Ethiopia: The Fakeonomics of Meles Zenawi


There is the economics of Adam Smith, the intellectual father of capitalism. There is Levitt & Dubner’s freakonomics of weird stuff. Then there is the fakeonomics (economics by gimmickry) of  Meles Zenawi, the dictator in Ethiopia and author of the five-year “Growth and Transformation Plan” (GTP). Zenawi forecasts a “not unimaginable” 14.9 percent economic growth for Ethiopia over the next five years after devaluing the currency by 20 percent, slapping price controls on many food items and watching from the sidelines annual inflation galloping at 34.7 percent. He has accused the country’s business community of price gauging and hoarding and threatened to shut them down, jail them and literally cut the hands of any business person caught in the illicit trade of coffee.

The GTP is 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.”

In my regular weekly commentary on May 5, I observed:

The ‘economic plan’ (“GTP”) itself floats on a sea of catchphrases, clichés, slogans, buzzwords, platitudes, truisms and bombast. Zenawi says his plan will produce “food sufficiency in five years.” But he cautions it is a “high-case scenario which is clearly very, very ambitious.” He says the ‘base-case’ scenario of ‘11 percent average economic growth over the next five years is doable” and the ‘high-case’ scenario of 14.9 percent is ‘not unimaginable’. The hype of super economic growth rate is manifestly detached from reality. The Oxford Poverty and Human Development Initiative Multidimensional Poverty Index 2010 (formerly annual U.N.D.P. Human Poverty Index) ranks Ethiopia as second poorest (ahead of famine-ravaged Mali) country on the planet. Six million Ethiopians needed emergency food aid last year and many millions will need food aid this year. An annual growth rate of 15 percent for the second poorest country on the planet for the next five years goes beyond the realm of imagination to pure fantasy. The IMF predicts a growth rate of 7 percent for 2011, but talking about economic statistics on Ethiopia is like talking about the art of voodoo.

It seems the International Monetary Fund (IMF) has come to the same conclusion. In a May 31, 2011 statement, the IMF artfully asserted:

Strong growth has continued in 2010/11 that the mission estimates at 7.5 percent (compared to an official estimate of 11.4 percent)….  The mission sees lower growth for 2011/12, at about 6 percent, on account of high inflation, restrictions on private bank lending, and a more difficult business environment… The growth and investment objectives of the new five-year Growth and Transformation Plan (GTP) are ambitious. The mission urged the authorities to the pace implementation of the plan to avoid any further overheating of the economy. Success will also hinge on allowing room for the private sector to thrive and maintaining a low risk of debt distress…

On June 8, Ken Ohashi, the World Bank’s (WB) country director for Ethiopiacandidly stated:

Ethiopia’s dependence on foreign capital to finance budget deficits and a five-year investment plan is unsustainable… I can’t see it’s sustainable short of discovering huge oil reserves, essentially an unexpected windfall… I don’t see how they can sustain such an aggressive investment plan without getting into serious problems… If you’re not as a nation saving enough, you are dependent on foreign capital or other means of financing investment in an unhealthy, unsustainable way… That’s the sort of trap they seem to be falling into… On debt there is a danger… If this public investment-led growth at some point really stumbles or stagnates for a while then all these debt equations could unravel. …  I do worry that without the private sector expanding much more vigorously then rapid growth is not likely to be sustainable and if that’s the case then all these debt balances could go out of control.

On June 6, Zenawi’s finance chief said the WB and IMF are all wrong. He insisted the GTP will “double economic growth by registering 14.9 percent growth on average”. He proclaimed that in the next five years there will be “fast and sustainable economic growth,” and “food security at household and national level.” There will be “more than 2000 km of railway networks would be constructed” and power generation will be in the range of “ 8,000 to 10,000 MW from water and wind resources during the next five years.”

On June 9, Zenawi’s deputy, Hailemariam Desalegn, offered assurances that “economic expansion won’t drop below 9 percent in the fiscal year to July 7, 2012, from 11.4 percent this year.” He boasted that “the whole community has mobilized to buy bonds. This huge savings and mobilization is used for infrastructure development… We are getting loans from China, India, Turkey and South Korea, so all these foreign savings are also mobilized… So I think we can perform on the ambitious plans that are in place.”

Cutting Through the Diplomatic Bull

For the last several months, Zenawi has been staging one farcical political theatre after another to distract attention from his brutal repression and to pretend that he is the one immovable object in the Sub-Saharan universe come the gusting southerly winds of change from Tunisia, Egypt and Libya or high water. He has been engaged in belligerent talk of regime change in Eritrea, inflammatory water war-talk with Egypt, wild allegations of terrorist attacks, proclamations for the construction of an imaginary dam over the Blue Nile, vicious attacks on international human rights organizations and wholesale jailing and intimidation of opponents.

