget, a "whack of cash" in the words of one top economist - but that pales in comparison to the $120-million the government spent importing food aid in the 2005 famine. And the sale of maize to Zimbabwe and other countries will inject an additional $120-million into the national economy, a sizable figure here.

I've come to believe that a lot of international aid is really about making sure that the economies do not develop, so that, when a famine hits, subsidized western farmers can make a killing selling food aid.