The Voodoo Economics of TPLF/EPRDF in Ethiopia
Ejigou Demissie, Ph.D.
Associate Professor, University of Maryland,
Eastern Shore, MD
Since the end of World War II, the economically advanced nations, particularly the US, have poured considerable resources into Ethiopia. The purpose of this aid, as has been said many times, is to improve the living standards of the population through increased economic growth of the country. But Ethiopia today is one of the 22 least developed countries in the world. In fact, on the basis of per-capita income per year, the country is ranked lower than its neighbors in the Horn. Over 80% of the total population of Ethiopia who lives in the country side (rural areas), still is engaged in small-scale agriculture using primitive methods of farming resulting in low agricultural productivity that is insufficient to meet the basic needs of the country's population. Low agricultural productivity has in turn resulted in low incomes, promoting migration into cities adding to unemployment and creating slums. In addition, illiteracy and poor health are prevalent among the population.
The goals of any government that is democratic should be to solve these problems of Ethiopia as soon as possible through implementation of policies that would:
(1) increase the level of employment and literacy by providing access to education,
(2) increase the national income, and
(3) improve the health of the country's population by providing services such as treated water supplies, medical facilities, and good roads.
Instead of doing such sensible things, the TPLF/EPRDF leadership which claims to be "democratic", ignited the flicker of ethnic fire in the country. As a result, the Ethiopian society that has, in large measures, transcended ethnicity is being forced to regress into ethnic politics which has been tested and failed in Liberia, Rwanda, Somalia and Bosnia-Herzegovina. In addition, TPLF/EPRDF has been busy dismantling all functional social, economic, and political structures, and replacing them with surrogate groups or individuals serving the interest of TPLF/EPRDF.
Economic "Reform" Programs
In its 1991 transitional economic policy plan, the TPLF/EPRDF has the following to say about the previous government's economic policies. "The reasons behind Ethiopia's economic crises are many and varied. Foremost among them is the anti-democratic nature of the regime (Derg) which trampled upon the human and democratic rights of the people. The totalitarian regime had denied the people the opportunity to participate in all issues that concern their lives and became a major hindrance to economic growth." The fact of the matter is that in the past four years the TPLF/EPRDF has given no opportunities to the Ethiopian people (except its political cronies) to play any role in the social, economic and political development of their country. The following are three illustrations of the voodoo economic "reform" programs (polices) of TPLF/EPRDF, which are ethnically and regionally skewed, of the past four years.
Instead of galvanizing the support of Ethiopians and promoting national development affecting all regions of the country, the leaders of TPLF/EPRDF have focused their economic development policy towards the Tigray province and the so called "independent nation of Eritrea". As a result they created more economic disruptions affecting the level of welfare of the large segment of the Ethiopian people. For example, by influencing the distribution of benefits of development to their own ethnic regions, they further skewed income distribution, increased abject poverty and unemployment in the country.
However, the primary function of regional development of a government that claims to be "democratic", must be to promote national development affecting all regions of the country. The selective regional development policy of TPLF/EPRDF is designed to improve only the economies of these two regions, at the expense of the rest of Ethiopia. Unless their activities are halted soon, the gap of economic development between regions in Ethiopia will continue to widen an abated, with the frightening results that Ethiopia will remain underdeveloped and hundreds of millions of desperately poor people throughout the neglected regions will be further hurt.
Structural Adjustment Policy (SAP):
The "implementation" of SAP by TPLF/EPRDF has not brought any economic benefits to Ethiopia and her people. The fact of the matter is that it has been used to dismantle the country's enterprises, educational institutions, and create further poverty affecting the health and well being of the country's population. In fact, the economic performance of Ethiopia since the SAP has been worse, even by the standard macroeconomics indicators favored by International Financial Institutions (IFIs) such as the International Monetary Fund (IMF) and World Bank (WB), than what was observed under previous governments. The country's GDP, level of investment, revenues (both internal and external sources) have been deteriorating since the TPLF/EPRDF took power in 1991. On the other hand, the country's expenditures, fiscal deficit, imports and debt service ratio have significantly increased.
For example, based on the assumption that it will increase export values, the country's currency under SAP was devalued. But the result of devaluation has been a consistent decline in the export transactions since the country couldn't improve her productive capacity, and couldn't compete in the international market. Productivity or competitiveness couldn't be improved due to high input prices resulting from the devaluation of the currency, as well as the inflationary pressure resulting from the country's budget deficits. The overall effect of Ethiopia's declining export performance has been a further devaluation (three times so far) of her currency.
The result of further devaluation has been for Ethiopia to pay more for imports and receive far less for exports. Paying more for imports resulted in bringing higher prices for many basic consumer staples, including food and fuel, severely affecting the overall social conditions (incomes, living standards) of the majority of Ethiopians. On the other hand, earning less foreign exchange resulted, and will continue to result, in the inability of the country to adequately pay some of her external financial obligations. In short, the voodoo economics of TPLF/EPRDF has not been successful in improving economic development in Ethiopia.
If there is any improvement in the country's economy at all, it has been in the regions of Tigray and the so called "independent" Eritrea, and it has not been due to the SAP, rather due to the high reliance of TPLF/EPRDF on external financing such as the significant new loans and foreign aid (which have to be paid by Ethiopians), and other means of relief it received from its western supports, particularly the US. In fact, contrary to the beliefs of TPLF/EPRDF and its Western supporters, what loans or foreign aids are doing in Ethiopia today is create undesirable social, political, and economic environment by strengthening TPLF/EPRDF lead government which is oppressive, undemocratic, totalitarian, and has no mandate to govern Ethiopia to stay in power. In other words, rather than shifting Ethiopia's economic policies in the direction of democracy, free enterprise, and respect for human rights, the voodoo economics of TPLF/EPRDF and its Western financiers is contributing to the economic deterioration as well as political and social crises of Ethiopia.
