EthioPoint: Ethiopians Analysis | Research Articles

Who Benefits from Economic Growth in Ethiopia?

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By Woldeyesus G Mariam
“Economic Growth,” refers to an increase in real national income or Gross Domestic Product (GDP), and may also be expressed as an increase in per capita income. Many notable Ethiopian economists, intellectuals, and journalists have discussed this issue in an attempt to determine the veracity of the government’s claim of over 10 per cent annual growth for over a decade.

An underpass in Ethiopia's capital Addis Ababa, in May. REUTERS
An underpass in Ethiopia’s capital Addis Ababa, in May. REUTERS

To determine whether or not economic growth has benefitted the Ethiopian people, it is worthwhile to examine the population’s standard of living overall. Interestingly, when we do so, we see that in the city of Addis Ababa, and elsewhere in the country, the people are poorer than ever, more families are suffering, and more and more people need help, but cannot find it. Even worse, there is a large population of homeless people who sleep on the city streets, as well as ghettos, where thousands of young people without jobs, education or hope waste their lives becoming a burden and unproductive members to society.
Inequality has also increased, such that 30% of the population, or 28 million Ethiopians, now live below the poverty line. Thus, despite the apparent fast-growing economy, the country remains one of the poorest in the world.
The following are some of the specific economic outcomes indicating what is being produced, as well as who benefits from it.
Concentration of wealth
It is obvious that only a handful of government bureaucrats and their business affiliates benefit from whatever growth there have been. They hold unparalleled economic and political power while the majority of the Ethiopian people experience high levels of both chronic and acute food insecurity, particularly small-holder farmers, and the rural population in general. Ethiopia is mired in a fiscal crisis fueled by soaring inflation, loss of purchasing power, and mass currency devaluation. This has benefited the few and impoverished the rest, thereby setting the country up to potential social unrest and conflict. Adam Smith (1776), one of the fathers of modern economics, believed that if a society is governed well, people who pursue their own happiness would also provide for other people’s happiness. Ghanaian economist George Ayittey, concluded that, “Africa is poor because she is not free.” Robert Guest, business editor for The Economist (2004), declared that, “Africans are poor because they are poorly governed.”
Sub-standard education
Education is an important determinant of welfare and happiness. It is important to raise educational standards that will increase the population’s literacy rate and promote a greater diversity of skills. McClelland (1966) concluded that education is not only a precondition for, but also a necessary factor in economic growth. To bring about change in any existing system is a difficult task, no less so than in Ethiopia, where goodwill effort and patience will be required. However, it will be more difficult to transform Ethiopian educational institutions, because they are controlled by a centrally planned and standardized curricula produced through the Ministry of Education (MOE). As a result, children in the primary grades read at un-acceptable levels and are not developing a strong foundation for lifelong learning. School children above grade 10 (ages 15-16 years) are required to attend indoctrination sessions in the ruling party political and economic ideology rather than concentrating on academic studies. Although officially illegal, but in practice admission to colleges is dependent upon membership in the ruling political party. Party membership is also required to secure government jobs after graduation. Teachers, civil servants, and judges are pressured to join the party and adhere to party doctrine. Currently, the government is obsessed with a rhetoric about education reform and overhaul. In the meantime, the children of party officials and members of their extended families are sent to schools overseas or to special private schools in the country.
In general, economic growth helps improve the quality of life through better access to healthcare that increases life expectancy. However, Ethiopia has only one medical doctor per 100,000 people, and an average life expectancy of only 48 years. This is because although Ethiopia produces a large number of qualified medical professionals, it is experiencing one of the highest “brain drains” of professionals than any country in the world. Such professionals are attracted by individual freedom and better working conditions overseas. As a result, those who can afford it, government officials and their allies, send their family members outside of the country for medical treatment or even to give birth to “anchor babies” with foreign citizenship, while the majority of Ethiopians do not have access even to basic medical services or clean water. Although significant foreign aid is reportedly spent on health care, a big chunk of it is known to be mismanaged as can be attested by the chronic lack of medicine and quality care.
Unemployment and poverty
Typically, economic growth reduces unemployment by creating jobs. This is significant because lack of jobs is a major source of poverty. Youth unemployment is reported to be over 70%. With no hope for work an increasing number of graduates from high schools and colleges take the risky and dangerous trips to join the masses of migrants in the Middle East, Europe and Africa, where many perish or suffer unimaginable abuse.
Mis-use of Foreign aid
