Obituary | Feb 29,2020
Sep 11 , 2020
By Christian Tesfaye
One of the more exciting developments to have come with the premiership of Abiy Ahmed (PhD) is a reorientation of economic policy toward markets. It is a return to an economic policy that had currency almost half a century ago. Between Emperor Haileselassie and Prime Minister Abiy, two left-leaning governments, one much more socialist-inspired than the other, saw to it that free markets were not allowed to decide the direction of the economy.
There are nuances here. For the Dergue, capitalism was inherently flawed, and a command economy, where the means of production are controlled collectively, was meant to be in the interest of protecting the working class. The EPRDF was less ideological than the military junta that overthrew the Emperor. Indeed, "pragmatism" was in their blood - they were socialists up until it was clear that the West’s capitalism had won. They also were not necessarily against the private sector, at least according to documents outlining their economic strategies.
With Prime Minister Abiy’s administration, Ethiopia seems to have come full circle. Liberalisation and privatisation of major state-owned enterprises are underway. The government has also been vocal about following a contractionary fiscal and monetary policy and even has plans to float its currency. These are all significant steps for a country with such small aggregate demand.
The debate rages. For those left-of-centre, Ethiopia is making a huge mistake in flirting with capitalism. Markets are no friends to the working class and create inequality. The winners will only be those that are already rich, and those with capital are sure to exploit the opportunity once the government removes its protective hand. They also allege that there will be no demand to stimulate the economy - not enough middle-class population to incentivise production - once government spending slows.
For those right-of-centre, markets create competition and innovation will follow. Yes, this helps those with capital, but it also helps them create jobs. The honest free-market advocates also concede that private sector-led growth might not produce high-GDP rates initially but makes the economy more resilient in the future. They add that the law of supply and demand is not voodoo science like centralised planning but a theoretically sound model that produces price signals and gives the best return on investment for both consumers and producers.
They both have a point. Markets are indeed theoretically sound and do produce economic surplus. For consumers, this is being able to buy goods and services for lower than they are willing to. For producers, this is selling goods and services for higher than they are willing to. Both sides of the market are rewarded.
Unfortunately, for markets to work in this manner, at the very least, there needs to be very little government involvement. It should not be allowed to determine prices, force suppliers to adjust the quality of their products or even distort the market by collecting too much in taxes (or, if possible, no taxes whatsoever).
Therein lies the Left’s biggest contention with the intellectual descendants of Adam Smith. One may be able to forgive the theory of demand and supply for assuming perfect access to information, complete lack of monopolies and oligopolies or failing to consider that people may be irrational in making economic choices.
But it is hard to justify that economics, as a science, says little to nothing about human welfare. The whole assumption that markets should be left to themselves to correct holes and imbalances seems cruel.
What if it takes a decade for the food market to reach equilibrium price and supply, where both consumers and producers are satisfied? Should we allow so many people to be food insecure out of consideration that government intervention would distort the market? Even if an unrestricted food market may mean that the demand is fully met a decade from now, should food insecure people in the present be left to their fates? Do the means justify the end?
The debate being had in Ethiopia about the right economic policy to follow is thus a debate between social justice and economic efficiency – which, as far as I can tell, are somewhat mutually exclusive. It is also why, with very few arguable exceptions, purely free market and command economies do not exist anymore.
Many countries around the world have come to prefer a capitalist-leaning mixed economy that attempts to address social injustices. True, most countries today are largely free-market-oriented, but few governments have policies against publicly provided transportation, education and healthcare. It is no longer about ideologies but what works in creating wealth for the most amount of people.
This is why the national discourse on the direction of the economy is deficient. It argues in binaries – as in politics. It is still about neoliberalism versus socialism - as if there indeed is an eternal struggle against those with labour and those with capital.
But the Cold War is over. It is time we discuss how social justice can be promoted inside an economically efficient system – one of the biggest puzzles there is.
Christian Tesfaye (email@example.com) is a researcher and Fortune's Op-Ed Editor whose interests run amok in the directions of both print and audiovisual storytelling.
PUBLISHED ON Sep 11,2020 [ VOL 21 , NO 1063]
Obituary | Feb 29,2020
Commentaries | Feb 25,2023
Viewpoints | Jul 01,2023
Viewpoints | Jun 27,2020
My Opinion | Aug 26,2023
Editorial | Jan 12,2019
Sunday with Eden | Feb 06,2021
Editorial | Nov 11,2023
Commentaries | May 13,2023
Fortune News | Oct 11,2020
Photo Gallery | 83060 Views | May 06,2019
Photo Gallery | 75217 Views | Apr 26,2019
Fineline | 58730 Views | Oct 03,2020
Fortune News | 58495 Views | Jul 18,2020
Commentaries | Dec 02,2023
Life Matters |
My Opinion | Dec 02,2023
Sunday with Eden | Dec 02,2023
Agenda | Dec 02,2023
Editorial | Dec 02,2023
Dec 24 , 2022
Biniam Mikru heads the department of cabinet affairs under Mayor Adanech Abiebie. But...
Jul 2 , 2022 . By RUTH TAYE
On a rainy afternoon last week, a coffee processing facility in the capital's Akaki-Qality District was abuzz with activ...
Nov 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
Nov 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
Leaders of the National Election Board are in a charm offensive mood, of a sort. Last week, they organised a rare tour for members of the me...
When the country's most senior diplomats and envoys return back to their posts after two-week debriefings, they leave behind a point or two...
Dec 2 , 2023
The symphony of traffic noise in Addis Abeba is not just a sign of life, but a siren...
Nov 25 , 2023
Ethiopia's quest to develop a functioning capital market is a demanding yet not unach...
Nov 18 , 2023
Prime Minister Abiy Ahmed (PhD) has made a fervent call for landlocked Ethiopia to ga...
Nov 11 , 2023
In November last year, a ray of hope pierced the gloomy skies of Ethiopia as the Pret...
I have a love-hate relationship with my phone. It is my go to source for information. I enjoy interacting with text messages and browsing t...
Over the weekend, I attended a wedding where my husband was one of the protocols. Despite the typical joy...
Dec 2 , 2023 . By MUNIR SHEMSU
Mamo Mihretu, the governor of the National Bank of Ethiopia (NBE), has outlined a com...
Dec 2 , 2023 . By AKSAH ITALO
BGI Ethiopia, one of the largest brewing companies, is in the throes of a major trans...
Minister of Agriculture, Girma Amentie (PhD), is leading a charge to overhaul the fer...
Dec 2 , 2023 . By AKSAH ITALO
Amidst accession to a cross-regional trade, one of the oldest industries is strugglin...
Or see contact page