Ending Famine, Simply by Ignoring the Experts

Ending Famine, Simply by Ignoring the Experts

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.

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.

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.

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.

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. Bernabé Sánchez, an economist with the agency in Malawi, estimated the extra corn produced because of the $74 million subsidy was worth $120 million to $140 million.

The United States, which has shipped $147 million worth of American food to Malawi as emergency relief since 2002, but only $53 million to help Malawi grow its own food, has not provided any financial support for the subsidy program, except for helping pay for the evaluation of it. Over the years, the United States Agency for International Development has focused on promoting the role of the private sector in delivering fertilizer and seed, and saw subsidies as undermining that effort.

For me the key sentence is "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." And yet despite evidence to the contrary the World Bank, the IMF and the US government are still committed to their faith in the "Free Market™". The belief is that by allowing "Market Forces™" to work in an unfettered in unregulated manner all good things in the universe can be achieved in sunshine and happiness will reign throughout our days. Or if not exactly that, the "Free Market™" is supposed to mediate all preferences, settle on the best and lowest prices, produce innovation and efficiency, reward the industrious and increase the general well-being of all.

The World Bank and IMF prescriptions for African nations and other nations in the developing world lay bare what the Right really mean when they talk about the "Free Market™". What they really mean is removing all meaningful regulation or governance of capital, essentially freeing it in any accountability to the state, while continuing to hold people, both in their roles as consumers and labor, fully captive to the same governmental forces which the Right does not hesitate to use to enforce the obligations that individuals have to capital.

That the failed "Free Market™" policies of the Right continue to dominate not only US government policy but also orthodox economic discourse stems from the fact that this orthodoxy really is a belief system and not a set of policies grounded in empirical evidence. It's a belief system that tells a self-contained story that is self reinforcing self justifying.

In a recent Nation article, Naomi Klein picks a similar point in regards to Latin America.

For the past thirty-five years in Latin America, ... shocks from outside have served to create the political conditions required to justify the imposition of "shock therapy"--the constellation of corporate-friendly "emergency" economic measures like large-scale privatizations and deep cuts to social spending that debilitate the state in the name of free markets. In one of his most influential essays, the late economist Milton Friedman articulated contemporary capitalism's core tactical nostrum, what I call the shock doctrine. He observed that "only a crisis--actual or perceived--produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around." Latin America has always been the prime laboratory for this doctrine.

In Latin America today, however, new crises are being repelled and old shocks are wearing off--a combination of trends that is making the continent not only more resilient in the face of change but also a model for a future far more resistant to the shock doctrine.

And as people shed the collective fear that was first instilled with tanks and cattle prods, with sudden flights of capital and brutal cutbacks, many are demanding more democracy and more control over markets. These demands represent the greatest threat to Friedman's legacy because they challenge his central claim: that capitalism and freedom are part of the same indivisible project.

The new leaders in Latin America are ... becoming better prepared for the kinds of shocks produced by volatile markets. One of the most destabilizing forces of recent decades has been the speed with which capital can pick up and move, or how a sudden drop in commodity prices can devastate an entire agricultural sector. But in much of Latin America these shocks have already happened, leaving behind ghostly industrial suburbs and huge stretches of fallow farmland. The task of the region's new left, therefore, has become a matter of taking the detritus of globalization and putting it back to work. In Brazil, the phenomenon is best seen in the million and a half farmers of the Landless Peoples Movement (MST), who have formed hundreds of cooperatives to reclaim unused land. In Argentina, it is clearest in the movement of "recovered companies," 200 bankrupt businesses that have been resuscitated by their workers, who have turned them into democratically run cooperatives. For the cooperatives, there is no fear of facing an economic shock of investors leaving, because the investors have already left.

Latin America's most significant protection from future shocks (and therefore from the shock doctrine) flows from the continent's emerging independence from Washington's financial institutions, the result of greater integration among regional governments. The Bolivian Alternative for the Americas (ALBA) is the continent's retort to the Free Trade Area of the Americas, the now-buried corporatist dream of a free-trade zone stretching from Alaska to Tierra del Fuego. Though ALBA is still in its early stages, Emir Sader, a Brazil-based sociologist, describes its promise as "a perfect example of genuinely fair trade: each country provides what it is best placed to produce, in return for what it most needs, independent of global market prices." So Bolivia provides gas at stable discounted prices; Venezuela offers heavily subsidized oil to poorer countries and shares expertise in developing reserves; and Cuba sends thousands of doctors to deliver free healthcare all over the continent, while training students from other countries at its medical schools.

Now that they can turn elsewhere for help, governments throughout the region are shunning the IMF, with dramatic consequences. Brazil, so long shackled to Washington by its enormous debt, is refusing to enter into a new agreement with the fund. Venezuela is considering withdrawing from the IMF and the World Bank, and even Argentina, Washington's former "model pupil," has been part of the trend. In his 2007 State of the Union address, President Néstor Kirchner (since succeeded by his wife, Christina) said that the country's foreign creditors had told him, "'You must have an agreement with the International Fund to be able to pay the debt.' We say to them, 'Sirs, we are sovereign. We want to pay the debt, but no way in hell are we going to make an agreement again with the IMF.'" As a result, the IMF, supremely powerful in the 1980s and '90s, is no longer a force on the continent. In 2005 Latin America made up 80 percent of the IMF's total lending portfolio; the continent now represents just 1 percent--a sea change in only two years.

