Ethiopia's Development Disaster: An Overview of Some Root Causes

December 20, 2007

Side Goodo

1. Introduction

At present, many economists agree that economic development implies not merely growth plus change but growth plus progressive changes in the socio-economic structure of the country. It implies changes in technology, the system of production organisation and pattern of income distribution. It implies reduction in poverty, inequality and unemployment. According to the proponents of the “basic needs” approach, there are five basic goals of development (Kuhnen, 1987). These are: (a) economic growth to secure food and other requirements for the population; (b) social justice to reduce inequality; (c) employment as means of earning an income but, as well, because of its ethical and social value; (d) participation as political involvement and social sharing; and (e) independence as freedom from external domination.

While individual societies may have different opinions on the priorities of these goals, in the absence of a general theory of development; one can use the criterion of fulfilment of these goals as a yardstick in development. Development is then understood as a simultaneous progress towards these five goals (Kuhnen, 1987).

While many African countries achieved the fifth basic goal of development half a century ago, after decolonisation of most countries in early 1960s, many countries still today failed to achieve most of the five basic goals of development. These countries are classified as the least developed countries (LDCs) in the world. Among the 49 least developed countries of the world as of 2007, 33 are in Sub Saharan Africa. These are: Angola, Benin, Burkina Faso, Burundi, Central African Republic, Chad, Congo Democratic Republic, Djibouti, Eritrea, Ethiopia, Gambia, Guinea, Guinea Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, Sao Tome & Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, Sudan, Tanzania, Togo, Uganda and Zambia.

The LDCs are characterized by low income, GNI per capita of less than US$750, low level of human resources development, and economic vulnerability. A country must achieve GNI per capita of over US$ 900 to leave the LDC camp. About five of these LDCs in Sub Saharan Africa are characterised by a very low level of economic progress measured by a very low level of Gross National Income (GNI) per capita of less than US$ 200. These are: Ethiopia, Somalia, Seira Leon, Burundi, and Guinea Bissau.

Only two countries in Africa have shown remarkable economic performances during the past 20 years and were able to graduate from the LDC category. These were Botswana which moved up the ladder in 1994 and Cape Verde Island which graduated from LDCs just in 2007.

The poverty and backwardness of Africa stands in stark contrast to the prosperity of the developed world. The continued marginalization of Africa from the globalization process and the social exclusion of the vast majority of its peoples constitute a serious threat to global stability (NEPAD, 2001). The continued influx of Africans seeking better living conditions in Europe has already caused a great alarm among the EU member states but no concrete actions have been taken by this block of wealthy nations to bring sustainable development in the African continent.
The UN Millennium Development Goals (MDGs) adopted in 2000 are not likely to be achieved in many of the African countries because of such dismal economic performances in most of these countries. The 2015 targets for most indicators are already accepted as unachievable. Thus many of African countries are trapped in a vicious circle of underdevelopment, poverty, hunger and famine. The world has the resources and the technology to eradicate poverty in Africa and globally, but it does not have the will. Ethiopia is a typical example of a sustained development failure.

2. Over a Century of Underdevelopment in Ethiopia

Ethiopia has failed to achieve a meaningful economic progress since the country took its current shape in 1880s and 1890s. As we have stated earlier, Ethiopia’s dismal economic performance with GNI per capita of about US$152 in 2005 puts the country at the bottom of the least developed countries of the world. As a result, poverty in Ethiopia is rampant. According to BBC World Service report (Feb 2007), 81% of Ethiopia’s population is living below the poverty line of US $2 a day. Given Ethiopia’s current population of about 78 million, this means that over 63 million Ethiopians today live below poverty line.

Ethiopia has one of the highest unemployment rates worldwide. Over 50% of the urban men between age 15 and 30 are unemployed. With rapid increase in population in rural areas, the size of the cultivable land holdings have shrunk to less than 0.3 hectares in over populated regions such as Sidama in the South creating a massive reservoir of redundant rural labour force.

Ethiopia has a high level of chronic food insecurity and is vulnerable to acute food insecurity, primarily caused by drought, environmental degradation and low access to and availability of food. The population is characterised by one of the world’s highest incidences of malnutrition and one of the lowest primary-education enrolment ratios in the world. Ethiopia is ranked 170 out of 177 countries in the UNDP Human Development Index for 2006 (WFP, 2006).

