Tag Archives: developmental state

In-depth: From Meles’ ‘Dead End’ to Abiy’s ‘New Horizon’

12 Jun

Posted by The Ethiopia Observatory (TEO)

Despite being only months away from his death, Prime Minister Meles Zenawi was on stellar form when the World Economic Forum on Africa came to Addis Ababa in May 2012.

“There has been very little infrastructure investment in Africa for the last 30 years. Since the 1980s, the gap in infrastructure investment has gone in the wrong direction. Why? Because since the 1980s, the policy has been that the private sector does infrastructure,” he told a rapt audience at the Sheraton Addis. Amid a stirring defense of his statist approach to development, Meles then derided the suggestion that democratization precedes prosperity: “I don’t believe in these bedtime stories and contrived arguments linking economic growth with democracy. There is no basis for it in history.”

Former UK Prime Minister Gordon Brown, sitting next to Meles, sheepishly disagreed, but some of the history of Western growth, as well as the recent examples of China and others, such as South Korea and Singapore, suggest the late Ethiopian premier had a point. Mindful of his audience, Meles also delivered soothing words about the essential role of private enterprise in development, but he remained clear-sighted: “What our policy is based on is making the public sector play its role so we have an Asia kind of growth.”

Western partners were frequently wowed by such displays from Meles, despite his illiberal leftist predilections, and stuck by his government, as he argued that developing countries must have policy space. Such ideas and Meles’ rejection of the “neo-liberal paradigm” and its “night watchman state” were the focus of his unfinished doctoral thesis, African Development: Dead Ends and New Beginnings. According to contested official figures under Meles and his successor, an “Asia kind of growth” was achieved over the last decade, as Ethiopia’s economy expanded by more than 10 percent a year.

Now, keeping pace with the dizzying ideological pivot last year by swaths of the Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF) regime, Western partners appear at least as impressed by Prime Minister Abiy Ahmed—who recently put in a star turn at Davos—as he takes the opposite approach: he prioritizes democratization, favors the private sector, and works hand-in-glove with the World Bank. “We are confident that international capital and expertise will deliver significant value for Ethiopia and contribute to the development agenda,” Abiy massaged the Davos set.

Ethiopia can’t afford a sustained slowdown

His office brands the strategy ‘A New Horizon of Hope’ and his advisors say public sector-led growth was unsustainable, as debt mounted, but with no equivalent increase in industrial exports, and a chronic and worsening foreign exchange crunch. The general idea now is to try and achieve returns on the last decade’s impressive investments in education and infrastructure by encouraging the private sector to capitalize on them, while rebalancing macroeconomic policy.

Given Ethiopia’s tenuous predicament, there’s popular support for the EPRDF political reforms championed by Abiy, and also the accompanying moves to temper the government’s economic role, although leftist dissent is flickering. After years of praise from all-comers of high growth driven by state enterprises’ borrowing and spending, now the dominant narrative describes the injustice, inefficiency, and corruption of that period, primarily focusing on the Metals and Engineering Corporation’s (MetEC) bungling.

Rather than a viable strategy for escaping poverty, opponents portray Meles’ so-called Democratic Developmental State doctrines as designed merely to entrench the hegemony of Tigrayan elites that formed the regime’s core. Consequently, Abiy-era economic policy has not been scrutinized closely, and bias has clouded positive and negative assessments. That needs to be urgently redressed. Now is a critical time for Ethiopians to decide which parts of the Meles agenda to keep and which to discard. The country cannot afford a sustained slowdown due to its poverty, bulging population—around 40 million people out of a total of 100 million are under 15—and volatile political crisis. State failure would produce seismic regional and international shockwaves. However, given the level of political dysfunction and elite disagreement, quickly forging a suitable new economic consensus looks like a tall order.

Privatizing prosperity

While some describe the approach under Abiy as a radical “neoliberal” departure, it is so far a pragmatic affair, involving significant continuity as well as novelty. The nuances are still unfolding. “The government will continue to play an important role. It won’t do everything as in the past, but in selected areas it will play a leadership role, and the Developmental State will continue for sure,” outlined Eyob Tekalign, a state minister of finance and former private equity man, one of a slew of key new policy-makers, in a February interview.

To illustrate, there have been no major structural changes to the financial sector and none are publicly planned, meaning foreign banks are still barred, state lenders remain dominant, the central bank politically directed, interest rates low, and capital outflows controlled. Similarly, an agriculture focus is set to endure, including an irrigation push, as are attempts to boost exports from industrial parks, and a bevy of new agro-industrial centers. There are no plans to introduce private land ownership, and certainly no advanced neoliberal policies, such as privatization of water, health, or education provision. In fact, large amounts of donor and government funds are likely to keep pouring into these areas where Ethiopia has made significant strides over the last two decades, reducing poverty, lengthening lives, and improving literacy.

That is not to say there is no change.

Last June, the EPRDF agreed to sell minority stakes in large state-owned enterprises other than public banks, including behemoths Ethio Telecom and Ethiopian Electric Power. Other entities such as railways and sugar projects will also potentially be offered for full sale. Those moves—initiated under former Prime Minister and EPRDF Chairperson Hailemariam Desalegn and advanced under Abiy—are the latest phase of a program to offload state farms, factories, and breweries inherited from the Derg’s command economy.

Although the privatization policy was expedited to ease a fiscal crisis, it’s unlikely equity sales and liberalizations will occur soon. Telecoms is a priority, and selling licenses to a minimum of two new operators may bring in close to $10 billion. There’s no clarity yet on whether Ethio Telecom will be broken-up, but a banker says it might take two years just to value its assets. The monopoly offers a shoddy and expensive service, despite a recent slash in prices. After mostly Chinese-funded efforts to expand mobile and data networks, now seems a reasonable time to expose it to competition.

One of Meles’ biggest misses

There are similar arguments in transport logistics, where state domination created a dysfunctional system. The World Bank and the government are prioritizing this area to try and boost textiles exports. Trucking a consignment from the flagship industrial park at Hawassa to Djibouti’s port costs more and takes longer than it should. This “critical bottleneck” faces a total “overhaul,” Eyob said.

In one of Meles’ biggest misses, the state-owned Ethiopian Sugar Corporation (ESC)—with the helping hand of MetEC, a major contractor that was run by military officers, which also failed on a $540-million fertilizer complex—couldn’t efficiently deliver large-scale schemes after it was tasked with turning Ethiopia into a top-ten exporter. Ethiopia is still a sugar importer, and ESC is generating no hard currency to pay back chunky Chinese loans. It also owes at least 50 billion Birr ($1.7 billion) to the Commercial Bank of Ethiopia (CBE), a giant that has around two-thirds of total bank deposits.

The Ethiopian Railways Corporation ran into similar management and debt difficulties, although it did oversee construction of the China-funded, -built, and -operated Addis-Djibouti line. The two main contractors are reportedly seeking shares in that railway. However, selling parts of Ethiopian Airlines, such as catering, is unpopular due to patriotic support for a successful public enterprise, so that idea is on the backburner.

