How the "free market failed" and government intervention saved lives; an example

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December 2, 2007
Ending Famine, Simply by Ignoring the Experts
By CELIA W. DUGGER
LILONGWE, Malawi ....Malawi hovered for years at the brink of famine. After
a disastrous corn harvest in 2005, almost five million of its 13 million
people needed emergency food aid.

But this year, a nation that has perennially extended a begging bowl to the
world is instead feeding its hungry neighbors. It is selling more corn to
the World Food Program of the United Nations than any other country in
southern Africa and is exporting hundreds of thousands of tons of corn to
Zimbabwe.

In Malawi itself, the prevalence of acute child hunger has fallen sharply.
In October, the United Nations Children's Fund sent three tons of powdered
milk, stockpiled here to treat severely malnourished children, to Uganda
instead. "We will not be able to use it!" Juan Ortiz-Iruri, Unicef's deputy
representative in Malawi, said jubilantly.

Farmers explain Malawi's extraordinary turnaround - one with broad
implications for hunger-fighting methods across Africa - with one word:
fertilizer.

Over the past 20 years, the World Bank and some rich nations Malawi depends
on for aid have periodically pressed this small, landlocked country to
adhere to free market policies and cut back or eliminate fertilizer
subsidies, even as the United States and Europe extensively subsidized their
own farmers. But after the 2005 harvest, the worst in a decade, Bingu wa
Mutharika, Malawi's newly elected president, decided to follow what the West
practiced, not what it preached.

Stung by the humiliation of pleading for charity, he led the way to
reinstating and deepening fertilizer subsidies despite a skeptical reception
from the United States and Britain. Malawi's soil, like that across
sub-Saharan Africa, is gravely depleted, and many, if not most, of its
farmers are too poor to afford fertilizer at market prices.

"As long as I'm president, I don't want to be going to other capitals
begging for food," Mr. Mutharika declared. Patrick Kabambe, the senior civil
servant in the Agriculture Ministry, said the president told his advisers,
"Our people are poor because they lack the resources to use the soil and the
water we have."

The country's successful use of subsidies is contributing to a broader
reappraisal of the crucial role of agriculture in alleviating poverty in
Africa and the pivotal importance of public investments in the basics of a
farm economy: fertilizer, improved seed, farmer education, credit and
agricultural research.

Malawi, an overwhelmingly rural nation about the size of Pennsylvania, is an
extreme example of what happens when those things are missing. As its
population has grown and inherited landholdings have shrunk, impoverished
farmers have planted every inch of ground. Desperate to feed their families,
they could not afford to let their land lie fallow or to fertilize it. Over
time, their depleted plots yielded less food and the farmers fell deeper
into poverty.

Malawi's leaders have long favored fertilizer subsidies, but they
reluctantly acceded to donor prescriptions, often shaped by foreign-aid
fashions in Washington, that featured a faith in private markets and an
antipathy to government intervention.

In the 1980s and again in the 1990s, the World Bank pushed Malawi to
eliminate fertilizer subsidies entirely. Its theory both times was that
Malawi's farmers should shift to growing cash crops for export and use the
foreign exchange earnings to import food, according to Jane Harrigan, an
economist at the University of London.

In a withering evaluation of the World Bank's record on African agriculture,
the bank's own internal watchdog concluded in October not only that the
removal of subsidies had led to exorbitant fertilizer prices in African
countries, but that the bank itself had often failed to recognize that
improving Africa's declining soil quality was essential to lifting food
production.

"The donors took away the role of the government and the disasters mounted,"
said Jeffrey Sachs, a Columbia University economist who lobbied Britain and
the World Bank on behalf of Malawi's fertilizer program and who has
championed the idea that wealthy countries should invest in fertilizer and
seed for Africa's farmers.

Here in Malawi, deep fertilizer subsidies and lesser ones for seed, abetted
by good rains, helped farmers produce record-breaking corn harvests in 2006
and 2007, according to government crop estimates. Corn production leapt to
2.7 billion metric tons in 2006 and 3.4 billion in 2007 from 1.2 billion in
2005, the government reported.

"The rest of the world is fed because of the use of good seed and inorganic
fertilizer, full stop," said Stephen Carr, who has lived in Malawi since
1989, when he retired as the World Bank's principal agriculturalist in
sub-Saharan Africa. "This technology has not been used in most of Africa.
The only way you can help farmers gain access to it is to give it away free
or subsidize it heavily."

"The government has taken the bull by the horns and done what farmers
wanted," he said. Some economists have questioned whether Malawi's 2007
bumper harvest should be credited to good rains or subsidies, but an
independent evaluation, financed by the United States and Britain, found
that the subsidy program accounted for a large share of this year's increase
in corn production.

The harvest also helped the poor by lowering food prices and increasing
wages for farm workers. Researchers at Imperial College London and Michigan
State University concluded in their preliminary report that a well-run
subsidy program in a sensibly managed economy "has the potential to drive
growth forward out of the poverty trap in which many Malawians and the
Malawian economy are currently caught."

Farmers interviewed recently in Malawi's southern and central regions said
fertilizer had greatly improved their ability to fill their bellies with
nsima, the thick, cornmeal porridge that is Malawi's staff of life.

In the hamlet of Mthungu, Enelesi Chakhaza, an elderly widow whose husband
died of hunger five years ago, boasted that she got two ox-cart-loads of
corn this year from her small plot instead of half a cart.

Last year, roughly half the country's farming families received coupons that
entitled them to buy two 110-pound bags of fertilizer, enough to nourish an
acre of land, for around $15 - about a third the market price. The
government also gave them coupons for enough seed to plant less than half an
acre.

Malawians are still haunted by the hungry season of 2001-02. That season, an
already shrunken program to give poor farmers enough fertilizer and seed to
plant a meager quarter acre of land had been reduced again. Regional
flooding further lowered the harvest. Corn prices surged. And under the
government then in power, the country's entire grain reserve was sold as a
result of mismanagement and corruption.

Mrs. Chakhaza watched her husband starve to death that season. His strength
ebbed away as they tried to subsist on pumpkin leaves. He was one of many
who succumbed that year, said K. B. Kakunga, the local Agriculture Ministry
official. He recalled mothers and children begging for food at his door.

"I had a little something, but I could not afford to help each and every
one," he said. "It was very pathetic, very pathetic indeed."

But Mr. Kakunga brightened as he talked about the impact of the subsidies,
which he said had more than doubled corn production in his jurisdiction
since 2005.

"It's quite marvelous!" he exclaimed.

Malawi's determination to heavily subsidize fertilizer and the payoff in
increased production are beginning to change the attitudes of donors, say
economists who have studied Malawi's experience.

The Department for International Development in Britain contributed $8
million to the subsidy program last year. Bernab
 
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