Over the last 40 years, Ethiopia has not sustained long periods of high economic growth rates. Short lived spurts of growth are typically associated with positive shocks such as rainfall. Despite the considerable growth levels of the 1990s, per capita income today is at a level that had been reached previously in the early 1970s. GDP per capita has increased by a low 0.2 percent per year over the period of four decades, i.e.1961-2003 (World Bank, 2006).

At the beginning of the 21st century, we witness an increase in global poverty and hunger along side unprecedented affluence among nations and individuals implying an ever increasing disparity between nations and with in various regions of a country. The fact that the Microsoft tycoon Bill Gate’s net worth is 5 times as big as Ethiopia’s 2005 annual Gross National Income (GNI) of $11.1 billion US dollars at current prices (World Bank, 2005) is a vivid depiction of not only how the country has failed in terms of economic achievement during the past century but also the alarming disparity between individuals and countries in the developed world and individuals and countries in the LDCs.

The political landscape of the country has been characterised by totalitarian systems; be it the feudal monarchy, the military dictatorship or the current one party dominated political system. Thus the peoples of the country never had any opportunity to participate in the political decision making processes. All available evidences indicate therefore that the country has failed to make any progress towards the five basic goals of development during the past 120 years. Ethiopia is a development disaster. Then what are the root causes for the country’s abysmal development performance?

3. Some Root Causes of Ethiopia’s Development Failure

3.1 A unique form of African colonialism and the creation of artificial state

The rest of the African countries blame colonialism for their underdevelopment. This is because, on top of the direct exploitation of human and material resources, western colonialism contributed to the underdevelopment in Africa by creating artificial states that lack legitimacy and political stability.

Ethiopia has been praised as the only African country that resisted western colonialism. Ethiopia was never colonised by the west except the brief occupation by Italy during the Second World War. However, Ethiopia, as it took shape in 1880s and 1890s, was itself the result of a unique colonial expansion by Abyssinians against the hitherto independent Kushitic, Omotic and Nilotic African nations of the south, east and the west. The rivalry between the two biggest colonial powers, Britain and France, during the scramble for Africa, created a unique opportunity for an Abyssinian king Minelik to conquer and subdue the hitherto independent states in the southern, western and eastern parts of the present day Ethiopia.

The disadvantage of African colonialism in Africa was that while the western colonialism brought advanced technology and education as a means of exploiting the resources of the colonies, the Abyssinian colonialism was characterised by archaic feudal system more inimical to economic growth and development than the indigenous political systems of the occupied nations. On top of this, the rapacious feudal system instituted by the Abyssinian expansion deprived the masses of these nations their basic means of livelihood, the land. Land was divided among the ex-soldiers of king Minelik who now became the new land lords. The peoples of these formerly independent states now became serfs. Consequently, two thirds of what these people produced was robbed by the land lords and the church. The serfdom killed any incentive to expand production and increase productivity. Such archaic feudal system lasted for nearly a century, from 1880s to 1974 when popular revolution overthrew the monarchy. The feudal serfdom resulted in over nine decades of down ward spirals in economic growth and development in the country.

On the other hand, the creation of artificial state out of an African colonial expansion coupled with brutal treatment by the land lords bred resentment and animosity among the ruling class and the oppressed peoples. The ensuing resistance struggle in various parts of the country consumed a great deal of resources that could have been put into alternative productive uses.

3.2 Bad governance and bad policies

Ethiopia has no one to blame for its unprecedented development disaster except for successive archaic feudal and totalitarian political leaderships. As we argued earlier, archaic monarchical rule and rapacious feudalism that lasted for almost a century, kept the country under perpetual darkness while the rest of the world was moving forward with lightening speed. Neither the 1974 revolution nor the 1991 TPLF take over of the political power in the country brought any fundamental changes on political organizations and economic management in the country. The socialist regime wasted 17 years of opportunity for economic revival of the country. Misguided policies of collectivisation and villagization pursued by the socialist government killed any private initiatives for investment and economic growth. Like its predecessors, the current regime managed to cling to political power for over 16 years with out any significant improvement in economic lives of the majority of the peoples in the country. In fact poverty, hunger and famine are now embodied into the very structure of the Ethiopian economy.