Gradual modernization is planned for financial services. The central bank is studying options, while a health check is being conducted on state lenders. The power corporation owes more than 200 billion Birr to the CBE, and the Development Bank of Ethiopia is bogged down by bad loans. Supported by the World Bank, there’s a focus on creating a dynamic government debt market to plug the budget deficit with non-inflationary borrowing and an ambition to establish a stock exchange by 2020. Measures have been taken to ease foreign-exchange regulations and are under way to allow non-resident Ethiopians to invest in banking.

Given hard currency shortages, and the gap between the official and black-market rate, clamor is growing for exchange-rate liberalization. Flotation may lead to inflation, which has generally run at more than 10 percent for years, as essential imports such a fuel and medicine become more expensive or simply unavailable as the Birr depreciates. The World Bank says a cheaper Birr would boost exports and crimp imports, reducing foreign-exchange shortages, but gradual depreciation since 2007 and two major devaluations haven’t had that effect. Additionally, most exporters rely on some imported inputs, and depreciation would increase the burden of Ethiopia’s dollar-denominated debt.

Sululta area, Oromia region; February 17, 2017; William Davison

A vital sector with a major shift is energy where public-private partnerships (PPPs) are slated to produce solar, wind, hydropower, and geothermal plants, with the government agreeing to purchase electricity produced from privately funded and run power stations. That’s a departure for a government that borrowed over the last decade for the power corporation to oversee construction of large-scale dams such as Gibe III and the Grand Ethiopian Renaissance Dam (GERD), envisioned as Africa’s largest—although efforts were made to fund the GERD domestically to demonstrate self-sufficiency, partly through effectively mandatory public sector salary contributions in return for low-yielding bonds.

The PPP policy aims to produce public goods and private profits and so will be a critical test of Meles’ maxim that developing nations should not rely on the corporate sector to deliver infrastructure. It will also be a test of the government’s ability to negotiate favorable terms in complex contract negotiations, and its lack of experience suggests this will be a stiff challenge. Private funding of infrastructure is presented as a way of transferring risk to the private sector, although arguably the UK used it as little more than an accounting maneuver to take capital investment off the government’s balance sheet.

Electricity generating capacity was supposed to increase to 17,346 megawatts by July 2020, yet that was quietly, but spectacularly, downgraded to a target of 6,000MW in the one-page A New Horizon of Hope strategy document in November from the Prime Minister’s Office. That’s 4,000MW less than the target in a five-year growth plan rolled out in 2010. The revision acknowledges that the flagship 6,450MW GERD on the Blue Nile is years behind schedule, after more MetEC blundering. Although it’s plodding along, a project closely associated with Meles has lost momentum, perhaps partly due to its relative inefficiency.

The aim had been to capitalize on a comparative advantage in hydropower potential to become a regional electricity hub through developing 35,000MW of installed capacity by 2037. The government signed a preliminary deal in January to connect with Gulf nations, but it does not appear electricity sales are a priority, although officials claim otherwise. A new bout of power rationing has just begun as dam levels dwindle at the end of the dry season. This involves reducing exports to Sudan and Djibouti and reduced shifts at factories. The World Bank says it’s not electricity generation that’s deficient in Ethiopia but distribution that’s inefficient.

Seemingly insurmountable challenges

In October, the government listed 14 energy and three road projects worth $7.5 billion it wants built as PPPs. A new secretariat announced in January it’s looking for investors for six solar schemes costing $800 million, and aims to have all energy projects contracted this year. That scheduling recalls the ambitious missed targets of the five-year plans—soon to be trumped by a 10-year economic blueprint—and there are other doubts. A frustrated investor says energy PPPs face a seemingly “insurmountable challenges” due to reduced political support for new schemes, the lack of a sovereign guarantee in case the electricity utility defaults on payments, and increased compensation demands by land users. “Without oversized support from the government, Ethiopia’s energy sector is very risky,” they said.

The government’s had stuttering experience of energy PPPs since 2014 with the Corbetti geothermal scheme, although an obstructive regulatory approach should now end with the pro-private sector mindset. The electricity tariff needs further revision to try and make projects bankable, but that will reduce Ethiopia’s attractiveness to investors, as cheap power is one of few competitive advantages.

Ethiopian consumers enjoyed one of the lowest prices in the world at around $0.03 per kilowatt-hour, which was doubled recently to bring prices into line with inflation and devaluations. A new “cost-reflective” tariff will be introduced by 2023, although the World Bank wants “full cost recovery” by 2021, which is unrealistic. Although businesses and the wealthy will bear the brunt of overdue increases, the government will have to move astutely in this area. With around a quarter of Ethiopians earning 17 Birr or less a day, extensive subsidy of basic services will be needed for some time. Miscalculation could lead to the type of discontent over living costs recently expressed in Sudan and elsewhere in the region, further complicating the political scene and destabilizing the state.

Debt issue

The commonly stated reason for ramping up economic liberalization is debt: public borrowing is 54 percent of gross domestic product, while external debt is 28 percent of output. This is much lower than, say, Greece or Italy, but is considered problematic because of a debt-servicing bill that hit $1.5 billion last year. “The reason that they are classified in our analysis as at a high risk of debt distress is because of debt and debt service relative to exports,” explained Mathew Verghis, World Bank Practice Manager for Macroeconomics, and Investment, to journalists in December. Abiy’s government has, however, had initial success at renegotiating the terms of some Chinese loans. Since 2012, Ethiopia’s had annual foreign goods sales of only around $3 billion, primarily coffee and other commodities with volatile prices, while Ethiopian Airlines brought in another $2 billion. Remittances, aid, loans, and foreign direct investment ease a balance of payments pressured by a trade deficit that was $12.4 billion last year.

A key part of rebalancing is the World Bank’s $1.2 billion six-year Growth and Competitiveness Program to boost private enterprise and modernize the financial sector. The budget support is split equally between loans and grants that will be released if the Bank is satisfied with macroeconomic policy. There are also several policy-related conditionalities that Meles would have blanched at, although officials say they weren’t imposed. “It’s our reform, not their reform,” argues Mamo Mihretu, a senior advisor to Abiy. Conditions include passing a public-private partnership directive; cabinet approval for an electricity-tariff increase and privatization guidelines; removing restrictions on private investment in logistics; and streamlining trade licensing and business-administration processes—a welcome measure for long-suffering small businesses, entrepreneurs, and foreign investors.

Renewed efforts to enhance tax collection are underway, with Ethiopia still in the bottom third of sub-Saharan African countries in terms of gross tax take. Abiy’s cabinet has delivered a new Civil Societies Proclamation and approved the establishment of an independent telecoms regulator, two more Bank conditions. “Our sense is that if all reforms go through as planned—many steps in complex reforms—it would represent a quite significant change in Ethiopia’s development model,” the Bank’s Verghis said.

