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Economic Strategic Vision Roadmap for Ethiopia: Part Three 

September 1, 2023

Tsegaye Tegenu, PhD
2023-09-05

Part Three discusses the first step of the Economic Strategic Vision Roadmap making, namely root cause analysis of the economic situation of the country. By definition, root cause analysis is a systematic and interdisciplinary approach used to identify the underlying or fundamental causes of problems, incidents, or failures. The purpose of root cause analysis is to prevent similar problems (chronic macroeconomic and political instabilities discussed in Part One) from recurring in the future.

Root cause analysis typically involves such techniques like the “5 Whys”, fishbone diagrams, or Failure Mode and Effects Analysis (FMEA) to trace symptoms and problems back to their root causes. In other words, it comprehensively investigates the causes of symptoms and problems.

A symptom is a visible or apparent indication of an underlying issue. Often you hear about symptoms of the economic situation of the country in a too short interviews about unemployment rate, inflation, budget deficit, etc. Symptoms themselves do not provide a complete understanding of the core problem causing them and addressing them do not provide long-lasting solution.

A problem is a broader issue that goes beyond the surface-level symptoms and represents a more comprehensive understanding of what’s going wrong. An example is macroeconomic and political instabilities discussed in Part One. Economic researchers try to understand the causes of these problems using economic models to identify and explain the factors that lead to inflation, unemployment, economic stagnation, etc. But these economists do not provide a complete understanding of the core causes of the problems.

Their model of causal relationship between variables or events focuses on specific causes of immediate problems or observed outcomes such as unemployment rate or inflation. The aim is to understand the nature and strength of the relationship between the variables without necessarily focusing on identifying the specific underlying causes. Their primary purpose is to improve policy performance.

Root case analysis of the economic situation goes beyond the surface-level symptoms and problem analysis. It is an interdisciplinary, systematic and structural approach used to identify the underlying or fundamental causes of problems, symptoms and failures.

Often a team of experts is formed to conduct a root cause analysis. The team members include macroeconomic specialist, sector experts (agriculture, industry and basic services), microeconomic specialist in business and market development, economic geographers specialized in spatial analysis and regional development, future studies experts, and scientists in political and social development.

Even if we do not have the expert group at the moment, I have tried to conduct a root cause analysis of the economic problems of Ethiopia using a fishbone diagram as a tool (see diagram). Before explaining the fishbone diagram, I have to say few words on the assumption and basic concepts I used to identify the causes and effects of the fishbone diagram.

To start with, I consider the population growth in Ethiopia as an independent force which is determined by demographic variables of fertility, mortality and migration. That means it operates separately from or without direct influence of government policies. Even if it is man-made choice, human society can’t stop/prevent this natural process called demographic transition, from happening once it starts to unfold itself. Governments, demographers and economists cannot eliminate/prevent it from happing. What is important is to understand it’s dynamic better in order to change the state of economic situation of the country.

Considering population growth as an independent force, I studied the multidimensional effects of population growth and described its properties in terms of size, structure and space (see the effect part of the figure). Size refers to the quantity and quality of resource scarcity, economic shortages and the kind of economic stress and strain it creates as the population continues to grow. Structure refers to the internal composition of the economic activities and their arrangement as the population pressure increases. Space refers to the characteristics, position, location, distribution of the economic activities and the relationship to their environment.

Recognizing population growth as an independent force help in devising effective strategies, policies, efficient allocation of resources, understanding of complex systems, and enables better decision-making.

In the fishbone diagram, the problem or effect is displayed at the head or mouth of the fish and the possible major and minor causes are listed on the main arow of bones (see figure).

The effects are i) Resource scarcity trap, economic stress and strain; ii) Productivity trap, and iii) Spatial imbalance. On the branches of the main arrow, I have sorted out the major causes of the effect problems into six option categories.

Major cause 1) Population growth pressure forces

Major cause 2) Availability of the quantity and quality of economic resource, supply, and coverage

Major cause 3) Organization, structure, location and distribution of economic activities

Major cause 4) Performance of government development programs and plan of resource creation

Major cause 5) Population pressure curve impacts (Part One), policy choice and design

Major cause 6) Institution and management environment

I have used extensive framework, various approaches and employed different methods to address each of the major causes. It is beyond the scope of this article to mention them and I defer the task to a later publication. But I have to say few words on what makes my conceptual approach (recognizing population growth as independent force) and my method of root cause analysis (fishbone diagram) unique or special.

In the past fitty decades, we have tried to address the economic challenges of the country through combination of macroeconomic, microeconomic, and sectoral perspectives. There is massive publication and you can order some of them from Ethiopian Economics Association, established since 1991. These distinct fields of study within economics addresses mainly immediate economic policy issues focusing on different levels and using causal analysis models. They use data and statistical analysis techniques to uncover patterns, trends, and correlations related to the symptoms or problems under investigation. These perspectives do not necessarily delve into the detailed factors or specific causes behind the observed associations. Correlations do not imply causation.

Identifying associations between variables is helpful in the choice of policies and intervention instruments. The primary goal of macro, micro and sectoral analysis is to enhance policy performance in economic growth, resource allocation, industrial competitiveness, technological innovation, job creation, etc. Whatever methods and tools used, these perspectives are primarily used to analyze economic policy choices and performance.

In long-term planning, however, it is vision, goal and strategy which comes first before policy issues. It is time that we change our thinking, ordering and sequencing in economic development intervention and planning process. The general sequence in planning process starts with vision, goal, strategy, and policy analysis comes last.

The sequence of vision, goal, strategy, and policy is logical because it starts with a broad and inspirational vision, narrows down to specific, measurable goals, then develops a plan (strategy) to achieve those goals, and finally establishes guidelines (policies) to ensure consistent execution of the strategy. This sequence provides a structured and coherent approach to planning and achieving long-term objectives. In the coming article (Part Four) we will look into the components of vision, goal and strategy. In Part Six, I will discuss policy issues.

 

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