Tag Archives: capitalism

Kebour Ghenna: ‘So yes I am against privatization if privatization is not based primarily on pragmatic analyses’

30 May

Posted by The Ethiopia Observatory (TEO)


Capital: What can you tell us about the future of democracy in Ethiopia, and the rise of ethnic nationalism?
Kebour Ghenna: The race to nationalism seems to make headways. The problem however, is that Oromo nationalism or Amhara, or Tigray nationalism is not going to solve our unemployment problem, or the climate change crisis, or the housing shortages and we can add many other problems. To the contrary these problems are better addressed by working together. I repeat working together. And the federation system, if well structured, with democratically constructed agenda through a series of discussions and procedures, can bring us prosperity. I am against those who preach ethnic nationalism as a solution to our current economic, social and political problems that’s not going to take us anywhere. It’s not by putting ethnic barriers that we can become a great nation. In fact if not careful, we may end up breaking the country into pieces and remain poor and powerless for generation.

Capital: Can this government, can Abiy Ahmed’s government, fight and win against ethnic nationalism?
Kebour: We all know Meles and his colleagues were the ones who introduced such territorially based autonomous regions, typically a community of language as ‘Regional Administration’, which are now conducting themselves as republics. Despite many voices of concern then, this ideology under the guise of history and pragmatism, was vigorously pursued. Abiy Ahmed is a member of this same party that legitimized this system, the party is still functioning, he very much relies on it for its day to day activities. Now we understand that he is taking the party in a different path; can he really convince his coalition members to change or transform his party’s orientations on this matter? I don’t know. But I worry that ethnic nationalism, which is becoming increasingly real in the past years in Ethiopia, may turn truly toxic, especially in these times of economic and financial turbulence within which Ethiopia’s highly indebted, unevenly developed autonomous regions find themselves.

(Photo: Anteneh Aklilu)

Capital: You mentioned that we are going through difficult economic times in Ethiopia today, can you elaborate more on the economic situation.
Kebour: We need first to understand that PM Abiy or his advisors and ministers do not really have much power when it comes to making the economy perform, that is, creating employment, generating foreign currency, create profitable firms, or controlling real wages or prices or even equalizing incomes or helping the poor very much. What is more interesting today is that people of power are under huge pressure to deliver prosperity to people who want instant gratification and are impatient for change. The young men and women like the ‘Kero’s and Fano’s’ of our time see politics as irrelevant to achieving the ideals that matter to them. How to reconcile this contradiction which on the one side is constrained by the limitation of power of political leaders with the impatience of the people is the biggest challenge. And we see it in the challenges our leaders experience in re-launching the economy. Yes the economy is in difficulty, it’s not creating employment, it’s not creating growth, not attracting enough investment and so on. But I have faith in the new generation; the PM has brought many of those young men and women into his team. He is also crisscrossing the country and the world and talking to professionals in search of ideas for turning the crisis into an opportunity for a ‘rebirth’ of the country. I salute the effort. But I also worry that such actions may not be sufficient or effectively conducted. I think there should be more discussions with regional leaders to promote a strong and cooperative region-federal relationship, encourage regional leaders to develop their own revenue systems, strengthen their economies, in short let them lead their economies. One small detail while I am on it, I think the federal government should consider the establishment of an association of regional presidents to share best practices and speak with a collective voice on national policy.

Capital: How do you explain the absence of an economic road map from the government and will there be a backlash as a result?
Kebour: I don’t know why this administration chose not to put up a road map for the economy or for its program in general. But I understand there are bits and pieces of this roadmap here and there. This is an issue that seems to bother many people, notably the elites and I suppose many business people. Somehow this administration’s response on this issue remains rather vague. Frankly, I am not sure if Ethiopians want a program, even less an ambitious program. I don’t see people eagerly awaiting the specifics of Abiy Ahmed’s EPRDF policies. Today such policies or programs are almost beside the point. Most voters will cast their vote for leaders representing their identity. The traditional ideological divides of Left and Right have collapsed. The tendencies toward ethnic politics we’ve witnessed in these past years will very well intensify.

