October 09, 2009

Maize, Ministries, and Hunger: How the World Bank Starved Malawi

by Kat Hobbs

“The City man cometh to no pain

When rural grounds receive no rain”

Dambudzo Marechera, ‘Throne of Bayonets’[1]

It is February 2002. Across southern Africa, droughts and floods have ripped apart the maize fields, destroying farmland and crops. In Malawi, locked in the South-East between Mozambique and Tanzania, more than seven million people are starving2; two thirds of the people are without food, eating pumpkin leaves, maize husks and the bark of banana trees to survive. The government grain stocks are empty, and the Famine Early Warning Systems have failed to predict the 400,000 tonne deficit. The international community is dragging its feet, spatting with the government over corruption allegations and policy advice; aid was suspended in November 2001, with the US diverting $6 million and the EU not only suspending aid but demanding a refund of 15 million euros. The government warehouses are empty, and the question which is held over the heads of the hungry is: where did the grain go?

The argument between the internationals and the government is a roll-call of power in the developing world. The EU, the US Agency for International Development (USAID), the International Monetary Fund (IMF), and the World Bank are but a few involved in the creation of this disaster. The World Food Programme and other NGOs are issuing a call to arms while the diplomatic finger-pointing continues; meanwhile parents are selling their children to feed the rest of the family3. To find the roots of the crisis, you have to rewind- back to the beginning of Malawi’s ‘development’ programme, when the World Bank and IMF began their roadmap to create prosperity. The grand plans rested on one key move, the darling of neo-liberal economists; the euphemistic ‘Structural Adjustment’ programmes.

When colonialism ended in Malawi in 1964, the country was enormously underdeveloped. Given the unstable climate (droughts are frequent, although one third of the country is covered by a freshwater lake, so irrigation is far from impossible) and endemic poverty- even now the UN Development Programme lists them 164th of 177 countries on the Human Development Index4- Malawi seemed desperately in need. The IMF and World Bank offered the Malawian government (at the time, an out-and-out dictatorship under “His Excellency the Life President Ngwazi Dr. Hastings Kamuzu Banda”) enormous loans. And as the country progressed in fits and starts, the need for money remained; the cyclic nature of debt in the developing world is well recorded. Malawi was soon aid dependant- and the banks could attach whatever conditions they wanted to the loans, effectively using them to set government policy.

Money hadn’t always come with conditions attached. During the Cold War, America and the USSR poured money into Africa, to win allegiance in their respective fights against the scourge of communism and the scourge of capitalism. Malawi, bordering on Mozambique which in 1977 took up Marxist-Leninist doctrine5, was flooded with unconditional aid, propping up the vicious Banda regime. The aim was to ensure they avoided becoming a link in the feared ‘Domino effect’: American money would flow as long as the free market and not the socialists ruled in Malawi. By 1992, the people were rioting and Banda’s regime was looking increasingly shaky; accused of murdering cabinet colleagues among other unsavoury acts, Western aid was suspended until good governance conditions could be implemented. Malawi became a multi-party democracy in 1994, but the real power still lay elsewhere; by 1995, 97% of Malawi’s government expenditure was supplied by US aid6. And it came with rules.

The IMF and World Bank ‘advised’ the government to privatise everything it could lay hands on, keeping faith in the saving grace of the markets. Privatisation, removal of trade tariffs, no minimum pricing for farmers; in order to develop, Malawi was to be opened up to foreign markets and private investors. The aid money which ran the country depended on it. The crowning glory was the ‘commercialisation’ of ADMARC, the government department which bought up grain and kept it in reserve, and the scrapping of the fertilizer subsidies and ‘starter packs’ of seeds which the government had been distributing to the poorest of the poor. In 1998, a loan was agreed to ‘help’ the government privatise not only ADMARC, but the telecommunications networks and the energy sector7. But ADMARC, ignoring the advice, continued to buy grain, keeping the maize price stable for farmers. Clearly they needed to be reminded of their priorities. So in 2000, the World Bank doled out another $28.9 million to the Malawian government to push through the “Privatisation and Utility Reform Project”[8]. This involved the closure of 400 of the 530 country-wide ADMARC markets which had given people not only the agricultural inputs they needed to grow food, but the access to markets that rural sellers needed in order to then sell their maize. It also resulted in the loss of thousands of jobs; the gaping hole in the economy it left was supposed to be filled by private investors and companies. The seeds of the famine had been sown. Private investors failed to appear, put off by the lack of infrastructure- roads, communication, power, all were lacking; the very sectors the Bank had instructed the government to pull out of. As agriculture collapsed, the hunger increased.

Meanwhile, the IMF had been keeping a strict eye on the macroeconomics of the country. When the first loan was arranged in 1998, the government agreed to eliminate price support operations for maize by ADMARC and prepare it to operate on a strictly commercial basis. In case of a harvest failure, it instead created a National Food Reserve Agency (NFRA) to handle the strategic grain reserve in place of ADMARC. But the NFRA began to behave just as ADMARC had done, stabilising prices for poor farmers by buying up grain. The IMF was stern; in their own words, “NFRA was likely to become a burden on the budget, as with ADMARC before it”[9]. There was also, they pointed out, the small matter of a $300 million loan the IMF had advised the government to take out from a South African bank that needed to be paid back. By the end of 1999, NFRA had 167,00 metric tons of grain stored. The Banks demanded its sale, waving the loan papers; the government obeyed. The grain reserve was sold to neighbouring states such as Kenya, or released onto the domestic market, causing the price to begin to fluctuate dangerously.