Policy objectives of true privatization are to improve production efficiency, competition, and quality of products and services, as well as to widen the distribution of ownership by selling off public enterprises in a country. For example, if the objective is to redistribute wealth to the Ethiopian people, an obvious option is to sell the enterprises to the employees of the affected businesses or to small investors with limitations on the number of businesses any one individual may acquire.
First of all, what is really being done in Ethiopia under TPLF/EPRDF is not "privatization", but expropriation of the country's assets and enterprises (owned and controlled by all Ethiopians), to the Tigray and Eritrean minorities. Second, the TPLF/EPRDF government is simply substituting private monopoly for the public one. But, converting public monopolies into private monopolies is not creating competition, in fact there is no connection between the two. Third, assuming that what TPLF/EPRDF is doing is "privatization", instead of the objective being the wide distribution of ownership to the Ethiopian people, it is blatantly using "privatization" to satisfy its plan for a rapid Tigrayization and Eritreaization of Ethiopia's economy by "selling" off businesses and assets owned by all Ethiopians to these group of people at less than perceived values of what was originally invested.
Among many other reasons, TPLF/EPRDF is doing this to allow itself to maintain the stance it began in 1991 that it is the protector of special interests of Tigrayans and Eritreans at the expense of some 50 million other Ethiopians. However, many members of this ethnic group, have neither the capital nor the technical skills to run the privatized businesses. But, most reliable sources indicate that since it is in its own interest, the TPLF/EPRDF has helped them to acquire capital in two ways: (1) granting them easier and extended financial terms of its own, and (2) being a guarantor of debts obtained from donor agencies and development banks to acquire the country's public enterprises.
On the other hand, the TPLF/EPRDF leadership was blocking other Ethiopians with their own capitals (The Gurage Businessmen for example) as unacceptable buyers of these public enterprises. First, the exclusion of other Ethiopians from competition in "privatization" is a highly disingenuous and destabilizing action by TPLF/EPRDF. Second, the sad reality is that in case of default of the Tigray and Eritrean "entrepreneurs", it is the Ethiopian people (the unacceptable buyers) that have to pay the TPLF/EPRDF guaranteed debts. Politics has become one of the most lucrative source of income to ethnic minorities than the majority of Ethiopians in TPLF/EPRDF "democratic" government.
In the final analysis, the so called "privatization" which TPLF/EPRDF, as well as its Western financiers (IMF and WB) see as important to economic development will fail either through mismanagement and/or corruption. In addition, the substitution of private monopoly for the public one, will not result in greater efficiency, more competition or cheaper, better quality products and services. Without higher productivity, there will be no higher employment opportunities to improve the purchasing power of the population to increase demand for products and services produced by the so called "privatized businesses".
For the past four years a growing and strong opposition to TPLF/EPRDF ethnic based rule has created political instability in Ethiopia. Under this condition, TPLF/EPRDF could not have implemented any meaningful economic "reform" programs that would generate any kind of economic growth in the country. In an environment of political instability, it is nearly impossible to improve production services, incomes, collection of revenues and control the flow of export commodities. It is, therefore, absurd to hear claims by TPLF/EPRDF and its Western supporters that Ethiopia's economy has improved since the implementation of economic "reform" programs such as SAP.
The brief analysis of some of the voodoo economic "reform" programs (policies) implemented in Ethiopia, showed that they have been used to accomplish TPLF/EPRDF own political interest, rather than shifting Ethiopia's economic policy in the direction of what is best for the entire population of the country. For example, the "privatization" of the Ethiopian peoples property to ethnic minorities was engineered not to improve economic growth in Ethiopia, rather to give special advantage to Tigray and Eritrean ethnic groups. In fact, the implementation of these programs have contributed to further economic deterioration as well as political crises in Ethiopia.
In addition, the financial aids of the Western powers to implement the TPLF/EPRDF "reform" policies, have not been used to improve the living standards of the Ethiopian people, nor to bring democracy and human rights which will empower the individual and the population as a whole (which they want us to believe), it is to promote their own "strategic" interests and that of the TPLF/EPRDF. In fact, the only thing that the Western powers have accomplished in Ethiopia is to bring a divisive government into power in the history of the country through the arrangement by Mr. Herman J. Cohen of the military occupation of Ethiopia by the TPLF/EPLF guerrilla organization which is creating havoc in the country.
The TPLF/EPRDF government has no support of the Ethiopian majority, and without a long term commitment by the Ethiopian people there will be no sustainablity of so called economic "reform" programs started by TPLF/EPRDF. The Western powers and their IFI's should know this. In fact, the Western powers know that a fundamental requirement to an initiation of economic "reform" programs such as "privatization" by any country is dependent on whether or not the government has any legal power to dispose of public owned properties. The TPLF/EPRDF does not since the freedom for TPLF/EPRDF to dispose of public property depends on fundamental and important documents known as national constitution that is made by the people for the people. Except in the minds of TPLF/EPRDF and their supporters, there is currently no constitution in Ethiopia that is debated and approved by the majority of the country's population that defines Ethiopia's social, political, and economic destiny.