Why is Ethiopia the second poorest country on the planet?

Ethiopians in Addis Ababa queuing in line to be fed by NGOs 

Why is Ethiopia the second poorest country on the planet?

By Professor Alemayehu G. Mariam,

Recently, a well-known correspondent for one of the major American media outlets stationed in Ethiopia sent me an email grousing about my article urging boycott of Coca Cola in Ethiopia. He wrote, “I’m sorry to be blunt, but I don’t understand the thrust of this article [on boycotting Coca Cola]. You seem intent on misleading at least some of your ‘millions’ of readers that Ethiopian politics is simply evil regime vs angelic (and united) opponents.”

My response to the befuddled foreign correspondent was terse, swift and unapologetic. “It is. Deal with it! I am not sorry to be blunt. It is your right to mindlessly parrot the regime’s line!!!” When one’s journalistic accreditation and privileged existence in Ethiopia depends on one’s choice of words and reportorial insipidity, timidity masquerading as integrity and neutrality becomes a journalistic virtue.

I suspect this commentary on the question of poverty in Ethiopia will befuddle the ruling regime in Ethiopia, its cronies, supporters and domestic and foreign apologists. They will all say, “Here he goes again rootin’ and tootin’ for  ‘angelic (and united) opponents’ and ‘demonizing’ an ‘evil regime.’” I never give the regime a “fair shake” and will never recognize “anything good they have ever done.” They will all bellyache about how I will go out of my way to discredit the galloping “economic growth the country has registered over the past decade.” They will whine about how I never miss the opportunity to paint the regime a darker shade of evil every Monday.

The fact of the matter is that I let the chips fall where they may. I pride myself in being blunt and not hiding behind a façade of moral relativism and self-serving, convenient and faux journalistic probity.  I do not believe in “angelicizing” demons nor demonizing “angels”. I tell it like I see it. I am a straight talker of truth to abusers of power; and those who can’t handle straight talk can walk.

I am also an unrepentant partisan.  I am 100 percent partial to the cause of human rights, the principle of rule of law and the practice of due process. I offer a personal point of view on a variety of issues. I analyze things happening in Ethiopia first through the lens of a constitutional lawyer and second as a political scientist. I moralize and pontificate from time to time because I am outraged by the evil that men and women do.  I believe poverty is the root of all evil. I believe the late Meles Zenawi left a dismal and bleak legacy of moral, physical and metaphysical evil in Ethiopia that will last for a generation. Shakespeare understood evil, and through Antony in Julius Caesar spoke: “The evil that men do lives after them; The good is oft interred with their bones. So let it be with Caesar.” I hasten to add, “The only thing necessary for the triumph of evil is for good men (and women) to do nothing” and to say nothing. Thus, I must speak out against poverty – the poverty spawned by poverty profiteers and poverty pimps -- as the root of all evil in Ethiopia.

The evil that survives evil men keeps Ethiopia as the second poorest country in the world  

Last week, the Oxford Poverty and Human Development Initiative (OPHDI) Multidimensional Poverty Index (formerly annual U.N.D.P. Human Poverty Index) reported for the fourth successive year that Ethiopia is ranked as the second poorest country on the planet. Over the years, numerous other international organizations have ranked Ethiopia among the bottom five worst countries in the world not only on poverty bust also on human righst and other measures.  In 2010, OPHDI reported that the percentage of the Ethiopian population in “severe poverty” (living on less than USD$1 a day) was 72.3%.  The OPHDI 2014 poverty statistics are even more shocking.  In rural Ethiopia, 82 % of the population struggles “in severe poverty” compared to 18% in the urban areas.  The highest incidences of “severe poverty” in Ethiopia in 2014 are found in the following regions: Somali (93% ), Oromiya (91.2%), Afar (90.9%),  Amhara (90.1%) and Tigray (85.4%). By OPHDI measures, poverty is not simply lack of money. It is  quintessentially about bad health, bad education, bad nutrition, bad child mortality, bad water supply, bad electricity supply, bad housing and bad sanitation. Ethiopia is in very bad shape; and that is how she got to be ranked the second poorest country on the planet!

The regime in Ethiopia tirelessly vociferates to project itself as a band of enlightened  “renaissance” leaders on a mission of transforming Ethiopia into a utopia. In September 2012, the ceremonial “prime minister” of Ethiopia, Hailemariam Desalegn, in his funeral oration proclaimed:  “Our great leader Meles Zenawi has been the chief architect of our country’s renaissance, which has been assured by double-digit growth over the last eight years.” A few weeks ago,  Hailemariam proudly told  The Africa Report: “Everyone is now talking about the Ethiopian renaissance”. (No kidding!?)

