Who is Responsible for the Mess of Ethiopian Economy? By Anteneh Shiferaw

January 2nd, 2012 Print Print Email Email

First of all, anyone who understands how our country’s situation is in a ‘state of complete mess’, could immediately raise other key indispensable questions such as, what about: the overt & covert killing of citizens, the prison tortures, the abusive terrorism law, the very serious human right abuses compounded in, the complete denial of the democratic rights’ of citizens for peaceful assemble and expression of ideas and believes . . . etc., and may take my topic as secondary issue of the day. Yes, that is absolutely right, I accept that; nonetheless, be the whole situation of our country is as miserable as it is, it is also imperative to show how the economic credential of Meles is far below some individuals wrongly perceived him as an intellectual and competent.

To come to my question/title, let me put it this way: which/who is to be blamed and responsible for the mess of the Ethiopian Economy: Is that the Sweetish/Sweeter Test of the Sugar/or the Farmers who had consumed the sugar, or the Wholesalers/Retailers, or the Prime Minster? By saying the Prime minster, I mean, being Meles Zenawi did both of his undergraduate and graduate studies under the prime-ministerial office it is more appropriate to say him the par-time Prime Minster who is astonishingly using the rest of his study time against the interest of Ethiopia and its people.

As to the sugar, so far, two things are very clear to us; i.e., the first is, at one time, the then first TPLF’s Prime Minster Tamirat Layne had officially and publically confessed that “the sweetish test of the sugar had made him to steal more . . . and advised that, though his stealing offense were expected to put him in a new friendship line of order, whatsoever the case is, he had assured his cronies that he was determined not to be used by the opposition camp either”.

Though there is no any secret behind the Ethiopian people who is really embezzling the coffer of the national budget and the economic resources, it is more than pity to hear a person who went to that extent of making himself a scapegoat, by covering up his master’s crime, in a humiliating way.

In fact, I am not sure how a person who has a habit of an easy rider (a person who takes advantages of the situation in which he was not entitled to hide or steal from the society/people) could be helpful to the opposition and the country itself? Anyway, although, he had confessed the stealing scenario, what Mr Tamirat Layne didn’t tell us yet is how many innocent Amharic language speaking citizens were selectively subjected to the century’s inhuman acts of genocide by TPLF, Coo, and under his leadership serving TPLF in the officially known areas of: Arbagugu, Arakat, Arbaminch, and many other areas and similar cases? Specially, by being falsely acting as: an Amhara group and the leader of the Amharic Speaking Society could raise million questions to be answered before a genuine court in the future?

On the other hand, Meles had also blamed both: the sweetish test of the sugar that made our farmers consume it to the extent of wiping out it from the market as well as the retailers/merchants who been accused of doing serious sabotages by hiding out other basic commodities. So, according to the current par-time prime minister too it was the test of the sugar that made the farmers consumed it and the retailers that put the economy at risk/in mess.

Now, the intent of this paper is not (currently) to discuss or ask a legitimate question whether Mr Tamirat Layne‘s had a role in the above mentioned genocide acts or not? That is absolutely a matter of justices in which the ethic of justices will one day itself come up and assert the whole issues when time permits; so, my intent is rather to discuss and show how the par-time prime minster/Meles Zenawi/ blaming the sugar/or alternatively the farmers/ and the retailers for the cause of inflation is absolutely unsubstantial by any means who claims know the ABC of economics. Besides doing so, I will also figure out: some of the main key factors that cause inflation as well as measures to be taken when such scenario/inflation happened in any given country, both from economic point of views.

To begin with, first of all it is very difficult and be naïve to say (unless and otherwise there exists a special event that trigger) inflation is an over a sudden event that bits the economy; rather it is a day to day build ups scenario done behind the scene of each economic activity unless and otherwise it is wisely monitored and met as it goes. In spite of this, beside encouraging and giving incentives to a given citizens to engage in the national economy investment with confidence monitoring all activities of the free market economy system by an independent economic professional body/economist/ on quarterly bases, at least, is an absolute economic management activities that needs to be made. This monitoring tasks includes: measuring consumers’ confidence of purchasing power, generation a report on inflation index to decide as to what would be the corresponding interest rate in that given period, identify import/export deficit, lower/higher unemployment data, budget and trade deficit, demand & supply gapes or streamlining, the impact of circulation of money volume in the public domain/hand as well as shortage/excess of deposit of local/foreign currency in the National Bank, . . . etc. Monitoring these events is a key market economy activity that needs to be done consistently and persistently than imposing price cupping in the system.