A decade and a half is not a short time to harness the resources of the country towards the path of sustainable growth and development. On the contrary, the current leadership is preoccupied with maintaining its political power at the cost of economic nightmare. Recent stories of high economic growth in the country can not be trusted because no tangible improvements have been observed in the living standards of the majority of the population. According to The Economist Magazine (Nov.1, 2007), “An area like Sidama, in the south, looks green, tropical and improbably fertile, but existence there can be precarious. One foreign charity, Action Contre la Faim, recently found that the average cash income for households in one area was six cents a day. Shocked researchers concluded that the depth of poverty there was ‘far beyond what had previously been thought’.

Visiting the nearby villages confirms these cold statistics. In Garbicho Lela, high up in the hills, a nurse estimates that 13% of children are severely malnourished. The one shop in the village betrays the low level of economic activity; on the weekly market day, when over 500 people will walk for hours from the surrounding hill-villages to sell a few things, the shop will do only about 200 birrs ($23) of business. On an average day, it sells two Pepsis. After three years of good rains, aid workers reckon that the risk of severe food shortages has, for the moment, receded. But so marginal are the reserves of food and money here that one bad season could still spell disaster”. Such is a shocking reality about the economic performance of the country.

Time and resources are wasted on repressions of democratic freedom and human rights. Dictatorial and predatory regimes, lack of democratic freedom and human rights, lack of recognition of the rights of various ethnic groups in the country, absence of the rule of law, absence of property rights and institutions that support free enterprise under the current and previous Ethiopian regimes are some of the key causes of continued underdevelopment and abject poverty of the majority of the peoples living in this country.

3.3 Social and cultural factors

The social and cultural practices of the various peoples in Ethiopia; be it Abyssinian, Kushitic, Omotic or Nilotic, are not conducive to economic growth and development. Some social and cultural practices of the peoples in Ethiopia discourage entrepreneurship and thriftiness as unworthy attributes in society. In Abyssinian culture in particular, a trader or business person was despised while unproductive priests and warriors were praised. The forerunners of the indigenous technology such as blacksmiths, tanners, potters and weavers were despised and marginalised by almost all groups of the peoples living in Ethiopia there by killing their derive for creativity and further innovation. The industrial revolution in Britain would not have been possible with out the full recognition and support accorded by the people to the forerunners of the indigenous technology.

The enslavement of the occupied peoples by the Abyssinian expansionists exterminated the already marginalised forerunners of the indigenous technology in many parts of the south, west and east. However, the most destructive and negative cultural practices of Abyssinia is the endorsement of dependency. The typical example of this is the practice of beggary. While enterprising and thriftiness were discouraged as unworthy, begging and dependency were encouraged as acceptable social norms.

The dependency syndrome has far reaching consequences on entrepreneurship, innovation, investment and economic progress. Members of the society have little incentive for creativity and little desire for uplifting their current status to a higher position. Every individual strives just for survival which may be characterised as a low level economic equilibrium. There is no incentive for change and hence no economic progress.

3.4 Low savings and investment

Collective wisdom suggests that frugality and thrift nurture rapid economic and social development. People in most advance countries of the world such as Japan are considered to be uniquely thrifty and high savers while the people in the least developed countries lack such attributes. As we stated earlier, the cultural practices of most Ethiopian peoples discourages thriftiness and saving. While the Japanese saving rate has never fallen below double digits for many years and has reached an alarming 40% for some years after WWII, Ethiopia’s aggregate saving rate was a mere 4% at the beginning of 1990s.

In most advanced countries low household savings are compensated with increased government savings. However, in Ethiopia the government saving is very low not only because of limited economic activities and limited tax base but because of steep rises in military expenditure to finance more than three decades of civil war. The recent war with Eritrea between 1998 and 2000 was estimated to have cost the poorest country in Africa over a million dollar a day. Most of the government expenditure therefore is financed either by borrowing domestically or abroad and grants from abroad.

Low savings implies low investment and low investment implies low economic growth. Economic growth is an important component of economic development. Low household savings implies low private investment while low government savings implies low level of investment in social and economic infrastructure without which economic development is unthinkable.

