Malawi wins results and recognition for rebuffing World Bank prescriptions
6 December 2007 | Washington, DC
A prominent New York Times article describes how Malawi went from food aid recipient to regional food provider in just two years after re-introducing fertilizer subsidies for its low-income farmers. The move contravened years of policy guidance from the World Bank and IMF, which warn against such distortions of the “free market.” But donors find it hard to argue with success, especially because in violating what its wealthy benefactors in Europe and North America say, Malawi is doing precisely as they do.
The front page of the New York Times on Sunday, December 2, 2007 prominently featured an article on recent successes in Malawi’s battle against regular outbreaks of famine.
Headlined “Ending Famine, Simply by Ignoring the Experts,” Celia Dugger’s article documents how the government of Malawi decided to re-introduce subsidies to small farmers for the purchase of fertilizer. The government’s move, a rare example of defying World Bank credo in a region still dependent on the institution’s good will, has produced solid, and virtually immediate, success.
After years of following the recommendations of the World Bank and donor governments to sharply limit, and ultimately eliminate, public financial support to farmers, the Malawian government in 2005 insisted upon subsidizing agricultural inputs for the country’s largely rural population. Last year, Malawi went from being a beggar dependent on food aid – much of it from the U.S. – to being a major provider of maize, the region’s staple crop, to neighboring countries like Zimbabwe.
The article acknowledges that some, like the U.S. ambassador in Lilongwe, claim steady rainfall and other factors have been more important to the increased production. But Dugger’s piece is a clear indictment of a system that forces impoverished countries to take harsh measures that wealthy countries like the U.S. would never consider.
Dugger summarizes the situation: “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.”
In rejecting the World Bank’s orthodoxy, Mutharika was just doing what his predecessors wanted to do.
“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,” writes Dugger.
The World Bank, along with the International Monetary Fund (IMF) and many of the most influential donor countries, has long maintained that “free” markets – ones with as little government intervention as possible – are the best way to build a healthy, sustainable economy. Indeed, the donors have often required that government subsidies and price controls be eliminated as a condition for receiving assistance. When consumer subsidies have been targeted, such as for staple foods or petroleum prices, popular responses have often been quick and furious. The most visible resistance to the “structural adjustment programs” designed by both the IMF and World Bank in the 1980s and 1990s often took the form of “bread riots,” also called “IMF riots.” Removal of producer subsidies, such as those for fertilizer, are one step removed from consumer outrage, but can cause consumer price hikes, food shortages, and lasting damage to economies that are most sustainable with a little government intervention.
The New York Times article’s observations parallel the findings of an October report by the Bank’s own Independent Evaluation Group (IEG). That report sharply criticized World Bank agriculture programs in Africa since 1991 for insisting on market reforms and the elimination of government intervention in the agricultural sector -- even in the absence of proof that the reforms would work. Dugger notes, “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.”
Even after the IEG report and the successes in Malawi, the World Bank remains reluctant to give up on its strict market orthodoxy. In October, just after the critical IEG report, the Bank released its 2008 “World Development Report,” its annual flagship publication, which this year focuses on “Agriculture for Development” and largely reinforces its advocacy of “free markets.”
In response to the positive turn of events in Malawi, Dugger reports, “Bank officials say they generally support Malawi’s policy, though they criticize the government for not having a strategy to eventually end the subsidies, […] and say there is still a lot of room for improvement in how the subsidy is carried out.” But the article also suggests that empirical observations like those now possible in Malawi are beginning to change the minds of some long-time believers in the economic canon.
Although Dugger only addresses the World Bank’s role in Malawi, the IMF played a key part in instituting market reforms in the agricultural sector. It was, in fact, blamed by many observers for exacerbating the country’s worst recent famine (2001-02) and causing unnecessary starvation. To curb public-sector waste and inefficiency, the IMF insisted that Malawi’s grain reserve be “commercialized” – made to function like a private enterprise. Because the agency left in charge with the reserve was not capitalized, it had to sell its one asset – the grain – in order to stay in operation. While the way in which the reserve stock was sold, all at once and for a low price, was certainly unwise and went beyond IMF advice, critics charge that it never would have happened if the IMF had not attempted to turn a clearly non-commercial agency responsible for safeguarding the population’s health into a self-supporting entity. In May 2002, even when the resulting famine led to the death of approximately one thousand people, the IMF suspended $47 million in assistance on the grounds of inadequate implementation of its reform programs.
At the launch of its World Development Report, the World Bank indicated its support for the “Alliance for a Green Revolution in Africa,” an initiative of the Rockefeller and Gates foundations that plans to fund development of new technologies and new seeds – likely including those produced through genetic engineering – to address Africa’s food shortages. “Green revolution” approaches require massive increases in inputs like fertilizers, pesticides, and water – a model that many fear is wildly inappropriate for African agriculture, which is dominated by small-scale, low-income farmers.
But while the Bank promised a renewed focus on agriculture in Africa in the wake of its World Development Report, it is not yet clear if it will reverse itself and support government intervention to ensure increased access to inputs on the more modest scale now being realized in Malawi. But with public recognition of the success Malawi has found while ignoring conventional wisdom, both from some donor countries and from the front page of the New York Times, there may be some grounds for hoping that other African governments will insist on following their instincts and supporting their farmers’ efforts to feed the region’s people.
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Additional Resources
Civil society on IMF/World Bank agricultural policies in Malawi
- Testimony from Collins Magalasi at “World Versus Bank” Tribunal in The Hague, October 15, 2007. (World Bank Campaign Europe website) (Adobe pdf, 130 KB)
- The Human Right to Food in Malawi: Report of an international fact-finding mission, by FoodFirst Information and Action Network (FIAN), 2006. (Rights and Democracy website) (Adobe pdf, 5.83 MB)
- Famine in Malawi Exposes IMF Negligence Report Blames Economic Policies for Over 1000 Deaths, by 50 Years Is Enough Network, June 2002. (Economic Justice News Online website)
- Death by Starvation in Malawi:The link between macro-economic and structural policies and the agricultural disaster in Malawi, Action Aid Policy Brief, June 13, 2002. (Action Aid website) (Acrobat pdf, 174 KB)
IMF response to civil society