By Worku Aberra
Over the past 50 years, Ethiopia has faced profound political changes. The restoration of Haile Selassie’s rule in 1941 marked the beginning of systemic shifts in Ethiopia, with modernization used as a means of consolidating power. Consequently, despite substantial efforts, the modernization initiatives failed to prevent subsequent upheavals. Successive governments—the Derg, the TPLF-controlled Ethiopian People’s Revolutionary Democratic Front (EPRDF), and the current Prosperity Party—have been unable to achieve stable governance.
Over time, state institutions have weakened. The Derg’s nationalization, land reform, and radical ideology disrupted Ethiopia’s traditional systems without establishing effective alternatives. The EPRDF’s adoption of ethnic politics as state policy deepened ethnic divisions, increased ethnic nationalism, and undermined Ethiopian nationalism by denying shared history, values, symbols, and experiences. The result has been state fragility, manifested by weak institutions, social fragmentation, political instability, deep and widespread economic problems, and the breakdown of law and order. State fragility has worsened under Prime Minister Abiy Ahmed, who took power in April 2018.
Belay Seyoum’s book, “State Fragility, Business, and Economic Performance: An Ethiopian Perspective,” published by Palgrave Macmillan in 2024, 465 pages long, provides a comprehensive analysis of state fragility in Ethiopia while discussing the various dimensions of state fragility in general. The book is a timely contribution to the discourse on the problems that Ethiopia faces today. It offers detailed analysis and recommendations that are crucial for understanding and addressing the complex challenges confronting the country.
The book is divided into three distinct parts, each organized into chapters. Part I provides a thorough examination of the underlying issues that contribute to Ethiopia’s political instability. The author begins by examining the causes and consequences of state fragility in Ethiopia. The analysis starts with the TPLF-controlled government of the EPRDF and continues under Prime Minister Abiy Ahmed’s Prosperity Party. The author examines the political context and the governance strategies, particularly what he calls “factionalized elite” and “group grievance” that have contributed to the current state of fragility in Ethiopia. Specific recommendations on how to strengthen the state and reverse state fragility are provided at the end of each chapter.
A country’s constitution can affect state fragility. The book argues that an effective constitution embodies the foundation of a nation’s legal and political framework and its acceptance by the public. The author scrutinizes Ethiopia’s current constitution and highlights how its defects have contributed to state fragility. Key defects include the embedding of ethnic politics, the right to self-determination, including cessation, and the denial of minority rights. The emphasis on ethnic federalism has increased tensions for resources, employment, and political power among the various ethnic political groups. Towards the end of Part I, the book addresses the critical need for strong institutions in Ethiopia, and details how institutional weakness contributes to economic inefficiency, political instability, social fragmentation, and eventually state fragility.
In Part II, the author employs economic indicators to demonstrate how state fragility fosters economic problems. Metrics such as GDP growth rates, income inequality, per capita income, inflation, and the rate of unemployment are examined to highlight the severe economic difficulties resulting from weak institutions. The book demonstrates how state fragility hampers economic growth, exacerbates income inequality, and undermines improvement in agricultural productivity. The misery index, which combines unemployment and inflation rates, serves as a stark indicator of the population’s suffering in a fragile state. The role of agriculture, a crucial sector in Ethiopia, is scrutinized to show how sate fragility affects food security and rural livelihoods.
The book discusses how industrial policies designed to foster economic growth, namely import substitution, export promotion, state intervention, and foreign direct investment, cannot be effectively implemented in a fragile state. The author provides a historical perspective on industrial policy in Ethiopia, tracing its evolution since the 19th century. This historical context is essential for understanding current problems and the long-term consequences of past policies.
An overview of entrepreneurship theory is provided, followed by a discussion on entrepreneurship in least developed countries and fragile states. The book presents the role of formal and informal institutions, transaction costs, and financing on entrepreneurship within the context of state fragility. It reviews entrepreneurship in Ethiopia and underscores the challenges facing private investment due to state fragility. Issues such as access to capital, regulatory hurdles, bureaucratic red tape, availability of skilled labor, and supply of critical inputs are explored in detail.