The jury remains out on whether that would be a good thing.

Eyob Balcha Gebremariam, a development scholar at London School of Economics, has cast his verdict. He wanted continuation of an East Asian-style developmental state tailored to Ethiopia. “The priority should be addressing the structural problems that make us a rain-dependent primary commodity exporter,” he says. For Eyob, rather than market efficiency and autonomous institutions, the mechanisms for rapid industrial growth are learning by doing, and close, thus sometimes corrupt, ties between business and political elites that are needed to get deals done. MetEC’s failures and outrageous abuse of its privileges should be treated as a useful if painful lesson, not used to justify curtailing industrial transformation efforts, he believes. Controversial ruling-party affiliated conglomerates and close ties with select tycoons were part of the Meles model. That said, Abiy’s highly personalized leadership is ideal for cultivating plutocrats, as he did recently with a lavish fundraising dinner. Recent reports suggest Saudi billionaire Mohammed Al Amoudi’s Ethiopian business prospects have not suffered unduly in the EPRDF power struggle and a well-connected Moroccan company may take over MetEC’s fertilizer debacle.

A food distribution point in Afdem Woreda, Somali region; October 8, 2014; William Davison

After a chaotic open election in 2005 ended with a deadly crackdown, Meles dropped any pretense of pursuing liberal democracy, used draconian legislation to crush dissent, and expanded the EPRDF to consolidate control of all tiers of government. He even rode roughshod over the federal system as he aggressively pursued national development at the expense of nominal regional autonomy on land and investment policies. The surge was the latest iteration of the EPRDF’s Marxist-driven class-based analysis, which led it to focus on the rural masses and dismiss urban elites as selfish “rent seekers” aiming to use pluralism to direct public policy in their narrow interests. The upshot of the EPRDF ideology was that liberal democracy was presented as an obstacle to improving the general welfare. Furthermore, democracy was recast as popular participation in the existential battle against poverty, rather than a system where government was accountable to people and individual rights protected.

This means the EPRDF took a side in a global ideological schism relating to development and liberty. For example, rather than seeing them as staunch defenders of fundamental rights, the EPRDF wildly characterized liberal Western organization such as Human Rights Watch as part of a fundamentalist neoliberal plot. As with the Soviet Union, Communist China, Chavez’s Venezuela, and many others, the EPRDF unabashedly prioritized the right to shelter, health, and food over civil rights, and were criticized for it. What this entailed was a brutally utilitarian approach to development, and that meant many people were knowingly sacrificed for a perceived greater good.

In Ethiopia, they were either moved out of the way for national priorities, such as hydro dams, or silenced because a hegemonic strategy didn’t allow dissent to be expressed, as countless opposition activists can testify. After more than three years of anti-government protests forced a rethink from Hailemariam and other EPRDF reformists, there is no doubt that this ruthless political-economic model failed in Ethiopia—but that does not disprove the developmental logic. More generally, there is no strong moral consensus among progressives on the rights and wrongs of China’s bulldozing state capitalism, which has certainly involved plenty of cronyism and crackdowns, while doubtless lifting tens of millions out of poverty.

The Meles approach was given some credibility by academics who grouped it under “developmental patrimonialism” along with the likes of Rwanda, another authoritarian state that’s received plaudits from donors for its use of billions of dollars of aid and fury for its human rights record, with critics doubting the veracity of its growth statistics. “The economic potential of developmental patrimonial systems, then, should be set against the loss of civil liberties they may entail,” wrote one scholar, Tim Kelsall. The claim was that undemocratic approaches could still be developmental, rather than extractive, if economic rents—such as the extra revenues generated by Ethio Telecom’s monopoly—were directed into productive areas, and that such a model might well produce better outcomes than more pluralistic systems.

Destitution is not solved by copying WB/IMF-inspired rules

Theorizing aside, Meles’ credit-driven high-risk coercive transformation effort was anyway essentially cut short by his 2012 demise and the subsequent unraveling of EPRDF control and discipline. It limped on under the dogged leadership of Hailemariam, who was torn between loyalty to his mentor’s approach and reformist inclinations, but internal fissures, popular discontent, and economic pressures surfaced in 2015. The rupture of EPRDF authoritarianism made a liberal democratic lurch the alternative to increasing bloodshed—but there’s no reason to think it will end Ethiopia’s poverty, according to Eyob from LSE. “Democracy is the solution for tyranny, but not for development,” he says, paraphrasing renowned late U.S. political scientist Samuel Huntington. “There’s an inherent contradiction between consensual democratic decision making and the radical action required to eradicate poverty.”

Eyob says Ghana is an example of a system where elites compete democratically but there’s no concerted effort to improve livelihoods. Ethiopia may be moving in that direction, or towards Kenya’s services-based growth. That may not be such a bad thing when you consider that, amid greater political freedom, Ghana’s GDP per capita went from $263 in 2000 to $2,046 in 2017, compared to Ethiopia’s increase over the same period of $124 to $768. However, Ethiopia had a higher population growth rate during that period. Coastal Ghana has a medium-sized population, while Ethiopia’s is the second-largest in Africa after Nigeria and it is by far the most populous landlocked country in the world.

Eyob’s case does become more persuasive when you consider that despite a relatively long history as a nation, and an infamously entrenched bureaucracy, Ethiopia’s still a developing nation with a weakly funded government, a fact that will only alter if tax receipts soar. Government spending is only 17 percent of GDP, while it is more than 30 percent for all but two of the 36 rich countries that belong to the Organization for Economic Co-operation and Development. As a comparator of the scale of global inequality in this area, Ethiopia’s annual government expenditure of 372 billion Birr is less than the UK NHS’s budget for mental health services, or the same as the cost of one U.S. aircraft carrier.

The EPRDF is praised for running extensive donor-assisted social protection programs, but foreign aid helps more than 10 percent of the population survive. Although Asian Tigers achieved sustained rapid growth with relatively small states, Eyob thinks Ethiopia’s autonomy has been sacrificed at a critical moment and policy is now geared towards constraining the state, rather than building it; and boosting private profits rather than improving general welfare. “The reality is development’s a political process about deciding how limited resources are distributed. There’s no country that’s addressed destitution by copy-pasting World Bank- and IMF-inspired rules,” he says.

How Ethiopia works

This sort of leftist thinking used to pervade the Prime Minister’s Office, but not any more, after Abiy recruited non-EPRDF policy whizzes, some donor-funded. One new face, Mamo a former World Bank official, is an arch-pragmatist, decrying sweeping ideological claims. He doesn’t rule out an interventionist approach, but wants to promote commercial enterprise, including where the state’s run out of steam: “There’s a huge potential we have not utilized in telecoms, energy, agriculture and logistics, where there’s been no meaningful participation of the private sector.” Mamo’s aim is to exploit unfulfilled economic potential to conserve and earn hard currency. Food security will be eased by expanding wheat production in irrigated lowlands, and he hopes negotiations with fertilizer giant Yara International, a concession holder, will catalyze $300 million worth of potash exports. Improved logistics and electricity distribution will be a shot-in-the-arm for manufacturing exports, he says.

