2005 July 06 Wednesday
How Much Does A Dollar A Day Buy In Malawi?

Xanthe Scharff has an article in the Christian Science Monitor about a Malawian mother of 4 children Selina Bonefesi and her husband Bonefesi Malema and how they live on a dollar a day.

Mrs. Bonefesi has a small business making fritters - fried cakes made of wheat, salt, sugar, and yeast.

....

The fruits of her labor are 150 small fritters and 150 large fritters, which will sell for about $.02 and $.04, respectively. Her customers are her neighbors, schoolchildren hungering for a midmorning snack, and people headed to the market three miles past her town. They all know Selina's house and yell out to her from the yard for service with a smile.

I don't know how big these fritters are or how many calories are in each fritter. But I'm struck by their low prices. I also wonder whether this family eats some of the fritters themselves.

Scharff says 4 donuts cost this family 16 cents. You certainly can't buy a donut in a donut shop in the United States for 16 cents, let alone multiple donuts. But how big are these donuts? What are they made from?

She spent all of 50 cents (US dollars) for trousers and two blouses. Doesn't this suggest that a dollar buys a lot more stuff in Malawi?

On a new day, Selina walks the three miles to the market. With the money that's left over from buying $3.92 worth of fritter supplies, she'll purchase fish ($.24), tomatoes ($.08), and practical items - soap, lotion, and salt, for a total of $.51. Trousers and two blouses for her youngest children tally $.50 after bargaining down the price. Next week she'll give her son $1.25 to select his clothes but will spend up to $1.60 on her daughter, knowing the importance of an attractive wrap. She motions to the brightly colored cloth that covers her legs. "If a woman has more than one of these, then she is a real woman," she says.

The $3.92 buys enough supplies for the 150 large fritters and 150 small fritters. Those sell for about $9 total.

Since salaries are very low in most occupations in Malawi the cost of school tuition is incredibly low as well.

They do, however, consistently pay Sifiledi's yearly tuition bill of $29.09 and a per annum of $6.46 for school supplies and smart pink-and-blue uniforms for the three school-going children.

I'm going to guess the school building is incredibly cheap and the construction is well below Western standards. But the kids can stll receive instructions.

These people are extremely poor, without a doubt. But when one hears about some Third Worlders living on something like a dollar a day one can't look at such numbers from the standpoint of prices we pay in developed countries. This Christian Science Monitor article should have provided more data on weights of what was purchased. But even from the details provided it seems clear that a dollar buys a lot more of the bare necessities in Malawi than it does in the United States or Europe.

Meanwhile Der Speigel has a good article on how aid money to Africa hasn't helped any.

Money is, for the Europeans, the solution to all of Africa's problems. But despite yearly payments of, at last count, some $26 billion, the majority of the continent resembles something approaching one big emergency military hospital.

Already today there are increasing numbers of Africans who call for an end to this sort of support. They believe that it simply benefits a paternalistic economy, supports corruption, weakens trade and places Africans into the degrading position of having to accept charity. "Just stop this terrible aid," says the Kenyan economic expert James Shikwati.

...

Often, what started out so promising ends up as a fiasco. Hendrik Hempel, who works for the German Society for Technical Cooperation (GTZ), helped renovate a state-owned farm in North Eritrea after the war with Ethiopia. For years he literally created a blooming landscape.

But Hempel's case became a silent indictment of the incompetence of the ruling government party. He managed to get better yields than the state-run farms. But despite his success, he was forced to give up when the government suddenly installed hundreds of former freedom fighters, who had been left without work after a number of state-run farms had gone bust, as paid employees in his business.

Still, Africa has some bright spots.

Taking office in 1995, current president Benjamin Mkapa vowed to move Tanzania into the middle rank of the world's economies by 2025. He pushed reform forward, most importantly by dismantling the moribund state mining company and offering tax and other incentives to private firms. The result was a boom in the mining of gold, diamond and tanzanite, albeit with a frightening rise in dangerous, privately owned mines. Still, by last year, mining had surpassed agriculture as the nation's leading export industry, bringing in $652 million and powering GNP growth to 6.7 percent this year, up from 4.2 percent in 1996. Tanzania is now among Africa's fastest-growing economies. Foreign reserves are healthy. Inflation stands at a modest 4.2 percent. Government tax revenues have quadrupled to more than $1.7 billion.

As long time readers know, I think the prospects for Africa will be bad for decades to come. But Africa could certainly be made less bad. If Western aid to governments gets cut back and more money goes toward problems whose improvement would allow greater economic growth Africa could do much better than it is doing today. For example, food fortification with micronutrients would raise average IQs. Fortification with vitamins, iodine, and other micronutrients would do more to raise Africa's growth rate than the hundreds of billions on projects funded through African governments. Vitamins and minerals are cheap. To give just one example off the top of my head: the proposed addition of vitamin D fortification to the US food supply has been estimated to add an annual cost of well below $20 million (from memory, sorry no URL). Africans don't need vitamin D. But they do need vitamin A, iodine, and some other micronutrients essential for brain development. If all US aid to Africa was aimed solely at food fortification then that alone would be enough to eliminate the vast bulk of African micronutrient deficiencies. Also, development of vaccines holds the potential of dramatically reducing brain damage by malaria and other diseases. Again, this would increase economic growth.

Share |      By Randall Parker at 2005 July 06 01:04 PM  Economics Development


Comments
Stephen said at July 7, 2005 8:03 PM:

I have a friend who is doing her PhD research on delivery methods for eliminating vitamin deficiency in the 3rd world. Apparently they've got iodine delivery working because the UN has organised for it to be added to salt at the 'refinery' level in 3rd world countries. Apparently the program is highly successful.

The problem with delivering supplements in the food is that the very vast majority of food is grown and marketed by the farmer and sold directly to the roadside stall retailer, so there's no convenient point of access for cheaply adding supplements to food.

The case quoted in Der Speigel is reminiscent of the problem that triggered Zimbabwe's rapid decline - at independence, peasant freedom fighters were demobbed but kept their weapons, after a few years they became unsatisfied because they had done all the hard work, but weren't getting the rewards. They became militant and started to reform their old units. Eventually the government had to bribe them with massive amounts of cash/land/privilege and the slide from civil society began.

What's really interesting is the cost of manufactured goods (ie trousers and two blouses for 50c). Presumably these goods were imported, or at least the material was imported. If they're available in Malawi at that price, is there any point in using tarrifs/subsidies to try and protect uncompetitive US garment manufacturers from imports like that? Wouldn't it actually be better for the US economy if clothes could be bought that cheaply, thereby leaving more money for consumers to buy locally produced goods of advanced manufacture?

Randall Parker said at July 8, 2005 3:53 PM:

Stephen,

I'm aware of the problem posed by the local growth and consumption of most foods. Yes, they don't have many of the massive cereal factories and bakeries. However, a fair amount of food in Africa comes from outside. All the aid food ought to be heavily fortified.

Also, anything like salt that is distributed over wider networks could be fortified.

Also, an increasing portion of the African populations are urban dwellers. Those could be reached. Big cities like Lagos could have lots of fortified foods.

Perhaps aid could go toward building medium sized grain processing facilities that produce fortified flours.


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