This interesting article discusses the use of smart subsidies to bring critical products - in this case, fertilizer - to poor farmers at prices they can afford so that they can change their own lives. It is also a story of how many variables go into success, which means that attribution for what works and what doesn’t isn’t always straightforward. We need constant experimentation and an honest appraisal of results, of successes and of failures too. It is exciting to see an increased dialogue around some of these issues in papers like The New York Times.
This is a most interesting article. Subsidies will be debated by academics, entrepreneurs, and governments for decades to come. Nevertheless, economies have to mature and the first stage is subsistence. They’ll eventually produce a surplus and become producers. Later they’ll refine their goods (ethanol, or another high priced corn product, [see this week’s Economist]) and act as manufacturers. Government subsidies are not a long-term solution, but when and allocated used appropriately, they can certainly ‘kick start’ this economic evolution.
Still, I propose the use different measuring sticks. They measured the subsidy at $74 Million, and the crop at $120-140 Million. This sounds great, but with the average corn price up 50% vs. 2006, did it really produce more food for the population of Malawi? If the corn is for export, use dollars. If the corn is for domestic consumption, and an effort to prevent starvation of your people, Shouldn’t we measure tons or acres harvested?
Needless to say, I agree that the extra attention from the NY times is great! Let’s hope it only increases from here.
Reply to Brian McCarthyThanks for pointing this out, Jacqueline. What I found most interesting about the article is the importance of dignity in policymaking:
Stung by the humiliation of pleading for charity, he [President Mutharika] 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.
It may seem obvious, but good policy - like good business - begins with understanding the true motivations of the people involved. In this case, Malawi’s president was rightfully sick and tired of asking the international aid apparatus for help to feed his people. Going even further off track, this story reminds me of the Cheetahs vs. Hippos debate begun by George Ayittey at the TED Africa conference. I bet Mutharika falls more in the Cheetah category than the Hippo side…
Empathy & dignity — start there, and good policy (or business) is more likely to follow.
Reply to Rob