Dula's Blog

The World Bank unravels Meles’ voodoo economics by declaring it ” unsustainable”. In departing and frank remark, Ken Ohashi, World Bank’s director for Ethiopia, said Ethiopia’s five-year plan is a fantasy ” short of discovering huge oil reserves.” on June 8, 2011 to Bloomberg News.

He asserted that besides unrealistic saving and growth assumptions, the government  domination or monopolization of key industries such as telecommunications, banking,  power generation, are the major road blocks to Ethiopia’s economic growth and viability.

As stated in my February, 2011 article entitled “Guerilla Economics” Meles, the Ethiopian dictator, has been  providing western media including Bloomberg with bogus economic data.  For example,  Bloomberg compared Ethiopia with the BRIC nations (Brazil, Russia, India and China) as possessing one of the fastest growing economies. 

Slick marketing aside, given the current institutional constraints, such as  government ownership of the major means of production and restricted access to technology to Ethiopia’s 83 million people,  it will be highly improbable if not impossible for the Ethiopian economy to enjoy the same growth like the BRIC nations. For example, in China citizens are denied much of their freedom, but their government has been able to provide them with steadily rising standard of living and good education. To the contrary in Ethiopia, lack of  basic freedom is compounded by steadily deteriorating standard of living and poor education, causing a significant proportion of the population to suffer starvation. Insecurity created by the regime, such as lack of property rights, lack of access to technology, and the vagaries of nature are creating a vicious cycle that is starting to spin faster and faster.

 According to Helpage International, an NGO based in UK, ” Food price has trebled in the last three years.”  http://www.helpage.org/search/blogs/?bid=283&keywords=ethiopia. According to the same agency, approximately 1,070 older people surveyed in Addis Abeba  last year,  845 or 79%, said they ate only once or twice a day. Price hike means less food.  Furthermore, The New York Times, May 12, 2011 article confirms  that under Meles  “More than 13 million people in Ethiopia are kept alive by sacks of grain and cans of cooking oil from the United Nations World Food Program.” The paper stated again that the situation is unsustainable and the number of starving people will grow; the number of bags of food needed to keep them alive will grow too.

Of course, there are  other reasons why the Ethiopian economy cannot enjoy similar or faster growth than the BRICs,  besides blocking access to technology, Ethiopian Diaspora remains unwilling to invest its tremendous intellectual and financial capital in Ethiopia because of the government’s ethnic policy, lack of  property right protection and runaway inflation.   Furthermore,  the injunction of ethnocentrism inhibits the free flow  of capital to its efficient destination with in Ethiopia and causes the misallocation of resources.

Despite these problems, Meles claims that the Ethiopian economy will grow  10-14.5% per annum in the next five years, much higher than the BRIC nation,   without even considering lack of the primacy of  the rule of law, property rights, free market economy or Ethiopia’s lack of  free access to the sea for flow of goods and services.

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.

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. However,  if one were to include the current inflation level, the economy has to grow by 49.2% per annum, an economic feat never achieved before.  According to Bloomberg, inflation accelerated to 34.7% in May from 29.5%  the month before.  It was 64.5% last year.

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, especially in the 2005 election, 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, worse than any time in history,  Meles is blaming the business community instead of his own wrongheaded policy, this includes the balkanization of Ethiopia, government domination of key industries,  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 advice 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. At the same time, recent price jumps have worsened the hunger situation in urban areas as well as in the rural areas. The rapid rise in population has outstripped Ethiopia’s ability to meet demands for major staples such as teff,  wheat, corn, berbere and others.

While the economy continue to get worse, the Ethiopian people are encouraged  to buying into the divide and conquer scheme planted by the regime in terms of tribe, religion, business against consumer, even though these are less relevant than solving their own and future generation economic survival.

To divert attention from the current economic crisis that the country is facing, Meles found two foreign adversaries, Egypt and Eritrea. The scheme to build the Millennium dam and declaring war on Eritrea were concocted to stem the revolutionary wind blowing from the Middle East against dictators and to beguile some gullible nationalists rather than to bring relief to the suffering people of Ethiopia

The current regime, besides denying the Ethiopian people their basic human rights, has  also denied them the opportunity to create a viable economic system for current and  future generations to come. The current scheme by the regime amounts to an undeclared war  on the very survival of the Ethiopian people and the Ethiopian nation or to put it mildly,  an economic genocide.

In the past, Meles talked a good game, offered much-ballyhooed proposals, but this time he went over the top by putting forward a  voodoo economics proposal, with an extra fantasy, and a mean-spirited hoax on the people of Ethiopia.

Dula Abdu, a real estate and investment consultant and a former banker. He can be reached at dula06@gmail.com or https://ethiodemocrat.org