Aklog Binara (Dr)
August 19, 2024
Free trade is not free.
Abiy Ahmed’s political decision to embrace the free market and neoliberal economics makes Ethiopia’s dire situation much worse. This is because Ethiopia does not enjoy a strong, non-ethnic, capable, and patriotic government.
The delusional and tribal Abiy Ahmed is in denial that there is no such thing as a free market. An American writer by the name of Gore Vidal is quoted characterizing the American economic model–the leading exponent of free market– “free market for the poor and socialism for the rich.”
The biggest beneficiaries of federal government policies in the USA are the rich and super-rich. For example, subsidies and tax cuts benefit the rich and super rich.
Nor is there such a thing as free trade. Those who dominate the global market system and the international institutions they created are intended to serve the national market interests and dominance of rich countries. This is why the BRICS movement gained traction.
The IMF and the World Bank are champions of the free market. Their shareholders intended them to promote and defend the free market system. Hence the criticism against their draconian policies such as Structural Adjustment Programs.
In his popular book, The Bad Samaritans: the myth of free trade and the secret history of capitalism, the renowned Korean development economist, Ha-Joon Chang informs us as follows:
“In relation to developing countries, the neo-liberal agenda has been pushed by an alliance of rich country governments led by the US and mediated by the ‘Unholy Trinity’ of international organizations that they largely control—the International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO). The rich governments use their aid budgets and access to their home markets as carrots to induce the developing countries to adopt neoliberal policies.”
The IMF and World Bank are deploying the same neoliberalism and free market tools that Tiger countries recalibrated in accordance with their national needs. Capable governments and civil servants led these economies. They established strong national institutions that defended national interests; that adopted relevant fiscal, monetary and trade policies. They tried their best to eliminate or at least contain corruption. They protected emerging domestic enterprises. They empowered their youths and women to participate in productive sectors.
In other words, these Tiger countries pushed for reforms that make sense. They refrained from accepting dictates from the Bretton Woods Institutions wholesale.
The IMF and World Bank use “carrots” as incentives while forcing the capital starved country to adopt the free-market system that is never free. The ultimate objective is to link the Ethiopian economy to global capital markets controlled entirely by the West.
Whether the government of Ethiopia accepts it or not, the decision-makers are the IMF and the World Bank and their rich shareholders. Ethiopia loses its sovereign rights in the process.
You therefore need to ask the question whether Abiy Ahmed committed economic and financial crime in the process.
This major policy shift in half a century entails far reaching implications for Ethiopian society, especially for the poor. The effects are multigenerational.
The IMF, the World Bank and the government of Ethiopia know that devaluations of the Birr in the past resulted in sharp price increases of essential goods like foods, medicines, and imports.
The government’s decision to provide subsidies to civil servants, low-income workers and consumers of petroleum products is unlikely to serve as a rail guard against price inflation and or shortages. Among other things, the government cannot afford it. It cannot raise taxes if earnings do not increase. If it does, what people gain in subsidies will evaporate in two ways: more taxes and less purchasing power.
The government will also be forced to print money. Printing more money that is not backed by increased productivity and real assets like gold, gas, petroleum, or others leads to more inflation. This is what I call a vicious cycle.
In addition, IMF conditions including barring major subsidies may frustrate the program itself.
Trust in Ethiopian government policies is broken.
History records that Ethiopia’s Prime Minister Abiy Ahmed has a proven track record to mislead, misinform, pretend, falsify data and speak to the world community and to the Ethiopian people that he is committed to the rule of law, peace, stability, mutually beneficial relations with all countries, democracy, and a market economy.
Abiy Ahmed’s avowed commitment to neoliberalism and an open market economy is tactical. It is to entice support from Western institutions including multilateral agencies like the IMF and the World Bank.
Abiy Ahmed tries to tread a fine line between abandoning the West substantially; and or joining BRICS. His pronounced commitment to the free market and to the dictates of the IMF and the World Bank suggests that Abiy’s heart is where the money is: the rich West. Money or capital is a powerful motivator.
But what happens if the program falters? What happens if there is a popular uprising?
Whether Abiy Ahmed leans towards the West or the BRICS, especially China and Russia, it is hard to trust the man in terms of his regime’s commitment to the welfare of the Ethiopian people and Ethiopia’ s sovereignty and national interests.
Just think of the rapid geopolitical realignment of forces in the Horn and Eastern Africa and ask who is gaining greater influence: Ethiopia or Egypt?
Abiy Ahmed is first committed to himself, his Party, his tribe and his regime. He is by no means committed to Ethiopia’s national security and sovereign interests.
History matters. Most Ethiopians like me were persuaded by Abiy Ahmed’s rhetoric of genuine commitment to unfettered inclusion, human rights, the rule of law and a corruption free Ethiopia. He echoed the notion that he is committed to Ethiopia’s national and sovereign interests and the welfare of its 130 million people. All its people, mind you.
Today, Abiy Ahmed claims he is blameless and fault-free. He blames past leaders for state and government policy and management failures. He chastises critics and incarcerates them in tens of thousands. He promises falsely and brazenly that he will fix institutional and structural problems that his own party, state and government inherited and continue to protect. He operates above the law and with impunity.
Abiy Ahmed and his Oromo-elite dominated Prosperity Party mimic the ethnic divide and rule doctrine colonial powers promoted in Africa. The Tigray people’s Liberation Front (TPLF) adopted this doctrine and dangerous model of governance of “Them versus us,” pitting one ethnic group against another. This is why Ethiopia is not at peace with itself.
Ethiopia is the most ethnically polarized country in Africa, and in the world.
