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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