Structural Problems of Economic Development and the Role of the State: A Lesson from Ethiopia's Past Experience, 1855- 1913.

Tsegaye Tegenu


Doctoral Candidate, University of Uppsala

Uppsala, Sweden


About 80% of the poor people in Ethiopia are located in rural areas and are primarily engaged in subsistence agriculture. If development is to take place and become self-sustaining, it will have to start in the rural areas or in the agriculture sector.

The core problems of widespread poverty, rapid population growth and rising unemployment all find their origins in the stagnation of economic life in rural Ethiopia.

Notwithstanding the urgent needs of tackling this reality, recent reforms appear to be dominated by politics and ideological consideration. Division of the country into ethnic-linguistic groups, formation of bureaucratic structure in the regions, drafting of constitution, granting of the right for secession, displacement of people on the basis of ethnic origins, introduction of the Latin alphabet, etc. have been given priorities. It is in this context and framework of political infrastructure that economic development problems are addressed. A clear illustration is the case of rural land question, which is the concern of the majority of the Ethiopian people. This problem is not yet debated, leave alone to recognize its solution by way of development policy.

Government officials on the other hand claim that the process of economic reforms is being undertaken through Structural Adjustment Program (SAP), in spite of the mounting critic raised against its implementation.

There is thus a debate as to the kind of political economy which the country has to follow, and the search for the "prime mover" which gives an internal dynamic for development. The issue is not only an accordance of precedence given to the economy, but a question of who can benefits from the reforms? For that matter the Derg regime has undertaken a series of measures which nationalized land, enterprises, banks, insurance, etc. It also introduced collectivization, villagization, and central planning. These measures were intended to transform the economic relations. But who benefited from the reforms? Indeed the problem is complex. Taking past experience into consideration, this essay aspires to contribute to the understanding of the relationship between structural problems of economic development and government objectives. It tries to present a condensed view of the structural and economic problems between 1600-1855. It then proceeds to analyze government polices and reform objectives poised in the period between 1855-1913.


Chronicles and traveler accounts of nineteenth century portrayed the prevalence of poverty and unemployment in the agricultural sector, particularly in northern and central Ethiopia. The causes were complex including both economic and non-economic problems. The attempt here is to see the problem from the economic context. No economic model or theory is used to analyze and discuss the problem.

In this work the approach to the problem is given structural emphasis which concern internal process and domestic constraints of development. Until the turn of the nineteenth century, Ethiopia was not integrated into the capitalist world economy, and as such there was no problem of economic dependency. Consequently, no use of dependency theory is made.

The empirical evidences stemmed from normative material such as government regulations, inventories, collection of instructions written to provincial governors, and available government tax documents. Reference is made to research results of some dissertation papers, Masters and Bachelor degree thesis. Some relevant literature on the economic history of Ethiopia are also used. Owing to the fragmented nature of documents and the non-market nature of the economy, explanations of the essay are based on qualitative statements and very few of them are results of statistical analysis. Discussion of the problem is presented by sector along with major policies of the successive emperors.

I) Agriculture

Owing to the divergence in nature of institutions for instance, system of land tenure), farm methods (such techniques as ploughing, rotation system) and natural endowment, agricultural activities in Ethiopian were dominated by type of systems.

In north and central parts of Ethiopia it was dominated by a Rist system, where as in south there was mixed farming, settled agriculture with pastoralism (particularly, Oromo areas), pastoralist economy predominately in Borena and Ausa, and Enset plantation in Sidama and southern Shoa areas. The set of production of relations therefore differ depending up on the particularities of the mode of production, and the political settings of the regions. Economically speaking, these formations however had many features in common: production was subsistence, in most cases ownership of land was communal, household was the basic unit of labor production, and the societies were linked by long distant trade. It is beyond the scope of this paper to make a deeper survey of each mode of production. Relative availability of evidences make it proper to focus on the Rist system. In this system decision on the allocation, disposition and use of the village land belonged to the village community as a body. Land could be redistributed among village members as a result of either population increase or natural calamities like drought, floods, famines, war and disease. Within the community, families had the right to cultivate land for their own use. Payment of tax to the government was an obligation entailed to the use of land.

