When Good Intentions Bring Bad Results

If you thought that American farmers was the only group powerful enough to hold a firm grip on policy makers, you haven’t met the “Landing Beach Committees” of Ghana’s fishing sector.

It’s a rare phenomenon, but it’s been known to happen, some subsidies aimed at helping the poor end up benefiting the rich, particularly in the rural sector and in basic public services. If ever there were a classic demonstration of how subsidies fail to achieve their intended effect, i.e. cushion the poor and vulnerable in society, the perennial premix (a special type of fuel that is used for fishing canoes) confusion is it.

Franklin Cudjoe, Kofi Bentil, and Bright Simons of IMANI Center for Policy and Education see no economic justification for subsidizing premix fuel for fishermen. The practice, they say, is “A political dance favored by the vote-obsessed elites of our major political parties… It is also a self-reinforcing system of perverse incentives for all those lucky to be caught up in the situation’s management.

“For a number of years now, this country has had to endure one controversy after the other about the distribution of marine fuel to fishermen for the powering of canoes and other vessels so critical to their livelihoods.Sometimes the scandal implicates a bunch of local bigwigs diverting the precious fluid for mixing with less-subsidized fuels in order to make a killing at the expense of the state and the hapless fisher folk of our coastal towns.These bigwigs, sometimes members of grandly named “landing beach committees”, are, obviously, shameless beneficiaries of a state of “information arbitrage” that has resulted from discrepancies in the availability of information to different parties. The coastal fisherman has no idea how much fuel is actually available in his or her locality, and has no real prospect of access to accurate data in this regard.The landing beach committee bigshot, on the other hand, has timely access to this information, and the means to profit from it, by mixing this information advantage with another kind of arbitrage: the artificial price difference between “premix” and other fuels.

The price difference is artificial simply because it is enforced by state subsidies…”

Read the full article!

This entry was posted on Friday, August 21st, 2009 at 9:26 AM. It is filed under Africa and tagged with fishing, fuel, Ghana, IMANI, politicians, poverty, subsidies. You can follow any responses to this entry through the RSS 2.0 feed.