Why Ethiopia Needs to Privatize Land

One of the factors, essential for economic development,
is a successful and thorough transformation of subsistence agriculture into
commercial farming. This is not just a technical transformation.  It is also a social transformation. It
requires changing existing property relation through land reform that can
privatize land and create owner farmers who will produce for market.

In the
eighteenth century, United Kingdom achieved agricultural breakthrough by
breaking up communal land into private farms so that major technical and
biological advances could be introduced into agriculture. Private ownership of
land allowed enterprising individuals more scope and opportunities for
permanent farming and independent experiments. Land began to be used more
efficiently; by rotating crops, all the fields could be cultivated, rather than
some land lying fallow as had been the practice for several centuries.     

  In the 1870s, the Dutch were the first to
lead in productivity, with the British and Americans soon catching up, because
many Dutch farmers owned their land, the feudal nobility was small and weak,
and the potential power was in the hands of entrepreneurs.  There was greater freedom to produce and sell
agricultural products and manufactured goods. 
Firms could ship their products to markets and hire workers without
political restrictions.

The
United States of America showed a remarkable increase in agricultural productivity
thanks in part to the Homestead Act of 1862, which created numerous privately
owned family-farm units from large landed estates and reserves of unused land.
The government made land purchase feasible by making credit sources
available.  The Homestead Act of 1862 was
a strong democratizing measure.

Realizing
that improved agriculture lay at the foundation of a strong nation, Japan carried
out a land reform that abolished landlordism and created owner farmers. Under
Japan’s 1946 land reform, wealthy landlords were given a reasonable price to
sell their land to the government. The government then sold the land on credit
to the peasants at the same price, giving the priority to tenants who had been
farming the land.  The peasants were
given sufficient time to pay their mortgage and no interest was charged.  The American Occupation at the time was
helpful for the success of the reform. 
The Occupation used its power to enforce a law, which was against the
interest of wealthy and powerful landlords.

The
Japanese land reform was later emulated in Southeast Asia, especially in South
Korea and Taiwan. In South Korea’s tenant-purchase program, the price of each
plot was set at three times its average annual yield. The farmer was given up
to fifteen years to pay and no interest was charged. The farmers embraced the
program because they believed that paying for the land would make their
ownership more secure.

There
have been land reforms in Ethiopian history, but they have always been done for
a political purpose to consolidate power of the rulers.  Land reform was considered, for the first
time, a necessary factor for agricultural transformation and economic
development in Ethiopia only after the 1960 Coup.   

In
1961, a separate ministry of land reform was created to study the various land
tenure systems of the country.  But
nothing was implemented because of the formidable opposition by the powerful
land-owning class of the royal family, the nobility, the Orthodox Church and
high ranking officials.  

In 1975,
the Stalinist Regime of Mengistu Hailemariam
abolished private ownership of land and commercial farms without compensation, making
the state the sole proprietor of all land.  Peasants were allowed use right only, living
as tenants of the state.  By controlling all
land and keeping it out of the free market, the state prohibited the gainful
use of landed property. Worse still, in 1991, the Regime of Meles
Zenawi introduced a lease system instead of returning
land over to the peasantry.  

State
ownership of land did not produce a property relationship that is significantly
different from the imperial system. The state replaced the land-owning class. Peasants
still worked the land they didn’t own, lacking the security and pride of an
owner.      

A
genuine land reform that can end state monopoly and privatize land is long
overdue in Ethiopia. However, there has to be first a permanent consensus on
the rationale for a genuine land reform that can create private ownership,
enforced by law.

There may
be those who believe that land privatization will bring back the old disparity
in land ownership. Others may say that the peasants will sell their land and
move en masse to urban centers to look for jobs, thereby increasing the number
of the unemployed.  Still others may
argue that foreign capitalists will buy all the land, impoverish the people
further and threaten the country’s sovereignty. Some may even believe that land
reform is a non-issue, arguing that China is growing rapidly without it.     

Peasants
in Ethiopia were opposed to disparity, but not to privatization.  Historically, they depended on their holdings
as a source of economic security, political power and social justice.
Therefore, they had always favored the idea of equal distribution of land and
getting their private holdings registered under their names in government tax
books. During the reign of Mengistu Hailemariam, peasants preferred private farms to collectivization.
 