Last September, Tedros Adhanom, the malaria-researcher-turned-instant-foreign-minister and the man being groomed to become  “prime minister” in 2015 after Hailemariam is unceremoniously shooed out the door, went to the Golden Citizen Festival in New York City and crowed about “the success of Ethiopia and Africa”. He said, “Ethiopia has done lots of strides in economic, social and political fronts… In economic growth, it has registered more than 10% for the last ten years… Ethiopia is on the rise…”

If Ethiopia is in a “renaissance and on the rise”, how is that she is the second poorest country on the planet? Why is it that Ethiopia has been unable to rejuvenate herself in her “renaissance” and rise up on the global poverty scale? Why is 82 % of rural population in Ethiopia “in severe poverty” in 2014? Why is it that nearly 60% of Ethiopia’s 90 plus million population struggling with an income below US$1.25 per day?  Why is it that over 60% of the Ethiopian population chronically or at least periodically food insecure?

The fact of the matter is that poverty, disease, illiteracy, corruption and human rights violations are the only things that are on the rise in Ethiopia. If there is a “renaissance” going on in Ethiopia, it is a renaissance of corruption, human rights deprivation and violation. Ethiopia has made backslides, not “strides in economic, social and political fronts.” But in the regime’s echo chamber of  “revolutionary democracy” and “developmental state”, (better known as Denial-istan), everything is hunky-dory. Anyone who says otherwise is wrong, misguided or ill-intentioned.

The Pollyannaish regime leaders in Ethiopia are very much like climate change deniers who refuse to accept irrefutable evidence of man-made global warming. The regime refuses to accept the fact that the vast majority of the people of Ethiopia live in abject poverty and that the regime itself is singularly responsible for the persistence of poverty in that country. But they would rather talk about an imaginary renaissance wonderland they have created!

The facts speak for themselves. In 2011, Global finacnial Integrity (GFI) reported,  “The people of Ethiopia are being bled dry. No matter how hard they try to fight their way out of absolute destitution and poverty, they will be swimming upstream against the current of illicit capital leakage.”

The GFI report further documented that “Ethiopia, which has a per-capita GDP of just US$365,  lost US$11.7 billion to illicit financial outflows between 2000 and 2009. In 2009, illicit money leaving the economy totaled US$3.26 billion, which is double the amount in each of the two previous years… In 2008, Ethiopia received US$829 million  in official development assistance, but this was swamped by the massive illicit outflows.  The scope of Ethiopia’s capital flight is so severe that our conservative US$3.26 billion estimate greatly exceeds the  US$2 billion value of Ethiopia’s total exports in 2009.”

Why is Ethiopia the second poorest country in the world in 2014? 

The principal reasons for the triumph of the evil of poverty in Ethiopia have a lot to do with the ineptitude, incompetence, ignorance, arrogance and corruption of the ruling regime and its late “chief architect” Meles Zenawi. Meles fancied himself as an economist among many other things. Steeped in his youth in the bush in the half-baked  political economy of Marxism, Meles tried to redeem and rhetorically reinvent himself as the “chief architect” of  “revolutionary democracy” and the “developmental state” in Ethiopia. However, neither Meles nor his witless acolytes have taken the opportunity to articulate the theory and practice of  revolutionary democracy or the developmental state. Instead, they have chosen to mount a babbling rhetorical attack on “neoliberalism” while stretching out cupped palms for alms to the International Monetary Fund and the World Bank. In a “scholarly” article in a volume edited by the old anti-neoliberal war horse Joe Stiglitz, Meles proclaimed, “The neo-liberal paradigm is a dead end incapable of bringing about the African renaissance, and that a fundamental shift in paradigm is required to effect a revival.”

Meles “shift in paradigm” was a fanciful “Growth and Transformation Plan”, not unlike the centralized five-year economic plans of the now forgotten Soviet Union. As I have demonstrated on a number of previous occasions, Meles did not have a growth and transformation plan; he had delusional plans of economic growth and transformation.

In my commentary “The Fakeonomics of Meles Zenawi”, I demonstrated that Meles’ “growth and transformation plan” is nothing more than a make-a-wish list of stuff. It purports to be based on a ‘long-term vision’ of making Ethiopia ‘a country where democratic rule, good-governance and social justice reigns.’ It aims to ‘build an economy which has a modern and productive agricultural sector with enhanced technology and an industrial sector’ and ‘increase per capita income of citizens so that it reaches at the level of those in middle-income countries.’ It boasts of ‘pillar strategies’ to ‘sustain faster and equitable economic growth’, ‘maintain agriculture as a major source of economic growth,’ ‘create favorable conditions for the industry to play key role in the economy,’ ‘expand infrastructure and social development,’ ‘build capacity and deepen good governance’ and ‘promote women and youth empowerment and equitable benefit.’
Stripped of its collection of hollow economic slogans, clichés, buzzwords and catchphrases, Meles’ growth and  transformation plan is plain sham-o-nomics.