There are two questions which remain fundamental to the agrarian historical research of the Rist system.

1) How did the Rist social structure influenced either an increase or a decrease in agricultural output and productivity during the period between 1600-1855?

2) Problems of analysis of the role of the Rist system in stimulating economic development or stagnation.

The third point relates to an examination of government policy to generate transformation in the system of Rist during the period between 1855 to 1913.

The study is based on the hypothesis that the Rist system was characterized by low-productivity, subsistence farming and persistence for many years including the period between 1855- 1913. Combination of historical factors restricted growth output of the system. These factors can be explained in terms of the means of production namely land, labor and capital, and relations of production.

In the Rist system, the use of plough technology was supposed to enable the family labor to plant large areas, and exploit unused and potentially cultivable land. But there was problem in exploiting land and the agricultural work force. The land could not increase in acreage as a result of the dominance of the Rist ownership and land use systems. Under the Rist system the land of the village was divided into arable and pasture. Holdings of arable consisted strips of scattered land in different places including outside the village where the cultivator lived.

Strips were units in a crop rotation, and two field was common, in which one was planted with cereal and the second was left to fallow. Each year the fields shifted to the next phase in the sequence. Peasants had to follow this communally agreed plan, and, therefore, they could not cultivate and practice grazing as it pleased them without reference to the rest of the community.

The system perpetuates small strips without giving consideration to consolidation and increase in the size of farm land. Short of change in the property system, increase in use of land depended through claim of unoccupied land and/or clearing of forest areas. Abandoned lands and pasture lands belonged to the community.

Individuals had the chance to cultivate land outside the commune land. The land thus cultivated and enlarged was once again owned and shared by descendants. Shortage of cultivable strips led to litigation, forced confiscation of land and transfer. Often these measures were sources of conflict and tensions. The difficulties to increase the area under cultivation affected the volume of overall production in the Rist system

Land reclamation require labor and capital such as livestock and seeds. There was a "scarcity" of labor. We do not know the composition of the household labor, and it is difficult to tell its effect on agricultural productivity. The land cultivated by a household consisted a number of dispersed strips of fields scattered over the countryside faraway from the homestead, and this consumed the agricultural working time. Since peasants had access to land, hiring of labor was expensive. Craft work and other non-agricultural activities were drawing up the labor force outside agriculture. Most significantly, a considerable number of clergies and permanent soldiers reduced the size of labor force in agriculture. In areas dominated by the Gebar system, peasants were obliged to make tax payment in kind and to give services such as collecting wood and grass to the military nobility.

This had confined the freedom of disposition in terms of working arrangements, working time, and choice of cultivation. Labor supply in the Rist system was not available as one would suppose and this constraint on size of agricultural workforce had affected the volume of overall production.

Production was affected also by the number of work animals and equipment, aspects related to saving and investment. Raising of livestock on a larger scale present enormous difficult in pasture land and provision of fodder. Heavy taxation left small surplus in the hands of the peasant households. They used the surplus to cover social reproduction, leave alone to retain for saving. Even if peasants could manage to save, the very type of communal tax assessment and distribution, discourages household to invest in property for fear of burden of taxation.

There was poor credit system, and if any, interest was high, which in most cases forced peasants leave the land. The situation was such that it did not permit peasants to invest in agriculture. The nobility were interested mainly in military matters, not on increasing agricultural output and productivity.

Finally there were non economic factors such as bad weather, wars, and natural calamities which affected grain production and livestock. Chronicles are filled with accounts of such episodes. The net result of these economic and non-economic factors had been a relative constant level of output and labor productivity, which led to stagnation of agriculture in the Rist areas. Land, labor and capital factors were so interwoven that one part could hardly be changed without changing the other, one system reinforced the other. During the nineteenth century, this problem was further compounded by the existence of "surplus population", such as Wenbede (robbers), Shifta (rebel), Dej Teni (job seekers), etc. The causes could be different: scarcity of land as a result of partition, increase of population, and high rate of taxation.

II) Agricultural Policy and Reforms 1855-1913

Government's reform during this period focused more on the agrarian production relations. In this respect the state objectives were to maintain full employment in agriculture and to make sure of security in property rights in land.

