This is a reflection on “Made in Africa: Industrial Policy in Ethiopia” by Arkebe Oqubay (PhD), published by Oxford University Press (OUP). In looking at the book, one would ask why such title. Apparently, the thing that is made in Africa is an industrial policy – an instrument of development that the book claims was conventionally reserved for the advanced economies in Europe, America and Asia. An area considered a faux pas for the least developed economies of Africa. The term industrial policy embraced several aspects of the economic development agenda that included state intervention, market efficiency and protection, growth and structural transformation, balance of payments and terms of trade, equity and financial leverage. Bypassed, or at least understated, were aspects of the political economy of industrial policy.
Current industrial policy is overviewed and the adequacy of its research is questioned. The lack of uniform state capability is also reflected in the varied outcomes of the three sectors presented – flowers, cement and leather. The limitations of current policy involving numerous economic agents (“MSEs as the industrial corollary of the smallholder farmers in agricultural policy”) are posited as a probable cause for a great economic growth that is not transformational and has failed to deliver to the multitude.
The main work is an analysis of case studies of industrial policy formulation and implementation. Two success stories were flowers and cement, and the one disappointing case was leather. The two success stories – were led by capable political and state officials, including the late Prime Minister Meles Zenawi, and the author, are in sharp contrast to the poor performance of the leather sector, a sector for which the book prescribes the cure of large ranches and meat plants established by foreign direct investment (FDI). The surveys and the analyses coupled with the supporting literature abstracted in the book propose several mechanisms that can leverage a successful industrial policy.
According to the book, these drivers are: a developmental state that learns by doing; an unbalanced economic growth through creative destruction emboldened by a “hiding hand” about troubles ahead (something like a veil of ignorance); FDI as growth catalyst and cure to inertia and chronic path-dependence. FDI is said to do this by: inducing local (and global) competition; bringing knowhow and money in hard currency; and downsizing the number of economic agents to a manageable elite.
Snapshots are spatially economical but rarely comprehensive lest they be an all-catching universal set. For such a book, I preferred to err by omission (and probably have), rather than construct a bland abstraction that sought total inclusion.
Before getting in to the rather subjective task of critiquing, I needed to set standards of critique. I opted to use a scale of five standards: pecuniary value, literature, bibliographic weight, bearing on rival thoughts and, last but most, its value to humanity.
In terms of its pecuniary value, the question is direct: is it worth 55 pounds (1,865 Br)? Books are commonly valued by author or publisher prestige, appeal of title or timeliness of subject. Books are also priced by the cost incurred in research, write up and publishing. Literature is important both as a matter of flow and lucidity in elaboration of works of others as well as the author’s; to make the diction palatable as well as deep, to retain an immersing structure without losing significance.
Books of significance eventually end up as references in their subject matter and hence I have also included this aspect in my standards. I have assessed the book in terms of access to the current book of knowledge and on its own capacity as well. I also inquired whether the book will afford the reader academic or scientific bearing on rival thoughts or works of similar nature. Finally, and most importantly, the critique ends by measuring and weighing the significance of the book for the betterment of humankind. I have questioned its impact on two things in particular: would it help better the relationships of humans among themselves and would it improve their relationship with their environment as more sustainable?
Apparently, this standard was afforded more space in the critique than all the rest combined. As the book was measured and weighed with such standards, I found it to be good in some and wanting in others.
On pecuniary value, I found the book to be worth every penny of its price. It is hard to imagine a more prestigious author than a freedom-fighting veteran with the pedigree of a metropolitan mayor and a prime ministerial advisor who went to Oxford on sabbatical leave, to boot. Again, at a time when the world is talking about rising Africa and its transformational development, “Made in Africa: Industrial Policy in Ethiopia” sports a subject so timely and a title so alluring.
As to the effort expended on the research, given the author’s widely acclaimed work ethic, the sheer volume of data compiled and referenced on the three sectors, the numerous companies studied and investors interviewed, will render the book an object of very high economic value. In addition, as the jewels on the crown, there is world-class editing by an Oxford Alumni, OUP as a publisher and a reverent foreword by an erudite professor of the same establishment.
I also found the diction, structure, significance of the book to be good. Notwithstanding the presence of Oxford the mighty, the book features diction and literary vehemence worthy of the subject matter and that matches the reputation of the author. In the foreword, Christopher Cramer (Prof.) admires the author for his immaculate work ethic and an eye for matters of import. And these talents are manifested in the book as attributes of significance and coherent structure.
