Can Ethiopia’s “Economic Miracle” Continue?
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In the 1980’s, television shows featured constant interruptions by celebrities asking for donations to feed the starving in Ethiopia. Beset by famine, drought, and civil war, Ethiopia was a hell on Earth with no meaningful plan for development. Fast forward to today and Ethiopia is a country that has experienced sustained growth at a rate of slightly more than 10 percent per year. The change is so great that some have even called it an “economic miracle.”
Astounding Growth at a Cost
In the 1980’s, television shows featured constant interruptions by celebrities asking for donations to feed the starving in Ethiopia. Beset by famine, drought, and civil war, Ethiopia was a hell on Earth with no meaningful plan for development. Fast forward to today and Ethiopia is a country that has experienced sustained growth at a rate of slightly more than 10 percent per year. The change is so great that some have even called it an “economic miracle.”
Astounding Growth at a Cost
Since 2000, Ethiopia’s poverty rate has fallen from 44 percent to 30 percent in 2011. While still high by western standards, it shows a significant improvement in unemployment. Similarly, the numbers of Ethiopian millionaires has grown faster than any other country.
This growth has not come without its fair share of growing pains. The government has displaced large populations in favor of leasing the land to agribusiness interests. These “land grabs” have left many Ethiopian citizens angry and distrusting of the government.
All Part of the Plan
This policy is part of an “authoritarian developmentalism” model, adopted in 1995 by the countries former Prime Minister, Meles Zenawi. This approach has led to a corruption of the true democratic process for the last 20 years, favoring state-directed economic growth over human rights or genuine democracy. While it is hard to argue with the results, the prospects for this approach as a long-term measure seem limited.
Ethiopia is running out of room to keep driving its incredible rate of growth. Even if the government can keep mounting political and social unrest at bay, its public investments in infrastructure, state enterprises, and human capital amount to 19 percent of its GDP (the third-highest such investment in the world). Unfortunately, this is in excess of the government’s current revenue capacity, meaning the nation will soon be forced to change the way it is conducting business or see its growth rate shrink significantly.
Prospects for Change
Some change has already begun. Corruption is down, according to a report by the World Bank, and the nation now has the highest ranking for honest government dealings in East Africa. It also ranks second to Kenya in World Bank rankings of government effectiveness. However, the years of political repression have led the nation to have the lowest ranking in East Africa for voice and accountability, political stability, and absence of violence.
The ruling party insists that it intends to foster greater political freedom in Ethiopia. Given the diminishing returns on the government’s investments, only such political reforms are likely to create the sort of stability necessary to invite significant foreign investments. If the government can reach a point of balance between growth and political freedom, then it may yet manage to hold onto its astounding growth rates and keep the “economic miracle” alive.