Expedited World Trade Organization accession is not an end in itself, but incentivizes transparent economic governance, which is also how Mamo sees the Bank’s budget support. He says streamlined regulations and improved credit availability for the private sector should lead to a tech boom, and tourism will hit new highs, aided by relaxation of the visa regime, opening up Emperor Menelik II’s palace, and the Prime Minister’s 29 billion Birr Addis Ababa river project, the beneficiary of the fundraising banquet.

Given the enthusiasm for the Abiy era from citizens, business elites, diaspora, donors such as the U.S., and investors—many of whom turned a blind eye to EPRDF authoritarianism—some aspirations will be realized. Yet Ethiopia remains the world’s 17th least-developed country—just behind Afghanistan and Haiti—and there’s a nagging sense that the strategy may stimulate urban dynamism, so creating prospering pockets of Westernish modernity, yet leave tens of millions languishing in rural poverty, and do little to kick-start industrialization. This impression is bolstered by Abiy’s existing signature schemes being services- and Addis-focused: the riverside rehabilitation, and a deal for an Abu Dhabi real estate company to build high-end apartments and malls, albeit with a social justice component. Thus far, Abiy’s economic blueprint lacks a big idea—something Mamo doubtless approves of—and it also contains several recycled ones, such as large-scale agriculture in the lowlands, tourism, and mining.

Prime Minister Abiy Ahmed at the launch of the Abu Dhabi real estate project in Addis Ababa; February 19, 2019; PMO

In his influential book, How Asia Works, British writer Joe Studwell, another pragmatist, divided that continent into states that had pursued effective development last century, and those that merely created enough economic activity for elites to prosper. He found successful nations with activist governments like China, South Korea, Japan, and Taiwan used three key approaches—and none of them hinged on political or economic liberalization. They encouraged labor-intensive gardening-style small-scale agriculture; manufacturing was promoted and exposed to international competition; and economic policy, including the financial sector, was controlled so funds were invested to support the two sectors. His thesis is that various approaches can work, as long as policies are focused on improving productive capacity.

Studwell does not dwell on authoritarianism. Yet a lack of democracy means economic performance is harder to gauge accurately as independent research is tricky and statistics easily manipulated. There’s an ongoing cost to victims and opponents and, paradoxically, authoritarian systems are less stable, as Ethiopia has demonstrated. It is hard to justify a period of rapid growth if within years or even decades a regime implodes or becomes aggressively militaristic, causing destructive chaos. Development economist William Easterly has long argued that democracy produces better economic performance over a timescale of several decades or longer, and recent research suggests that democracy enhanced growth in southern Africa.

How Asia Works was praised by Bill Gates, whose foundation has funded the Taiwan-style Ethiopian Agricultural Transformation Agency (ATA) since 2011. The idea is for technocratic agronomic wizardry to improve yields and reduce middlemen’s cut. Yet agriculture is a mixed story. Long before the ATA, Ethiopia tried to boost smallholder productivity through an army of development agents that were linked to the EPRDF’s smothering political apparatus. Impressive yields were claimed, but there are doubts over statistics. “Very low levels of irrigation and mechanization point to the fact there is a huge amount still to do,” Studwell says in an interview. “It also links to the manufacturing challenge—making core technology like pumps and small engines.”

Ethiopia scores well on finance, which has been geared towards development and protected from volatile international flows. Since 2011, the government required commercial banks to buy central bank bills worth 27 percent of each loan to ensure they funded priority schemes. However, the policy struggled because of the Development Bank of Ethiopia’s weaknesses at assessing projects.

Studwell is optimistic, as long as the government keeps finance focused on strategic areas, and prevents destabilizing outflows of pension funds’ investments into financial instruments. “If they remove controls while allowing portfolio investment, that would be madness,” he warns. Instead they could ape Chinese or Taiwanese schemes that prevent portfolio investment being “pulled out on a whim.” Studwell says the government could help manufacturing by licensing foreign banks to import capital for trade financing, and that oligopolistic competition between state-owned utilities might best serve the national interest. The author, who like Meles sees no connection between early-stage economic development and democracy, is looking at Ethiopia as a potential Asia-style African breakout state—but only time will tell if Abiy’s government applies his policy mix.

Empowered

Chunks of Abiy’s overall strategy should be uncontroversial regardless of the precise approach. That is because few economies remain as state-controlled, closed, or under-developed as Ethiopia’s, with, for example, few multinational franchises, no stock exchange, little in the way of electronic payments, and a public telecoms monopoly—not to mention enduring extreme poverty. Currently, the big picture is that despite almost $14 billion of credit from China in the 12 years to 2017 for investment mainly in mainly telecommunications, transport, and energy, the infrastructure deficit Meles described at the Sheraton Addis is still present.

Arguably, without more heavy investment in the infrastructural spine of a market economy, Ethiopia will struggle to industrialize, and so fail to move up the global economic food chain by producing higher value-added goods. Additionally, with more than two million Ethiopians hitting the labor market each year, and countryside space shrinking, rapid industrial growth is the obvious way to provide jobs—although the World Bank says even a highly successful manufacturing drive wouldn’t create nearly enough of them.

“Rebalancing macroeconomic policies could exert downward pressure on activity” the IMF said last year. Yet any such dip would be alarming given major political challengesexacerbated by restive and aspirational youth. Reduced borrowing and slower growth in government spending is already having an impact, although private-equity firm Cepheus Capital expect 8 percent expansion this year. This is partly due to an Abiy-induced feel-good effect, which includes foreign investment that could reach $4 billion, a similar figure to last year. The IMF expects Abiy’s pro-private sector approach to prevent a downturn, but if that doesn’t happen, growing ranks of unemployed young men would fuel an explosive political situation, and probably lead millions more Ethiopians to seek work abroad. That would be bad news for the European Union, which, far from dealing with an influx of Ethiopians, wants South Sudanese, Eritrean, and Somali refugees to settle in Ethiopia, with Sudanese possibly added to the list if its transition sours further.

Few contest that the Meles model was defective and ran into severe difficulties. However, ultimately, Ethiopia is one of the world’s poorest countries and afflicted by intense political, demographic, and environmental pressures. To prioritize its stability and development, foreign partners could back debt relief, not austerity. “There’s a question of whether the international community has fully appreciated the nature of the challenge. Ethiopia needs an infusion of cash on a scale that no-one is willing to contemplate yet,” says a diplomat worried about a Yugoslav-style fragmentation of a fractious multinational federation facing surging ethno-nationalism. Concurrent political and economic liberalization contributed to the collapse of the Soviet Union, while Yugoslavia’s disastrous fragmentation was preceded by serious economic problems.