The reader can navigate comfortably from back to back and wherever she may pause, the content is sure to be significant and, most importantly, intricately woven into the whole structure at its proper place. This has made the book maintain its literary flavour without compromising its coherence.
The book is a work of reference on its own; but more so as a means of access to knowledge the establishment has to offer on the subject of industrial policy in a third world developmental context. Many studies on developing countries fall short of their intent blaming the lack of reference materials. Made in Africa will fill this gap for many years to come, not only from the voluminous primary work that the author has industriously produced but also from the compendium of secondary materials indexed and referenced with a contingent of analytical work.
Even the bibliography, with the exception of some conspicuously absent mainstream references, is a catalogue of painstakingly selected works on developmental economics. This is an enormous contribution to, and a huge help for, researchers engaged in a similar quest.
Where I found the book wanting is on analysis of rival thoughts. Perhaps the earliest weakness encountered in the book is its unnecessary and weak claim that conventional wisdom on industrial policy is opposed to its useful application in Africa. Very few and remote references were cited as evidence to this outlook; too few and too remote for a claim that is neither easy to validate nor necessary to make so far as the objective of the inquiry is concerned; namely, how industrial policy would work for Africa, taking lessons from Ethiopia.
Such unnecessary antagonism may serve as an impetus for a taking on a daunting task against a not-so-wise global conventional wisdom. However, it may also misdirect researchers and readers alike in biased tracks. For instance, the World Bank Group’s 2008, “Growth Report: Strategies for Sustained Growth and Inclusive Development by the Commission on Growth & Development”, prepared by a commission of twenty prominent individuals, including sitting governors of the Bank of China and the Bank of Indonesia, two Nobel Laureates (one serving as chair), two former middle-income-country leaders and a former US Treasurer, was conspicuously ignored.
The report hardly opposes the active role of the developmental state; nor does it underestimate the significance of structural transformation by discretionary industrial policy. The novelty and application of Made in Africa as developmental thought on the design and implementation of industrial policy, would have been much more enhanced had its narrative been juxtaposed against such rival thoughts as that of the Growth Commission’s. Unfortunately, the book did not take on such a challenge.
Another edge that remains absolutely wanting is the book’s value for the betterment of humankind. The impact of sector dynamics and policy reforms on society at large is hardly predictable. And, it may be deemed unfair to criticise a book about sector-specific reform alternatives on the basis of the highly unpredictable, country-wide trade-offs. But Made in Africa, from preface to bibliography, is dotted with concern for the people of Ethiopia – and Africa, whose masses supposedly languish in deprivation in a world of industrial abundance. This gives any critic the liberty of weighing the book in terms of the value it affords policy makers or researchers in their quest to alleviate the plight of society. In that sense, I sought to answer the following questions:
Are the masses drivers or do they suffer from inertia? Which way should wealth accumulation go – creative or extractive? Is comparative advantage a creed or a substance? Is political economy objective or a constraint? Which mattered most in the debate on governance or equity, state impunity or demanding society, and elite or masses?
The people are rarely seen in the book except in a paradoxical duality; at times as a lethargic cause of impeding inertia and at other times as unlimited fodder to low pay, high-scale heavy industry. The numbers speak of this gross oversight. The total size of the work force of the country is about 70 million (the employment to population ratio is 80pc, twenty points higher than the world average). In 2007, main manufacturing (classified as establishments that use power driven machines) employed 195,000, while cottage industry employed 1.2 million in 2001. In contrast, labour engaged in 2012 in the two successful sectors covered by the study – cement and floriculture – was slightly over 40,000 and 7,000, respectively.
The choice of sectors for the study also reflects sidelining of the significant population. In the early pages, the author states, “One way to understand the successes of, and challenges facing, Ethiopia’s catch-up and transformation is through the in-depth study of […] leather, garments, and floriculture, credited with the rapid transformation of the economy in past decade.” But, ironically, cement was preferred over garments, a sector with arguably much greater popular significance, more extended linkage and economic impact.
Again, the scope of the book is sector reform dynamics and choosing cement as an import-substitution industry that is easier to research as an “insider” may bias the selection choice. Nevertheless, when evaluating the book based on its value to the benefit of the people, such choices will naturally detract from its merits. However, to be ignored may be better than to be ranked the lowest of economic agents. This would be an impediment to the productive investment of their own accumulated wealth unless they join en masse as employees or subcontractors in industries which more knowledgeable expats will obligingly set up using their land, their money, their endowment funds and their government.
