Question

Malawi Versus the World Bank
SONIA PATTEN
Summary This article by Sonia Patten describes the impact of market-oriented World Bank and International Monetary Fund policy on the subsistence farmers of Malawi. Early on these two lending institutions adopted the "Washington Consensus," a policy designed to reform the economies of poor nations by instituting capitalism and bringing them into the world economy. The "Consensus" required borrowing countries to adopt five rules in order to receive loans: (1) cut spending on health, (2) privatize state-owned enterprises, (3) allow market set interest rates, (4) open their economies to foreign investment and competition, and (5) manage currency rates.
Malawi is a small African nation. Ninety-five percent of its population lives on small one to four acre plots of land typically producing just enough food (maize in this case) to feed family members and participate in ceremonies such as weddings. Maize is hard on the land because it requires substantial nutrients to grow properly. There is no land left to farm in Malawi, thus no way to let some of it lie fallow to recover its fertility. British colonial officials recognized the negative impact of exhausted land on maize yields and started providing subsidized fertilizer by 1952, a policy continued after independence. By the early "80s Malawi approached the World Bank for a loan because of a balance of payments problem. By 1990 the government had ended fertilizer subsidy programs, price controls, and regulated seed prices, and devalued its currency. Unable to afford the cost, farmers grew crops without using fertilizer. The result was vastly reduced crop yields, starvation and malnutrition, and a life expectancy of 37 years. Malawians responded by skipping meals, mixing brans with maize flour, adding cassava to maize four, selling assets and land, and in some cases begging.
Before the 2007 planting season, Malawi's president reinstituted the subsidization of fertilizer. The resulting yield that year so large that the country was able to export grain. Malnutrition dropped and health increased. The Malawian case illustrates the impact of macro-economic policy on a local micro economy.
According to Patten in "Malawi Versus the World Bank," the effect of the World Bank on Malawi was to drive people off their land and into cities where they could work in newly established businesses.

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