Emperor Tewedros's first policy was reinstitution of the Rist land. He declared Beyabath Geba (literally go to your fathers land). In Shewa, for instance, the king declared that peasants could own the land of their fore-fathers, while those without any hereditary right to land were told to follow him. This declaration caused litigation, as peasants were uprooted by the tenancy system, and had no chance to claim back land. This policy also arose similar problem in Hamasen. The king, upon the request of the nobility, reversed his policy, and declared Ye Iyasu Yebca (land policy formulated by Emperor Iyasu I 1682- 1706), confirming the policy of land holdings by the local gentry.

Unable to re-institute the Rist holdings, the emperor instead followed another policy which encouraged land reclamation policy known as Hager Maknat, literally it means "to open up a land", or to first cultivate a land. This policy was based on the traditional concept expressed in terms used to refer to the first occupant, or land clearer and cultivator of the land called Aqni Abat. Emperor Tewedros distributed cattle for each Akni- household ready to cultivate new reclaimed land.

Emperor Yohannes followed different policy, mainly focusing on settlement rights. In 1888, emperor Yohannes and Ras Alula issued an edict dealing with the position of squatters. It laid down that forty years undisputed occupation of land constituted legal ownership, tantamount to Rist. This edict like others crystallized in a period of considerable immigrations and military colonization particularly in the high lands of Eritrea and north eastern parts of Wello. Emperor Yohannes, and the governor general of Mereb Melash, Ras Alula, followed similar policy of Tewedros which re- instituted Rist holdings. In the province of Hamassen, Ras Alula issued an edict saying "man is free, land is tributary", and went to declare that every land holder, by whatever title, who paid tribute on the land in his possession would thence forward be considered to hold his land by right of Rist, i.e. as permanent heritable tenure.

This policy was a continuation of the traditional policy which the state used to interfere in the land ownership system to avert the situation of landless peasants often uprooted from their holdings particularly as a result of credit and mortgaging of land. This policy was first declared in 1603/4 by king Zedengel, later by Emperor Iyasu I in 1690s.

Menelik did not resort to the policy of reinstitution of land ownership to the landless peasants. Instead he followed the Gebar system already existing in Shewa, which encouraged tenancy and private individual holdings of land. But his policy of Qelad, land measurement, registration and classification, which started in 1880s, enabled the state to allocate and sale extra and unused lands. In the south the Qelad system, registered land in the provinces and classified as noble holdings (Siso Balabat) on which Gebr (land tax) was not imposed and as state (Mengest) land under tax- paying possessions. The introduction of the Qelad system led to major changes in the system of land ownership by way of creating individual titles to land.

Private ownership was encouraged and reinforced by law. Though it had potential to increase productive capacity, this policy had no immediate impact on production since tax payment in service consumed much of the agricultural labor time.

There is little information of the state's policy as regards the system of land use. It seems that methods of cultivation, soil management, use of suitable farming tools, cultivation of crop patterns were the responsibility of the peasant household and the community. However, there were some state reforms that had a spill-over effect on land use system. For the first time Menelik introduced new type of tree called eucalyptus tree, primarily intended for the purpose of using it as fire wood.

These tree was later used to restore the problem of soil erosion caused by centuries of deforestation. Again those plantation privileges granted to foreigners for the purpose of collecting revenue had positive consequences in the system of cultivating wide range of crops. Menelik encouraged coffee production, tobacco were also produced on large scale. Regarding animal husbandry commercial cattle farms were established in 1890s. There was no policy regarding restriction on grain production in favor of stock-farming, tobacco or coffee plantation. It was the peasant household which made the decision, and peasants continued to give priority to food crops. Teff production was introduced in the south.

The objective to introduce reforms in land-use system in particular and in agriculture in general was stated explicitly in the decree to establish the Ministry of Agriculture in 1907. This ministry was responsible for the improvement of quality and quantity in agricultural production, cattle breeding, agricultural tools and forestry.

Also, the ministry made survey of cultivated agricultural lands, forests, meadows and cattle census in each governorate and in consultation with the government it gave tax exemption for places affected by drought and epidemic diseases. The ministry was in charge of agricultural contracts and running of agricultural schools, if opened. It fixed land and livestock taxes as well as tax on agricultural enterprises.

