Saturday, September 23, 2023


“What economy?” Asked this lady manager last week, pompously.
‘Ethiopian resumed its flight to Asmara, pretty soon we’ll have our navy back in Assab”
Teddy Afro is down…ISSU is up!
“The country has a budget” (with a huge hole in it!)
“The Emirates dished out a billion… or two or three, in handouts and investment…”
“Washington DC – the next stop for Dr. Abye Ahmed.”
“Why worry? The country continues to be euphoric, non-stop, for the last three months…”
I suppose one should only start worrying when the party is over. Fingers will be pointing at Dr. Abye, Ethiopia’s most popular and dynamic prime minister in decades, if things go wrong, particularly if the economy fails.
Upon reflection, Dr. Abye’s popularity rests on two legs: His rhetoric about Ethiopian unity and his idealistic promise of love and care for all.
The first leg is still looking fresh, the second one… well, I’ll let you reflect on it!
Some people are beginning to sense uneasiness about the economy or the absence of direction of where the government is heading. Many remained skeptical about the privatization scheme sketched out so far, aimed at revitalizing the economy.
Is AA going to articulate something we haven’t heard before? Is he going to propose a set of actions that have not already been tried in the way of revitalizing the small and medium enterprises?
We don’t know.
What we know is that the way ahead is complicated …The country is bankrupt. And government is weakening. Money, power…and hopes for the future…remain stuck, somewhere!
So the question is should you buy Ethiopia or look for new pastures?
Anyway, dear readers, Ethiopia has always been assessed in terms of its potential… it has been this way for centuries! There will be soon more discussions (I hope) on its potential. Discussions on the kind of economic system or arrangement it needs. Small forums are already popping up here and there. Political parties including those on the opposing sides (those that still exist) will hopefully do more analysis on what is needed? Where to look for capital investments that can diversify, modernize and rejuvenate our economy, coupled with an overhaul of the policy apparatus commensurate with those goals.
Come to think of it there aren’t many choices in terms of economic systems to choose from these days.
For over two decades Ethiopia officially claimed to be a developmental state. A government basically insulated from democratic debate and contestation on issues of economic decision-making. Those in charge borrowed, taxed, stole and defrauded all in the name of developmental states using whatever legal or non-legal means to bankrupt the country.
As a result the EPRDF gave the ‘Development State’ notion a dreadful name. And yet the traditional key goal of developmental state is the building of markets. Typically developmental states use trade policy, public financing subsidies, tax incentives and other industrial policies to build up their economies, in particular their manufacturing sector.
The free market approach would have countries only exploit their current ‘comparative advantage’ as if it was naturally determined and static condition, whereas a developmental state would view comparative advantage as dynamic and changeable over time, and to be manipulated in a long term process of constant industrial upgrading.
Now there are many people arguing that the free market will fix it all and send us all into nirvana. These folks ignore the critical role states play, in not only making markets but also supporting technological development and innovation. These free market critics of state intervention have long claimed that the private sector can do it all by itself – if the state would just get out of the way. They want to ignore that a satisfactory market economy capable of maintaining itself does not arise from our energetically doing nothing. They don’t want to acknowledge today’s economy is an artistic construct, requiring the existence of strong state authority.
Yes, dear readers, the state has unique coordination and convening powers and ability to pool risk, create markets and provide public goods that the private sector cannot undertake. In fact the debate over the role of the state in development is largely settled. As empirical analyses indicate adequately designed economic and political institutions have positive effects on growth and wealth.
Many also believe the dispute about capitalism vs. socialism have come to an end, the current discussion is more about which kind of market economy ensures a positive economic and social development in a country. The question in fact is how states can best carry out these functions or rather how states can establish humane and workable economic order.
Ethiopia should therefore explore for an economic arrangement that would produce beneficial results for all. Our underlying philosophy should be based on building a competitive economy that (i) guarantees property rights, (ii) ensures lowest price volatility (low inflation – to coordinate economic activity efficiently), (iii) embraces open access to domestic and international markets, (iv) ensures the consistency and stability of economic policy, and ( v) makes sure that not only consensus is realized by all people, but that there will be mutual benefits from the implementation of institutions.
No, we should not seek to centrally plan the economy, or to let unrestricted free market go awry, but to put in place a socially responsible political economy that in contrast to neoliberal ideas of free markets protects the individual and its environment from the sort of homogenization and strife that markets bring about.
Remember there is no rocket science, magical secret, or something fishy in, say, South Korea’s development miracle and economic and political freedom some five decades back. It is the outcome of an economic management system that has been put in place in tune with vision of the political leadership to let everybody cherish the taste of sustainable progress.
There is no reason we cannot repeat that feast today!

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