There is the economics of Adam Smith, the intellectual
father of capitalism. There is Levitt & Dubner’sfreakonomics 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.”
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.
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…
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.