III) Manufacturing and Mining

In addition to the geographical environment ( crop production of the region), the land tenure system, played important role in the division of labour. Those who had access to land by the Rist system practiced agriculture and those who were landless and migrants engaged in trade and craft.

Craft and trade in Ethiopia remained predominantly rural production largely for household consumption and not for sale. The organization of the peasant household craft production varied from region to region, based on par-time or full-time activity, seasonal or perennial. As a general rule, craft production in rural areas tended to be seasonal, mostly carried out during the slack period between harvesting and lanting.

Village craftsmen, especially smiths had land holdings but their surplus labor was appropriated as tax in the form of ploughshare. They worked as well as agriculturist, providing substantially, if not entirely, for their own subsistence. Territorial princes organized their household artisans. Thus craft manufactures could be made by any household that had the necessary skills and capital. Crafts production at the household level was a small-scale and scattered. It tended to be relatively larger and more concentrated at the households of rulers (Mesafint).

There is no commodity production based on craft type of independent organization. There were some craft production in the urban areas, but urban craft was not mean for sale, but for maintenance. The small urban craftsmen manufactured based on utility values, not on exchange values. They aimed at producing enough to acquire foodstuffs and other things commensurate with the social rank; they did not aim to generate a surplus in order to produce large quantities of goods for a subsequent circulation or distribution.

Until 1855, there was no comprehensive scale craft production for the purpose of commodity production; there was absence of independent organization and specialization. From the time of Tewedros, large scale manufacturing based on local handicrafts was inspired by the central government. Because of the nature of the labor organization and requirement of capital, large scale handicrafts and manufacturing was state project (royal workshop). In other words it was controlled and financed by the central government. In 1861, Tewedros established a cannon and mortar Gun- manufacturing workshop in Gafat, near his capital, Debre Tabor.

In a span of five years, the manufacturing industry succeeded in producing four iron cannons and nine brass mortars. This factory was destroyed by the British military expeditionary force who fought against the king in 1868.

In 1910 Menelik established an ammunition factory in Addis Ababa. Moreover, concessions were granted for the establishment of mills, leather, soap and other small factories around Akaki. Menelik also declared an Awage safeguarding the status of craftsmen. Nonetheless, the derive for these reforms were for revenue collection, self-sufficiency of the court, and military interest of the state, than an ambition for industrialization. Indeed, craft production had structural problem, it lacked stimulus from the agrarian sector either through release of the labor force or an increase in demand for craft products. Merchant capital, which was in the process of formation during the turn of the nineteenth century, was not available to finance the manufacturing and mining. What was available was used for non productive purposes such as the purchase of urban land and house in Addis Ababa. There was no local enterprise and interest to inspire a large scale factory based on machine production. The state tried to derive the development of manufacturing, but on its own interest, in the area of military craft and jewelry work.

IV) Trade

Self sufficiency in foodstuff (grain and meat), both by the peasants and the household of the nobility had rural character of handicraft; low volume of agricultural production for sale in the market were causes for the lack of development in trade in Ethiopia. Observed from the perspective of formation of classes, the problem was felt particularly around petty traders. In Ethiopia, the class of small retail trader was undeveloped. There were merchants but they were mainly engaged above the retail level, operating in regional markets (long distance trade) or on large scale international (import/export) trade.

Peasants were self-sufficient in the production of consumption goods such as food, clothes and drinks. If there was any surplus it was sold by the producer himself, meaning without the intervention of an intermediary part. Rural market was dominated by producers who had no profit motive, but carry simple exchange. In the rural market the seller was identical with the producer and the buyer with the consumer. Because producers were able to sell directly to the consumer, merchants could not mediated between those two sides and tried to make profit by selling goods at a higher price than they had purchased. So there was no retail trade on consumption products, and if any it was on a small scale. Merchants of long distance trade engaged primarily in naturally extracted items such as civet, ivory, wax, gold, not in the trade of necessity products.

The class of merchants was also affected by factors other than lack of non-commercialization of agriculture and specialization in the division of labor, particularly between manufacture and agriculture. The system of indirect tax administration, which was farmed out to individuals in return for fixed payment and this led to arbitrary taxation of domestic market. Besides the great number of custom tolls, and insecurity along the roads, particularly during the Era of Princes had affected long distance trade.

