Learning the Lessons – Addressing Inequality




Ethiopia is at a turning point. With the new Prime Minister in place, the ruling party can open up, engage in genuine political competition and set a new track for the country. Or it may choose to engage in window dressing and unsuccessfully try to continue along the path which caused the current crisis. Either way, there will be a change, as the latter course will not work for long.

What can be learned from the last 26 years of EPRDF rule in Ethiopia and applied to make things better?

Economic growth has been good, but widening inequality has been bad. The issue of inequality needs to be addressed.

Reforms after 2001 helped allow a nascent private sector to emerge, which has driven the economic growth in Ethiopia (not the five-year plans that the old EPRDF relied on). But this independent private sector has been burdened with suspicion and red tape, with areas of the economy cordoned off or captured by the party and the state. The inefficiency of the party-statals and parastatals have kept them from being too dominant, as witnessed by the botched job the military has done with MeTEC.

But the blurring of political strength with economic opportunity has created an unhealthy linking of political connections to business, at the cost of efficiency and increased corruption.

There is a need for strong conflict of interest guidelines for party and government officials to prevent the interlocking of political and business power. The problem of using political power to gain or further business interests is not unique to Ethiopia; this has bedevilled most African countries. The recent example of state capture by the Zuma clique in South Africa is an example where this has gotten out of control, but now there is a concerted attempt to reverse this problem and bring the malefactors to justice.

Ethiopia should go down the same road, at least in terms of separating the state from business and enforcing conflict of interest rules vigorously. Further unleashing the private sector and the withdrawal of the party and the government from large sections of the economy can again accelerate economic growth. Discontent has arisen from the perception that state and party officials have used their positions to enrich themselves and their cronies.

The youth are justifiably worried about their future and fed up with crony capitalism and vast inequalities (covered up by official statistics but evident to all). Positive state-driven initiatives to improve infrastructure or increase employment, like the Special Economic Zones, can have a positive impact. Combined this with unleashing the private sector and the entrepreneurial zeal of the youth is the best hope for the needed job creation to absorb the youth bulge.

As businesses succeed and make money, they become the source of growing taxation (which suffers now from arbitrary measures), which if applied fairly, produces growing revenues while not undermining the growing economy.

Rural inequality is different and must be recognised and dealt with. Although official statistics show substantial increases in agricultural production in most of the countryside, the reality is geographically divided, cutting across regions and ethnic lines. The western parts of the country benefit from improved rains and relatively large landholdings. While almost no one is getting rich on the limited plot sizes, the overall production levels in western areas are going up, fertiliser and seeds are having a positive impact, and most farmers are selling enough to pay for inputs and increase their income.

The Centre and Eastern parts of the country is a different story. Rainfall is becoming even more unreliable, particularly in lowland areas, and for most farmers, the plots of land are too small to produce enough to feed their families even in a relatively good year. In bad years, the loans for inputs heavily ‘encouraged’ by the government go unpaid, building up unsustainable levels of debt.

Ironically it is not only Eastern Oromia and Amhara that are affected, but Tigray region is also arguably in the worst shape. Despite significant efforts to rehabilitate the dry farming land, 11 of the 16 livelihood zones of this region are no better off now than they were 10 years ago. Some are worse. The ideology of the ruling party, which seeks to keep ‘peasant’ farmers on overcrowded and overused land has hurt those who have supported them the most in their struggle, the farmers in the Tigray region.

Again the solution to this problem is that many of those in these marginal cropping areas need to move away so that those who remain can try to succeed on larger plots. It is the youth who are facing these choices – about half have to either move to towns and cities and gain employment or face a bleak future in the declining marginal rural areas.

Pastoralist youth are faced with a similar challenge, as pastoralism becomes more concentrated with larger herders succeeding but smaller herders failing. As smaller herders lose their livestock to droughts, they want their children to get the education so they can move and get ‘jobs’. Already many youths from both marginal cropping and pastoralist areas are ‘voting with their feet’ and moving to towns and cities.

The government has mostly refused to recognise this problem – painting all agriculture as successful. The more complex reality is that some areas are in fact succeeding, with perhaps 60pc of the rural area population getting better. But, another 40pc is getting worse, and they need different assistance, not just safety nets to keep them in places where they cannot succeed, but help to have the behaviour and skills that will help many of them to succeed in employment elsewhere.

 



By John Graham
John Graham is a former aid manager and analyst in Ethiopia.

Published on Apr 15,2018 [ Vol 18 ,No 938]


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