Capital: Are you optimistic about the future of Ethiopia?
Kebour: Let me first say that I, as an ordinary citizen, am engaged in civic activities, recognizing of course that my individual contribution can only be quite modest. Still I see myself as a player, I don’t want to sit around, as a spectator, and say I am an optimist or pessimist. I am, and want to be engaged, I want to be an active citizen and help make the community a better place. I want ultimately to see a prosperous and fair Ethiopia. I think as a player you can’t be an optimist or pessimist, you just play to succeed.

Capital: What about the opposition parties, are you expecting them to form a reasonably broad alliance ahead of the next election?
Kebour: Despite the number of opposition parties, almost 120 in the country and growing, I argue that our democracy is being crippled by a lack of true ideology. We have been paralyzed by having too few constructive policy arguments. Not only there is very little exchange of ideas in recent years, but we have also seen on a whole host of critical issues that the government is being run by a party largely interested in money and power. This has been the root cause of our governmental dysfunction in recent years. In fact opposition parties in Ethiopia have hardly presented their ideology, hardly shared a picture of the shape and content of the ideal society they advocate for Ethiopia. For me, the ‘ideology’ we seek should outline the strategies and tactics that will be used by the party to achieve the envisioned society. The ideology should describe the sort of people who will do the work – the party organization – that will take the larger society to the ultimate ideal. Today we have to be careful not to mistake the clamors of interested and factious men as ideology or some kind of patriotism, most are in fact meaningless noise. Citizens should begin demanding substantive policy debates that will ultimately drive our government’s decisions.

Capital: Many say that you are against privatization, can you tell us why?
Kebour: May be you should ask me if privatization serve the public interest or not? For me, the issue is not simply whether ownership is private or public. Rather, the key question is under what conditions will companies or managers be more likely to act in the public’s interest. The debate over privatization needs to be viewed in a larger context. Privatization involves the displacement of one set of managers entrusted by the shareholders – the citizens – with another set of managers who may answer to a very different set of shareholders. By the way private ownership does not necessarily translate into improved efficiency. More importantly, private sector managers may have no guilt about adopting profit-making strategies or corporate practices that make essential services unaffordable or unavailable to large segments of the population. A profit-seeking operation may not, for example, choose to provide Internet services if it’s not profitable.

(Photo: Anteneh Aklilu)

Capital: So you are against privatization if I understand you well?
Kebour: Let me take this question away from the ideological ground of private versus public to the more pragmatic ground of managerial behavior and accountability. Viewed in that context, the pros and cons of privatization can be measured against the standards of good management – regardless of ownership. Why? Because, first, neither public nor private managers will always act in the best interests of their shareholders. Privatization will be effective only if private managers have incentives to act in the public interest, which includes, but is not limited to, efficiency. Second, profits and the public interest overlap best when the privatized service or asset is in a competitive market in other words in a liberalized environment. It takes competition from other companies to discipline managerial behavior. If these conditions are not met, continued governmental involvement will be better. The simple transfer of ownership from public to private hands will not necessarily reduce the cost or enhance the quality of services. So yes I am against privatization if privatization decisions are not based primarily on pragmatic analyses of whether agreed-on ends can best be met by public or private providers. As I said the ends need not be limited to efficiency; they need only be clearly specified in advance.
One last point, private corporations are very good at writing contracts that shift all risk to citizens (the taxpayers) and keep any rewards for the company. Once a public service is outsourced or asset is privatized, taxpayers have little recourse if a contract was drawn up poorly or the drafters failed to anticipate all contingencies. Because some contracts are written for extended periods, the public can be locked into bad deals for generations

