Growing Pain

Conventional economic theory has it that a country can burst out of underdevelopment if its economy grows by at least 8% annually over a 10 year period. The Korean miracle of the late 70s and 80s is often cited as a case example of a rapid transition from agrarian backwater to global powerhouse. Can we dare hope Ethiopia has entered that groove to prosperity?
The recently released IMF report on the Ethiopian economy seems to indicate this may be so. The report portrayed a rosy picture of commendable past performance and robust prognosis for the future. The contents of the report are, to say the least, an early New Millennium gift for an administration in need of international corroboration of obvious economic achievements it is quite proud about but feels that the growth being registered has not been appreciated by the nation.
The details of the IMF report show that Ethiopia’s economy is expected to enjoy a fourth consecutive year of +9.5% growth - a Tigerish figure that has even the erudite PM Meles intrigued.
Speaking exclusively to foreign media this week, the PM admitted that though growth is brisk, economic theory is apparently being contradicted by several anomalies. These are among others, rapid development amidst pervasive unemployment: especially in the capital, daily wages more than doubling and a strange gender imbalance in the work force that has more women involved in construction work than men. Maynard Keynes must be turning in his grave.
Be that as it may, we should give credit where it is due and applaud an administration which has proven several times that its strength lies more in the realms of economics and in foreign policy rather than domestic politics.
Ethiopia’s economy of late, can be aptly likened to a healthy 10 year old growing out of his britches. This super fast growth is not all a sign of good health as bitterly experienced by many countries whose super heated economies eventually led to economic meltdown. Even China with all its obvious success is taking measures to cool its hypergrowth, lest rampant inflation spurs more civil unrest among its hundreds of millions of low income workers.
The administration, it is hoped, will draw lessons from that of other rapidly developing economies by first adjusting and then fine tuning the economy. This can be accomplished through various ways. One is to tighten the money supply and impose speed bumps on the avenue of development. An economy, just like grape vines, needs periodic pruning to achieve the best of harvests. Another strategy is to focus on more labor intensive projects instead of single mindedly pursuing prestige projects that have minimal or at best, very temporary positive impact on reducing unemployment.
Even the mature economies of the USA, Japan and Europe conduct regular adjustments to their money supply, exchange and interest rate levels. This is done with a view toward ensuring a sustained yet steady growth that will not over tax supply and demand dynamics.
In Ethiopia’s case, and in particular concerning the issue of urban unemployment, attention must be given to the huge influx of rural migrants that daily increase the labor pool. The attraction of the capital city is undeniable, but it can sustain only so much pressure in its already depressed job market. The only way to keep rural inhabitants away from the teeming city is to make the hinterland more attractive to inhabitants which in any case would prefer to obtain sustainable livelihoods in their home localities. This is an admittedly difficult but absolutely essential step if the nation is to grow equitably.
May the registered and internationally validated economic success lead us into lasting prosperity.Growing pains