There’s nothing significant that Ethiopian elites agree on

Ethiopia’s challenges combined with a more empowered population mean trade-offs are stacking up for policy makers. There’s already been a significant rise in labor disputes as workers demand rights, most recently in the health sector, while there’s been high-profile criticism of rock-bottom factory wages. Surplus labor, however, is also an asset for a nation with few comparative advantages trying to attract capital. Political liberalization means more of such demands, without force as a suppressive tool, as Abiy’s government is experiencing.

Last year’s transition occurred after more than three years of protests partly over the evictions of Oromo farmers on the edge of Addis Ababa; demonstrations that reoccurredbriefly in March. Past control and repression meant smallholders could be removed from their land for minimal compensation. That’s trickier now, as could be seen with protestsat Sendafa in 2017 that closed a new government landfill, contributing to a fatal landslide at the existing overloaded dump. In another example, three major donor-funded road projects, including an expressway along the route from Hawassa to Djibouti, are currently held-up by compensation demands.

Economic nationalism was part of Oromia’s uprising with flower farms and factories torched because of low wages and evictions. Pollution claims shut down the only commercial gold mine last year, while the manager of Dangote Cement’s plant in Oromia was murdered with colleagues a year ago, possibly due to a labor dispute. Other foreign mining and road workers have also been killed and held hostage. Former Oromia President Lemma Megersa expressed his frustration at counter-productive behavior that discourages investment.

Commentators discuss a new “elite bargain” to replace the EPRDF’s uneven regional power sharing, but some argue there’s nothing significant about their country that Ethiopian elites agree on. Others even hope that amid political and economic liberalization there will also be a consensus on a Developmental State 2.0 strategy, pointing to the heavy left tilt on Ethiopia’s political spectrum. But Meles tried to sell the nation on a concerted approach to statist development, and failed; currently, it is hard to imagine Abiy trying. Some see a silver lining with a liberalized political sphere producing popular support for rational approaches to issues such as energy investment.

Others see only dark clouds.

Addis Ababa land-lease prices at auctions were an average of $650 per square meter in 2015. The frustrated energy investor believes farmers occupying valuable real estate could now seek compensation of $100 per square meter. “Even at $50 per square meter the cost of the land will be more than the cost of the entire facility,” they say about planned power stations. “Abiy has created a sense of freedom and empowerment among farmers. But you cannot please everybody: you can’t pay market prices if you want to rapidly develop infrastructure.”

According to this thinking, greater democracy is an impediment to development, and Ethiopia does need a powerful interventionist state to bulldoze its people out of poverty. But that would mean partially disinterring Meles’ legacy and, so far, Abiy has barely mentioned the former Ethiopian leader—let alone borrowed heavily from his developmental doctrines to invest them in Ethiopia’s future.

 

/Ethiopia Insight

 

The New Scramble for Ethiopia

2 Jun

Posted by The Ethiopia Observatory (TEO)

Ethiopia’s prime minister is making headlines as a Trudeau-like liberal reformer. But behind his progressive sheen, his economic policies are set to accelerate inequality and poverty.

The new government already embarked on a partial privatization of key state-owned enterprises, as well as a hasty overhaul of the country’s regulatory framework in the hope of securing foreign capital for development. US trade delegations are ready to pounce on the lucrative state-owned Ethiopian Airlines, which will sell 45 percent of its stake to foreign investors.Recently, the German development minister complained that Germany could not just sit back and watch the US and China making billion-dollar investments in Africa: Germany should be involved too.



Earlier this year, the German president and key German industrialists visited Addis to sign a memorandum of understanding between the Volkswagen Group and the Ethiopian Investment Commission to set up an automotive industry in Ethiopia. Nine months into Abiy’s new leadership, the new scramble for Ethiopia has already taken off.


The liberal establishment’s story of last year’s change in Ethiopia is a familiar one, told and retold countless times across the globe since the end of the Cold War. In 2018, this story goes, after decades of authoritarianism and a closed state-led economy, a new, enlightened leader finally arose to usher in a period of liberalization and the free market. Soon after, the World Bank approved US$ 1.2 billion in grants and loans in return for the standard package “towards supporting reforms in the financial sector including improving the investment climate.”

What happens in Davos, stays in Davos — at least for the majority of the Ethiopian public, who takes little interest in the exclusive annual gathering of the global financial elite. This year, however, the speech by Ethiopia’s new prime minister, Abiy Ahmed, at the 2019 World Economic Forum was shared widely on social media. Its spread highlighted the pop-star-like status that the country’s new, charismatic leader enjoys among Ethiopians, especially the country’s youth.

The forty-four-year-old prime minister addressed the World Economic Forum’s jet-setting global rich in their own language: literally, in English, but also in their neoliberal language of removing red tape for business, the power of the private sector, open markets, and integration (including Ethiopia’s commitment to joining the World Trade Organization).

Ahmed’s speech epitomized the usual pitch for global capital to come to cash-strapped developing countries (high returns! tax holidays!). But it also provided important insights on where the country may be headed, following its change of leadership in 2018 after years of protests.

The liberal establishment’s story of last year’s change in Ethiopia is a familiar one, told and retold countless times across the globe since the end of the Cold War. In 2018, this story goes, after decades of authoritarianism and a closed state-led economy, a new, enlightened leader finally arose to usher in a period of liberalization and the free market. Soon after, the World Bank approved US$ 1.2 billion in grants and loans in return for the standard package “towards supporting reforms in the financial sector including improving the investment climate.”

The practical results of two decades of the developmental state have been mixed at best. While the class of domestic capitalists is fairly small, wealth has become increasingly concentrated among a small group of party cronies and those directly linked to the military-run parastatal corporations. Though land is officially publicly owned, nomenklaturafigures and business people (domestic and foreign) linked to the party’s upper echelon became extremely wealthy through corrupt land deals and urban Ethiopia’s ubiquitous construction projects. This network has alienated other factions of capital, including among the large US-based diaspora, that were not linked to the political elite. These frustrated capitalists have become the base for the free market push, couched in the language of liberal democracy, in Ethiopia.

However, with Abiy’s Ethiopia aiming to become the world’s next low-wage paradise, inequality could increase dramatically. Foreign direct investment, while highly regulated and limited to certain sectors (mainly infrastructure, construction, agriculture, and textile), has taken on a significant role over the past ten years, growing from US $265,000 in 2005 to nearly US $4 billion in 2018.

Meles’s alternative path was financed with investments from China, estimated at more than US $12 billion between 2000 and 2015 and channeled towards infrastructure development (however, many of the country’s megaprojects went nowhere thanks to corruption). For instance, in 2017, a $4 billion railway, built and funded by the Chinese, opened to link Addis Ababa to the Port of Doraleh in Djibouti (where China opened its first overseas military base in August 2017).

