In two recent articles Dr Elleni Zaud Gabre Madhin, the CEO of the Ethiopian Commodity Exchange (ECX) traced her family roots and engaged in educating the Ethiopian Diaspora about free markets and bigotry. In this short commentary, I shall focus on the key ideas transmitted by Dr Elleni’s two writings. It is not intended to be a personal attack. It is a discourse on issues of ethnicity and markets as they affect Ethiopia.
First, it important to note that Dr Elleni is not the first Ethiopian economist to write about the benefits of liberalized markets. Similarly, with regard to culture-based politics, a number of writers have examined the many faces of ethnicity. I shall not return to them. Hence, from a conceptual perspective, there is little, if any, contribution from Dr Elleni’s recent writings. What makes her position different is that she has actually driven the concept to practice, albeit in a difficult environment. What makes it even awkward is that she is writing about free markets when her boss (Prime Minister Meles) is writing about “the dead end” of free (liberalized) markets. For these two reasons, Dr Elleni must be given the credit that is due to her.
Ethnicity is the politicization of cultural differences. According to Bauman, to classify means to set apart; it is to aggregate and disaggregate; it is to postulate that a group or adjacent entities have similarities/differences and whether they are opposed to one another. To classify is to find the world a structure. Hofstede in turn states that culture is more of a source of conflict than of synergy. For him, cultural differences in international businesses are nuances at best and often a disaster. The economist Sen (2006:105) also underlines the link between culture and governance, and argues that a heightened culture and identity contrast cannot be used to explain the failure of governance. The trouble with Dr Eleni is neither her identity nor to whom she is married to, nor where and what she studied. It is rather her audience’s perception that she is defending a bad governance system.
Markets transcend cultural barriers. The role of governments is to enable markets achieve what they can achieve; and correct their failures. Governments spend their energy and resources so that their country scores consistently high in several international indices:- country investablity index, governance index, business environment index, transparency index, failed states index, happiness index, etc. In simple terms it means there ought to be property rights, investor protection laws, labour rights and human rights laws. It means there is a rule of law, and impunity is disallowed. It means market and non market instruments will not be changed according to the whims of politicians. This is the allocation side of the equation.
In the distribution side, there are issues of inequality, fairness and ownership concentration. Who owns who and who owns what is important. It is no secret that TPLF leaders arrogantly and ignorantly oppose market based economic policy and liberal democracy (free and fair election). Instead they mimic South African communists and argue for the so called “developmental State paradigm”, which in essence means a centralized, bureaucratized and managerial-ist government that commands big resources. In other words, despite the fact that he has been in power for about 25 years, Ato Meles failed to transform the TPLF into a respectable post conflict national Ethiopian political party, whose economic policy embraces a mixed and liberalized economy system. In other words, one would be preaching the free market dogma to an autocracy, ethno-cracy and at best to a crony capitalism system. Dr Elleni knows that there is neither epistemology nor ontology in “the market”. Economists developed major theories of economic behavior in the context of choice, information and network. Standard economic models of decision making often reduced the emotions of people, idealizing the decision-maker as a perfectly rational cognitive machine. It is evident that rational economic agents and those that advocate for social justice will be at odds with Ethiopian policy makers which Dr Eleni serves with high level of loyalty. In other words the outcomes of free markets may not be desirable to crony capitalism system as the system thrives through corruption, ethnic and other networks, opacity, and a governance system that is marred with impunity.
Organized markets are institutions (laws and organizations). An exchange is thus nothing more than an organized trading floor where quality, delivery and settlement mechanisms are made easy, efficient and reliable. In his seminal work entitled quality, uncertainty and the market mechanism, George Akerlof shows the role of information in second hand car markets and education institutions in the United States, and the rice market in India. The birth of a commodity exchange in Ethiopia should be welcomed and it should serve as a prelude to the creation of other exchanges where financial and environmental products can be exchanged. Hence, no one in his/her right mind should object the creation of markets. The issue at stake is the credibility of the information that is reaching market and non market participants.
During the Dergue period traders were killed for not releasing their stocks of berbere to the market. Colonel Mengistu announced what the price of a chicken should be, and how many eggs a birr should fetch. Evidently the solders had neither raised a chicken nor were they educated in the production and marketing of chicken. Similarly, three decades after the Dergue’s errors, the TPLF economists accused coffee and currency traders for the shortage of foreign currency and trade deficit that the country is facing. The government threatened the traders badly and imprisoned some of them. As regards the coffee crisis, Dr Eleni’s commodity exchange was at the center of the controversy. Terrorized by the situation, some of the traders were fleeing into exile while others are waiting for the confiscated and lost coffee stocks to be found and returned. Some claim that they have been forced to sell their products at lower prices than prices in the open market. On the other hand, the coffee traders were accurately expecting devaluation and price reversals. No one has yet proved them wrong. TPLF economists delayed the devaluation, allowed political intervention in the market, but were unable to prevent the expected devaluation. In sum, we learn that both Dergue and TPLF have essentially made the same mistake:- both attempted to control prices and force supply. The information revealed by the market were incomprehensible to them.
In her power point document which she kindly made it available at the www.ecx.com.et, Dr Elleni disassociates herself (ECX) from the recent “regulatory crackdown.” However, what the viewers of ETV know is that Dr Elleni was present when the Prime Minister was threatening and reprimanding the coffee suppliers. The interesting question that must be asked is that why our free market evangelist kept silent when the TPLF hubris was threatening the market. An independent manager of a credible exchange would have prevented the injury either through advisory or personal influence or through the legal system. If this is not possible, a credible manager would resign and save his/her reputation. As Salvador Dali once stated, intelligence without ambition is a bird without wings. To aim for a free market, if there is ever one, is something but to be infuriated because the Ethiopian Diaspora raised questions about the link between the crackdown and the ECX, is incomprehensible.
— Minga Negash is a professor of accountancy at University of Witwatersrand, Johannesburg. Email. [email protected]