In the light of the above, the IMF and the World Bank are granting a free pass to a tyrannical, corrupt, and tribal regime. This is in huge part because their owners believe it is in their national security and market interests to do so.
The Ethiopian ethnic governance model is not sustainable. It is archaic and backward looking.
I remind the reader that all Sub-Saharan African nations have abandoned this model inherited from colonial powers. Their constitutions disallow the formation of political parties based on ethnicity and religion.
This is why Ethiopia’s system is backward looking while the rest of Africa’s is forward looking.
The results of post-ethnicity and language-based model countries measured by social and economic indicators are simply astonishing.
Rhetoric aside, deeply flawed macroeconomic policies, structures, institutions, governance, and government leadership tend to keep a society stuck in search of a way out.
The Ethiopian economy is a war economy. It is in shambles. This war cycle and pretentious psychological make-up is not propagated by, for example, Amhara Fano or, on the surface at least, by the Oromo Liberation Army (OLA).
Rather, the system, institutional modality and structures are conceived deliberately and managed willfully by the Oromo-elite dominated Prosperity Party and its beneficiaries. This party is inimical to the Ethiopian people and to Ethiopia. The beneficiaries from the IMF and the World Bank do not represent most Ethiopians. They represent domestic and global elites, including elites of multilateral donors.
One can readily predict that the Abiy regime will incentivize its new program imposed by the IMF and the World Bank through subsidies to civil servants, military personnel, and other critical persons. This will increase the budget further.
This unholy partnership and the stop gap measure the IMF, and the World Bank declared are anathema to peace, stability, and mutually beneficial relations with neighboring countries. They also undermine Ethiopia’s sovereign rights and deter sustainable and equitable development.
Simply put, the unintended consequences of Ethiopia’s Structural Adjustment Program SAP) imposed on Ethiopia will be massive and multigenerational. They will worsen the following conditions on the ground.
Flawed policies impact most citizens adversely.
- Today, more than twenty-one million Ethiopians go hungry each day.
- Thirty eight percent of Ethiopia’s children under the age of five are stunted (2023)
- Ethiopia is home to an estimated 4.4 million Internally Displaced Persons (IDPS) in 2023, one of the largest in the world
- More than four million Amhara school age children are denied education.
- Ethiopia still ranks 175th out of 191 countries on the UN Human Development
Index.
This index measures improvements over time of the social sector like education, health, sanitation, nutrition, infant mortality, access to safe drinking water.
- Only 13 percent of Ethiopians have access to clean water (2023)
This may sound ironic in that Ethiopia touts itself as the water tower of Africa.
- Forty six percent of Ethiopians lack access to electricity (2022)
- A staggering 90 percent of Ethiopians do not enjoy basic sanitation (2022)
The IMF and World Bank Programs may deepen poverty by cutting expenditures on health, education, sanitation, safe drinking water, food, medicines, and the like.
What do I propose?
In the next series, I shall identify and discuss major institutional reforms that stimulate sustainable and equitable growth and development.
You do not need to travel to Dubai, Singapore or South Korea or Thailand or other Tiger countries to learn about best practices in growth and development.
I shall discuss 15 African advanced or advancing countries that offer best practices and appropriate replicable models.
Dr. Aklog Binara highlights significant concerns about Ethiopia’s current economic and political policies under Prime Minister Abiy Ahmed. Here are the key points from the article:
Summary of Key Arguments:
- Critique of Neoliberal Economics:
- Dr. Binara argues that Abiy Ahmed’s embrace of neoliberal economic policies, influenced by institutions like the IMF and World Bank, is exacerbating Ethiopia’s crisis. He criticizes the notion of a “free market,” suggesting that it primarily benefits the wealthy and powerful nations while harming poorer countries.
- Historical Context and Comparisons:
- The article contrasts Ethiopia’s situation with that of the “Tiger” economies (e.g., South Korea, Taiwan) which adopted tailored reforms rather than wholesale neoliberal policies. These countries had strong, capable governments and institutions that helped manage their economic transitions more effectively.
- Economic Implications:
- The analysis points out that the IMF and World Bank’s policies, such as devaluations and reduced subsidies, could lead to increased inflation and economic hardship for the Ethiopian population. Dr. Binara suggests that these policies may worsen poverty and socio-economic conditions, given Ethiopia’s already dire situation.
- Political Critique:
- Dr. Binara criticizes Abiy Ahmed for his alleged failure to address Ethiopia’s ethnic divisions and for pursuing policies that seem more aligned with Western interests rather than genuine national development. He suggests that Abiy’s government is more focused on maintaining power and appeasing foreign donors rather than improving the welfare of Ethiopian citizens.
- Consequences of Current Policies:
- The article outlines several negative outcomes of the current economic policies, including high levels of poverty, food insecurity, and inadequate access to basic services like clean water and sanitation. Dr. Binara forecasts that the ongoing structural adjustment programs may further exacerbate these issues.
- Call for Reform:
- Dr. Binara proposes exploring institutional reforms that are more suited to Ethiopia’s unique context. He suggests that learning from successful practices in other African countries could offer more relevant models for sustainable and equitable development.
Implications:
- Policy Direction: The article implies a need for Ethiopia to reconsider its economic policies and focus on more localized, contextually appropriate reforms rather than strictly following international neoliberal prescriptions.
- Governance and Leadership: There is a call for a shift in governance towards more effective and transparent leadership that prioritizes national interests over external influences.
- Future Analysis: Dr. Binara promises to explore successful models from other African countries in future discussions, offering potential pathways for Ethiopia to achieve sustainable development.
This analysis provides a critical perspective on Ethiopia’s current economic and political strategies, emphasizing the importance of tailored reforms and effective governance to address the country’s multifaceted challenges.
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