The new government already embarked on a partial privatization of key state-owned enterprises, as well as a hasty overhaul of the country’s regulatory framework in the hope of securing foreign capital for development. US trade delegations are ready to pounce on the lucrative state-owned Ethiopian Airlines, which will sell 45 percent of its stake to foreign investors.

Recently, the German development minister complained that Germany could not just sit back and watch the US and China making billion-dollar investments in Africa: Germany should be involved too. Earlier this year, the German president and key German industrialists visited Addis to sign a memorandum of understanding between the Volkswagen Group and the Ethiopian Investment Commission to set up an automotive industry in Ethiopia. Nine months into Abiy’s new leadership, the new scramble for Ethiopia has already taken off.

A progressive platform must reject a development strategy that is built on exploiting the country’s rapidly expanding working class and demand that the spoils of economic growth finance the expansion of universal and free essential social services.

Neoliberalism Versus the Developmental State

In order to make sense of the transformation underway in one of Africa’s fastest-growing economies, it’s important to understand Abiy’s political project, its social base, and how it operates within the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF).

It’s ironic that the new prime minister’s 2019 World Economic Forum address was received with so much approval from global financial elites. Only seven years ago, Ethiopia’s former prime minister Meles Zenawi hosted the 2012 World Economic Forum on Africa in Ethiopia’s capital Addis Ababa. There, he shocked the international financial elite by telling them that neoliberalism was a failed project.

Meles, who ruled as prime minister from 1995 until his death in August 2012, advocated instead his version of the “developmental state.” In this scheme, the state is in the driver’s seat of development, with ownership over key sectors and a tightly regulated private sector that serves to advance the overall national development agenda.

This model, which became official state doctrine in the early 2000s, is an eclectic mix of social and economic policies, some inspired by the East Asian “tiger” states but also more recently China’s industrial park and special economic zone industrialization model. Ethiopia also implements its own version of import substitution, allowing a small bloc of domestic capital to hold a state-sanctioned monopoly over key imports and local manufacturing.

Meles saw an opportunity for African countries to pursue an alternative development path in the rise of China and the breakdown of the Washington Consensus. This was his response to three decades of IMF policy, which turned Africa into what Meles called a “continental ghetto.”

Meles’s alternative path was financed with investments from China, estimated at more than US $12 billion between 2000 and 2015 and channeled towards infrastructure development (however, many of the country’s megaprojects went nowhere thanks to corruption). For instance, in 2017, a $4 billion railway, built and funded by the Chinese, opened to link Addis Ababa to the Port of Doraleh in Djibouti (where China opened its first overseas military base in August 2017).

Meles’s model, following in a long line of twentieth-century projects built on distortions of Marx, envisioned the development state’s historic role as serving the peasantry, the state’s “class base.” In contrast to neoliberalism, where wealth becomes concentrated among private capitalists, the activist state would ensure that wealth is broad-based and invested in expanding the nation’s technological capacity.

The practical results of two decades of the developmental state have been mixed at best. While the class of domestic capitalists is fairly small, wealth has become increasingly concentrated among a small group of party cronies and those directly linked to the military-run parastatal corporations. Though land is officially publicly owned, nomenklaturafigures and business people (domestic and foreign) linked to the party’s upper echelon became extremely wealthy through corrupt land deals and urban Ethiopia’s ubiquitous construction projects. This network has alienated other factions of capital, including among the large US-based diaspora, that were not linked to the political elite. These frustrated capitalists have become the base for the free market push, couched in the language of liberal democracy, in Ethiopia.

Meanwhile, Ethiopia remains one of the poorest countries in the world, with a per capita GDP of about $860 (less than $2.50 per day) and a population of about 100 million expected to double over the next thirty years.

Still, under the developmental-state model, poverty declined from 45.5 percent in 2000 to 23.5 percent in 2016. This despite a population growth from 65 million in 2000 to 100 million 2016. Ethiopia has one of the lowest Gini coefficients (which measures income inequality) in Africa, much lower than neighboring “free market” Kenya. Large-scale and pro-poor investments in social services ensured that primary education (with gender parity) reached 100 percent, health coverage 98 percent, access to potable water 65 percent, and life expectancy at 64.6 years (up from about 50 years in 2000).

However, with Abiy’s Ethiopia aiming to become the world’s next low-wage paradise, inequality could increase dramatically. Foreign direct investment, while highly regulated and limited to certain sectors (mainly infrastructure, construction, agriculture, and textile), has taken on a significant role over the past ten years, growing from US $265,000 in 2005 to nearly US $4 billion in 2018.

With no private sector minimum wage in Ethiopia, low wages are seen as Ethiopia’s “comparative advantage” in the global race to the bottom, with the Ethiopian Investment Commission reporting that “the average wage of workers in the leather factories is US $45 per month, while the minimum wage in Guangdong is about US $300.” The recent Worker Rights Consortium’s investigation also reveals that Ethiopian factories are paying wages far lower than in any other apparel-exporting countries, with an average of 18 cents per hour.

In response to the International Trade Unions Confederation (ITUC) denouncing exploitative wages in Ethiopia’s manufacturing sector, local business-friendly media were quick to warn that it’s too soon to ponder wages. “The one prime opportunity the nation can offer investors is low-cost labour,” they argue, “and taking that away will only have negative consequences. It will just drive investment elsewhere and exasperate unemployment in the country.”

In a particularly telling convergence between the aid-industrial complex and Western foreign policy agendas, these low-labor-cost industrial parks double as European migration-control tools. Donors have pledged to mobilize $500 million for two industrial parks, as long as Ethiopia reserves a third of the projected 100,000 jobs for refugees. The necessary proclamation permitting refugees to work in the formal labor market was passed in January 2019. This was advocated for by Western governments who would never dream of proposing a 30 percent refugee quota on job-creation schemes at home.

Revolutionary Versus Liberal Democracy

Meles not only borrowed state-led industrialization strategies from China, but also a China-inspired version of “development-first democracy.” Meles maintainedthat democracy would come after development was achieved, and when the base of the developmental state (the traditional, noncapitalist peasantry) had been transformed into an industrial proletariat.

Until then, a political system was required that would not dispute the fundamentals of the national developmental project. In Meles’s historic mission of ending Ethiopia’s “humiliation of poverty,” there was no place for a political opposition that could jeopardize the country’s long-term objective of development.

The 2005 elections, which were somewhat freer than later elections, proved a shock to the Meles regime. The opposition swept all seats in Addis Ababa and initially appeared to have won a majority of parliamentary seats. Yet when official results were released four months later, the ruling party was declared to have won 59 percent of seats.

Since then, the democratic space became even more restricted, with an increasing number of political prisoners, intensifying legal repression (such as declaring opposition groups terrorist organizations or the very restrictive NGO law introduced in 2009), and forcing people into silence or exile.