Now Zenawi is shifting from political to economic theatre. As the country convulses in spiraling inflation Zenawi says, “It’s all good. Not a problem.” But the verdict of the big time bankers is in: Zenawi’s GTP is pure fantasy, a figment of his imagination. Of course, bankers like diplomats avoid straight talk and prefer to tip-toe and tap-dance around the truth. When they can say the GTP has as much chance of success as a snowball in hell, they would say the plan is “ambitious,” “unhealthy” and “unsustainable.” Instead of saying the plan is manifestly doomed to failure, they hedge on absurd contingencies that the plan will work only if “huge oil reserves are discovered” or the country gets an “unexpected windfall”. When they can say the Ethiopian economy has collapsed, they hem and haw about their concerns that the plan could “further overheat the economy”. They twiddle their thumbs and “worry about the private sector not thriving,” and express concern over Ethiopia’s “dependence on foreign capital”, the “unraveling of debt  equations” and “debt balances getting out of control.”

Fakeonomics 101

As I have demonstrated in a previous commentary, Zenawi’s economic planning is based on juggled figures, massaged statistics and irrational exuberance about overrated and illusory economic development. Systematic falsification of economic data, fraudulent statistics and creative accounting in economic reports have largely gone unchallenged for years by the learned economists. The lack of systematic and sustained critique by Diaspora economists is all the more surprising and baffling given the fact that the economic swagger and wind-bagging about stratospheric economic growth and development comes from a regime not known for its economic “literacy”. The Economist Magazine in its November 7, 2006 editorial, in the context of the Starbucks coffee row, bluntly stated: “The Ethiopian government, one of the most economically illiterate in the modern world, would do well to take Starbucks’s advice.”  The same observation was repeated in 2009 at a high level meeting of Western donor policy makers in Berlin where, according to a Wikileaks cablegram, a German diplomat suggested that Ethiopia’s economic woes could be traced to “Meles’ poor understanding of economics”. Today, to the surprise of many observers, the IMF and WB who have previously swallowed whole the regime’s preposterous economic claims are openly echoing the views of the German diplomat and the  Economist Magazine.

Deceit, chicanery, paralogy and sophistry are the hallmarks of Zenawi’s regime. For many years, that regime has managed to scam the multilateral bankers and donors by talking about “sustainability,” “double-digit growth”, “renaissance” and “accelerated development in the developmental state”. It has even sought to shame and intimidate Western banker and donors by moral hectoring of the  evils of “neoliberalism”. Zenawi seems to follow the old principle that “If you tell a lie big enough and keep repeating it, people will eventually come to believe it.” In the Information Age, if you tell one big lie and embellish it with little lies every day, you will end up fooling yourself and no one else. (That obviously does not apply to Ethiopia which is hopelessly stranded and trapped in the Censorship and Disinformation Age).

The economic facts about Ethiopia are plain for all to see: The economy is in the stranglehold of organized racketeers and regime cronies. Regime-affiliated businesses and enterprises control “freight transport, construction, pharmaceutical, and cement firms receive lucrative foreign aid contracts and highly favorable terms on loans from government banks.” According to the regime’s data, by the end of the 2009 fiscal year, Ethiopia’s  outstanding debt stock was pegged at a crushing USD$5.2 billion. Remittances by Diaspora Ethiopians were the mainstay of the economy, and in 2008 Ethiopians in the U.S. alone sent  $1.2 billion.   “Ethiopia is Africa’s largest recipient of foreign aid (at $3.3 billion in 2008 and rising).” The regime has auctioned off  millions of hectares of the country’s best land for less than pennies. “For £150 a week (USD$245), you can lease more than 2,500 sq km (1,000 sq miles) of virgin, fertile land – an area the size of Dorset, England – for 50 years, plus generous tax breaks.”

According to the regime’s data, Ethiopia’s year-on-year rate of inflation jumped to 34.7 percent in May (2011) from 29.5 percent a month earlier; and food prices rose 40.7 percent during the year. Every year, Zenawi’s regime runs up the SOS flag begging for emergency humanitarian aid . So far in 2011, humanitarian pledges, commitments and contributions to the regime exceed USD$212 million. To get a government job or higher education, one has to be a member of Zenawi’s party. Ethiopia’s current population of some 80 million is expected to double in the next thirty years. It is mind-numbing to imagine the number of people who will be living in abject poverty without access to health care, education and employment in Ethiopia in three decades.  The regime has failed to implement any policy aimed at controlling population growth.