In my commentary, “The Voodoo Economics  of Meles Zenawi”, I demonstrated that Meles has been making hyperbolic claims of economic growth in Ethiopia based on purely fabricated economic statistics. For a number of years, Meles and his regime have been pulling a public relations sleight-of-hand by using the IMF as a front to channel bogus economic statistics to prove their economic prowess and unrivalled success to the world.

I am certainly not the first one to expose the economic and political ineptitude, incompetence and corruption of the ruling regime in Ethiopia. In its November 7, 2006 editorial, the Economist Magazine described “the Ethiopian government as one of the most economically illiterate in the modern world.”

On November 3, 2007, the Economist magazine reported, “The fact is that for all the aid money and Chinese loans coming in, Ethiopia's economy is neither growing fast enough nor producing enough jobs. The number of jobs created by flowers is insignificant beside an increase in population of about 2m a year, one of the fastest rates in Africa.... The government claims that the economy has been growing at an impressive 10% a year since 2003-04, but the real figure is probably more like 5-6%, which is little more than the average for sub-Saharan Africa. And even that modestly improved rate, with a small building boom in Addis Ababa, for instance, has led to the overheating of the economy, with inflation moving up to 19% earlier this year before the government took remedial action. The reasons for this economic crawl are not hard to find. Beyond the government-directed state, funded substantially by foreign aid, there is--almost uniquely in Africa--virtually no private-sector business at all.” In 2009 at a high level meeting of Western donor policy makers in Berlin, a German diplomat suggested that Ethiopia’s economic woes could be traced to “Meles’ poor understanding of economics”.

Crony capitalism as the root cause of poverty in Ethiopia 

The root cause of poverty in Ethiopia is not “neoliberalism”. It is “crony capitalism”, the “capitalism” of the “chief architect” of “revolutionary democracy” and the “developmental state” in Ethiopia. Crony capitalism is a system in which economic activity and success depends almost entirely on political connections. Stated simply, one must be an insider (a crony) with political and ethnic connections to get the lion’s share of economic benefits and avoid punitve consequences. In the argot of economists, such economic activity is sometimes described as “rent seeking” in which  “individuals or groups lobby government for taxing, spending and regulatory policies that confer financial benefits or other special advantages upon them at the expense of the taxpayers or of consumers or of other groups or individuals with which the beneficiaries may be in economic competition.”

Meles' crony capitalism is a mutual support system where cronies support Meles and his party the TPLF (and handmaiden EPDRF) in exchange for a variety of  benefits and favors ranging from the creation of a favorable regulatory environment to direct subsidies and public procurement contracts. Insiders gain at the expense of outsiders, and therefore  everyone wants to become a crony for the money. Even entrepreneurial individuals are situationally compelled to submit to the predatory crony system just to survive.

In Meles’ crony capitalism, the “government” has total control of the economy and its cronies maintain a total chokehold on all productive sectors. The Meles regime maintains a stranglehold on the economy through regulation, taxation, public expenditures and subsidies of economic activities. They have the unbridled power to benefit their cronies and fatally cripple their enemies, or at least deal significant setbacks to those who are not willing to pay to play. As a result, economic activity, entrepreneurial viability and business success depends almost entirely on the whims and fancies of those who control the levers of political power.  Such is the incestuous process of “wealth creation” and "double-digit economic growth"  in Ethiopia’s crony capitalism.

Very few have been able to succeed as independent entrepreneurs in Meles’ crony capitalism. Those who succeed are eventually swallowed by Meles' crocodilian cronies. Economic success in large measure depends on the level of political activity and support of the regime. If independent entrepreneurs want to survive, they must participate in crony capitalism even though they may prefer to avoid it. The Meles regime has used its regulatory power, taxing authority, and expenditures on transfers and subsidies, to favor its cronies and debilitate those who are not willing to pay to play. This has caused a run among entrepreneurs of all kinds to seek favorable “government” treatment and protect themselves from regulations, expenditures and consequences that will put them at a competitive disadvantage.

