Dula's Blog

Guerilla Economics  – Hard to Understand

Dictator Meles and former Marxist guerilla leader may be providing western media including Bloomberg with bogus economic data. Recently, Bloomberg compared Ethiopia with the BRIC nations(Brazil, Russia, India and China) as possessing one of the fastest growing economies.  Given the current institutional constraints, such as  government control of the major means of production,  including housing stocks, all land, Internet etc. , it will be highly improbable if not impossible for the Ethiopian economy to enjoy the same growth like the BRIC nations. Unlike China or India, direct investment in Ethiopia is limited by the Ethiopian Diaspora or foreigners because of the high risk the country poses due to the lack of rule of law, which is manifested in the need sometimes to pay protection money to government agents and  often to members of Meles tribe.

Claims that the Ethiopian economy will grow  10-14.5% per annum in the next five years , much higher than the achievement of the BRIC nations  is highly improbable  for a country like Ethiopia. There are many reasons why the Ethiopian economy cannot enjoy similar or faster growth than the BRICs, because the current regime denies Ethiopians access to technology, voluntarily made Ethiopia land locked,  and provides no property rights or rule of law to protect  investors.  These factors discourage Ethiopia from achieving rapid economic growth. Of course, the injunction of ethnocentrism also causes the misallocation of resources and inhibits the free flow  of capital to its efficient destination with in Ethiopia.

BRIC nations can brag for growing their economies  with demonstrable benefits to their citizens such as job growth and  capital formation,  instead of imposing  price control and throwing business owners to jail as is the case in Ethiopia.  This is what some call truly dictatorial economics, where the ruler controls everything; land, Internet, cell phone, etc. , but assigns blame when the economy starts to stumble.

Dictator Meles claims that the Ethiopian economy will double in 5 years, that would require the economy to grow at or above 14.5% a year with zero inflation or if one were to include the current inflation level, the economy has to grow by 29% per annum, an economic feat never achieved before.   

For the last 20 years  Meles promised  free and fair election to appease international donors and to bring hope to the suffering people of Ethiopia, but when people voted to oust him in past elections, he used bullets to silence them.  So his economic projection of doubling the economy in the next five years may be another way  to prolong his rule with a false promise.  For the last 20 years, the Ethiopian economy grew on average  3.6%, significantly lower than other developing countries.

 Currently, Ethiopians are going through a severe economic situation, as in the past,  Meles is blaming the business community instead of his own wrongheaded policy, this includes the balkanization of Ethiopia,  lack of property rights, lack of access to technology, lack of transparency, and rule by an ethnic minority that also raises the risk premium against any investment in Ethiopia.

Meles’ attempt to control inflation using price control misses the point. The price control strategy as witnessed in the U.S. in the 70’s under president Nixon does not work.  Now the regime is engaged in the blame game with its faltering economy. The government is lashing out on defenseless businesses by taking their property and throwing them in to the dungeon. Hardly a solution to a seriously flawed economic policy pursued for the last 20 years  with state control of the vital organs of the economy and printing money, which is the primary cause of inflation in the absence of real economic growth and productivity.

Retired opposition leader and former World Bank director, Bulcha Demeksa described recent government price control measures as “classical dictatorial” response to a failed economic policy.

Meles has refused to do the obvious despite the advise of the international community and sometimes of his own advisors, free the economy from the shackles of state control and establish  property rights and the rule of law.

In many economies, the government sector is one of the smallest and the least contributor to economic growth. The Marxist regime believes otherwise.

The Ethiopian people should stop buying  government  propaganda such as blaming businesses instead of the economic policy  promoted by Meles, which is driving prices and misallocating resources.

Ethiopian businesses and consumers need to rally against the farce and dictatorial economy of Meles and his ploy to  blame others instead of his failed and flawed economic policy to avoid unnecessary bloodshed and conflicts among Ethiopians.  It is also well known that  Ethiopians continue to suffer  drowning in the Indian Ocean or getting killed in refugee camps fleeing this draconian dictatorship.

 The current regime, besides denying the Ethiopian people their basic human rights, may also denying them the opportunity to create a viable economic system for current and  future generations to come.  What is going on in Ethiopia under the current dictatorship some argue being equivalent to undeclared war on liberty and the very survival of the Ethiopian people and the Ethiopian nation.

Dula Abdu, a real estate and investment consultant and a former banker, and adjunct professor of economics.  He can be reached at dula06@gmail.com or www.ethiodemocrat.org