And then disaster struck: the rains failed. The government, having been told to sell off the grain reserve, had nothing to offer; international donors, including the World Bank and the IMF, expressed shock and horror at the unfolding crisis. Where, they asked, was the grain reserve? They turned on the government that they had funded and advised, accusing it of corruption and irresponsibility. Aid would be withheld until the grain could be accounted for. Between October 2001 and March 2002 the price of maize shot up by 400%. At the same time, in spring 2002 and 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’. As the famine set in and worsened into 2002, Malawi was still spending 20% of its national budget on debt repayment to Western creditors: more than was spent on health, education and agriculture combined10. Crippled by famine and debt, the country was sliding into destitution.

And then Malawi dared to do something which has been virtually unheard of in sub-Saharan Africa, dependant as that region is on the goodwill of powerful development companies. In 2005 the government decided to defy the World Bank and the free market advice that had brought them to the brink of ruin. They re-introduced fertilizer subsidies and starter packs, and began supporting the farmers that comprise 70% of the population. In the words of Celia Dugger in the New York Times, “Over the past 20 years, the World Bank and some rich nations Malawi depends on for aid have 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.”[11]

Malawi still has a long way to go before it will be food secure; the unstable climate of the region, combined with a lack of diversity in farming practice, leave it vulnerable to sudden shocks. However, in the two years following the re-introduction of the subsidy, Malawi went from a beggar nation reliant on foreign aid to a net producer: by 2007 it was selling more food to the World Food Programme than any other southern African country, and exporting thousands of tons of grain to neighbours such as Zimbabwe.[12] Refusing to bow before the power of the free market, Malawi has begun a long, slow road to independance.

But across the rest of Africa, the patterns are repeating themselves; Nigeria, for example, is once again on the brink of food riots. Except this time the problem is not a lack of food; the country has plenty. The culprit is the 19% value added tax which the IMF pressured Niger’s President Mamadou Tandja to implement, with foodstuffs included. The tax was added even though food costs rose more then 75 per cent in the previous five years13. The Niger government, under instruction from the IMF and European Union, at first refused to distribute free food to those most in need; such actions would “depress the market prices” that benefited wholesalers and speculators14. Meanwhile thousands are starving while sitting in front of stocked shops; they simply cannot afford the food. The World Bank and the other international institutions and governments whose protectionist policies at home effectively bar Africa from competing in world markets continue their hypocrisy in insisting on African trade liberalisation, opening the continent to the powerful multinational corporations who benefit from the cheap labour and rich natural resources. The ideology of free market economics recognises no value in the life, liberty and dignity of thousands; only the dancing numbers that mark profit and loss hold power. As the climate hots up and the weather across the globe grows more and more unpredictable, droughts and famine will only become more common. If we do not act now to place people before ideology, and life before profit, then countless more will stand where thousands of Nigerians are standing today, on the wrong side of fatly stocked shop windows with empty pockets and empty stomachs. No matter the theoretical elegance of free markets; they can create only inequality, and one outcome. In the eloquent call to arms of the Zimbabwean poet Dambudzo Marechera:

“Huger in the belly

Rose to the Brain.

Its bright eyes clenched

In anger to smite with white-hot steel

The reinforced glass between my want

And your plenty.”[15]

[1] ‘Throne of Bayonets’, Mindblast, Dambudzo Marechera, Harare Modern Writers, 1984

[2] http://news.bbc.co.uk/1/hi/world/africa/1985765.stm

[3] http://news.bbc.co.uk/1/hi/world/africa/1844748.stm

[4] http://hdrstats.undp.org/countries/country_fact_sheets/cty_fs_MWI.html

[5] http://news.bbc.co.uk/1/hi/world/africa/country_profiles/2120437.stm

[6] http://www.americanforeignrelations.com/E-N/Foreign-Aid-The-post-cold-war-world.html

[7] http://www.worldbankcampaigneurope.org/IMG/pdf/Testimony_Collins_Magalasi.pdf

[8] http://www.worldbankcampaigneurope.org/IMG/pdf/Testimony_Collins_Magalasi.pdf

[9] http://www.imf.org/external/np/exr/facts/malawi.htm

[10] http://www.justfocus.org.nz/tag/privatisation/

[11] http://www.nytimes.com/2007/12/02/world/africa/02malawi.html?_r=1&th&emc=th

[12] http://www.nytimes.com/2007/12/02/world/africa/02malawi.html?_r=1&th&emc=th

[13] http://www.theecologist.org/blogs_and_comments/commentators/other_comments/268756/market_famines.html

[14] http://www.theecologist.org/blogs_and_comments/commentators/other_comments/268756/market_famines.html

[15] From ‘The Coin of Moonshine’, Mindblast, Dambudzo Marechera, Harare Modern Writers, 1984

- 3 comments by 0 or more people Not publicly viewable

  1. bath mateus

    Very impressive posting. I enjoyed it. I think others will like it & find it useful for them. Good luck with your work. ;-)


    30 Dec 2009, 09:25

  2. Andy

    Great article. Makes me feel sick thinking about the damage the Bretton Woods organisations are continuing to do in the developing world with their one-size-fits-all lending conditions. Set up to help post-war Europe out of economic crises, their raison d’etre 60 years on now seems to be to alleviate third world poverty. But as they are undeniably and uniformly failing, one has to ask – why do they still exist? They undermine democracy and sovereignty, and force conditions upon vulnerable nations which the developed world merrily chooses not to adhere to.
    Anyway, as I said, great article!

    06 Jan 2010, 17:52

  3. Nick Matyas

    Awesome posting man!
    You are a great blogger. I like your work. Truly you are a genius.
    Keep up the good work Man!!


    14 Jan 2010, 23:41

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