Capital: Regarding the overall economic direction, many say we are heading towards a crisis, what is your view?
Kebour: As regards the economy, we may already be in crisis depending on whether you believe we’ve reached the tipping point. Let’s first recognize that the problem is not simple, and so the answer is not going to be simple either. The political picture remains muddy, it’s not clear that the federal government is strong enough to protect and maintain the rule of law. It’s not even clear to me that it can impose taxes or regulate commerce across the country. One fundamental question is whether our divided house remains one nation? How about the impact of climate change in our life and the economy? We have to tackle all these problems at the same time, they are interrelated, they require the participation of all of us: government, business, civil societies, faith organizations, academia and others. Regarding the economy the government has taken some steps here and there, and I don’t see any problem of reforming in bits and pieces, but then these bits and pieces should come one after the other in an ongoing effort to address the deep economic crisis the country is experiencing. I say, start by unchaining business growth, make sure business believes in the best future, find the right balance between liberalization and state-led development, encourage new entrants, new entrepreneurs unconnected with the state to reinvigorate the moribund economy, consider making Ethiopia not just a diplomatic city, but a commercial city with a very open economy, the easiest place in the world to register, and operate a company; abolish the Ministry of Trade’s business registration department, ensure the independence of the national bank (the one institution that is not ready to reform but is choking the economy), introduce a flat tax to ensure people pay proportionately more in income tax. Anyway, there is much to do in this area.

Capital: If you had one simple recommendation to the government – what will that be?
Kebour: You mean in addition to what I just said earlier, I would say – and I have been saying this for quite some time – and it relates to the privatization of public assets, in particular the privatization of Ethiopian airlines; I want to say to the PM, to just drop the idea of selling the airlines! I want to say to the PM to just look south, look at Kenya Airways; it was privatized in 1995 with IFC as chief advisor, where is this airline today? Not everything is good with privatization, don’t destroy the Pride of Africa.

Developmental state thesis, the prime mechanism for “getting something done”

4 Apr

Posted by The Ethiopia Observatory (TEO)

by Kebour Ghenna

Last week my 18 year old niece wanted to know if PM Abye Ahmed is running a developmental or liberal administration.

Not having read Friedrich Hayek, Milton Friedman or understood Leon Walras, Vilfredo Pareto or even Rosa Luxemburg to understand the heart of many economic theories, I was careful not to say stupid stuff.

On a more realistic level we tend to miss that Developmentalism and economic liberalism are two forms of capitalism.

Yes Dear readers, capitalist societies will either be developmental or liberal depending on how they set their major institutions, namely the state and the market. Economic liberalism gives full primacy to an idealized free market, while developmentalism brings into play both state and market (supposedly) in a more balanced way. The two capitalist systems are also based on separate ideologies, one based on the role played by the market and the other on the role of moderate intervention by the state in the economy. You look closely at the two forms and you’ll obviously find many gradations and permutations in commitment to both creeds.

Personally let me confess that I have an ideological bias, and so would like to argue that developmentalism – the one that combines moderate but effective state intervention in production and in the distribution of income – is a more balanced form of coordinating capitalism than economic liberalism, and generates more growth with financial stability. It reflects the needs of aspiring industrializing nations like Ethiopia to catch up with more advanced capitalist economies. It rejects the self-regulating market ideal, and the individualism underlying it, calling instead for cooperative relations among government, business and labor under state leadership to increase substantially the material wellbeing of its citizens while also advancing key political objectives defined by modern societies: national autonomy, social order, individual freedom, social justice and protection of the environment.

On the other side the market is unbeatable whenever there is effective competition because it allocates resources more efficiently. Still the state is supposed to coordinate the non-competitive sector, such as, the interest rate, the inflation rate and the exchange rate, the distribution of income, and the protection of the environment –areas where there is no real competition and where the market fails to deliver.

One more thing, a developmental state is oriented towards social democracy, because it will limit the capacity of the rich to capture the state and buy prestige, political power and privilege. The social-democratic state has no objection to capitalists using their money to buy luxury goods and services but seeks to promote social justice within the framework of a representative democratic polity and a capitalist economy.

Now let me stop and try to reply to my niece.