The
argument that privatization will encourage the peasants to sell their holdings
and flee to the urban centers is based on a false assumption that peasants are
irrational people.  A recent study by Abeje Berhanu and Ezana Amdework about peasant
entrepreneurship debunks this mythology.

The
study affirms that in Ethiopia entrepreneurship is a widespread phenomenon
among the peasantry, “characterized by a strong orientation to improvement and
change, creativity and innovation, new ways of generating income and making
profit, pro-activeness and willingness to take risk, far-sightedness and
forward planning.”

Peasant
entrepreneurship is essential for consolidating farm sizes and improving
productivity. In Ethiopia, because of population pressure in the rural areas,
plot sizes have continuously diminished and become uneconomical to farm.  The average size of a cultivated holding is
less than one hectare per peasant household. 

The
argument that privatization of land will flood Ethiopia with foreign investors is
based on an irrational fear and hatred of the free market system. Investment capital
is a scarce resource; and consequently, it moves mainly to places of high
return and safety, such as the United States of America or South Africa. The
Ethiopian market is not one of these places. In the United States of America,
foreigners buy real and financial assets and the inflow of funds has benefited
the American economy.

How
about the argument that land reform is a non-issue for Ethiopia given the Chinese
experience? This is just another excuse to postpone the necessary reform.  Land is actually owned by the state in China.
The so-called “collective ownership of rural land” by the people is an empty promise.
The Chinese peasants do not own the land; they cannot sell or mortgage their
holdings.  On the other hand, the
government can expropriate land from the peasants and lease it out to generate
revenue.

All this
justifies the urgent need for a land reform that can create private ownership
in Ethiopia. Land privatization will enable peasants to own (through an
affordable land-purchase program) the land they work and have the security and
pride of an owner. They will have an incentive to work harder, improve their
incomes and be able to save and invest in agricultural improvements. As a wise
observer once said, “Give a man the secure possession of a bleak rock, and he
will turn it into a garden; give him a nine year lease of a garden and he will
convert it into a desert.”

Private
ownership of land will compel herders in Ethiopia to show interest in
scientific stock breeding and range management practices. The communal range
land system has kept the herding communities in Ethiopia in poverty by
depriving them of the initiative to be resource-conscious and devise efficient
ways of raising cattle. Herders in Ethiopia consider natural resources as free
and limitless. As a result, they seek to increase their livestock beyond the
carrying capacity of their surroundings. This practice presses harder on the
food-feed supply while adding relatively little to consumable meat supplies or
productive work-animal capacity. 

Private
ownership of land will encourage both domestic and foreign entrepreneurs to
invest in agriculture. Prior to 1975, there were many successful commercial
farms and plantations in Ethiopia, which were owned by domestic and foreign
entrepreneurs. They grew industrial crops and food staples.  Productivity per acre of commercial farms was
more than five times higher than that of peasant farms. The commercial farms
and plantations helped increase the supply of grains and raw materials and
enabled the country to be self-sufficient in sugar and cotton production in a
short period of time. They provided employment opportunity and contributed to
state revenue and foreign exchange earnings. They brought modern technology to
the countryside.

Private
ownership of land in Ethiopia has to be enforced by law and the private farms
and agribusinesses that were confiscated by the state have to be returned to
their previous owners or a fair compensation has to be paid. Urban land has to
be privatized.  Private homes and plots
that were confiscated by the state have to be returned to their original owners
or a fair compensation has to be paid. This will restore faith in the new
system and reassure potential investors.

Government
has to get out of the real estate industry and a free market for urban land and
housing has to be restored. This will help economize housing and provide
potential investors an incentive to increase supply. Instead of a low-rent
accommodation policy, government can subsidize home purchases by the low income.
This will promote capital accumulation and widen the middle class.  

The
now industrialized countries transformed their economies in a fundamental way by
changing their property relationship and uplifting their peasants first. By freeing
land and their peasants, they laid the foundation for a democratic, middle
class society. Thus, the question of freedom and democratic development in
Ethiopia cannot be resolved without implementing a land reform that can end
state monopoly and transfer land into private hands.

—
The writer, Daniel Teferra, is Professor of Economics, Emeritus