In a country where most of the wealth is landed and of agrarian origin, the book fails to demonstrate how the accumulation and distribution of wealth in the transformation of an agrarian economy will unfold during the application of a successful industrial policy. The late Prime Minister Meles always raised the issue of transformation in terms of a choice between that which is dispossessing or extractive and that which is creative or additive. A recent book, Why Nations Fail, by two respected development economists, Daron Acemoglu and James Robinson, explains the nature of these two variant political economies. Extractive wealth accumulation occurs when disadvantages are exploited to control factor prices and property rights distorted for, and by, economic rent seeking and collection.
For decades, the EPRDF and the government of Ethiopia have declared that the foundation of its growth strategy is the smallholder farmers and their hope of improved productivity without relinquishing their primary assets – land and cattle.
Export promotion zones, huge ranches with meat processing plants, industrial parks in metropolitan cities are characterised by three extractive natures corresponding to the three factors of production. They induce youth migration lured by low skill, low pay jobs; they promote land grabbing and forcefully depress the price of livestock; and avail the people’s hard earned savings as cheap capital to investors. It is this that the book recurrently, chapter after chapter, encourages. And this is a guaranteed recipe for trouble; it is the making of an economically dispossessed and politically disenfranchised society – a good cause for social instability.
Puzzlingly, the book continually derides comparative advantage as an irrelevant aberration in the formulation of industrial policy. Comparative advantage is an endowment that is dynamic. Building economies on comparative advantages is efficient, enhances the balance of payment by favourable terms of trade and is a dynamic common denominator in the “interaction of the three factors that matter for industrial policy effectiveness” – industry structure, linkage dynamics and political economy.
Qualitative researchers often have the luxury of using semantics artfully and may sometimes blur the distinction between what is rhetorical and analytical in their narrations. Discrediting comparative advantage as a “creed” and rendering economic axioms as “doctrinal” straitjackets (Prof. Cramer in the Foreword) poses the danger of undermining the value of quantitative researches and econometrics.
Ultimately, these are very important works that will bring us to a more predictive set of knowledge on any subject, including industrial policy for low income countries. Modelling by elementary theory of comparative advantage with countries and factor (technological) endowments as mathematical elements so as to predict non-autarky (policy-independent) prices may not move books from the store shelf.
But, without pretending to grasp either the mechanics of its vectors, or its logarithmic modularity, I definitely believe such a model will inform the choice of industrial policy for Ethiopia in present day global competition. I would do so as I would believe a medicinal breakthrough from pharmaceutical research – without my having any clue about the pharmacology of the breakthrough – would surely be a cure for a related acute illness. By brushing aside comparative advantage dismissively from the array of arguments for or against comparative advantage, the book has missed another opportunity to engage in discourse that may inform the betterment of the people, as surely, the “advantage” in “comparative advantage” belongs to the people in a fair and just political economy.
On political economy, initially, the book takes it as a key factor in the interaction of matters that lead to an effective industrial policy. Later, however, it is reduced to a constraint, where the purpose of industrial policy is stated as “economic development”. This is a marked departure from the essence of policy making in Ethiopia, as led by the EPRDF and as was for decades preached and practiced by the government of Ethiopia, spearheaded by writings of its revered late Prime Minister, Meles Zenawi. If one subject can define policy making in federal Ethiopia, it is political economic development.
Specifically, Ethiopian policymaking since right after the Ethio-Eritrean War has been focused on one singular object: the domination of a rent-seeking political economy, a political economy that is rampant globally and to which Ethiopia is no less vulnerable. The author is probably more aware than anyone else about this, as is witnessed by how succinctly the industrial policy that has prevailed since the conclusion of the Ethio- Eritrean War in 2000 is described.
Sadly, the very foundations of the Industrial Development Strategy of Ethiopia, “human resource development, improving the regulatory environment & justice system, and combatting a rent-seeking political economy” are sidelined by the book as mere highlights in the overall strategy. Also, its cornerstones, development of “small farmers and SMEs” are hailed by the book as challenges too difficult to deliver owing to their numerical immensity.
