Ethiopia: Why is Big Money Failing the Economy?

Published on 17th June 2008

Sufian Ahmed
Three years have passed since Sufian Ahmed hastily and injudiciously predicted Ethiopia’s economic wonder and high-speed transition into a middle–income nation in 20 years. As the top executive officer of Ethiopia’s Ministry of Finance & Economic Development, Sufian Ahmed has all the necessary information to estimate future economic growth in Ethiopia. Unfortunately, three years after his optimistic predication, Ethiopia is yet heading to another phase of drought and starvation.

The term "economic growth" refers to the increase of a specific measure such as real national income (NI), gross domestic product (GDP), or per capita income (PCI). GDP is the measure of the goods and services produced by an economy in a specified time usually a year commonly expressed in terms of a measure of the aggregate value-added output of the domestic economy. When the GDP of a nation rises, economists refer to it as economic growth. The real progress of nations is not measured by a single measure of growth such as GDP, it is also measured by the degree of access its citizens have to economic institutions and to the political process.

Statistical indicators have been used as a powerful tool in promoting human rights. The UN is one of the vanguard organizations that uses statistical indicators to measure the well-being of people in member nations. It not only measures the well-being of people; but also injects capital into the economies of poor countries to help them fight poverty and build participatory political institutions.

Despite the World Bank’s constant pumping of capital in Ethiopia for the last 63 years, Ethiopia has not been shielded from being the symbol of poverty and bad-governance in the world. What went wrong? Evidently, the injection of a large dose of aid fund, loan, transfer capital, and domestic capital formation has induced uninterrupted GDP growth in Ethiopia between 2001 and 2007.

In the last five years, the government of Meles Zenawi, the World Bank, and the IMF have produced voluminous documents highlighting the growth of the Ethiopian economy. Such a claim would have been valid only if the heralded growth had a positive impact on the daily life of poor Ethiopians. Economic growth has no meaning to the majority of Ethiopians unless its benefit trickles down to them. If the economy is booming, why are many Ethiopians poor? Why does the UN Misery Index rank Ethiopia at the bottom of its list three years after Sufian Ahemed’s optimistic prediction?

In spite of the recent economic growth that benefitted a handful of élites, the World Bank’s overarching objective of poverty reduction has been a complete fiasco in Ethiopia. The quality of governance has been deteriorating in direct proportion to the number of years the World Bank has been in Ethiopia.

Here any rational person can draw the following three conclusions: The World Bank does not enforce its objectives, or the bank does not have a monitoring arm. Aid funds are not properly used in Ethiopia. Despite the constant flow of bilateral and multilateral capital, bad-governance has stifled economic growth in Ethiopia.

The information that comes from government sources definitely polishes Ethiopia as a peaceful place where people live in harmony. However, the political landscape in Ethiopia remains tainted by the aftermath of the May 2005 parliamentary elections and by the recent hard to believe and depressing story of territorial sale to Sudan. Yes, leading opposition leaders have been released from jail, but the number of political prisoners is increasing with the passing of every single day. To make things worse, the recent exclusive intra-TPLF party election has deepened the rift created by the 2005 election.

The World Bank should not be a watchdog over the government of Ethiopia but it must establish and follow strict monitoring and enforcement polices to pressure governments in poor countries to change their behavior. Otherwise, the very capital destined to change the lives of poor Ethiopians, will end up disenfranchising millions of people from the political and economic establishments of the country.

The recent shifts in the conceptualization of development and the emphasis on human rights have re-defined the relationship between development and human rights. Human rights is no longer seen as the by-product of development, but rather, a critical factor to achieving economic and social development. Rapid global development must not be viewed independently; it should be contrasted with localized ideas of “rights”, “development”, and “civil society”.

Meles Zenawi and his advisors assume a unidirectional cause and effect relationship between "human rights" and "economic development". According to their assumption, People are not "ready" for democracy until some hypothetical level of economic development has been achieved. Based on this hazy assumption, they postpone the fundamental issues of liberty until economic development is achieved. No nation can see economic prosperity and genuinely take advantage of economic freedoms without political freedom and the right for all citizens to participate equally in all aspects of society. Human rights and political freedom are fundamental prerequisites to build a prosperous nation. In the 21st century, human rights and political freedom are no longer separated from economic and social conditions.

Today, lack of money is not the main reason why Ethiopia hasn't been able to pull itself out of poverty; if it was, the UN, EU, the World Bank, and a number of Western governments have thrown a large sum of money at poverty reduction programs Ethiopia. However, a very large number of Ethiopians still live below the threshold of poverty. The critical building block for poverty reduction is not money, but governance; a factor that they fully control. Actors involved in governance include: government; landlords, trade unions, cooperatives, NGOs, research institutes, religious leaders, financial institutions, political parties, and the military.

What is good-governance? It is a decision making process that follows the rule of law, is participatory, consensus oriented, accountable, transparent, responsive, equitable, and inclusive. Good-governance assures that the views of minorities are taken into account and that the voices of the most vulnerable in society are heard in decision-making. Good-governance is responsive to the present and future needs of society, and it also assures that corruption is minimized.

Condensed from Economic Growth and Misery, Ethiopia’s Paradox


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