3.5 Limited resources

Ethiopia is not endowed with abundant natural resources. Therefore, the traditional belief that the country is “the most fertile land on earth” has only come out of unwitting ignorance. However, by African standards, Ethiopia is a potentially wealthy country, with fertile soil and good rainfall over large parts of the south and the west. Coffee is the most important crop to the country’s economy and produced in the southern part of the country. By the late nineteenth century, coffee had become one of Ethiopia's most important cash crops. In addition to this the country possesses several valuable minerals, including gold and platinum.

However, both the availability of these resources and their exploitation is limited. As a result, the country has never become a great trading nation unlike many developing countries. Coffee has remained the single most important source of foreign exchange earnings covering up to 2/3 of the total export revenues.

There is ample evidence that the availability of vast natural resources positively contributes to faster economic growth and development. While some advanced countries such as Japan were not particularly endowed with abundant natural resources, a recent fast economic growth in Botswana in Sub Saharan Africa is directly linked to its abundant diamond reserves. On the contrary, countries such as the Democratic Republic of Congo endowed with vast mineral and other natural resources still failed to achieve tangible economic progress and remained one of the least developed countries of the sub Saharan Africa.

Ethiopia is endowed with sizable water resources such as perennial long distance rivers and lakes throughout the country. However, due to lack of technological progress and continued reliance on archaic and primitive method of farming, the majority of the population in the country continue to suffer from hunger and famine alongside such plenty of water resources.

3.6 Population pressure

Before the 1990s economists were unable to find a clear link between population growth and overall economic growth. However, a new research since mid 1990s, indicated that falling fertility opens a “demographic window” of economic opportunities. The falling fertility means that the number of dependent children relative to the working age population becomes fewer thereby allowing the country to release more resources to make additional investments which can spur economic growth and help reduce poverty.

High fertility impedes development in a variety of ways. The macroeconomic impact of high fertility was highlighted by the World Health Organisation (WHO) when it stated “At the societal level, rapid rural population growth in particular puts enormous stress on the physical environment and on food productivity as land-labour ratios in agriculture decline. Desperately poor peasants are then likely to crowd cities, leading to very high rates of urbanization, with additional adverse consequence in congestion and in declining urban capital per person.” (WHO, 2001).

Unlike the other regions of the world, in much of sub-Saharan Africa the demographic transition and the attainment of the “demographic window” is a long way off. The population is still very young and the proportion in working ages relatively low.

Ethiopia’s population dynamics clearly indicates that the demographic transition is a long way to go. The fertility rate is still high. According to the Central Statistical Agency (2006), the 2005 Ethiopian Demographic and Health Survey found that there has been a decline in fertility from 6.4 births per woman in 1990 to 5.4 births per woman in 2005 indicating only a marginal one child drop in 15 years. There still is significant differential in fertility rates across regions and across wealth levels with rural women and women with lowest wealth quintile having twice as many children as those in urban areas and highest wealth quintile.

As a result the country is still characterised by a rapid population growth. As of 2007 the country’s population growth rate is over 2.27%. Given the estimated current total population of 78 million this implies that the country’s population will continue to grow by nearly 2 million every year. At this rate the current population needs only about 30 years to double.

4. Ethiopia’s Development Prospect

Does the 21st century hold any hope for the country’s economic revival, recovery and development? While the various peoples living in that country hope for the better, the future is still bleak. The country’s prospect for the future economic recovery and development hinges primary on the current political processes.

The various peoples of the country are pressing on their demands for greater freedom, democracy, full recognition of ethnic rights and meaningful political autonomy. As long as the current regime continues to suppress the demands of the majority of the peoples in the country using force, the dream of economic recovery and sustainable development will only remain a dream.

In the absence of a viable political alternative in the country, the current regime is required to make fundamental changes in its political structures and make fundamental concessions with the various ethnic political organisations which it considers as unlawful. In particular, the regime has to stop playing ethnic cards while its policies are primarily centralized and unitary. This undermines the credibility of its policies. Economic development is unthinkable with noncredible government and noncredible policies.

The current regime can show that it is a better alternative to diehard unitary political stances of some opposition political parties by making fundamental changes in its policies. Among others, this would include the full accommodation of all genuine political opposition, full recognition of ethnic rights and full political autonomy for the majority of the poulation, full recognition to property rights and respect for the rule of law. Failing this, the current regime sinks the country into oblivion.