WSJ writes about how good intentions can result in bad results:
In the 1990s, Ethiopia went through a decade of global initiatives that sought to boost agricultural production but at the same time withdrew state support for the farming sector. The government, under pressure from international lenders and aid donors, was pulling out of the grain markets in favor of an underfunded and inexperienced private sector. However, little provision was made to support this fledgling free market with storage facilities, transport and financing. When a bumper harvest came in 2001, the markets were overwhelmed. Prices collapsed.
The problem was that the government, at the same time it was pushing to boost production, was also dismantling its system of state aid to farmers and intervention in the agriculture sector. In its place came a private-sector system that was inexperienced and woefully underfunded. It couldn’t absorb or distribute the bountiful harvests that came. Storage facilities were inadequate. Traders still relied on donkeys for transport. Export markets were nonexistent. There was no money to support prices or help farmers get through losses.
The warning on prices, though, triggered no great alarm. “The market side hadn’t been thought about at all. The government was saying, ‘That’s a second-generation problem,’ ” says Eleni Gabre-Madhin, an Ethiopian who explores market dynamics at the International Food Policy Research Institute in Washington and regularly meets with Ethiopian officials in the capital, Addis Ababa. “The emphasis was on, ‘Let’s just produce.’ ”
Could there be some lessons from India?