One has to assume that those in the inner circle of the regime are aware of the massive economic crises in the country despite their manifest lack of “economic literacy.” But that assumption may be questionable given the fact that the regime appears to be in denial and has used its modest economic ingenuity to pin the blame for Ethiopia’s galloping inflation and the rest of that country’s economic problems on global market forces.   Zenawi now offers the GTP  as a “pie in the sky” plan that will not only provide food security but also catapult Ethiopia into becoming a middle income country like Malaysia in five years. The fact of the matter is that the regime’s self-centered short-term interests in accumulating wealth for its members and determination to cling to power forever have trumped the long-term strategic interests of the country.

Zenawi now is not only having difficulty persuading its bankers that it has the right economic policy, but the bankers are looking at his plan with increasing derision and cynicism. Ohashi says the GTP will work if Ethiopia “discovers huge oil reserves” or gets “an unexpected windfall.” Ohashi might as well have said the plan will work if manna falls from the sky.

Zenawi’s fakeonomics is nothing new. The old communist regimes in Eastern Europe used to pull the same types of political and economic stunts. They would hold “elections” and declare they won it by 99 percent (to their credit not by 99.6 percent). They also had their “five-year economic plans” in which they predicted and “achieved” incredible economic growth. For instance, they would set a production target of ten thousand tractors a year and actually produce five thousand. They would publicly report they produced fifteen thousand tractors and give the factory bosses increased wages and bonuses for exceeding the production target. The communist regimes would even say they did not have inflation just high prices and deny high quality food items and other amenities to the masses while the nomenclatura (party bosses) and their cronies wallowed in luxury. The reality in Ethiopia is that basic necessities are unavailable and unaffordable to the vast majority of the people, and even those who could afford the inflated prices must have the right connection to get an adequate supply. A regime incapable of providing sugar, cooking oil and other basic staples to the people now boasts of making Ethiopia a middle income country in five years.

Are Ethiopians better off economically today than they were five years ago? The answer to that question will be the answer to what they will be five years from now!

In the final analysis, it is not about the plan. It’s about the man. As George Ayittey said, “Africa is poor because she is not free.” I say Africa is poor because of dictators who cling to power like ticks on a milk cow.

Previous commentaries by the author are available at: www.huffingtonpost.com/alemayehu-g-mariam/ and http://open.salon.com/blog/almariam/

 


20 thoughts on “Ethiopia: The Fakeonomics of Meles Zenawi

  1. Ashu on

    best analysis wth reasonabl dought. thanks .Plan which is nt depend on past record and data will nt suceed all GTP PLAns are vodoo

  2. Gebre on

    At least Meles has serious economic thinking and planning in place. I would say Mele’s economic ambition is great. There is no such thing without encountering difficulties and problem on the way.

    Critics will always make negative comments. When it comes to economic development of Ethiopia critics will not participate just they sit and criticise, oppose and write negative comments which they effectively become obstacles to everything.

  3. AeGenaiea on

    With Woyane economisty such Dr (Ato) Neway Gebreab,Prof?Medhanie Taddese,Dr Barnebas Gebreab,Prof (Shachi Berebere)Kenfe and a few Tigre analytic….Wezader bihone Woyane yeshalaw neber

  4. Agerie on

    GEBRE, are you seriously not understanding the path Ethiopia is taking? or are you just supporting the current government at any cost? Do you have an understanding of economics? Have you been following events for the last five years; statements and promises made by H.H Meles and if they actually been kept? If you really care for Ethiopia then you would look at them clearly and see where Ethiopia is heading.

  5. Anti weyane gugile on

    [Gebre]You sound to me a retardeed weyane comformist or blind loyalist,who’s duity is to take care of the urgent need of saving your under acheiver boss.This article demonstrate Melese’s short coming in his five year plan autlandish prediction of 14.9% growth.What you need to know is this Ethiopia does not have economic experts.For that matter the country doe’s not have lack of skilled man power.The problem is the weyane gugile principle.More than any thing els it is this hat hurts our people.Melese is determind not to accomodate Ethiopians in the pollitical process.Had there been participatory democracy in the country citizens will have apart and a say in the affiars of their country.And Ethiopian could not have been poorly managed by the weyane gugile shiftas.

