Prometheus 6   

… By then, geopolitical necessities had changed, as had theories on how to develop the third world. Benefactors began attaching tighter strings to their money, first during the final decade of the Banda regime, then with the subsequent elected government. The World Bank and the International Monetary Fund had entered their ''structural adjustment'' period. Austerity in government spending was preached, the overriding principle being that the poor were best served through the efficiency of free markets. The fine print in most loan agreements committed governments to reduce subsidies, curtail spending and sell off monopolies.

Whatever eventual benefit there might be in such reforms, the immediate impact on Malawian farmers -- paupers during the best of times -- was distress. Corn prices, no longer set by the government, became unpredictable. Given the risk caused by instability, the private sector did not mature as expected. Worse yet, the kwacha was repeatedly devalued. Falling prices in the world tobacco market had strained already thin foreign-currency reserves. At the urging of the I.M.F., the government instituted small devaluations in 1990 and 1991 and two larger ones in 1992. Finally, in 1994, Malawi moved from a fixed exchange rate for the kwacha to one that floated. For farmers, that meant the cost of fertilizer, an imported good, ballooned as the kwacha shriveled.

Before, fertilizer had been subsidized. Loans had been, too. Farmers now found themselves adrift ''in the worst of both worlds, a Bermuda Triangle,'' deprived of the benefits of a regulated economy while yet to gain the benefits of a free market, said Lawrence Rubey, the United States Agency for International Development's chief of agriculture in Malawi. He gave an example with some dismal arithmetic: in dollar terms, the price of a bag of fertilizer had actually gone down. But in devalued kwachas, the cost had risen fivefold. This was devastating to farmers with badly leached soil. ''The past arrangement of high state control of the economy was inefficient, but at least it was stable,'' Rubey said.

…Like many poor, heavily indebted countries, Malawi operates something like a business in receivership. Lenders and donors -- among them the World Bank, the I.M.F., the British, the Americans and the European Union -- carefully monitor fiscal policy and budget expenditures. Their approvals are necessary, or their generosity is withdrawn. The spigot of aid goes on, off, on, off.

Understandably, this has made for a peevish relationship. The Malawians quite correctly contend that the donors are hypocrites: while opposing state subsidies elsewhere, wealthy nations hand out $1 billion a day to their own farmers, about six times what they give in development aid to the globe's poor. (Nicholas Stern, the World Bank's chief economist, once pointed out that each day, the average European cow receives $2.50 in subsidies while 75 percent of the people in Africa are scrimping by on less than $2.) These subsidies also depress commodity prices, undercutting the ability of developing nations to compete in world markets and get their nations off the dole.