How poor farming policies fuel inflation

By Alex Singleton | 20 April 2005

An editorial in The Standard (Kenya) makes the important point that attempts at helping poor farmers through price supports can be bad for a population as a whole:

Over the last four years, Kenyans have been suffering from a deteriorating quality of life because of the rising prices of basic commodities.

Since 2000, the index that measures inflation among poor households in Kenya has risen by 46 per cent. The situation is not any better for middle class households...

Indeed, when we take that food, and specifically maize and other staple fair, accounts for 70 per cent of the low income consumers' budget, we begin to see how the failing of the country's farming and food security policy fuels inflation...

In the last one year, the Government has been dabbling with price subsidies that paid farmers a guaranteed minimum price that had nothing to do with either market forces or farming productivity.

While in the short term this will make farmers happy, it will not make them efficient producers. This could signal trouble for the economy in the future.