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Critics Blame Free Market Reforms for Malawi's Food Crisis - 2002-11-13

In the southern African nation of Malawi, more than 3 million people are at risk of hunger. Critics have said free market reforms have contributed to high food prices that a large number of Malawians can not afford. Others have said government mismanagement and bad weather, not economic reforms, are behind the food crisis.

Food shortages brought on by drought and flooding are not new to southern Africa. The last weather-related famines in Malawi were in 1992 and 1949.

But critics have said Malawi was able to cope better then. They say policies advocated by donors during the past 10 years have left Malawians poorer and less able to fend off the current food crisis.

British-based charitable organization Oxfam International has said free market policies have contributed to the drop in food production and distribution during the past year.

Oxfam economic policy advisor Max Lawson says the Malawi government's agricultural policies are contradictory. He said the government wants to keep prices for food like maize affordable to the voters who keep it in power. But it also wants to please donors like the United States, the European Union, and scores of non-government organizations that favor free-market policies.

In at least once instance, Mr. Lawson said the government adopted contradictory advice that contributed to a perilous drop in food production. He said three years ago the British government, the European Union, and the World Bank began giving small packs of fertilizer to all small-scale farmers in Malawi.

"But after pressure from the other donors the policy was reevaluated. The World Bank pulled out of [the scheme]. [Donors] decided instead of giving [assistance] to every single farmer, they would scale it down to half of all farmers and then the next year to a quarter. In the first year when it was given to all farmers, it contributed enormously to [food production], but in the final year, it was given to only a quarter of all farmers, and it was very badly targeted. So it was an example of good policy by one donor eroded and contradicted by another and by the Malawi government trying to please everybody," Mr. Lawson said.

Donors are blamed in other ways for Malawi's food shortages. Last year, the International Monetary Fund advised the government to sell some of its 167,000-metric-ton grain reserves to help offset budgetary deficits.

A European Commission study had concluded that up to 60,000 metric tons would be a sufficient buffer in case of a food emergency. Such a crisis in theory would be picked up by an early warning system six to eight months ahead of time.

But Malawi's National Food Reserve Agency sold off all of the grain reserves, allegedly to private traders who hoarded the food and later tried to sell it at exorbitant prices.

Critics say privatization has weakened the state's ability to respond to crises. With liberalization, state marketing boards are being dismantled so poor subsistence farmers in rural areas must depend on private traders to buy and sell maize and other foods. They often are accused of being unwilling to take their vehicles in areas with poor roads and areas that are not profitable. Depots of the state-run marketing boards once served these same regions.

Government subsidies on fertilizers and seeds have also been removed in favor of private suppliers. But many of the poor can not afford to pay the new higher prices. Critics note that many Western countries continue to subsidize their own farmers.

The country manager for the World Bank in Malawi, Dunstan M. Wai, has a word for the critics. He says, "People blame everything that goes wrong on structural adjustment policies. They were simply meant to remove distortions, controls in the economy, and create an enabling environment for the private sector, but also make government more efficient and effective. They were not ill conceived. Also, we emphasize the sequencing and selectivity of the policies and we try to identify the strategic entry points, which would produce multiple effects and a positive impact on the ground."

Mr. Wai said the World Bank works only in consultation with a government. He said the World Bank was invited to return to Malawi this year after a three year absence.

Mr. Wai said the Minister of Agriculture, Aleke Banda, approached the Bank for help in the current crisis and in boosting the country's agricultural development. As a result, he said the World Bank is considering a $50 million credit which will likely include grants to help the government with food imports and other aspects of recovery.

As for the future, he thinks Malawi needs to refine its role in the developing southern African market.

Most economists do not think the heavily agricultural country is suited for industry.

But Mr. Wai said tourism is a possibility. He also advocates further development of its agriculture especially for potential exports like pineapples, mangoes, and horticultural produce that could be marketed with better regional rail and road links, and improved storage facilities.

U.S. Agency for International Development Malawi Mission Director Roger Yochelson said his agency is helping to develop the National Association of Small Farmers of Malawi, a group whose goal is to develop common strategies that will help them stand on their own.

In southern Malawi some of the group's farmers have switched from growing maize to chili peppers. They are exporting 100,000 metric tons of the commodity to Europe this year, which makes them a power in the market and removes their need for government subsidies.

Mr. Yochelson said it is too soon to condemn free-market economics in Malawi because it has only been eight years since the end of authoritarian rule. "There are going to be times that the democratic process is going to create a great deal of sluggishness - and it may cause political and economic suffering. If you have an open wound, the best thing to do may not be to put mud on it. It may be to let it bleed and rinse it out; it hurts and disables you for a while, but when it heals you will be stronger forever. Maybe that is what has to happen in a society including in the private sector," he said.

But critics like Oxfam and donors like Western governments have reached a consensus on economic life support. They agree that subsidies may be needed in food emergencies, and that the state can likely play a more effective role in helping to develop markets, especially in rural areas where private traders have no incentive to go.