Baking a Country to Prosperity on Borrowed Yeast

Baking a Country to Prosperity on Borrowed Yeast

Jul 5 , 2025. By Ahmed T. Abdulkadir ( AhmedT. Abdulkadir (ahmedteyib.abdulkadir@addisfortune.net) is the Editor-in-Chief at Addis Fortune. With a critical eye on class dynamics, public policy, and the cultural undercurrents shaping Ethiopian society. )

When my father retired from the civil service years ago, he opened a narrow bakery, with four walls, an iron oven, and a hopeful sign. It sent hot loaves to schoolchildren racing to the morning bell. For me, a teenager drafted into wage-free summer shifts, the shop was a seminar in political economy.

At dawn on the first of every month, he joined a line at the cooperative, waiting for the government truck to arrive. Among burlap sacks and nodding pensioners, I met Ethiopia’s “developmental state” in physical form: subsidised flour bearing bureaucratic seals.

The model does not tiptoe into commerce. It dived. It owns land, channels bank credit and scripts production. Late-industrialising countries prize it as a shortcut from plough to factory. Instead of patching market failures, it determined to design the market itself, armed with five-year plans and mandatory targets. Ethiopia, under the EPRDFites, embraced that playbook. Party economists cited South Korea and China, convinced that strong guidance could vault a subsistence agrarian base into middle-income ranks. Growth became a national creed; the state would be the engine, the engineer and the referee.

Our bakery sat on the fringe of that machinery. Cheap flour lowered costs, so even humble bread might attract capital. Yet, the decree that granted the subsidy also fixed the retail price, a hedge against unrest that empty stomachs can ferment. Every bag of flour was both a lifeline and a leash.

Morning sales blurred, 30 sweaty minutes of flying buns and clinking coins. By noon, the alley fell silent, and I stacked five- and 10-cent pieces into brittle towers, rehearsing sums my father called “negotiated profit margins.” The state gave with one hand and squeezed with the other. From the government’s perch, small shops like ours were conduits of stability. We kept bread flowing, bellies full, and tempers cool.

In return, profit margins grew so thin that one could read the fine print of policy through them. Subsidies softened blows, but ceilings cemented revenue. Survival reduced itself to self-exploitation, an extra shift, a skipped repair. Keep bread cheap and small outfits endure only by stretching hours and underpaying themselves. Raise prices and risk riots. Neither planner nor proprietor could escape the bottom line. Margins wilted with every uptick in rent, yeast or fuel.

Those days revealed another rule. Subsidies were safer for policymakers than real investment. They could be granted or withdrawn overnight, toggled to douse public anger. Flour arrived at a discount, but the paperwork that accompanied each sack felt heavier than the grain. It spelt out not only cost but conduct, right down to the gram.

When inflation breached double digits or foreign-exchange reserves were depleted, the truck would often show up late or not at all. The subsidy, never large enough to build stockpiles, could not cushion the gap. My father tried stretching dough with extra water, a longer proof, anything to postpone the inevitable. Each workaround confirmed that the developmental state’s safety net was woven with short fibres.

One slow week blurred into another until he swept the floor, killed the pilot flame and locked the gate. No formal bankruptcy, only attrition, one vanished customer at a time, and a final shrug over the flour dust.

The closed storefront mirrored larger fissures. Between 2004 and 2019, GDP per capita leapt from 136 dollars to a little above 1,000 dollars, and annual output expanded at an average rate of 9.5pc. Massive public investment and cheap credit fueled the surge, but structural change lagged.

Manufacturing’s share of output barely changed, remaining near 4.5pc from 1991 through 2017, a stubborn “missing middle.” Billions steered to micro and small enterprises created jobs, but seldom lifted productivity, constrained by the very rules meant to nurture them. The state’s industrial vision often leapt past the corner shops that form the backbone of the economy. That missing middle was visible on any drive from Addis Abeba to the regions—vast industrial parks on the horizon, informal stalls at every bus stop and almost nothing in between. Factories house machines but few workers; stalls hold workers but little capital.

The gulf between them is what the developmental state, for all its muscle, has yet to bridge.

Billions of Birr flowed into Micro & Small Enterprises (MSEs) programs with the slogan of “job creation.” Loans were cheap, training plentiful, yet most firms stayed small, locked out of supply chains. Productivity hardly budged, and many enterprises rotated in and out of existence exactly as our bakery did, quietly, without paperwork, noted only by a shuttered door.

Critics argue that the model misinterpreted motion for progress. Support came in the form of rules rather than risk capital, discipline rather than oxygen. Proponents counter that discipline kept Ethiopia’s growth story intact for more than a decade. Both claims draw support from the same facts.

Giant dams and a sleek railway won headlines, yet repayments swelled external debt, and currency shortages choked importers. Policies that assume perfect logistics unravel when the truck stalls. After our closure, smaller stalls followed, then vendors who had once bought our rolls, illustrating how thin margins can transmit shock through a community.

Officials defended the compact on the grounds of social peace. “A loaf is cheaper than a protest,” one veteran bureaucrat liked to say. The logic worked, until it did not. Flour deliveries can calm a street, but they cannot build an economy.

Economists now pick over those “fault lines,” asking whether a system that can lay concrete can also cultivate competition. Our bakery offers a field note. Subsidies, quotas and ceilings kept bread affordable, but they also throttled the small-scale capitalism the policy claimed to promote.

The scent of fresh dough still pulls me back to those pre-dawn waits at the cooperative, but nostalgia shares space with caution. Baking a country to prosperity takes heat and patience. Turn the oven too high or clamp the door too tightly, and the loaf collapses before it leaves the pan.

PUBLISHED ON Jul 05,2025 [ VOL 26 , NO 1314]