The systematic and brutal clampdown of dissent ensured that the ruling party won 499 out of 574 seats in the 2010 elections and, finally, a China-style 100 percent of seats in the 2015 election. Critically, the harsh reactions and condemnations by the West have also strengthened the ties between China and Ethiopia given the former’s policy of not interfering in domestic affairs.

This model of authoritarian pro-poor growth, including protectionism and state subsidies for agricultural inputs, ensured that the large mass of rural poor saw some real material improvements in their living standards in return for relative loyalty to the state. The massive expansion of EPRDF party membership, especially at lower administrative levels, also provided an army of local party spies for the police state that could immediately stifle dissent.

The numerically tiny middle class, mostly based in Addis, became largely apolitical after the brutal crackdown in 2005, when postelection protests resulted in the deaths of at least two hundred protesters.

The urban middle class primarily focus on securing their own — fragile, as wealth does not run very deep — material status, including through petty tax-evasion schemes, profitable black-market currency exchanges, and acquiring smuggled Western brand-name clothing, iPhones, and laptops. For those who can attain a middle-class lifestyle — signaled by a car and modern housing (with a live-in maid, mainly young girls from rural areas who earn approximately $40–60 per month) — political freedom was not worth the prospect of imprisonment. Instead, they preferred to “sit out” the Meles regime while securing their own little piece of the economic and real estate boom. This class focuses on accruing enough cash (access to credit is very restricted) to lease a plot of land and build a property that will rise in value alongside the country’s spectacular growth rate.

The Qeerroos

When protests erupted in the countryside in 2015, the middle class failed to understand the revolt’s class nature. Instead they reduced it to an expression of backward ethnic chauvinism. In reality, the protests, led by Oromo youth known as Qeerroo, foregrounded struggles over class, exploitation, and discrimination.

The trigger for the unrest was the government’s controversial proposal to expand Addis Ababa into the surrounding Oromia region, threatening local farmers with mass evictions. The government’s continued use of excessive force against protesters resulted in a death toll of more than 900 people between 2015 and 2017. The government also jailed tens of thousands of mostly ethnic Oromo political prisoners, turning a land dispute into a much larger protest for Oromo ethnic self-determination and “national liberation.”

The protests’ base of rural, unemployed, and underemployed youth was the product of the past twenty years of fast-paced but uneven development and rapid population growth. As in the “Arab Spring,” social media played a critical role in shaping the Qeeroo movement’s collective identity, while facilitating the coordination of rallies, boycotts, and roadblocks (since Addis is surrounded by the Oromia region, protestors managed to cut the capital off from fuel and other supplies). This large generation of young people — 50 percent of the country’s 100 million people are eighteen or younger — is also increasingly literate. Youth literacy (15–24 years) increased from 27 percent in 1994 to nearly 70 percent in 2015.

Critically, protestors carried out many attacks against factories. They especially targeted joint ventures between foreign investors and local non-Oromo elites, who the protestors accused of land-grabbing and denying decent jobs to locals.

Fears began to mount that the prolonged violence and increasing international scrutiny of the government’s heavy-handed response would push away foreign investors. This played into the hands of reformist forces within the government, many allied with the US-based Ethiopian diaspora. These forces highlighted the developmental state’s failure to ensure stability and the superficial compliance with human rights (with the notable exception of labor rights) demanded by US and EU investors.

Still, protesters had little to lose in material terms and, unlike the middle class, no stake in the authoritarian development model. The protests continued for more than two years despite the government’s repeated implementation of states of emergency and total internet blackouts.

Real cracks within the EPRDF became visible in 2017 when Lemma Megersa — president of the Oromia region (and close ally and mentor of Abiy) and then-chairman of the Oromia’s regional EPRDF member party Oromo People’s Democratic Organization (OPDO) — began challenging his own ruling party’s heavy-handed response. He became the first “oppositional voice within,” preparing the blueprint for Abiy’s takeover of the EPRDF in the spring of 2018.

Dismantling the One-Party State From Within

When Hailemariam Desalegn — Ethiopia’s prime minister since Meles’s death in 2012 — stepped down after years of unrest in February 2018, few expected systemic change from within a party that ruled the country since 1991. After all, more than 60 percent of Ethiopia’s 100-million-strong population were born after 1991 and have never experienced another ruling party in their lifetime.

Real change also seemed unlikely given that the new prime minister was elected through a secret vote by the EPRDF’s opaque 180-member Council. Despite rumors of a division within the ruling party, it was unexpected that the party would elect Abiy. As an ethnic Oromo with a rural background and a base of support among Oromia youth protesters, he seemed set on implementing the opposition’s agenda.

But Abiy had another side. The urban middle class — silent through the years of mass repression of rural protesters — immediately flocked to support Abiy. He embodied the urban middle class’s cosmopolitan aspirations: his US resident wife and children relocated to Ethiopia only recently (his three children all attend Addis’s most expensive international school) and he works out regularly at one of Addis’s most upscale health clubs. Abiy’s most recent vanity projects highlight his bias towards an urban middle-class base: a digital museum, a mini-Ethiopian theme park, a zoo with 250 animals, and a $1 billion riverside greening project in Addis.

Upon gaining power, Abiy broke with the party’s biggest taboo by making peace with Eritrea, thus removing the permanent state of war and raison d’être for a strong police state. He then ended the state of emergency and released tens of thousands of political prisoners. In Davos, Abiy proudly announced that today there are no journalists in Ethiopia’s prisons (adding a cheeky comment that sometimes Western countries could learn from Africa too).

Abiy not only invited back exiled opposition leaders but installed a former political prisoner and high-profile opposition leader as the head of the Electoral Board and appointed a 50 percent female cabinet. He also passed amnesty laws, started the process to repeal Ethiopia’s repressive NGO law, and unshackled the media. And importantly, he began to bring military-run parastate organizations, responsible for embezzling billions of dollars, under government control.Meow is likeIf


If cats could talk, they wouldn’t.

~Nan Porter

The Social Question

While Abiy has largely delivered on promises of political freedom, his new government has so far been silent on the social question. Similar to other charismatic liberal darlings such as Obama or Trudeau, Abiy has enthusiastically embraced identity politics (within the culturally acceptable realm of a traditional and deeply patriarchal society such as Ethiopia), while treating poverty and inequality as issues best addressed through the market and technocratic means.

Abiy’s agenda is now clear: He intends to set Ethiopia on a path to (more) free market capitalism, reducing the role of the state while increasing the role of Western investors and the private sector more broadly.

However, Ethiopia’s political economy and development model remains dominated by China. Abiy may preserve the independence of Ethiopia’s development path by playing China and the West off one another. As one of the only two African countries that was never colonized, ensuring independence through strategic alliances and concessions would be a very Ethiopian approach (and in line with Abiy’s current careful regional maneuvering between Qatar and Saudi Arabia).

