Second Thoughts on Malawi’s Fertilizer Subsidies

When the word "simply" appears in a headline about development issues,

be very, very cautious. That’s what happened in story that the NYT splashed

on its front page Sunday: "Ending

Famine, Simply by Ignoring the Experts", by Celia Dugger. The thesis

of the story is basically that by doing the opposite of what the World Bank

advised and subsidizing fertilizer, Malawi has managed to find itself in a world

of agricultural plenty.

One problem is that the article didn’t come with hyperlinks: it does things

like quote "an independent evaluation financed by the United States and

Britain" without giving us any idea of where to find it. What’s more, the

only people the article quotes are people who support its thesis. All this meant

that Brad DeLong was immediately suspicious: "it’s very hard to assess

what is going on," he wrote,

noting that Dugger doesn’t even say where the subsidies are coming from.

Nevertheless, it was clear to Mark Thoma who would embrace the article wholeheartedly:

"This is very Rodrikian," he wrote.

"It’s also Sachsian".

Turns out, Thoma’s batting .500 on that one. Sachs is quoted in the article,

and loves the fertilizer-subsidy program. But Dani Rodrik today gives his blog

over to Maggie McMillan, who has some

extremely pointed words for Dugger:

Low fertilizer use is indeed one of the Africa’s most vexing challenges.

But subsidizing is only a band-aid, masking its high cost and low productivity

without sustaining growth…

Dr. Masters and his colleagues at Purdue University did one of the first studies

of Malawi’s fertilizer subsidy program, when it was first introduced.

They predicted the high payoff reported in the NYT article, but found that

it had little to do with the fertilizer subsidy as such. Most of the effect

comes from the improved seed that accompanied the fertilizer, and from overcoming

Malawian farmers’ credit constraints.

Without underlying change, warns Dr. Dick Sserunkuuma, an economist at Makerere

University in Kampala, farmers do not benefit enough from the fertilizer to

make the subsidy an effective development strategy. The article makes it sound

like farmers in Malawi can achieve international levels of competitiveness

simply by applying fertilizer. This is simply not true…

The World Bank has given out lots of loans to African governments for fertilizer

and it has good reason to be cautious. For example, in an effort to stave

off famine and reduce Ethiopia’s dependence on food aid, in 1995 the

World Bank gave two loans to the government of Ethiopia totaling $164 million

to support fertilizer use. Fertilizer use increased quite a bit, and with

good rains in 2000/2001 there was a record harvest and maize prices plummeted.

I was there that year and the sad joke was that farmers had come all the way

to Addis to beg on the streets for money to repay their fertilizer loans.

Inputs can be productive without being profitable…

More fertilizer use is clearly an important part of poverty-alleviation success

stories around the world, driven by the spread of improved seed and favorable

market conditions. Subsidized fertilizer can raise output only temporarily.

So there is certainly scope for increased fertilizer use in Africa, but it

is not the magic bullet that the NYT headline would have us believe.

Many thanks to McMillan for moving the story forward in a smart and non-truculent

manner. Now, what are the chances, do you think, that Celia Dugger will respond?

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