Ethiopia: The Fakeonomics of Meles Zenawi – By Alemayehu G. Mariam

June 20th, 2011 Print Print Email Email

meles_zenawiThere 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/

  1. Tadele
    | #1

    LOL!!! Enjoyed reading Fakeonomics 101. I look forward to reading Fakeonomics 102. Our artists should consider developing a movie based on it.

    Probably our Economists are good only for fighting among themselves.

    As the writer, I have also been wondering about the quietness of our learned economists. At times, I suspect that they might think Fakeonomics is real; probably they are taking notes from the tyrant lectures. Where are you our Economists with PHD’s? Do you think the tyrant knows the stuff, the economics, better than you?

    I challenge you to say something better than what the political science professor articulated because you supposed to know the stuff better than him.

  2. Genet Wodajo
    | #2

    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.

  3. nbere
    | #3

    A very good piece as usuall.
    Four more years to go to meet the GTP,Plus the difference(11.4-7.5)=3.9 % already lost in fisical year 2002-2003 E:C.
    That is not impossible it is only a matter of “massaging” the figures.

  4. Sam
    | #4

    Alemayehu wrote “the Oxford Poverty and Human Development Initiative Multidimensional Poverty Index 2010 … ranks Ethiopia as second poorest … country on the planet.” But Meles and the yes-men surrounding him have started telling us within five years Ethiopia would be among the middle-income countries. How does this fantasy revealed to them? No reasonable person guess let alone knows about this crazy dream. What new knowlege Meles acquired that remained elusive to him for the last twenty years? Nobody really guess. If it only required writing a five-year plan to be among the middle-income countries why so many African countries had never thought about it before? It is a dillema. I understand Meles and his yes-men are frustrated the way the economy is going. I also understand, according to them, no other parties or learned individuals except EPDRF has the knowlege or the “national feeling,” or vision to lay out the best economic policy the country needs. Maybe that is where they are wrong. To create a robust economy ideas from Ethiopians who grounded their knowlege in economics should be sought after. It does not matter whether they are pro-EPDRF or not. They are Ethiopians. They wish the best for their country. Had EPDRF been a party that promotes the interest of the country before the party’s ideology, such a fantasy would not have be written as a five year plan. The main idea EPDRF seemed to have not understood is investors are not rushing in speed to invest their hard-earned money in a country where the rule of law and freedom of the individual is secondary to the party’s interest. Had they known that, they would have spared their time from writing fantasy.

  5. Youhne negn
    | #5

    Thanks Professor. As usual your article was concise and to the point.
    May God bless you

  6. Boku
    | #6

    just may be, all these people know and able to do is this.

  7. RespectEthiopiaOrElse
    | #7

    Prof. Al,
    nice article again, but i must correct you here.
    Surprise surprise, Ethiopia is not among the 10 poorest countries, Eritrea is.
    On per capita basis for 2010 Ethiopia is richer than:

    1. Zimbabwe
    2. DR Congo
    3. Liberia
    4. Burundi
    5. Somalia
    6. Niger
    7. Eritrea
    8. Sierra Leone
    9. Central Africa Republic
    10.Afghanistan

    http://www.therichest.org/world/poorest-countries-in-the-world/

  8. Sheger
    | #8

    What Economics are we talking about? Pleas don’t take me some crazy or volgar. You know where I am coming from.
    But though it reminds me of shady song, ” I won’t pretend ” or some thing like that.

  9. zeman
    | #9

    Whether the economic policy of Meles is wrong or right as long as his slave army is fed he has no worry.

  10. kaitama
    | #10

    No sooner than Zinawians invaded Ethiopia,robbery revolution began.The mafia group composed of anti-Ethiopia elements fashioned the Marxist-Leninis idiology to the modified brand,logo on it,named Revolutionary Democracy.Zinawians motto was EVERYONE IN THE FAMILY WILL PROSPER.Indeed,today,everything and anything that is available above and below the lands,in Ethiopia is owned,controlled,and run by Zinawians.Zinawians did not enter Ethiopia as enturepruners;they did not design new products and knowledges;rather,they brought in millions of guns and bullets and looted and murdered in billions of dollars and many thousand of Ethiopians.

    What is more is that Zinawians have been investing billions of dollars on real states,venture capitals,and amalgamated corporation abroad and their wealth and assests are expanding far,wide,and deep in globalization market while Ethiopia and Ethiopians are heading towards to the no-return point of bankruptcy.

    Therefore,Ethiopians must focus on totally removing Zinawians from the surface of Ethiopia and demolish the sytem they built to loot and murder Ethiopians.

  11. BOSTONIAN
    | #11

    TO Respect EThio..
    Commentator No. 7:

    David deftated Goliadh so you had imprached the professor with irrefutable fact as the information you supplied ascerained such material fact. good correction, – Bravo !!!!!!

  12. lilizuma
    | #12

    Dear readers,What is that not true about Meles Zinawi and the system with two ecomonic system he built and transformed it into a suppressive and opprssive regime?

    In addition,Ethiopians must be extra vigilant on the loan,that now has rached US 5.4 billion dollar, Meles Zinawi has been taking in the name of Ethiopia and Ethiopians from international lenders,and it is likely that Ethiopia will default on the payment in the future.This is a cost on Ethiopians and Ethiopia.

    Loan consumption:- Zinawi is a cost on Ethiopia;it is true and has been seen on day to day basis.Ziawi wasted the loan on the regime’s ocnsumption financing its security and buying weapons and armaments worth in millions of dollars it received from international bankers, with little or no meaningful benefit for Ethiopians.

    For the lasst two decades the TPLF/Woyane economists built and ran two economic system,one for themselevs and another one for Ethiopians distorting the market by passing laws that favors themselves through the banks they runand control.Today,everything and anything that is available above and below the lands,in Ethiopia is controlled,run,and owned by Zinawi and a small group of people around him.As TPLF/Woyane’s economy is expanded,the economy they built for Ethiopia is shrinking to the point it will collapse soon.Zinawi and his group stole US 8.4 billion dollar from Etiopia and Ethiopians;this is no the beginning and never will be the end.For sure,Ethiopians will continue to fight against Zinawi and his regime tooth and nail and end everything in victory.Afterall,Zinawi is a cost on Ethiopia and must be removed from the surface of Ethiopia to the place where he will serve for life for all crimes that he has committd.

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