By Teshome A.(PhD), email@example.com, Tigrai Online Oct. 06, 2012
“We are making progress on the economic front though not necessarily according to the standard orthodox prescription, so some people think there must be something wrong…” Late Prime Minster Meles Zenawi
n August 20, 2012, Ethiopia lost its brave son the late prime minster Meles Zenawi. When the state media announced his death, various international news agencies reported about the death of the prime minster the way they perceived him. Many newspapers presented his significant contribution in social, economic and political development in the country. In contrast to these, few individual and organization tried to write a report against the fact that prevailed in the country. For instance International Crisis Groups (ICG) said that Ethiopia’s much praised economic development was not as robust or cost free as Meles would have wanted or as the international community believes.
Such kind of flawed report or analysis arose mainly due misunderstanding the recent social and economic development in the country or purposely construed to undermine the contribution of our late Prime Minister Meles Zenawi. It is the responsibility of all Ethiopians to remember and maintain the legacy of our late Prime Minster. This article is consisting of four sections including an introduction: Meles’s development paradigms, economic transformation in Ethiopia and conclusion and recommendations.
2. Meles’ development paradigm
Meles Zenawi (2009) asserted that the end result of neoliberalism has in fact proved to be that we have neither meaningful growth and transformation nor sustained liberalization and macroeconomic stability. During his life time our late prime minister identified a set of assumptions, concepts, values, and practices that constitute a way of viewing reality for the community that shares them, especially in an intellectual discipline. Many argue that he was behind a number of new ideas in Ethiopia as well as in Africa. Just to mention a few them that he pioneered are: the Ethiopian renaissance, NEPAD, green economic development, growth pool and one voice for Africa. In this section I will focus on his democratic developmental state the development paradigm.
According to Meles, a democratic developmental state can be defined as one that has the capacity to deploy its authority, credibility and legitimacy in a binding manner to design and implement development policies and programs for promoting transformation and growth, as well as for expanding human capabilities. Such a state takes as its overall socio-economic goal, the long-term growth and structural transformation of the economy, with equity. Under democratic developmental state, the fruits of successful development are expected to win popular support, which is confirmed through a series of elections.
He argues that the neo-liberal paradigm, which suggested a non-activist and non-interventionist state, a night watchman state as conducive to economic growth, is based on two pillars. The first one is that competitive markets are both pervasive and Pareto efficient. The second one is rent seeking and rational choice theory. Our late prime minster tried to explain how these two pillars of neoclassical development paradigm does not reflect the economic reality prevailing in developing countries. Regarding the first pillar, competitive market cannot always ensure Praetor efficiency. Because Pareto efficiency assumes that there is perfect information and free mobility of factors of production. Also it assumes that producer and consumer objective is to maximize profit and utility which is highly unlikely in current situation. The other interesting point is Pareto efficiency does not consider the equity aspect of the economy.
The second pillar of neoliberalism, the minimal state intervention, was to reduce rent seeking and rational choice theory. According to this argument more government intervention leads to higher rent seeking due to individualistic nature of humans. Therefore the implication is that people are rational in their decision; we do not need government intervention. Meles explains that government created rent does not necessarily have to be socially wasteful. It becomes wasteful only if solely self-interest maximizing individuals use it to create wealth at the expense of society and only if the state is incapable of improving the market. He said that it is not the size of government intervention that increases rent seeking rather the nature of the government. The proper and efficient design of government structure can reduces rent seeking.
3. Economic transformation in Ethiopia
Ethiopia introduced new developmental paradigm in 2002. This section tries to see the impacts of developmental state on the economic transformation in Ethiopia: Economic growth, social and infrastructural development.
3.1 Economic growth
Economic growth refers to an increase in the national output or per capita income. In 1996, the national Gross Domestic Product (GDP) was Birr 37 Billion. After six years that is in 2002 the GDP increased only by Birr 30 Billion and reached around 67 Billion. Data from various sources revealed that during this period, Ethiopia’s economic growth was unstable proving once again that neoliberalism is the source of economic irregularity.
At the start of the developmental state, the national output was Birr 67 Billion. In the same period that is after six years the nation’s output has shown a leap and has reached Birr 131 Billion. During these years the country produced additional Birr 64 Billion outputs. In 2010, the country was able to produce Birr 159 Billion GDP. That means after introducing the developmental state paradigm the country was able to produce more than Birr 11 Billion in output annually as compared to Birr 3.8 Billion annual output during neoliberal period. In addition to higher national output during the developmental state, the country enjoyed stable economic growth with sectoral change and increase in per capita income.
3.2 Social development
Many argue that the involvement of government in the economy enhance social development by allocating necessary resources for health, education, drinking water and other social safety nets. The health coverage in the country has increased from 40 percent in 1995 to 60 percent in 2002. During this period the health coverage only increased by additional 20 percent. But between 2002 and 2010, the health coverage increased from 60 percent to 89 percent. Within eight years the nation has managed to increase its health coverage by 29 percent.
In regards to the health facilities, the number of health centres in 1995 was 246. This number has increased to 412 in 2002. Within seven years, the country managed to construct 166 new health centres. After 2002 that means within eight years the nation was able to construct more than 1500 health centres. In the same period, the country managed to construct 42 hospitals and by 2002 it managed to construct 85 hospitals. Such success in the health sector was not due to the demand and supply marker principles rather due to the active involvement of the government in the health sector development by designing the Health Sector Development Program (HSDP).
In the education field too, the number of students in higher education has increased from 30.5 thousand in 1995 to 77.1 thousand in 2002. During these seven years, the additional new student that joined the higher institution was only 27 thousand. The number of students in the higher institution reached 260 thousand in 2010. Just within eight years the nation’s higher educational enrolment number increased by 130 thousand students.
3.3. Infrastructure development
Realizing the importance of infrastructure, the Government of Ethiopia (GoE) has embraced massive infrastructural development in the country. In this section I will focus on road, communication and hydropower construction. In 1995, the total road network was 23 thousand KM. In 2002, the road network reached 30.8 thousand KM. During this period the rural network has expanded by 7 thousand KM with the annual construction of 0.87 thousand KM. But between 2002 and 2010, the road network has increased from 30 thousand KM in 2002 to 49 thousand KM in 2010. Just within eight years, the road network has increased by 19 thousand with annual growth of 2.3 thousand KM. Both of internet and mobile subscribers have showed remarkable change during developmental state. For instance the performance of mobile subscribers during the developmental state was 200 percent higher than the neoliberal period. In the same way, between 1991 and 2002 the national economy obtained only 226 MW. But after 2002, just within ten years the country managed to produce additional 1460 MW.
4. Conclusion and recommendation
Unlike the other African leaders, Meles Zenawi criticized the neoliberal developmental state and proposed a democratic developmental state as an alternative for neoliberal development paradigm. During the developmental state, the nation’s economy experienced broad base and continued economic growth. This economic growth realised by massive infrastructural provision and social development. Beside these economic performances, still the country is facing the twin challenges: inflation and trade imbalance. Few scholars wrongly blame government intervention for these problems. This does not indicate market mechanisms alone solve the economic problems in Ethiopia.
GOD BLESSES ETHIOPIA!