The book investigates sectoral changes, especially the relative shares of services and manufacturing out of GDP. The phenomenon of premature deindustrialization in Ethiopia is briefly examined, in which the service sector becomes dominant without a strong manufacturing base. The trend, worsened by state fragility, is concerning as it limits the country’s ability to build a diversified viable economy.
The book presents a brief history of trade, examines the volume and direction of trade between various regions and countries, and elaborates on how state fragility affects international trade. It also outlines the evolution of Ethiopia’s trade policy, the contribution of special economic zones, and the effect of foreign direct investment on Ethiopia’s international trade and how they might be affected by state fragility.
The author investigates preferential trade arrangements and the effect of tariff and non-tariff restrictions on trade between countries. He assesses the benefits and costs of these arrangements, demonstrates the asymmetric distribution of benefits, explores the implications for regional economic integration, and addresses how state fragility affects regional integration. After weighing the costs and benefits of regional trade arrangements and joining the World Trade Organization (WTO), the author concludes that while joining the WTO at this stage may not be particularly beneficial for Ethiopia, regional economic integration could be advantageous but is hampered by state fragility.
Part III presents the critical areas of education, technology policy, and the lessons that Ethiopia can learn from successful developing countries. The author presents the characteristics of education and its influence on economic development, particularly in fragile states. The analysis shows both the constructive and destructive roles of education in such environments. The book addresses the impact of limited access, violence, erosion of cultural identity, inadequate funding, poor infrastructure, lack of trained teachers, and inconsistent policies on educational outcomes, especially in a fragile state.
The author outlines Ethiopia’s education policy, tracing its evolution from religious education to modern education and education under Italian occupation. A historical overview of educational policies under various Ethiopian regimes is provided, along with an analysis of educational outcomes. The pros and cons of mother tongue instruction are examined. The discussion emphasizes how state fragility weakens the quality and accessibility of education.
The book explores the role of technology in economic development and the various channels of technology transfer, explicitly technology transfer, through foreign direct investment (FDI), joint ventures, licensing agreements, and educational exchanges. The author emphasizes the need for policies that facilitate these channels for the effective absorption of technology. An analysis of FDI and joint ventures in technology transfer reveals how they bring in capital, expertise, and advanced technologies to boost local resources, but are affected by state fragility.
The author discusses the conditions necessary for successful technology transfer, including stable governance, favorable investment climates, and strong institutions. He also reviews technology policy options for developing countries, drawing on global examples. Effective technology policies promote innovation, enhance productivity, and stimulate economic growth. The author outlines strategies, such as investing in research and development, fostering public-private partnerships, encouraging appropriate technology, protecting intellectual property rights, and creating supportive regulatory frameworks, yet these efforts are hindered by state fragility.
The book presents lessons from successful developing countries like China, South Korea, Malaysia, and Brazil, which have achieved remarkable economic growth through strategic policies, including investments in education and technology; and how these lessons can be applied to Ethiopia, while emphasizing the need for context-specific strategies. The book concludes that while Ethiopia faces significant obstacles, learning from these successful examples can offer a roadmap for sustainable development, provided state fragility is addressed.
In summary, the book discuses an extensive range of issues, covers interconnected variables, and offers a panoramic view of perspectives on state fragility in Ethiopia. The comprehensive approach helps readers understand the complex interplay of factors contributing to state fragility, but the broad coverage sacrifices focus on any single issue. Some readers might prefer a more concentrated examination of one aspect of state fragility for a detailed analysis. Another potential critique is the lack of an overarching theoretical framework that ties together the various issues discussed by the author.
Despite these concerns, the book is an important contribution to the discussion on state fragility in Ethiopia. It offers valuable insights and recommendations for addressing the complex challenges facing the country. The author’s ability to weave together multiple strands of analysis into a coherent narrative provides a useful framework for understanding the manifold nature of state fragility. The book serves as a significant resource for policymakers, scholars, and anyone interested in Ethiopia’s future.
Worku Aberra is a professor of economics at Dawson College, Montreal, Canada.
Chair of the Economics Department
Dawson College