Meles said that during the 1990s, when neoliberalism was the only game in town, the government carried out its state-led development model “in stealth” to keep the Washington Consensus powers close. Abiy, who joined the EPRDF as a teenager and grew up politically under Meles, may pursue a similar dual strategy: short-term gains and additional non-China FDI through implementing just enough neoliberal reforms. Meanwhile, long-term Chinese funding will help maintain the primacy of the state and sustain the developmental agenda of pro-poor growth within a liberal-democratic setup.

The partial opening of the economy will meanwhile weaken the previous regime’s economic base, particularly its allies in domestic capital and the military. After all, one should not forget that while Abiy spoke eloquently at the World Economic Forum, he is also fluent in Meles’s two languages: his mother tongue Tigrinya, and the language of the developmental state.

In any case, progressives must insist that the ongoing political reform reflects not just “liberal” democracy but a radical one, in which “human rights” are indeed workers’ rights and women’s rights. Not in the Hillary Clinton sense of equal representation in top leadership positions, but through rights and protection of the country’s millions of female informal workers, women’s access to land, progressive sexual and reproductive rights, and an overhaul of the country’s legal and law enforcement sector that brings material rather than a symbolic change in women’s lives.

A progressive platform must reject a development strategy that is built on exploiting the country’s rapidly expanding working class and demand that the spoils of economic growth finance the expansion of universal and free essential social services.

Progressives must reject the neoliberal depoliticization of economic policy and the supposed supremacy of the free market. More importantly, progressives must insist that poverty and inequality are inherently political and man-made outcomes of social struggles. They must urgently organize and build a radical democratic agenda for Ethiopia that combines political with social and economic rights.

The renewed scramble for Africa shows that competing factions of global capital are itching to extract billions of profits from the African continent. Meanwhile, many African governments are willing to sell out their people and natural resources for a shameful price to remain competitive and “attractive for foreign investors.”

At times, this may be because local leaders are under pressure to quickly bring in money and jobs at terms they do not dictate. They hope to create a minimum level of economic opportunities for the growing number of young people who have nothing to look forward to and for whom the state has nothing else to offer. For some, this may be an issue of short-sighted state survival, and the lack of time or public support to try an alternative path when people are, quite literally, hungry.

Looking Ahead

From an international socialist perspective, the issue with Abiy’s speech at the World Economic Forum is not the speech alone, but the Forum and the power relations it represents.

As long as the global economy continues to serve the interests of a neoliberal financial elite — where in 2018 the world’s richest twenty-six billionaires owned as much as the bottom half of the world — there is only so much say the poorest countries can have in today’s international governance, shaped as it is by imperialist legacies.

It is the responsibility of socialists in the West to support political forces committed to implementing a socialist and anti-imperialist agenda that will change the rules of the game of the global economy, which are still mostly made in the Global North. For instance, much of the suffering in developing countries could be prevented if we had a UN Security Council with a President Sanders and Prime Minister Corbyn. They could even begin dismantling the Security Council from within. This is very much within the realm of the possible in the next two years.

At the same time, the global left should not leave “capacity building” to McKinsey, the Clinton Foundation or other Western NGOs. For young Ethiopian progressives, this is likely the first time in their lives that there is space to organize and build a left-wing political project. They need to learn very quickly before the “invisible hand” turns Meles’s “development without democracy” into Abiy’s “democracy without development” for Ethiopia’s poor.

 

Jacobin by Sephanie Jay is a freelance writer and independent international development consultant based in New York and Addis Ababa. She can be reached at stephaniejaynyc@gmail.com.

 

 

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

 

 

 

 

 

የበረከት ስምዖን መበለት:                    ቀኑን ጠብቆ የመጣ ‘የኪራይ ሰብሳቢ’ ዋጋ!

5 Nov

Posted by The Ethiopia Observatory (TEO)
በከፍያለው ገብረመድኅን
 
ኢሣት አርብ ማታ (ኅዳር 3/2017) ባቀረበው ዜና በ300 ሚሊየን ብር ወጪ ግንባታው በመጠናቀቅ ላይ ያለውና በአዲስ አበባ ከተማ የሚገኘው ደብል ትሪ ባለ አራት ኮከብ ዘመናዊ ሆቴል ምሥጢራዊ የአቶ በረከት ስምዖን ንብረት ነው በሚል ሕወሃት ምርመራ እንዳስጀመረባቸው ተዘክሯል።

እኔ አቶ በረከትን መመርመር ይገባቸዋል ብዬ ያሰብኩት፣ ገና ድሮ ነበር።

ለምን በሉኝ?
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Lessons from a Troubled Neighbor; lessons also for others who can learn, other than pretenders

12 Jun

Posted by The Ethiopia Observatory (TEO)
by Yan Jiefu, Lessons from a Troubled Neighbor CaixinOnline
 

Japan’s rapid post-war growth that ended in years of stagnation serves as a mirror for China to reflect on its own economic model
 

China has looked to Japan for lessons in development for almost a century. Despite frictions between the two countries in modern history, China has long considered Japan as a model among developed nations.

Huang Zunxian, who served as a Counselor at the Chinese Embassy’s in Tokyo for the Qing Court between 1877 and 1882, discussed his observations on Japan’s geography, politics, society, culture and other aspects in his seminal work, Treaties of Japan, published in 1890. Huang is one of the pioneers who reintroduced Japan to the Chinese public after the Meiji Restoration, a revolution that restored imperial rule to Japan in 1868.

The Chinese were eager to learn from Japan’s success not only because of its remarkable achievements in modern times, but also because it was the only developed country in the East.
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Ethiopia’s New Parliament, New Cabinet: Inauguration of Electoral Authoritarianism

5 Oct

Editor’s Note:

    As if the TPLF/EPRDF, as usual, are not engaged in efforts to deceive Ethiopians, they spent this day appointing and promoting themselves, in the meantime cheering as if they have done the unheard of miracles and found the key to the right way in the governance of Ethiopia. Recall that the nation rose at the Mekelle Conference recently to show its fury against and disgust with electoral thievery and business as usual.
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TPLF Forces Resume Arrests and Detentions of Oromo University Students: Rejection of TPLF Governance, Its Policies Infuriates Regime Officials

28 Aug

Posted by The Ethiopia Observatory (TEO)
by the Horn of Africa Human Rights League

While fresh arrests and detentions, kidnappings and disappearances of Oromo nationals have continued in different parts of the regional state of Oromo following the April-May crackdown of peaceful demonstrators, court rulings over the cases of some of the earlier detainees by courts of the regional state are being rejected by political agents of the governing TPLF/EPRDF Party.
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Scholars At Risk shares concern about forced indoctrination of Ethiopian students in ruling party ideology & policies: Stale party propaganda as education

24 Aug

Posted by The Ethiopia Observatory (TEO)
by Academic Freedom Review

The Ethiopian Ministry of Education has issued a mandatory directive that compels over 350 thousand new and existing university students to be trained in government’s policy and strategy. The directive also states that students who do not hold the certificate of completion cannot continue their studies.
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