Emperor Tewedros made changes in the administration of indirect tax by state officials, but it was limited to district level (Meslene), not the whole administration. He tried to abolish custom tolls. A profound change came during the time of Menelik who changed the whole indirect tax administration to the local level. He ordered for the establishment of camping sites along trade routes to give protection to merchants, encouraged the development of infrastructure such as roads, bridges, telecommunications and postal system. Though not immediately, his policy of Qelad measurement laid down the ground for commercialization of agriculture in southern Ethiopia, and this policy had greatly contributed to the urbanization of southern Ethiopia.

Menelik's reforms were synchronized by a conducive developments of external conditions. Colonization of neighboring countries such as Sudan and Djibouti opened new outlets, and the adjacent colonial governments of the time were encouraging expansion of trade with Ethiopia. After the battle of Adwa, colonial powers had changed their policy from colonization by a military force to colonization by peaceful commercial penetration.

Internal reforms and external developments stimulated the expansion of long distant regional and international trade. Through Gonder in the north west, through Adwa and Masswa in the north, through Assab in the north east, through Addis Ababa in the center, Harar, Djibouti and Somali coastal towns in the east, Borena and Lugh in the south, Enariya, Jiima, Kaffa, Bonga in the south west, Gore, Bure, Welega and Gambella in the west. These were regional trade centers of the second half of the Nineteenth century through which import/export trade expanded. There are a detailed collection of data on the volume, patterns and direction of the import and export goods of these specified regions. But who benefited from this expansion of trade?

V) Motivation of Economic Reforms 1855-1913

We have seen aspects of structural economic problems and state's policy concerning the various economic sectors. In agriculture, the structural problem was around the Rist system whose role is discussed as hindrance to labor mobility, capital accumulation and restraints on increase of agricultural production. The state policy during the time of Tewedros and Yohannes was reinstitution of Rist land by way of resettlement and reclamation of land. Its objective was to give employment to those persons uprooted from their land or landless peasants, and to fill the treasury of the state since peasants who cultivate land had the obligation to pay tax to the state reinstitution and 40 years settlement policy was conducted within the bounds of the Rist system, which lead to the same vicious circle of agrarian problem. Menelik continued the Shewan type of agricultural tenure system which encouraged private ownership and tenancy arrangements. But his Qelad policy, though it had a long term impact to increase agricultural production, the kind of labour and service obligation attached to it made it difficult to realize its potential for rural change. It was Ras Teferi who abolished these obligations and changed the system of payments into monetary forms, thus creating propitious conditions for agricultural commercialization.

In the manufacturing sector, the structural problem was lack of stimulus from the agricultural sector, both in the provision of labor and food surplus for the towns, which in return led to the absence of labor specialization. Agriculture was dominated by the Rist system which tide labor force to the land; while on the other hand the extensive process of mining requires labor. Towns could not develop as manufacturing centers because of low supply of surplus production brought for the market, and the rural nature of craft production. The emperors tried to encourage manufacturing but under the same system of household organization, that was based on royal manufacturing centers and all ventures in this direction were inspired by military interest, than ambition of industrialization. In fact the entrenched class of the conservative military nobility resisted any change, and some of them were boasting in their houses how they succeeded in obstructing an implementation of some concessions.

Trade was encouraged by development of such units of infrastructure as transport, railway, road construction, telegraph and a postal system, financial institutions such as banks and granting of monopoly privileges. Menelik guaranteed the security of merchants through the proliferation of camping sites (Menehariya) and changes in the administration of indirect taxes achieved through salaried state officials. However, trade was concentrated on the import and export sector.

Emphasis was given to the export of primary products such as coffee, skin, wax, civet, etc. These products did not require capital and labor on large scale. Imports of textile and iron products stifled the precarious internal development of iron and textile domestic production. Who benefited from these reforms? Those who benefited were first the state, it means the king, the court and provincial officials, and the military. Though not officially stated in a document, economic policy of the state was designed to increase not the productive capacity of the economy, but the revenue capacity of the state.

