Market-led Economic Policy Advocacy Needs Platform

Feb 23 , 2019
By Asseged G. Medhin

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The political situation of the past four decades has succeeded in driving skilled human power out of Ethiopia, including economists that could have contributed to policymaking.

This largely entailed the generation that came of age during the student movements in the late 1960s and early 70s. While a section of it, those that subscribe to developmentalism, stayed active in politics, the intelligentsia that could have provided the other side of the argument remained silent. There was never a platform to advocate for market-led economics on the scale that was set aside for developmentalism.

Prime Minister Abiy Ahmed (PhD) has changed this and offered liberal economic policy pundits a voice. However, after almost three decades of an antagonistic relationship with the government, the business class and liberal intellectuals are not yet willing to engage on the level they should be.

This will be counterproductive to efforts to address the weaknesses of the private sector. Without the active participation of economists, academics and the business class in arguing for market-led development, the current bureaucracy and government institutions, biased towards revolutionary democracy, will continue to dictate matters.

The few active in calling for a new economic road map, rather than the one advocated by the Growth & Transformation Plans (GTPs), are not advocating neoliberalism, for the drawbacks of that economic prescription have been evident over the years. But they want to see bigger private sector engagement in the economy to bring about competition and better delivery of goods and services.

This can hit obstacles the more policy changes are delayed. It can also be contorted into a hollow argument that market-led policies can be implemented under a developmental umbrella, which is merely impractical.

Developmentalism has been forwarded as a tool for advancing the interests of citizens. And while it has had benefits in helping stimulate the economy, the lack of inclusive political institutions led to the economic model being abused. Worse, the growth of monopolies weakened competition and created an economy that failed to be dynamic. As a result, the nation’s economic fate has been tied down to a few commodities.

The current model has taken the nation’s economy to double-digit growth and poverty reduction. But it is unraveling before our eyes as can be witnessed on the macroeconomic front. There needs to be a transformation in policy making. And to realise it fully, more space needs to be given to debates and discussions.

On such a platform, the value of comprising and allowing the private sector to play its part will be made clear, which should drive public opinion. Popular support can give the government the stimulus to drive forward reforms, especially in fiscal and monetary policies as well as liberalisation of the service sector.

The current mindset of the public and, more worryingly, government institutions is that the status quo still has some fruits to bear. From the National Bank of Ethiopia to the Ministry of Trade & Industry, ministries are operating with the mindset that businesses pose a threat to the economy.

After months of major reforms in the political reform, the economic front remains painfully distressed. This has more to do with the fact that economic institutions largely continue to be staffed and led by the same people that have been around for decades than the view that the political situation is sucking all the attention.

Different management with different perspectives needs to be brought to the fore, and associations that represent the private sector need to be strengthened so they can lobby for the changes they desire. The combination of these can lead to a smoother transition and realise liberalisation and World Trade Organisation membership sooner.

But this can only be achieved if economic institutions can be detached from undue influence by politics. Indeed, political and economic ideologies cannot be divorced, but this does not mean that institutions such as the central bank should be swayed by politics.

The argument of those that advocate market-led economics should be anchored on the model’s superiority in improving the quality and quantity of services and goods. A liberal economic environment encourages competition, which leads to the most efficient allocation of labour and capital. It is on this end that we can find competitiveness, which the developmental state has curtailed for too long.

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PUBLISHED ON Feb 23,2019 [ VOL 19 , NO 982]

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