On the same token, one of the key features of socialist/communist economic policy is to monitor the effective implementation of price cupping in the economic system. This cupping is imposed because unlike the free market economy policy key, if not all, existing Means of Productions and Distributions Lines are belongs to the socialist government. As a result of this, the pricing of items must meet with the production and distribution policy inputs. Nevertheless, what difference the Ethiopian economy from the socialist one/kind is that all means of productions and distributions lines of the previous military governments’ were all transformed by the name of privatization policy (including the new ones) into the hands of TPLF’s EFFORT mega group companies which is set to exploit the Ethiopian People without the presence of other competent competitors in the sector.

Here, what happened, EFFORT be without any competent competitor around it, though Meles hasty price cupping and threatening measures and words were directly to harass and punish the retailers/merchants as it had happened (as many retailers’ license were revoked and shops broken and vandalized by TPLF’s polices and soldiers), however, later he had realized that as a result of his destructive action the retailers had decided completely to be out of such a market system. The retailers are out of the market system mean, indirectly or directly, almost all means of productions of TPLF’s EFFORT Mega group companies and its wholesaler personnel were affected most in which his temptation to prolong the price cupping system was unsustainable and rather affecting the sell volume of his/EFFORT’s companies on a daily bases. As a result of this, he was forced to revoke the price cupping system due to Conflict of Interest rather than trying to pretend he had lifted the price cupping on a genuine economic policy failure bases.

To see how this conflict of interest incurred, first let us look in brief how the retailers were unfairly threatened and their licences were revoked by Meles and his cadres: as a retailer, they are using to buy goods/items from TPLF’s/EFFORT’s wholesaler’s stores at a given price. Being they bought the items from TPLF’s wholesalers’ stores at a given price they have to sell that item bearing some sort of genuine profit out of it. Otherwise, their waste of time and money is nothing in a true economic transaction terms. Sadly, however, what Meles did, instead of studying (if he ought to) the whole transaction scenario from the point of first distribution/transaction to the point of reaching to the consumer’s hand he had deliberately had kept the wholesalers behind a safe zone/hand and targeted the retailers all alone unjustly. As a result of this unjust and harsh punishment, some retailers got bankrupted with in that short given time and some threaten to leave the business altogether. Though this was done against to the retailers, as I said above, eventually TPLF’/EFFORT’s mega group companies where affected too due to sell volume dropped around them in which Meles was forced to revoke his price cupping paradigm due to conflict of interest. Otherwise, the revoked could have not been done out of pretending admitting genuine economic policy failure.
Note that, consumers’ high purchasing power confidence may increases the volume of money circulating in the market, in which this may trigger inflation symptoms; however, as long as the inflation symptoms are dealt/monitored according by a well-managed market economy system high consumers’ confidence mean do stimulate the economy and have a positive incentive for the growth of the general national economy rather than what Meles claimed that the farmers purchasing power biting the sugar sector and the general economy for inflation was unacceptable to hear from a person who claims know the ABC of economic management/knowledge credentials. Meaning, unlike his claims, what triggering/fuelling inflation most is the drive up of cost of basic food items as a consequence of deteriorating/shortage of supplies, mainly due to mismanagement of the economy and lack of incentive in the productions lines.
In spite of this, the actual misery situation of our farmers is extremely difficult to explain in such a few words. It is simply shocking and unbelievable. i.e., unlike his fabricated claims, the farmers are the most affected section of our people, by skyrocketing inflation, mainly in two aspects: the first is due to lack of CASH to spend to sustain their immediate lives (because if there is any yearly yield, TPLF collects all their products during an early period of production with a very cheap price by reinforcing the repayment of TPLF’s own fertilizer costs) coupled with the high cost of living and lack of incentive from the ruling TPLF government such as: plot of land, technical advice and assistance, and cash loan.
Moreover, being so far we had identified that the high cost of basic food items is one of the key factors that triggers inflation any/a cent used without bearing the economic value principle is another factor that needs to be considered too. i.e., Money for value/item or labour/ vice versa value for money is the fundamentals of the economic theory. Meaning, money be gotten in the form of illicit/corruption way is contradicting the above theory and make it very difficult, if not impossible, to manage the economy of a given country. i.e., the circulation of money in an illicit way/i.e., in the form of bribe or in the form of incentive for TPLF’s cadres by printing paper money is another catastrophic scenario of Ethiopian case, as well as some other countries of the world of such type of governments who does not have the knowhow to manage an economy system/market economy system. For instance, soon after Gaddafi of Libya seized power 1969, when he was advised that there was no enough money in the National Coffer to pay his soldiers he had immediately ordered his bank managers to print more money so that they pay his soldiers more money; even without knowing what could be the implication of printing more/or less money to the national economy mean? Sadly, this is what is happening in Ethiopian case too, even after Meles stayed 20 years in power as the so-called leader!