Foreign aid is one of the many tools that can improve the quality of life and help meet many basic needs. Ethiopia has received billions of dollars in developmental aid. For example, the U.S. gives Ethiopia approximately $800 million in aid annually. However, the question is, who is receiving, and who is responsible for distributing the foreign aid. Obviously, the aid is manipulated along partisan ideological lines. The government has used aid as a political weapon to control the population, punish dissent, undermine political opponents, and increase the wealth of its allies. Based on their track record, officials of the ruling party have used foreign aid to oppress the very people it is intended to help, and have sequestered some of the money in their foreign bank accounts. There is a general agreement that foreign aid is far less effective in countries that are poorly governed and corrupt, and indeed, can prove counterproductive. Some economic studies have denounced traditional foreign aid because it enables predatory, parasitic institutions to continue their corrupt and destructive policies indefinitely. Economic studies have found that individual freedom, good governance, and the rule of law are key drivers in promoting economic growth and reducing poverty. Ana Gomes, a career diplomat who serves as member of the European Parliament, expressed her disappointment that foreign aid has failed to benefit those who fight for justice and democracy and that it has actually increased the potential for conflict in Ethiopia and Africa in general. She stated that the politicization and manipulation of aid distribution by the Ethiopian ruling party violates international law and all standards of moral decency. She stated further that those countries that provide aid must take urgent action to ensure that this immoral practice comes to an end. Donors are well aware of the human rights abuses that take place in such countries, but have ignored the repression of civil and political rights, and remained deaf to appeals for justice and freedom. She concluded by saying that the silence on the part of Western governments amounts to collusion, and constitutes a gross misuse of taxpayers’ money and a betrayal of international human rights laws. From a macroeconomic perspective, the donors’ taxpayers’ money has greatly contributed to prop up Ethiopia’s dictatorial regime. These are some of the economic realities in Ethiopia under the current repressive government.
Pervasive Corruption
Several watchdog organizations have stated that the disparity in wealth can be attributed to corruption. In 2014, Transparency International ranked Ethiopia as one of the most corrupt nations in the world. The report alleged that there was minimal transparency in public institutions, minimal oversight of civil servants, and widespread bribery. This dismal score is a sign that corruption is endemic at every level of the government, and there is no punishment for corrupt officials and institutions that do not respond to the citizens’ needs. The Indian Ocean Newsletter stated that corruption in Ethiopia, as in the Mafia, is a family affair. The report added that many officials of the TPLF have a reputation for having amassed huge wealth and enjoyed unwarranted privileges.
According to the Economist Intelligence Unit, “corruption in Ethiopia poses various problems for the business environment, as patronage networks are firmly entrenched and political clout is often used to gain economic prowess.” The report confirmed further that, “political parties belonging to the ruling party have established companies which include banks and insurance companies. The ruling party also runs other business conglomerates in construction, agriculture, transportation and import and export of key products, including fertilizer purchase and distribution. The companies with party affiliation receive preferential treatment for licenses and permits. Transparency International’s Global Reports make it clear that corruption in Ethiopia has worsened, and one of the most corrupt practices is that related to land allocation. Despite its importance to the agricultural industry, it lacks appropriate oversight and regulation. It is obvious that the country’s economic growth is neither open nor inclusive nor sustainable, because the mechanisms of government are set up to benefit only a handful of its supporters and business affiliates.
The regime is known as well for severe human rights abuses. They spy on every citizen, and opposition forces are silenced brutally. In violation of international law, and in the name of national security, political activists, journalists, and bloggers have been imprisoned and tortured for writing critical reports or dissenting views. Former detainees have described being held under horrific conditions, including being hanged by the wrists. The regime has failed to provide good governance that is the most critical determinant of sustainable development. The party leaders make policies designed primarily to indefinitely remain in power by avoiding the risk of a revolution. The Ethiopian constitution and federal laws conform officially to universal legal standards, and are cited conveniently by politicians and diplomats, but in practice, they are ignored, unenforced, and mean nothing to the people.
Peaceful change in the existing Ethiopian political system appears to be impossible. The TPLF/EPRDF regime has catapulted itself to power successfully through the barrel of the gun, and has ever since compromised the country’s long-term interests with its misguided fiscal, economic, educational, and military policies. The institutionalization of ethnic-based governance has been promoted to nurture inter-ethnic conflict among citizens who for centuries had lived in relative harmony. At present, armed struggle is the only choice for Ethiopian opposition forces to save “deprivation of liberty”. It is understandable that the opposition forces can disagree about some of the particulars, but they cannot deny the need to be responsible in this regard. It is also worthwhile to engage and recruit Ethiopian rank-and-file military forces to help this cause and protect Ethiopia from disintegration.
Malcolm X (1965) had said, “We declare our right on this earth to be a man, to be a human being, to be respected as a human being, to be given the rights of a human being in this society, on this earth, in this day, which we intend to bring into existence by any means necessary.”
Freedom Matters
The writer can be reached at [email protected]