The suggestion that the diverse interests of the Ethiopian people, emerging as they are from centuries of destitution, is too much to handle for the government is a recurring narrative throughout the book. (At one place the author even courts the idea of the centralised unitary governance of the Orient as good cause for success but respectfully, to his credit, refrains from a comparison with our Federalist system and only alerts of the challenges of country-wide policy consensus). But, among the views expressed in the book, far removed from the governing political economic perspective, is the “cure” prescribed for the “[ailing] underperformer”, namely, the leather sector.
Arkebe suggests, somewhat magnanimously, that input markets for raw hides and skins be complemented in the “medium-term” by a policy that introduces “larger scale arrangements such as ranches” side by side “with no inherent conflict between continued small holder productions” of livestock. Of course, there will be an inherent conflict between ranchers and smallholders in livestock management, grazing land interference and, most important of all, market leverage that favours the ranchers and leads to an eventual dispossession. Apparently, acquiring smallholder livestock will be the most expedient means of filling up the ranches, considering the present state of cattle breeding technology has not reached that of its poultry equivalent. And this is when the author clearly, had earlier stated the inordinate importance of livestock in the political economy of Ethiopia – 25pc of the gross domestic product (GDP) and millions of directly dependent pastoralist households.
As if to further the puzzle, at first, it is hard to positively place which side of the (in)equity structure Made in Africa stands on. But later in the book its position is well revealed. The declared objective of its industrial policy is economic development and its “soul” or “sacred politic goal” is structural transformation. Its objective is not development with good governance that ensures an equitable distribution of economic rents and opportunities for a demanding populace. It is a policy of showcasing grand “economic silos”, as one African periodical journalist second guessed the author during an interview on Made in Africa.
One will also notice that the state is narrowly defined in the book as merely comprising the sovereign central power and hardly takes into account the diverse population within the regional territorial configuration. In its closing pages, the book indulges in a narcissistic affinity for the developmental state – limited to the administrative part of central government- and preaches the beauty of learning by doing and failing implying that the people have to bear the brunt of all that comes in the name of development for the sake of the “the sacred “structural transformation. Hence the conclusion that Made in Africa stands on the side of government and foreign investment but not at all on the side of a demanding populace.
Surely, the book may be deemed a world class literary work and is indeed a good reference for those interested in industrial policy, but even this excellence, used as it is to promote interests other than the popular political economic cause – dominating rent seeking – deserves little credit. Save that it inadvertently elucidated, with incisive diction and elaborate literary flow, the dark side of the industrialisation frontier, which our leaders are now well cautioned to avoid.
And as a case builder for the developmental state and FDI, it may also be a valuable asset, if one ignores the author’s candid bias and complete disregard for political economic outcomes. In the end, the book is reduced to nothing but advocacy for a state that intervenes to open up the economy for FDI, through a discretionary industrial policy whose cardinal governance is reciprocity between investors and public administrators, preaching inordinate tolerance of state failure as a lesser evil to that of market failure.
Regarding its value to humanity, the mechanisms of growth and industrialisation advocated will pose a danger to the people for whose benefit such an arduous work was presumably intended. Such an industrial policy exposes the people to an imported capitalism that will dispossess their meager economic wealth and disenfranchise them from the governance structure of their sovereign state. And this will be a sad turn of events for an author who has lived, with his compatriots, a life dedicated to the people and for the people of Ethiopia.
The beautiful snippets from Samuel Beckett would have been so inspiring if only it had referred to the Ethiopian people as whole – federal and regional states, the leading Front, civil servants and the masses as one inseparable socio economic entity. Incidentally, it is ominous that days before the start of WWII, in September 1938, Neville Chamberlain was filmed remarking with a similar quote: “when I was a little boy, I used to repeat, if at first you don’t succeed, try, try, try – again! “, on his relentless failed attempt to appease a belligerent Hitler. And even Beckett’s snippet is a twist out of the fatalist whole, when read in full: “All of Old. Nothing else ever. Ever Tried. Ever Failed. No Matter. Try Again. Fail Again. Fail Better”.
Certainly, Arkebe deserves sincere gratitude and high regard as a fellow countryman who stands a tall giant in Ethiopian politics and public service for daring to face the Oxford establishment armed with nothing but his cognitive brilliance & passionate curiosity; for enduring, in search of knowledge, the pain of separation from family, country and an iron clad protection of an incumbent political power; and for publicising that rival thoughts are entertained in Ethiopia, even at the highest levels, thus revealing to the world the tolerance and humility of the person, the party and the natio
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