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September 4 , 2021
By Christian Tesfaye ( Christian Tesfaye (email@example.com) is a researcher and Fortune's Deputy Editor-in-Chief whose interests run amok in the directions of political thought, markets, society and pop culture. )
Some word processor programmes suggest the use of “developing” to “poor” when referring to a country. The justification is that the latter is somewhat derogatory. It is fitting for a world that has grown politically sensitive. Part of the idea is that countries may be economically underdeveloped but culturally and historically rich.
The substitution of “poor” with “developing” also assumes that most countries are in a state of development. It is a win-win for everybody. Nations do not need to be derided by the use of a term such as poor and they could at the same time be referred to by a word that accurately describes their economic status.
But there is a problem. Phrases such as “low-income,” “lower-middle-income” and “middle income” describe countries much more precisely, while "developing" has been ascribed to any nation that has not created an economy that leans primarily on the service sector.
This has been changing as the world experienced divergent rates of growth over the past few decades. Sixty years ago, South Korea or China could have been African countries given their subsistence agriculture dependency, high levels of poverty and poor levels of human welfare. But much of the world has hit upon the elixir of growth, while sub-Saharan Africa remained particularly poor.
Economists have had to invent a separate term to differentiate the have-nots and have-ish. By the time the new millennia rolled out, both China and Ethiopia could not possibly be referred to in the same way. The former was a developing country and the latter is a “least developed country.” Ethiopia was and is decidedly economically poor. While China may not have a GDP per capita on the level of Western Europe, it has become industrialised and boasts the largest number of billionaires in the world. China made it, Ethiopia and much of sub-Saharan Africa did not.
How large the difference in outcomes between developing and least developed countries is can be explained by using a country that is not normally considered that much better than Ethiopia – Bangladesh.
I once visited Bangladesh, one of the densest countries in the world with a history marked by civil war, coups and hunger. It is a highly conservative society, where alcohol is discouraged and has not done all that much to expose itself to the outside world. They are also considered one of the most promising developing market economies.
Their arsenal has been export-oriented manufacturing, especially as China is becoming expensive for investors as living standards grow. With industry accounting for over a third of the output of the 350 billion dollars in annual GDP, Bangladesh exports nearly 40 billion dollars, over 10 times that of Ethiopia.
It does have a trade deficit, but it is only around 10pc of their exports, while that of Ethiopia’s is close to four times the export revenue. Dealing with trade deficits is also a great deal easier when a country has a foreign exchange reserve worth 48 billion dollars. On a good year, Ethiopia manages three billion dollars in forex reserves.
What does all of this translate to in terms of citizen’s welfare?
The best measure of this is usually the human development index, which aggregates income, education and life expectancy. The average Bangladeshi is on average likely to earn twice as much as an Ethiopian, likely to live a decade more, and over one and a half times more likely to be able to read and write.
Ethiopia’s situation is distressing not just relative to the likes of Bangladesh but even Egypt, Ghana, Kenya and Botswana. It is only comparable to countries that are similarly basket cases, such as Sudan. In the truest sense, Ethiopia is an economically poor nation that has neglected to do its homework for far too long. No amount of euphemism will change what is on the ground.
PUBLISHED ON Sep 04,2021 [ VOL 22 , NO 1114]
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