When Meles lectured his parliamentary colleagues about the staggering inflation of the country, he said “one who knows the ABC of economics credentials wouldn’t suggest as: ‘at the presence of inflation there won’t be (feasible) economic growth’.” And . . . continued his speech and suggested that “even the presence of high economic development will (in mostly cases) exhibit inflation, or followed by inflation . . . etc.”
As anyone could understand, the whole point of the above paragraph is just a futile attempt to convince us to accept his claims that “although there is staggering inflation there is economic development in the country”. According to claimed data: growth is 11 per cent while inflation is 40 to 45 per cent in the given period. So how growth is achieved while CASH Money circulating in the public hand or deposited in National Bank is devalued by 40 to 45 per cent in unprecedented manner of Ethiopian history?

Here, the next most obvious question any one could ask/raise to Meles is: If there is really any economic development under his TPLF lead government in Ethiopia, say it 5 or 11 per cent, 6 or 12 per cent, or whatsoever any double digits growth he claimed, why is the living conditions of our people is extremely miserable and deteriorating day after days, month after months, year after years, and decay after decay since he subdued the nation by sectarian military means? And the other fundamental question which needs to be answered is: What are the key economic management measures to be taken when such staggering inflation threatening to the degree to collapse the whole economy of the nation? Why was price cupping imposed on retailers/merchants/ to control inflation that does not go in line with the claimed free market economy policy paradigm?
So, as I said from the very beginning, I will disprove his economics management credentials and also try to put an overview of the measures to be taken when such inflation hitting the economy of a given country is exhibited.

Key economic measures/decisions to target inflation

As stated above, there are causes/events that may trigger inflation; whatsoever the case is, when a given country’s economy goes down to the road of inflation what it makes it most frighting scenario is that it MAY trigger unemployment issues. As inflation exhibited and hits the national economy it immediately makes the unemployment issue much worrying. When inflation builds up and became out of control coupled with unemployment rise it pushes the economy to the bad word i.e., recession unless and otherwise the national economy is run by an aid budget/economy like our Ethiopian case which depends on the GOODWILL of donor countries and DO LESS in the economic management side and SPEND MORE time on the correspondence/distance education/ study.

Mind you, as EFFORT is running business using donor’s countries money, without any competitors around it, coupled with getting more incentives from the ruling TPLF government, for sure there is growth around it. However, as EFFORT deposits its extra capital in overseas banks, in the form of foreign currency and also don’t pays genuine taxation fees as revenue into the national economy, the 11 per cent growth continuously for last 8 years which Meles talked (paradoxically) do neither taken as a growth of the National Economy nor have any positive impact with 99.6% of our population, duelling Masses.

The economy being in recession mean, there is no enough revenue in the form of tax: less tax and higher unemployment mean either the government SPEND more money to keep public service employees and important public economic sectors & infrastructures . . . etc. In an economy of this type, i.e., if it is believed that inflation is the key derive for such scenario it should be met with a very tough economic measure (aggressively) to target inflation, to bring down inflation.

To target inflation (i.e., to bring down inflation), there are two fundamental economic theories to be deployed, or adopted alternatively. Meaning, the choice of the theory depends on each case and the decision taking body itself. The first theory is, the Nobel Prize-winning economist Milton Friedman’s theory: i.e., controlling inflation by setting a firm target for volume of money in circulation (i.e. reduce the volume of money which is outside the National Bank Control), and the second one is: pushing up rates as high as it target inflation.
Now, in the following subsections I will try to discuss a bit of each theory:

a.Firm target for volume of money in circulation

To achieve this, i.e., to reduce the volume of money circulation in the public hand, there are series of measures to be taken. However, what we have to know from the outset, the measure depends on the status of the country’s economy size and weakness. i.e., if a given country’s economy is well-developed and strong enough to sustain economic activity pending, the best way to reduce the circulation of the money in the public hand is that the government must takes the first initiative by reduce government’s spending in the public sector, which may go (even) to the extent of stopping borrowing as well as spending in the economic activities: delay public economic development activities. i.e., put development plan on hold till situation stabilized back. Mind you, this on hold must be done in a delicate ways so that it doesn’t aggravated recession. Besides, to support such government’s initiative, the National Bank can also play its own part by buying back its national currency to deposit it at its National Bank by using its reasonable amount of cumulated foreign currency deposits. The whole idea of this economic theory is to reduce the overheated economic activities that had triggered inflation is one way of reducing the volume of money circulating outside of the national bank.