  6. Anonymous on

    embassy of the federal democratic republic of Ethiopia to Ireland
    Mr. Mulugeta Asserrat Kassa (Counselor) PR

    Investors are Welcome

    The Ethiopian Economy is predominantly agrarian, with agricultural produce contributing 45% of gross domestic product (GDP), 62% of the total export and 85% employment. Manufacturing, mining, trade, tourism construction, services, etc. make up the remaining 55% of the GDP. Industry contributes only 11% of the GDP, and 16% total export of the country.According to the Economic Freedom index, published annually by the Heritage Foundation in the United States, noted in 2004 that Ethiopia offered the second-most-improved business environment in the world. The ranking was based on improvement in four areas: trade policy, foreign investment, fiscal burden and government intervention.With its market oriented economic policy, a liberal investment law, fast service delivery by the Ethiopian Investment Commission (the responsible body dealing with foreign investors) and with the number of opportunities stated below, it is the right time to invest in Ethiopia. The Embassy of the Federal Democratic Republic of Ethiopia in Dublin is always ready to cooperate with those who have interest to invest in Ethiopia

  7. mini-soda on

    I love this writing. There is one thing I have problems with, the author says Meles understands very little economics, I say Meles DOES NOT understand any amount of economics, be it small or tiny. He is just riding what others tell him, and others tell him what they think he needs to hear, not when they think he needs to know.

  8. nahome on

    United States praises Ethiopia for its willingness to deploy peacekeepers in Sudan – Video

    The following is a brief statement made in today’s state department daily briefing. The United States said Ethiopian Prime Minister Meles Zenawi played a critical role to bring stability and peace between North and South Sudan. Below is an excerpt from today’s briefing.

    MS. NULAND: Good afternoon, everybody. I have one brief statement before we get started with your questions.

    The United States welcomes the agreement signed today between the Sudanese Government and the Sudan People’s Liberation Movement on the withdrawal of Sudanese military forces from Abyei and the deployment of the Ethiopian peacekeepers to maintain security in the area. This agreement is a very important first step and we urge the parties to move quickly now to implement it and translate it into immediate concrete improvements in the security and humanitarian situation on the ground, including the swift deployment of the Ethiopian forces so that we can amplify the peacekeeping force in Abyei. We particularly applaud the efforts of the African Union high-level implementation panel with its chairman President Thabo Mbeki on securing this agreement.

    We also recognize the critical role played by Ethiopian Prime Minister Meles and appreciate Ethiopia’s willingness to give peacekeepers. This agreement also comes after an extremely intense U.S. diplomatic effort in response to the Abyei crisis. As you will have seen, the President issued a very strong statement over the weekend calling on the parties to choose peace. Secretary of State Clinton was in Addis Ababa last week where she met with both parties. She made phone calls to both parties over the weekend as well, also urging them to choose peace. And of course, our own Ambassador Princeton Lyman has been in constant motion to secure this agreement over the last couple of weeks.

    But the work is obviously not done; violence continues in Southern Kordofan, and we continue to call on the CPA parties to immediately end the ongoing conflict in Southern Kordofan to provide unfettered access to humanitarian aid workers and to provide the needed assistance to those innocents affecte

  9. Gebre on

    # Anti weyane gugile,

    I can see your anxiety flaring in your mind with full of hatreds towards to the Tigrayan people. I thin you lost your glory of common sense. What you have forgotten is Weyane got rid of the most terrible government on earth (i.e. the Derg and Mengistu) who killed thousands during the red terror.

    Don’t you think the Ethiopian people had enough civil war? The Ethiopian people need at the moment peace, stability and economic growth.

    You have to come to terms that Ethiopia will never be like the Arab spring (Egypt, Tunisia, etc.) at all. The Ethiopian people are tired of listening rubbish politics with no substance like yours and the Ethiopian Review point of views. If you have an alternative that benefit the Ethiopian people, I can assure you that the Ethiopian people will support you. All this Facebook noises of May 28 did not materialise. Let’ face it your campaign against the EPRDF government is a big fiasco. You and others thing, the Internet campaign will solve the problem. You must get the message. The Ethiopian people are not interested in recriminations. The Ethiopian people are only interested in a serious solution to the serious problem the Ethiopian people are facing which is Economic development. Economic development does come by magic. It requires a policy to start with.

    Until you come up with constructive economic and political policies that benefit the whole spectrum of Ethiopian citizens, you will be idle on the same point you are preaching and no one will listen to your unhelpful argument. You will end up singing in an empty theat.

  10. Waka on

    Elias
    I find this comment in other link which is posted from Ethiopia as i imagine and for me it is as if she was saying my thoughts and that is why i do not hesitate to paste and bring it here.

