Governments previously overlooked other aspects of agricultural development, such as improved infrastructure, in favor of costly universal subsidies, and fertilizer was distributed through centralized state monopolies that crowded out private importers and sellers. A more sustainable approach to the role of subsidies in agricultural development calls for temporary vouchers that target smallholder farmers, cultivate demand for private retailers, and exploit the efficiency of private markets.As we discuss in our forthcoming textbook on global food policy, policies are enacted for a variety of reasons to benefit a variety of causes. Is the relevant policy choice between a program that reduces poverty less efficiently and one that reduces poverty more efficiently, or is it between a program that reduces poverty and no program altogether? Efficiency cannot be determined without reference to the goal: improve electoral chances? reduce poverty? increase production? promote long-run fertilizer markets? reduce hunger? keep urban wages low? some combination of all the above?
... The pattern of voucher allocations was not determined by a district’s poverty level. In fact, slightly more vouchers were granted to less-poor districts, which may have undermined the subsidy program by displacing unsubsidized purchases.
A closer examination reveals that the government targeted vouchers toward districts in which the ruling party was defeated in the last election. A district received 2 percent more vouchers for each percentage point by which the party had lost ... The vouchers were apparently wielded to bolster the party’s popularity where it was lacking....
Banful warns that without a mechanism to curtail political misuse, the new subsidies advancing across Africa will likely fall short of their potential to help farmers and stimulate agricultural productivity.
Monday, August 9, 2010
Fertilizer Subsidies in Ghana: Politics Matter
A new IFPRI publication discusses Ghana's 2008 fertilizer subsidy program, enacted while fertilizer prices rose 35%: