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Month: October 2023

Global Wealth Disparities Threaten Global Order

Posted on by Tizita S.

In these tumultuous times, it often feels like one shock quickly eclipses another. Before one problem can be solved, another crisis emerges. Just a few weeks ago, the war in Ukraine dominated headlines, but the recent outbreak of violence between Israel and Hamas has since taken centre stage.

To be sure, during times of crisis, our instinct is to focus on extinguishing the fire closest to us. But it is equally crucial to understand and address the root causes so that we have fewer fires to fight.

As populist forces have polarised electorates and deepened social divides worldwide, the global political climate has grown increasingly volatile. While determining the causes of this shift will undoubtedly take some time, one could argue that the rapid advance of digital technologies, unchecked globalisation, and rising inequality have transformed our political and economic systems, fueling sociopolitical unrest.

While the debate over whether economic inequality has increased over the past few decades is still ongoing, the question is moot. We know for certain that global economic inequality increased steadily between 1820 and 1910. Since then, it has fluctuated, and any estimate depends on researchers’ specific methods and metrics. But the data clearly show that economic disparities have reached intolerable levels, with the world’s richest one percent gaining 38pc of the increase in global wealth between 1995 and 2021, compared to just two percent for the bottom 50pc.

Moreover, regardless of the overall inequality, it is undeniable that the concentration of wealth continues to increase. Between 1995 and 2021, global wealth grew by 3.2pc annually. Over the same period, the wealthiest 0.000001pc increased their wealth by 9.3pc per year.

We are horrified by our ancestors’ acceptance of practices like slavery and feudalism. When future generations look back at today’s world, they will likely be shocked by the extreme levels of inequality and social injustice we have tolerated. But, beyond their inherent immorality, the political implications of today’s economic disparities often go unnoticed. In this age of digital connectivity and globalised commerce, excessive wealth concentrations undermine democracy in two main ways.

The globalisation of finance and supply chains has enabled wealthy and powerful countries to affect the well-being of citizens far beyond their borders. But while the citizens of Burkina Faso, for example, cannot vote in US presidential elections, the decisions made by American presidents affect their daily lives as much as those made by their leaders, if not more. Imagine a scenario where only the residents of the District of Columbia were allowed to vote in a US presidential election – such a system could hardly be called a democracy.

This dynamic suggests that globalisation erodes global democracy. Yet, there is not much that developing countries can do to challenge American hegemony, given that the United States will not allow the whole world to participate in its presidential elections.

Given that extreme wealth often translates into political power, the concentration of wealth in a few hands is anathema to democracy. This is particularly evident in the age of Big Tech, when billionaires can gain an outsize influence on public discourse by taking over critical media platforms or manipulating search results. One can hope that advances in generative artificial intelligence will level the playing field in the tech sector and thus help curb inequality.

I recognise the potential damage poorly designed interventions can cause. History is replete with examples of well-meaning but ill-conceived policies that sought to reduce inequality, only to backfire and inadvertently bolster the right-wing narrative that all government intervention is inherently problematic.

Nevertheless, such policies can yield significant returns by combining moral intentions with thoughtful design. In a recent paper I co-authored with my students – Fikri Pitsuwan and Pengfei Zhang – we explore the megaprofits generated by Big Pharma and Big Tech companies.

While imposing patent waivers might reduce the incentive to innovate, just as placing profit caps can cause production to fall, it is possible to design mechanisms that limit excess profits without sacrificing efficiency. One such strategy is to use a commodity tax to cap the profit of a group of companies, such as all the Big Tech firms. This intervention can neutralise the incentive to cut production by heightening competition within the group.

We must also recognise that beyond a certain threshold, relative rather than absolute inequality matters most to people, including the wealthiest. We can levy significant taxes on the rich without reducing their incentives, provided they maintain their relative standing. As long as billionaires like Elon Musk and Jeff Bezos understand that taxation will not alter their rankings among the world’s wealthiest individuals, they will remain motivated to increase their earnings, and the rest of us will reap the rewards of their efforts.

Neoliberals got it wrong: pursuing greater equality without reducing incentives is entirely feasible. We can establish a fairer society by mitigating inequality and curbing the outsize influence of a few ultra-wealthy individuals. If we want to save democracy, we cannot afford to wait.

 

Blossoming Tensions Over the Global Flower Industry’s High-Stakes Race

Posted on by Tizita S.

In the thriving world of international commerce, few sectors have witnessed the meteoric rise and shift that the flower industry has seen. Over the past few decades, floriculture has transitioned from traditionally domestic to a high-stakes, highly globalised business. As economic climates change and consumer preferences evolve, so does the landscape of this multi-billion-dollar industry.

Historically, Europe, the Middle East, and North America have been the dominant consumer markets in the flower trade. Countries near the equator have found favour due to advantageous climatic conditions and relatively cheap energy costs. The Netherlands has long been the reigning champion, but Colombia, Kenya, Ecuador, and Israel are not far behind in the pecking order. Ethiopia is also blooming globally, climbing into the top five, while Israel’s influence seems to be wilting.

However, this growth trajectory has seen its fair share of hurdles. Market demand appears to be plateauing, with an overabundance of flower supply tipping the scales. Forecasts suggest a subdued growth rate of three per cent for the last three years in Western Europe’s cut flower markets. Discerning consumers and evolving trade requirements have pushed the industry towards the brink of change. The surge in demand for sustainably produced and distributed products means producers must step up or step out. Margins are dwindling, and the traditional playbook of the flower industry is being rewritten.

The future leans towards transparent supply chains, with direct trade channels gaining prominence over traditional auction systems.

Technology is another game-changer. The Flora Holland auction, a notable marketplace, has witnessed over 56pc of its rose transactions through its remote buying system, ‘KOA’. European wholesalers have capitalised on the digital wave, with online storefronts allowing for real-time trade. This paradigm shift makes information exchange crucial, emphasising accuracy and promptness.

A new leaf is turning in the European flower trade. Social and environmental standards are now at the forefront, thanks to changing consumption patterns, media scrutiny, and advocacy by non-governmental organisations. The market has certification schemes, best practice codes, and consumer labels. Retail giants are cultivating their bespoke standards, further fragmenting but undeniably elevating the importance of industry benchmarks.

The global arena is rife with competition as leading flower exporters – the Netherlands, Colombia, Ecuador, Kenya, and Ethiopia – battle for market share in Europe, the Middle East, and North America. This intensified rivalry stems from a stagnating demand and an influx of large-flowered roses from Africa that have started matching, if not exceeding, international quality benchmarks.

With Colombia trailing, Ecuador has been aggressive, expanding its floral footprint in Europe and pre-war Russia. Eastern Europe, in particular, has embraced Ecuadorian blossoms. Colombia, not to be outdone, is eyeing niche markets, a domain traditionally ruled by Dutch and African flowers. Before the war with Ukraine, Russia has been a lucrative market for Kenya and Ethiopia, and the quality of their produce speaks volumes.

Across the Atlantic, the North American market is a hotbed of competition. Ecuador harbours ambitions of increasing its market share there, while Kenya grapples with logistics, even without import duties. Direct flights between the US and Kenya might be the missing link, a topic currently under discussion between the US airlines and the Kenyan government.

The global flower trade story is incomplete without shining a spotlight on Ethiopia.

From a modest 840hct production area in 2004, the country now boasts roughly 1,600hct allocated to floriculture. The growth is evident in the exports too – a leap from 46,000tn in 2004 to an impressive 291,000tn in recent years. The foreign currency earnings from this sector have witnessed a three-fold jump from 196 million dollars in 2004 to 660 million dollars in 2015.

The primary blossoms of choice are a diverse range of summer flowers, including roses, carnations, statice, alstroemeria, and lilium. Such is the sector’s significance that it evolved to be second only to coffee in foreign currency earnings. Last year, it recorded a 22.5pc growth over the previous year’s earnings of 246.5 million dollars.

However, growth has not been a bed of roses. Land scarcity, crucial for expansion and new entrance, has curtailed existing and prospective investors from realising their full potential in the global market. High-tech developments and stringent supplier criteria will continue to shape Ethioipa’s prospect in the cut-flower sector, determining participation. Its future prominence in the industry hinges on its adaptability to the evolving conditions.

So is the global industry so intertwined with nature its survival will depend on its ability to evolve and adapt, much like nature.

A Global Coffee Cartel Should be on the Table

Posted on by Tizita S.

Coffee prices have soared in recent years, owing to unfavorable weather conditions and supply shortages in major producing countries like Brazil, India, and Vietnam. But even if consumers pay more for their daily cup, coffee farmers are seeing little gain because they lack sufficient bargaining power.

Since the 1950s, coffee has been among the world’s most-traded commodities – at one point, it ranked second, behind oil – and many governments regard it as a strategic good. But not all coffee trade is created equal.

Countries in the Global South export low-value-added unprocessed coffee – raw beans and dried and seedless coffee – with Brazil, Columbia, Vietnam, Indonesia, and Ethiopia controlling a combined market share of about 70pc. Countries in the Global North dominate exports of higher value-added processed coffee – such as roasted beans and instant coffee – with Switzerland, Germany, Italy, France, and the Netherlands accounting for 70pc of the market. The coffee sector is dominated by just three developed-country firms – Nestle, Starbucks, and JDE Peet – which account for 77.7pc of the total revenues of the sector’s 10 biggest players.

Prices of processed coffee dwarf unprocessed coffee: 14.30 dollars for a kilogram on average versus 2.40 dollars. Coffee producers in the Global South claim a small and declining share of the market’s value. Whereas in 1992, producer-country exports captured one-third of the value of the coffee market, they captured less than 10pc 30 years later. Coffee farmers get one percent or less of the final retail price of a cup of coffee, and about six percent of the price charged for a package of coffee sold to consumers in the Global North.

The obvious solution would be for coffee producers in the Global South to develop processing capabilities to increase their exports’ value-added. But there are formidable barriers to progress on this front, beginning with the high tariffs developed countries impose on processed coffee imports – 7.5pc to nine percent in the European Union (EU), 10pc to 15pc in the United States (US), and 20pc in Japan. Unprocessed coffee is not subject to tariffs.

While developing economies also impose tariffs, they tend to be more symmetric across processed and unprocessed coffee. In Brazil, both imports are subject to a 10pc tariff. While developed-country-led multilateral banks and research organisations advise developing countries to increase their exports’ value-added, developed countries’ trade policies discourage them from doing so.

Developed-country governments are unwilling to change their tariff regimes; developing countries must rely on financial incentives to counteract them. For example, they can subsidise processed coffee exports and impose export tariffs on unprocessed coffee. Malaysia did something similar with palm oil: after the United Kingdom (UK) imposed high tariffs on processed palm oil imports, Malaysia lowered taxes on processed palm oil. It introduced an export tax on crude palm oil exports.

Would-be exporters of processed coffee in the Global South also face non-tariff or technical barriers, such as sanitary and phytosanitary rules. These are, of course, entirely justifiable. Overcoming them will require the Southern exporters to invest in building technological capabilities and developing planting and processing approaches that meet international safety, environmental, and social standards.

Exporters in the Global South could even go so far as to produce and export branded coffees sold directly to North consumers. Branding and marketing is, after all, the highest value-added segment. The problem is that entry barriers in consumer markets are very high, and it takes considerable resources – and a significant risk appetite – to build up a new brand.

One way firms could circumvent some of these barriers would be to acquire existing brands. This is another lesson from Malaysia, which executed a hostile takeover of British palm oil firms on the London Stock Exchange. This kind of international acquisition has served as a useful catch-up strategy for a number of latecomers, not least China.

Producers in the Global South have another option. They can create an OPEC-style coffee “cartel,” which would have far more bargaining power on prices and tariffs against the Global North. While this solution may appear radical, it is feasible, given that the Global South’s top 10 coffee producers command nearly 90pc of the market. It is also justifiable, as the supply-side oligopoly that a cartel represents would be intended specifically to confront an existing demand-side (roaster) oligopoly.

First, however, the coffee sector in the Global South would have to be consolidated, with small firms combined through mergers and acquisitions. The new large companies could work together with public research institutions to upgrade the quality of the coffee being exported and change the value distribution. For example, the Federacion Nacional de Cafeteros de Colombia could work with the Colombian freeze-dried coffee producer Buencafe. The Malaysian Palm Oil Board could serve as a model here.

Of course, asymmetries in the global coffee market could be addressed in multilateral fora, such as the United Nations or the G20. But as long as developed countries actively impede their developing-country counterparts’ ability to make money from the coffee they produce, Southern producers have little choice but to take matters into their own hands. Tariffs and subsidies, hostile takeovers, and even the formation of a coffee cartel should all be on the table.

 

The Dichotomy of Benevolence and Cruelty

Posted on by Tizita S.

Over the last weeks, I have been showered with blessings organised at multiple events.

It was genuinely heartwarming to see most materials we will need were gifted by family and friends. I was even surprised as some people my husband and I only met for a day attended to wish us good fortune.

Pregnancy has been a life-changing experience for me. Becoming a vessel and sacred space where another human takes root and begins to grow has transformed me in ways I never imagined. As my belly swells, so does my heart, expanding to encompass a boundless and infinitely fragile love.

Kindness is a gentle breeze that follows me wherever I go. It wafts through the aisles of supermarkets, the halls of banks and the chairs of salons, strangers giving me tips for my well-being and blessing my unborn child.

I have gotten used to special treatment from acquaintances with my neighbours offering to give us a car while ours was in the shop while others took turns in my kitchen, preparing delicious meals to nourish me.

As being a mother has always been one of my goals in life, I actively observed others and knew the challenges and rewards awaiting a parent early on. What I failed to envision was the special treatment that comes with pregnancy even amongst strangers.

It has been an excellent reason for many people to be good to me and the hostility based on several discriminatory reasons vanishes. The free access without making queues always leaves me marvelling and humbled by how interconnected we are.

Amidst the happy moments, many told me to enjoy such kindness while it lasts. They say the unhealthy treatments from many individuals come back at full scale in the parenthood phase.

As simple as it sounds, it leaves me wondering.

If humans are capable of immense benevolence, where does the capacity for cruelty come from?

Our capacity for goodness is often selective. But if the men on the streets who often sit on the side of the road harassing passersby have it in them to utter thoughtful words and good wishes which indicate a capacity for empathy, their viciousness at other times is a conscious decision.

While some may argue that cruelty results from a deep-seated survival instinct, others contend that it is primarily a learned behaviour influenced by societal norms and upbringing.

It is unfortunate that many people have learned to keep their expectations low due to a recurring pattern of disappointment leading to a sense of cynicism. To realise that acts of kindness and generosity are only observed on certain occasions, such as during pregnancy is saddening.

However, the mere existence of this capability, even if selectively, indicates the potential for growth and improvement. By consciously making an effort to extend this virtue to all individuals, one can cultivate a more compassionate and ethical character.

The public’s kindness to pregnant women stands in stark contrast to its unkindness to adults. This dichotomy is puzzling, especially considering that the same precious unborn babies who are so cherished in the womb eventually grow up to be adults who are often treated with disdain.

My worldview has shifted since being expectant. I see the world with new eyes, imbued with a sense of wonder and awe. I am aware of the interconnectedness of all things, and I feel a profound responsibility to nurture and protect this precious life growing within me.

I am left to think the public is pro-life, but it is a mystery why the populace is aloof when those precious unborn babies make it to adulthood.

Debarring Language Switches

Posted on by Tizita S.

I came across a recent challenge that required participants to speak English for two minutes without using other languages.

While this may seem easy for someone with a strong command of the language, many who claimed to be fluent found it daunting because uninterrupted speech requires good knowledge of vocabulary.

Personally, I can hold a conversation in English and keep it going but writing allows me to convey myself more effectively.

But my vocabulary is limited to my exposure during conversations or what I grasped while watching movies which played an essential role in my language learning. These days, I do not come across new words as I seldom have time to watch a movie.

Code-switching is observed among bilingual and multilingual speakers.

It can serve communicative purposes by facilitating expression, building rapport and signalling identity. However, this challenge highlighted a common paradox.

While mixing different languages can be a valuable tool for communication, it can also prevent the speaker from fully immersing oneself in either language. This is evident because speakers are continually transitioning between grammatical structures, vocabulary and pronunciation, making fluency a challenge.

Potentially it will hinder vocabulary acquisition as one may rely on familiar words from their mother tongue instead of actively seeking out new words in their second language.

People may experience vocabulary scarcity for infrequently encountered items or concepts.

For instance, someone with finite knowledge of cars may struggle to discuss the subject in English. The general terms, such as “horn” and “trunk,” might come easily but the specifics in between can pose a significant obstacle to effective communication.

Lack of specificity is another form I usually struggle to communicate with my in-laws whose native language differs from mine.

One time, my son took a vaccine and his grandmother asked which part of his body they gave him the shot on. I casually said it was in his hand; a native Amharic speaker would have understood although my description was not specific to the arm which was the correct place.

But she was confused and asked “As in here?” while pointing to her hand. That was when I realised I should have been more specific.

It is difficult to convey certain concepts to non-English speakers. These factors can even lead to misunderstandings, especially when speaking with people who do not know any of the local languages.

Speakers who use mixed code are not solely exposed to or engaged with any one language which limits their opportunities for learning. Moreover, they may become accustomed to translating words directly from one language to another which puts accuracy into question.

I sometimes find myself mixing Amharic words although the people conversing with me do not understand it. Perhaps it would be easier to comply somewhere where one language medium is used.

The issue is debatable when it comes to education.

A study done in 2009 by conducting a survey among students and by interviewing teachers in the Philippines showed that 44pc of the students consider codeswitching acceptable while the majority did not. Although teachers recommended it for effective communication, they believed it should be restricted to informal classroom activities.

In Ethiopia, the ability of teachers to convey messages using English after certain grades as the language medium changes is doubtable. It might be one factor for the shocking students’ results upon taking an entrance examination as well.

Strengthening teachers’ language proficiency while capacitating them with the necessary resources and infrastructure is expected from the Education Ministry.

Through this challenge, I realised that it is critical to be mindful of the potential negative repercussions of combining languages. While code-switching is not inherently harmful, it can impede the learning process if not used sparingly.

SASSY STROKES

Posted on by Tizita S.

Two freshly graduated architects entertained attendees with whimsical caricatures at the European Film Festival last week on Cape Verde Street. Artistically endowed college graduates have increasingly found themselves searching for alternative professional paths as employment prospects in the formal sector diminish.

 

GRIM GREENERY

Posted on by Tizita S.

The roundabout around the Sheraton Addis located across Friendship Park is under renovation. Many people prefer the location for a photoshoot due to its visuals. Addis Abeba’s landscape has been refurbished in the past few years, with new grandiose projects like parks and museums spearheaded by the Prime Minister adorning the 137-year-old city.

AMBIENT FLICKERS

Posted on by Tizita S.

(Left to right) Germany Ambassador Stephen Auer, Minister of Finance Ahmed Shide and Minister of Women & Social Affairs Ergoge Tesfaye (PhD) attend the German Unity Day at the Embassy. It is celebrated to commemorate the reunification of Germany in 1990. Germany has been a long-time partner with Ethiopia recently announcing a package of 10 million euros to encourage peace efforts between the Tigray interim administration and the federal government.

Zemen Inks Integration Deal With Safaricom

Posted on by Tizita S.

An interoperability and integration partnership was inked between Safaricom Ethiopia and Zemen Bank executives allowing the bank to work as a super agent for the M-Pesa mobile money platform last week.

Safaricom has signed similar agreements with 10 commercial banks such as Hibret, Bank of Abyssinia and Abay as it establishes itself in the mobile money landscape that went live last month. While Safaricom has been operating in Ethiopia for about a year, it received its payment instrument issuer license from the central bank in May, setting the stage for the launch of its mobile money service.

Zemen has managed to reach a total subscribed capital of 14 billion Br and passed the central bank’s minimum paid-up capital requirement by 2 billion Br ahead of the 2026 deadline.

A prior agreement between the two institutions had allowed Zemen to provide cash services for Safaricom agents. The Bank President Dereje Zenebe said they plan to remain at the forefront of digital solutions in banking during the ceremony at the recently inaugurated headquarters last week.

British Council Invests in Ethiopia’s Education Quality

Posted on by Tizita S.

In the wake of a mere 24pc of teachers passing the qualification exam which revealed severe incompetency, English language proficiency training to enhance their skills was piloted on 375 principals and teachers across the regional states.

The program involved three days of physical training and 50 practice hours through digital and print mediums while they showcased the results last week at the Hyatt Regency Hotel on Africa Avenue.

The event was attended by the Country Director of the British Council, David Maynard, Minister of Education Berahnu Nega (Prof) and several stakeholders from the education sector who engaged in a lively panel discussion.

Funded by the British Council the course had 189,000 dollars budget. The Country Director of the British Council stated that partnership with the Ministry of Education and regional bureaus to sort out drawbacks in education quality.

Berhanu concurred, noting this year’s dismal students’ university entrance results indicated a deeply rooted problem partly due to the incompetency of teachers and school administrators.