The evidence on the Meles’ regime’s crony capitalism is uncontested and manifest. Human rights groups, analysts and commentators have been reporting for years that the Meles regime frequently denies the benefits of foreign aid programs including food, fertilizers, training, etc., to known opposition supporters. I have commented on the subject in a number of my weekly commentaries. According to the World Bank, roughly half of the Ethiopian national economy is accounted for by companies held by a regime-affiliated business group called the Endowment Fund for the Rehabilitation of Tigray (EFFORT).  EFFORT’s freight transport, construction, pharmaceutical, and cement firms receive lucrative foreign aid contracts and highly favorable terms on loans from government banks. An exhaustive 2011 study by Sarah Vaughan and  Mesfin Gebremichael entitled,  “Rethinking business and politics in Ethiopia The role of EFFORT, the Endowment Fund for the Rehabilitation of Tigray” provides ample data and analysis on the incestuous relationship between the regime and that organization.

The World Bank’s massive 2012 study entitled, “Diagnosing Corruption in Ethiopia” and my own serialized commentaries on the findings of that study demonstrate the manner in which crony capitalism has triumphed in Ethiopia. (Those commentaries are available on my open salon blogsite Al Mariam’s Commentaries.) Crony capitalism in Ethiopia is perhaps most palpable and visible in the mining sector. The World Bank study showed the inner working of Meles' crony capitalism:

A mining company could be required to pay a large premium in return for a mining license. Senior officials and the mining company could keep this premium secret, and the officials could receive payment in offshore bank accounts.

An official may require the mining company to make a large donation to a charity if it wants the license to be issued more quickly. Although the charity may appear to be genuine, it may in fact be a front for a political party or for the official’s personal or family gain.

Officials collude with mining companies to grant subcontracts to relatives. The licensing authority could, as a condition of the license award or social development plan, require the mining company to undertake a large amount of additional infrastructure works at the mining company’s own cost.

A mining company may submit an environmental management plan for a mining license that will inadequately control the leaching of poisonous chemicals into the water supply. Proper controls would [be costly]. The mining company may pay the official responsible for approving the license a bribe to approve the deficient conditions.

Officials may demand a share in the profits of a mining company. A mining company may agree to give an official’s relative a free share in the profits of the mining project if it receives a license on beneficial terms.

Officials grant licenses to companies secretly owned by them.

Officials secretly acquire land that is subject to a license application.

An official who is aware that mining may take place on an area of land may lease the land in advance of the mine licensing. Once the license is granted, the value of the land may materially increase. The official thereby profits from his or her inside knowledge by selling or licensing his or her rights to the land to the mining company.

Officials manipulate license registration.

An official in the department that issues mining licenses may hear that a mining company wishes to apply for a license. The official may alert a businessperson with whom he or she has connections, and the businessperson may quickly apply for a license over the same area. The official grants the license to the businessperson. The mining company then has to purchase the license from the businessperson, and the businessperson shares the profit with the official.

A prospector may discover minerals, mark the area, and contact the relevant licensing authority to receive a discovery certificate. A corrupt official may not register the discovery in that person’s name but instead notify a business colleague and register the discovery in the colleague’s name. The corrupt official may then falsely inform the discoverer that someone else had previously discovered the minerals.
Contractors and suppliers may engage in fraudulent transactions in  tendering, submitting claims, and concealing or approval of defective works.

Mining companies may commit fraud by making false declarations about the identity and quality of minerals or by bribing certifiers to approve false declarations.  

When will Ethiopia rise from its ignoble position as a second poorest nation on the planet? 

As long as political connections are more important than entrepreneurial ability and drive, Ethiopia shall remain the second poorest country on the planet.

As long as a few elites at the very top are favored in the legal system and given first class citizenship simply because of their ethnicity and allowed to prosper by sapping the productivity of the most dynamic sectors of the society, Ethiopia will remain the second poorest country on the planet.

As long as individuals and groups gain more wealth through political connections than through productive activity, Ethiopia will remain the second poorest country on the planet.

As long as a predator  “government” preys on a disempowered population and saps the entrepreneurial drive of its young and restless, Ethiopia shall remain the second poorest country on the planet.

As long as personal and political connections to the powers that be trump the rule of law, Ethiopia shall remain at the tail end of nations.

Poverty is root of all evil in Ethiopia. But who (what) is at the root of poverty in Ethiopia?

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Professor Alemayehu G. Mariam teaches political science at California State University, San Bernardino and is a practicing defense lawyer.   

Previous commentaries by the author are available at:

http://open.salon.com/blog/almariam/
www.huffingtonpost.com/alemayehu-g-mariam/

Related reading: Is Ethiopia really ahead of Eritrea?

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