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Submitted by Joseph Hanlon on
Clearly subsidies are an inefficient temporary response to a much deeper problem. Two decades of deregulation, lower wages, etc. are not "diversifying the economy into labor-intensive sectors" because foreign investors (who benefit from World Bank and IMF policies) are not interested. Mozambican entrepreneurs need a whole range of support structure -- not just credit but markets, training, and other support -- which in the rest of the world comes from the government. The Brazilian development bank is an excellent example of how to diversify the economy, but not for Mozambique because it goes against World Bank policy. Small and medium scale commercial agriculture is the obvious way forward. But not long ago, the World Bank intervened to block the hiring of more agricultural expention officiers -- even after the Bank's own study showed they were effective and pro-poor -- because the government, according to the Bank, should not provide extension services. That is ideology gone mad. In Malawi, a fertiliser subsidy (which may not be all the 'efficeint') has turned around agriculture, increasing income and ending the need for food aid. But the Bank and donors would never allow that in Mozambique. If you look at the Mozambican commercial agricultural successes, tobacco and cashew, they are areas which have extensive outside intervention (tobacco by a multinational, cashew by a state institute) where markets are guaranteed and risks are shared. What Mozambican farmers (and the domestic private sector in general) need is not more deregulation, but active intervention and support.