Liberalisation of the agricultural markets and its impact on the smallholder farmers. The case of Malawi

One of the major aims of the Structural Adjustment Programs, except from correcting short-term imbalances in the economy and creating an environment for sustained economic growth has been, according to the World Bank, to correct the urban-bias politics in Africa. The World Bank uses neo-classic economic models in their analysis of the characteristic of the urban-bias as well as its outcomes. According to the World Bank the major obstacle for the smallholder farmers as individuals and for the agricultural sector as a whole has been the setting of the prices for the agricultural produce which in most cases has been done through state controlled marketing boards. In the beginning of the 1980:s the World Bank started to criticise this system and argued for liberalisation of the agricultural markets. The World Bank assumes that the prices would be higher if they were set on the free market since the market in a better way will reflect the scarcity of the products. This would raise the smallholder farmers’ incomes as well as their production. Therefore “getting the prices right” has been the main objective for the Structural Adjustment programs. In Malawi the process of liberalisation of the agricultural markets started in 1987 and I would argue that they could be characterised as liberalised by 1996. Even if Malawi has been described as a “strong adjuster” meaning that they have implemented the programs efficiently, the outcome regarding the agricultural sector has been bleak. Quantitative measures at the national level show no signs of any major positive changes regarding production and poverty for the smallholder farmers. In this essay I would argue that the failure of liberalisation of the agricultural markets partly depends on the narrow way of analysing the smallholder farmers’ situation in the economy. By using the entitlement approach developed by Amartya Sen we will get a wider and more realistic picture of the situation. By using definitions as Endowment Set (what the farmers own) and Exchange-Entitlement Mapping (what the farmers can exchange from what they own) and analyse the relationship between these two we get an opportunity to deepen our understanding of the impact of liberalisation of agricultural markets on the smallholder farmers in Malawi. The analysis in this paper is based on a field study that was conducted in the Lilongwe West area last year. 68 farmers were interviewed. The conclusion is that in general the farmers’ Exchange-Entitlement Mapping has been affected negatively which has worsened their Endowment Set indirectly, which again tend to affect the Exchange-Entitlement Mapping negatively. The situation can be characterised as a vicious circle. Instead of just focusing on prices I will in this paper argue for a broader view regarding agricultural development including land issues, extension services and poverty reduction. This would demand a stronger state and probably a “de-regulation” of the agricultural markets.