While the government and the National Bank (jointly) do this, on the other hand, the government must encourage the private sector to do the usual business activities/performance in a better productivity way as it generates the much needed revenue for the national economy. What the government can do here is monitor the activities of the private sectors so that they are successful in their economic activities. This can be done by: providing expert advice, studying new market outlets by using diplomatic means, finding cheaper resources, encouraging them to use the full capacity of productivities with quality than quantitative, and provide more training to be more productive . . . etc. Meanwhile, this theory is also deployable when responsible nationalist government thinks that the National Resource is overexploited/depleted/ unwisely and felt responsible to keep it for the generation to come.

Nevertheless, if the national economy is weak /underdeveloped/ like ours, the responsible government in power can continue with its public development plan but with much more CONSERVATIVE way in its FISCAL POLICY. Meaning, every cent must be spent on a basic and necessity item or development plan. Taking tough decision on corruption and similar issues is put as government policy of the regime, and lead the mixed economy system (i.e., the public, the private, and the joint ventures) in more harmonic, balanced, and delicate ways; both leads in a fair/genuine free market economy system with conservative fiscal policy.

b.pushing up rates as high as it target inflation

Contrary to the above theory, this theory doesn’t target sources of money suppling channels. Instead, what it does (most) is monitoring Inflation Rate and increase/or decrease correspondingly the Interest Rate as it goes. The key strategic point of doing this is, if interest rate do not increased as inflation increases the public will be forced (or be in panic/panicky and choose) to withdraw their money from the bank and rush to hold it either on assets form or even change it into foreign currency before inflation crisis hit the economy tough (according to the public psychological thinking). The most recent example to such scenario is it is enough to remember what had happened in Argentina about 10 years ago. The public rushed doing this mean, immediately two catastrophic things triggered: the first is, cost of basic food items will be skyrocketed; and second, the national/local currency will be coming useless (be ordinary paper), because in such economic uncertainty the public prefer foreign currency to local one.

One of the key figures who used this theory b is the prominent economic adviser Mr Paul Volcker who brought inflation down from nearly 14 per cent to 2 per cent after president Carter was defeated in a humiliated way in the ballot box due to lack of economic management credentials, while Mr Volcker’s economic management had helped the then president Ronal Reagan be re-elected for the second term. When I briefly put Mr David Uren’s idea, the economics correspondent, “Volcker was the key engineer who had forced US Federal Reserve agreeing to absorb up $US billions of the banking losses”. That means, Mr Volcker economic credential/experience is not only helpful to bring inflation of Ethiopian kind down to its knees but also has coined the new unthinkable economic crisis fighting methods (the austerity methods) of absorbing big banks and firms losses by responsible government firms/such as Federal Reserve/ or EU Central Bank than leaving them to be at a state of bankruptcy, because they claim it is too big to loss/fall in which this had helped the US economy to go in the right direction to be back on track again. Unlike the EU’s banks, USA banks and financial firms are now in a good position with good money up running again for business to be as usual.

Now, to come back to our Ethiopian staggering inflation case, none of the above mentioned theories were adopted/accepted. Especially, had Meles thought to follow any true economic decisions other than the price cupping it is a bare fact that the second theory would have been out of his choice from the outset, without any consideration; because if the Ethiopian National Bank increases Interest Rate in line with Inflation increases Meles thinks that the most, if not the only, bank loan beneficiary TPLF’s EFFORT mega group companies were believed to be affected by the increase of the interest rate. Hence, rather than adopting genuine economic policy of either the first or the second theory Meles had imposed the price cupping to make the retailers/merchants a scapegoat without any justification. This is my justification that Meles’s economic management credentials is far below than some individuals wrongly perceived him as competent.

When it comes to the agriculture sector and the land/farmers issues, as the local farmers strong participation in the sector are being the pillar of any country’s economy growth they are (were meant to be) given the first priorities to be encouraged (be given different types of incentives and training) to have their own agricultural firms/holds of different scales than any of the foreign firms.

i.e., under a true nationalist leader who cares about the wellbeing of (his/her) people and sovereignty of a nation foreign firms options are always considered after priorities being given to the local ones. This is the obvious task of a responsible government of any given nation/country unless and otherwise the person in power is an agent’s of foreign element/s. However, in Ethiopian case, our farmers are now totally pushed/forced to become a daily labourer to foreign firms in their ancestral land. As many concerned Ethiopians, international scholars, and human right activist are still using to write more about the land grapes of the century’s crime I am not going to discuss it now either. Nevertheless, what I would like to underlined here is that, Meles and his ministry of agriculture’s Isayas Kebede are the prime responsible individuals for this century’s crime against a nation and its people.