The transformation reaches beyond Latin America. In just three years, the IMF's worldwide lending portfolio had shrunk from $81 billion to $11.8 billion, with almost all of that going to Turkey. The IMF, a pariah in countries where it has treated crises as profit-making opportunities, is withering away.

And not moment too soon. Latin America has turned away and failed policies of neoliberalism and the cycle of dependency it produces. Developing countries borrow money from the IMF and World Bank with long strings attached that turn them into virtual puppets of their lenders. In exchange for loans which must be repaid the nations are forced to adopt policies which favor international capital, allowing capital to essentially drain all benefit from investment from the nation, leaving the people of the nation holding a large debt and no better off than they were, much less with any capacity to repay the debt, thus forcing them to borrow more and repeating the cycle. Latin America's experience shows that this dependency produces a vulnerability. Precisely because capital is not accountable to governments, but governments in developing nations are dependent upon, in this system, capital, capital can pull out at any time if their will is not obeyed.

Latin American governments have come to realize that if they are to reassert their sovereignty they need to free themselves from the depredations of the World Bank and the IMF and their neoliberal theocracy.

It is heartening to see the same process began on the African continent.

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Children of the Corn Subsidies: Maybe Bush Has a Good Solution

The New York Times has editorialized that Bush's proposal for reforming our farm policies is A Bill Democrats Should Like. On the surface, it seems like they are correct that this is "one of the more sensible pieces of legislation to emerge from this administration in quite a while."

It proposes a strict cap on payments to individual farmers as part of a larger effort to hold down traditional subsidies. It seeks to help smaller and younger farmers and poor rural communities.

And it includes the most generous conservation program ever offered by this administration: increasing spending by $7.8 billion over 10 years on land conservation and investing an additional $1 billion a year in a bold new program to develop renewable fuels other than corn ethanol from farm crops.

Oxfam, long a critic of US farming subsidies, calls the proposal "encouraging." Oxfam nearly correctly notes that, "subsidies encourage overproduction, with the surplus dumped on the international market, in turn lowering prices and undercutting the livelihoods of millions of poor farmers around the world."

It's also worth noting in our current political debate that those "farmers around the world" include Mexican farmers. With cheap subsidized corn, now no longer tariffed thanks to NAFTA, flooding the Mexican economy, Mexican agriculture workers flooded our borders looking for work.

I say "nearly" above because Oxfam misunderstood the nature of the subsidy program and the problem it was meant to address. Tom Phillpot at Grist, an enviro web site, gets to the core of the issue.

For about a century, the main problem facing U.S. agriculture has been abundance. Powered by the great 20th-century agricultural innovations -- hybridized and later genetically modified seed varieties, synthetic fertilizers and pesticides, and petroleum-powered machines -- farmers consistently churned out much more food than people could eat, causing prices to drop.

According to classical economics, farmers should respond to the "signal" of lower prices by cutting production, which would cause prices to stabilize. Instead, they've tended to respond by scaling up -- investing in land and technology to boost production. They hoped to make up in volume what they were losing in price -- creating a vicious circle of rising productivity, lower prices, and recurring farm crises.

If this seems counterintuitive, it's important to consider that farming is has a long production cycle - a year from beginning to end. Unlike, say VCR manufacturers, they cannot react rapidly to market forces. They have one shot every year to plan that year's production. If they cut production in an effort to raise prices, but no one else does, then they won't accomplish the goal of raising prices and will have to suffer through a year with lower prices and lower yield. It's a version of the classic problem in economics, The Prisoner's Dilemma.

Subsidies started as a means to correct this problem not by lowering the cost of production to the farmer, but rather by lowering the output of the farmer. And then in the 70s they morphed. The new idea was to sell as much of our agriculture product overseas as possible, even if (as in the case of the USSR) we had to subsidize that. And subsidies became a way to support farmers with direct payments when prices dipped below the cost of production.

So reducing the subsidies (which nearly everyone agrees is correct at least for big agri-business which receives the lion's share of the subsidies) limits an ineffective solution to the problem. And that's good. But it still leaves the base problem. Everyone will still overproduce and prices won't rise. Oxfam won't get it's desired outcome.

One obvious portion of the solution would be to feed our own people. The federal government has paid farmers $164.7 billion in subsidies between 1995 and 2005. Even Bush's new scaled back bill will cost $87.8 billion over the next five years. At the same time, eleven percent of American families are "food insecure", in the new Bush adminstration euphamistic way of saying "hungry". All of those billions could feed a lot of people and still help farmers by creating legitimate demand.

The Farm and Food Policy Project has proposed a somewhat vague but still innovative and reasonably comprehensive set of proposals. (PDF link) The proposals are largely market based and so should get support from the Right. These include revenue based risk management schemes and savings programs for farmers to give them a greater sense of stability.

It includes programs to encourage farmers to switch away from the heavily subsidized corn to alternate crops with emerging domestic markets, like organic produce. They advise, instead of subsidies, targeted investments in farmers willing to make the adjustment so that they can afford to transition.

Diversifying production would also reduce competitive pressures. If a farmer isn't producing the same crop as everyone else, there's less of a need to overproduce to hedge against price drops. But farmers will need assistance in setting up distribution networks to transition away from corn and soybeans.

So credit where credit is due, Bush's proposal seems like a small step in the right direction and is probably the most our Congress will be able to produce. But it still falls far short of what is needed.

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