    “Many in Ethiopia do not doubt that Meles Zenawi is an ethnical fascist bent on keeping his absolute and corrupt power at any cost. His understanding of economics and governace are based on fascistic ideology and political orientations. Fascist ecomomies are distorted, parasitic and organized to benefit and enrich the elite in power and their ethnic affliates. This is what is happening in Ethiipia under the fascist and racist Meles Zenawi. Meles` attempts to confuse and mislead through throwing out some economic jorgons like the developmental state or liberal economy do not hide the very fact that he runs a fascistic economy laden with crimes like nepotism, corruption and favoritism. The wife of Zenawi is now deeply involved in the open and illicit mega- businesses which are assumimg the controlling position in the country. The so called growth and transformation plan is part of the fascist economic plan for further looting and impoverishment of the the country.”

    Reply

  11. Waka on

    Gebre

    Dont get me wrong “woyanne has never get rid of the dergue rather an organized C.I.A,some from the dergue high officials,and above all the Ethiopian peoples were frustrated with the military regimes brutality
    after EPRP repeatedly killing of its members in return kills many youths that could have been Ethiopias futures that only bring its collapse not woyanne militia that could have been a one day picnic for sure for the well trained Ethiopian military or in other language one
    brigade would have been enough for the woyanne militias with no idea any way woyanne has been choosen by Paul Hinze and herrman cohen and
    other C.I.A and others from European union British as a leader as it was the only Group that was ready to accept every destraction and humiliation that was in its own agenda with no hesitation in a plain language woyanne is a group assigned by the enemies and Ethiopian hater institutions and being advised and supported by these same countries and institutions in a way that Ethiopia has never seen in its 3000+ history more over now is time for the same group to change its foreign policy which seems to be is on the way and a time for woyannes sun to deem and the whole fake of the 20 woyanne years lies will be defeated by the truth that was languishing in woyanne prison lik the Ethiopian peoples cloudy sky on woyanne and its very old and primitive administration thundering to let the fire on the woyanne circus tent.

  12. Hailu on

    Very good compare and contrast analysis for Meles’s GTP.
    Even though I am not economist ,I learned a lot from Dr Fekadu Bekele articles. Adam Smith is not a father of Capitalism. Adam Smith’s theory of free market is very much new and it did not bring any capital. Capitalism is 400-500 years old guy.
    Professor Alemayehu, you need to pray so that Fekadu Bekele may not read the first sentence.

  13. factfinder on

    The corrupt business people bankrupt Ethiopia . Self claimed Billionaire Sunshine owner Samuel Taffesse escaped prosecution and fled to the US two weeks ago. After looting millions of dollars, Samuel Taffesse is leaving isolated life in his five million dollar mansion . Samuel is claiming that the government is after him and they wont let him do his business and they forced him to transfer his position to one of his engineer. He is bragging about how they corrupted they are and how he is bribe them and manipulate them. He had stashed millions of dollar from diaspora real-estate purchase .

  14. anti weyane gugile on

    [Anonymous],
    From Ireland, Dublin I am sure your comment will be received well by the watchful eye of the gugile intelegence.Neither you have to be concerned about your anonimity, I am sure you are known to the Hamassen, and Adwa gugile. And, in due time your servitude will be rewrded.By the way do you care at all, if the statements you presented before us is accurate or not? If so why, provided what you wrote is not your own wish list but accurate information, do you fail to give us your source. I think many can easily guess why you wrote those words -expecting a pay back from your tyrant.

    Mr. Anonymous you said, “The Ethiopian Economy is predominantly agrarian, with agricultural produce contributing 45% of gross domestic product (GDP), 62% of the total export and 85% employment”. Economic experts such as Arnold C.Harberger, stated, recently
    “The country continues to have trade imbalance because of excess of imports than exports”. And he believes this imbalance is a consequence of two factors-large foreign aid and emigrant remittances which gave the country more foreign exchange than its export. Not to mention the fact the gugile policy favors only its EFORT, Medroc and the gulf Pan Arab states than the small Ethiopian business mmcommunity.

    http://www.econ.ucla.edu/harberger/ethiopia2010.pdf

  15. anti gugile on

    [Gebre],
    The pariah political group you are made to believe is invincible will be anihilated by the popular aprising of the Ethiopian people.Any way you look at it ,weyane has no exit strategy,when the people rise in unison,as the popular Amaharic phrise states it, it will be-ENDE WETACH KERECH.That is to say it will all end South of the Nile.

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