TPLF’s leader and his cadres do have (and implemented) many ways and means to deceive our people. In this regard, the so-called currency/Birr devaluation process is almost one of the trickiest and simplest of all kinds ever happened in the currency devaluation processes. To do the trick, what Meles and his cadres had been doing (at different times) were, when they do have a hidden plan to devaluate the value of Birr they first try their best to buy/collect the foreign currency (as much as they can) from every directions, including in the black market. Then, once they completed this phase they deliberately disseminate false information (countrywide) as the value of dollar is speculated to be decreasing; this helps them to get the rest of the foreign currency that had not yet been bought at the first phase. After they make sure that everything thing is done at their capacities, within 8 – 13 days later, they instead devaluate the value of Birr and be millionaire/ billionaire out of the unfair devaluation trick, within a couple of weeks. So one concludes that devaluation is not to regulate the market but serve them as means of enrichment with a tricky/dirty game. Last but not least, the trick hadn’t yet stopped at the level of only changing one currency with another one but goes to the extent of replacing/changing the National Bank’s Treasury GOLD deposit with Copper within short span of time.

First of all, I don’t understand a leader who is claiming had adopted the principles of free market economy system do the currency devaluation (trick) every given period? In real free market economy system the currency of that given country has to be floating and its paper money value depends/determined on the day to day sell value of it at the open market like a commodity. In fact, this does not mean that if there is need to give more Competitive Incentive (advantage) for the export market local currency devaluation won’t be done. Nevertheless, if we take the Ethiopian case, it is neither free market economy system nor the people have the freedom and equal rights to participate in a true and fair business climate.

Meanwhile, when we talk about floating, some countries (the best example here be China) deliberately fix their currency/Yuan/ below the actual market price in order to encourage (keep the competitive advantage for the) export market. Here, when we talk about floating and fixed rate system of currencies of different countries, those whose economy doesn’t depends on import and export market their currency doesn’t change significantly either. For instance, although Hong Kong currency/Dollar/ (HKD) is floating, as its business is highly on the international stock market (being not like the mainland China on export type or other country’s import) its currency never had changed almost for the last thirty years without any government interference. So, the reason why I mentioned the HKD’s case is that when currency devaluation is done it immediately exhibited either the domestic economy is set/adjusted/ for a more competitive foreign market or negatively the local/domestic economy is shrinking due to lack of economic policy leadership and management (like the Ethiopian one).

Last but not least, the Abay Dam Bond issue is one of Meles’s current economic sabotage used to cheat innocent Ethiopians at both ends, domestically as well as in the diaspora. What it makes it more surprising is, Meles pushing key riparian states (the Nile Basin Region) agreement/initiative aside and trying to re-negotiate with Egypt unilaterally is a futile mistake done at the expense of our good relationship with countries mainly: Uganda, Kenya, Tanzania, as well as Rwanda. These countries see Meles’s unilateral negotiation with Egypt as a serious betrayal done behind scene against their newly signed important agreement, between the above mentioned key countries.

Besides, what I want to advice innocent fellow Ethiopians, especially in the diaspora is that, when someone bought bond from democratically elected government the bond is absolutely (100%) guaranteed by reliable financial institutions. However, unlike the guaranteed bond of the above case/type who is going to guarantee the Abay Dam Bond when TPLF and Meles forced to cede power by either broad masses uprising for change or even let us think with the unthinkable peacefully ones too? So, be aware what you are doing now, this is really a crime against our people. Doing any (be it big or small) business with TPLF in such unjust way won’t be acceptable when the time comes. Everything will be scrutinized. If there is a true will to help the Abay Dam (and other future dams) to be done, first and for most, Help Ethiopians (our people) to have a democratically elected leader who can bring a real change to life of our people and keep the sovereign of the country safely guarded.
To wrap up, Meles is not an economist who can manage the economy, and also not politician who can brings political solution to our country problem. So the reality is, whether by historical accident of new political order of the Cold War era or with military support of historic enemy countries Meles was able to control the country and was also given a fair crack of the whip and proved his incompetency in both cases; i.e., incompetent in terms of finding: political, and social solutions for the existing problems; and has also demonstrated himself that he is not an economist either, but a locally born and grown racist. So, he has to cede power unconditionally and leave Ethiopia for responsible Ethiopians who are democratically competent to lead the country in the right direction.

Love Ethiopia Love its People!!

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