Between developmental capitalism and liberal capitalism there is a grey area. There are moments when it is difficult to identify the character of capitalism because in some countries governments have turned liberal but the state continues to intervene in the economy.

As I said markets are an excellent institution, but the only thing that they do well is coordinate competitive activities. Given the complexity of the major modern economies, given the existence of non-competitive industries, given the repeated failure of markets to establish the right macroeconomic prices, neoliberalism cannot be a stage of capitalism. It failed in Eastern Europe. It failed in Eastern Europe. It suffered a definitive defeat in 2008 in the West. How could we then view neoliberalism as the best form of capitalism for Ethiopia?

/Source: author’s Facebook






Yanis Varoufakis in TED talks: Capitalism will eat democracy – unless we speak up!

26 Jan

By Keffyalew Gebremedhin – The Ethiopia Observatory (TEO)

TED: Yanis Varoufakis thinks we need a radically new way of thinking about the economy, finance and capitalism.

“Have you wondered why politicians aren’t what they used to be, why governments seem unable to solve real problems? Economist Yanis Varoufakis, the former Minister of Finance for Greece, says that it’s because you can be in politics today but not be in power — because real power now belongs to those who control the economy.”
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Free to stitch, or starve: capitalism and unfreedom in the global garment industry

25 Feb

Editor’s Note:

To add a further real life example to the validity of Alessandra Mezzadri’s concerns and arguments, TEO has put the following few paragraphs, which with the help of France’s TV2 video shedding the mistreatments, abuses and exploitation of Ethiopian workers in Chinese manufacturing firm.

    The youtube video documentary hereunder is prepared by France’s TV 2, presented here as courtesy of Tristan Waleckx/David Da Media/France 2. Entitled LD L Ethiopie case les prix Escalave moderne – literally to mean Ethiopia is helping to cut down prices at the slavery of its people – was aired in France on Sept 27, 2013. TEO’s Editor was made aware about its preparation on September 6, 2013 through France’s TV 2 journalist Waleckx Tristan, who gave us a call from Paris to discuss manufacturing in Ethiopia. We were told what the caller and his group had in mind and regarding the tip to Addis Abeba by the project team.
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Ethiopia and Kenya: Doing it my way – The Economist

1 Mar

Ethiopia ploughs on with state control

Ethiopia ploughs on with state control (courtesy: The Economist)

Posted by Admin

An ideological competition between two diametrically opposed economic models

ETHIOPIAN BORDER GUARDS at the arrivals terminal in Metema check every passport against a handwritten list of undesirables to be kept out. This a country in which the state knows best. That may be tiresome for visitors, but it has made Ethiopia one of Africa’s development stars. A newly built road leading away from the border is surrounded by intensively farmed fields of sesame, Ethiopia’s second-biggest export after coffee. Golden bundles of harvested stalks sit on fields flanked by streams. It is a long time since famine-struck 1984, when Bob Geldof sang about the country “where nothing ever grows / No rain or rivers flow / Do they know it’s Christmas time at all?”
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State of the world: Deep crisis of confidence afflicts democracies, elsewhere unease & sufferings

27 Jan

By JACK EWING, Davos World Economic Forum 2012
Special Coverage of the World Economic Forum, The New York Times

Protesters in Moscow and Cairo fill public squares to demand representative government. Yet, on the streets of Madrid and New York — or of Athens, which gave us the very word for democracy — discontent is almost as rampant.

The only consistent messages seem to be that leaders around the world are failing to deliver on their citizens’ expectations and that Facebook and Twitter allow crowds to coalesce in an instant to let them know it. This is not a comforting picture for the 40 heads of state or government who are attending the World Economic Forum in Davos, be they elected leaders like Chancellor Angela Merkel of Germany or authoritarians like Meles Zenawi, the prime minister of Ethiopia.

Protesters in downtown Los Angeles last fall condemned inequality, corporate greed and budget cuts (Photo courtesy of Frederic J. Brown/Agence France-Presse — Getty Images)

But wait, there’s more!

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