By the turn of the nineteenth century Menelik could annually raise an estimated amount about 6 332 082 Maria Theresa Dollar from direct tax, and about 3, 131, 428 MT$ from indirect tax, a total of 9 463 510 MT$. If one compares this sum with that of the total direct and indirect tax revenue collected in 1864 by emperor Tewedros (237 226 MT$), the revenue of the imperial government had increased by about 400 percent during the time of Menelik. The state was able to pay for its standing army, numbering about 400 000 (and this number excluded the auxiliary forces,) purchase of weapons and ammunitions. The number of rifles was estimated to be half a million by the time of Menelik.

Secondly, the aristocracy class indirectly benefited from the revenue of the state through the acquisition of office and titles. Directly they benefited through engaging in business activities. One way was to participate in trade with the collaboration of foreign merchants (Tujars) by furnishing capital. They also gave credit to individual merchants with a high interest. They invested in urban real estate, particularly in Addis Ababa through purchase of land and construction of houses. Finally they engaged in commercial, financial and manufacturing concerns as share holders. A typical example was the Bank of Abyssinia established in 1905. It is difficult to tell whether the aristocracy profited more from state revenue or from its business engagements. On the other hand, the Ethiopian citizens (Zega) under the jurisdiction of the Balabt, Sum, Mekwanent, and Mesafint remained suffering from the structural economic problems outlined above.

Nowadays objectives of economic policy are stated in the form of development plans covering different sectors of the economy. But it requires serious work to distinguish professed objectives and real intentions. In the period of our discussion there were economic reforms primarily motivated to increase and cultivate the revenue potential of the state. Those who benefited from the economic reforms and activities were the aristocracy and military nobility.

Once again we have the same historical question: in what manner should the political power structure be constructed to bring about changes in structural socio-economic problems--changes which can promote the productive capacity of the economy?

VI) Suggested Readings

An improved version of some of these ideas, a detailed empirical evidence and documentation of this essay will appear in a forthcoming work. But as a general reference the following readings are suggested:

1) Eshetu Chole (1994), "A Preliminary Appraisal of Ethiopia's Economic Reforms 1991-1993", in Marcus, H. (ed.) New Trends in Ethiopian Studies. Papers of the 12th International Conference of Ethiopian Studies. Vol. II.

2) Dessalegn Rahmato, (1994) "Land Policy in Ethiopia After the Derg", in Marcus, H. (ed.). New Trends in Ethiopian Studies. Papers of the 12th International Conference of Ethiopian Studies. Vol. II.

3) Richard Pankhurst (1990), A Social History of Ethiopia. Addis Ababa, Ethiopia.

4) Richard Pankhurst (1968), Economic History of Ethiopia, 1800-1935, Addis Ababa, Ethiopia.

5) Allen Hoben (1973), Land Tenure among the Amhara of Ethiopia. The Dynamics of Cognatic Descent. Chicago, USA.

6) Crummey, D. (1984), "Banditary and Resistance: Noble and Peasant in Nineteenth Century Ethiopia" in Rubenson, S. (ed.) Proceedings of the Seventh International Conference of Ethiopian Studies. Lund, Sweden.

7) Tadesse Beyene, Pankhrust, R., Shiferaw Bekele (eds.) Kasa and Kasa. Papers of the Lives, Times and Images of Tewedros II and Yohannes IV, 1855-1889. Addis Ababa, Ethiopia.

8) Bahru Zewde (1990), "Concessions and Concession-Hunters in Post-Adwa Ethiopia: The Case of Arnold Holz", in Africa, vol. XLV, 3

9) Shiferaw Bekele (1991), "The Railway and British Financial Capital, 1896- 1902" in Africa, vol. XLVI, 3

10) Schaefer, C.H. (1990), Enclavistic Capitalism in Ethiopia, 1906-1936: A Study of Currency, Banking, and Informal Credit Networks. Ph.D. Dissertation, Illinois, University of Chicago

11) Garetson, P. (1974), A History of Addis Ababa from its Foundations in 1886 to 1910. Ph.D. Thesis, University of London, London, England.

12) Pawlos Gnogno (1984 E.C.) Dagmawi Ase Menelik. Addis Ababa, Ethiopia.

13) Mahteme Selassie (1962 E.C.) Zekre Neger. Addis Ababa, Ethiopia.