The Future of Ethiopia: Developmental State or Political Marketplace?

(I) CONVERSATIONS WITH MELES ZENAWI

The Developmental State

AdW: What is the developmental state?

MZ: The definition of the developmental state has three components. First, it must be autonomous from the private sector. It should make use of the private sector and guide it, but also be independent from it. The class base of such a state should be an atomized and satisfied peasantry: atomized in the sense that the peasantry are becoming capitalist and have abandoned their allegiances to intermediate social entities, and satisfied in that their material well-being is improving. The developmental state should control the commanding heights of the economy so as to be able to lead the private sector (banks, utilities, some key production sectors).

The second characteristic is obsession with development. It must pursue accelerated economic growth as its absolute and overriding priority. Development should be a matter of national survival; the ideology should be that growth is survival.

The third component is the hegemony of developmental discourse (hegemony in the Gramscian sense of being an unreflective, internalized set of assumptions, not an imposed order). The norms and values of our society must be based on value-creation and growth. Our small-scale producers must be focused on improving their material well-being through production.

AdW: Why is this better than the Washington Consensus programme of economic liberalization?

MZ: One problem we face is that in common with every other African country, our economy is very small, and the economic power possessed by the government relative to the size of the economy is very great. This creates outside rent-seeking opportunities to those in political office. It’s not a question of whether the state will allocate rents, but how it will do it. Will it be an activist, developmental rent-allocator, or will it be a passive rent-allocator? If the state isn’t activist, the most capable people in the country will congregate around government office and direct those rents into their own pockets, and we will see the state as a network of patronage that facilitates massive corruption and capital flight.

The fundamental problem we face is that Ethiopia’s factors of production are so constrained, that we can never complete in a globalized market without an activist state guiding our development. This activist state isn’t just investing at a micro-scale but is guiding the entire economy, allocating state rents in a strategic manner.

AdW: Is Ethiopia’s developmental state modeled on China?

MZ: No. We take elements of different models from around the world. One of the benefits of the multipolar world is that we no longer need to stick with a single paradigm for development. When we came to power in 1991, it was an inauspicious time for any kind of political-economic model that wasn’t based on unfettered liberal capitalism and the nightwatchman state, so we had to hide our agenda of state control and bide our time. With the rise of China, the Washington Consensus lost its global hegemony. That didn’t simply give us a choice between two models, but something far more important: it meant that we were able to pick and choose among the aspects of different models that existed around the world. In the 2001 document on foreign policy and national security, we determined that we would select what is most suitable for Ethiopia from different countries around the world: the U.S., Germany, China, Korea, wherever. I call it the ‘Frank Sinatra’ model: ‘I did it my way.’

AdW: How do you analyze corruption?

MZ: Corruption is everywhere, in fact, the only non-corrupt states in the world are the northern European protestants.

Let me make a distinction between pervasive rent-seeking and corruption. The developmental state can be corrupt (as in South Korea and Taiwan). In these countries, officials take bribes. For example, customs officials routinely ask for additional payments for importing goods, worth 12 percent of the value of consumer goods but exclude the key capital goods that drive the country’s development. Even the thieves have internalized the developmental ethos: that is true hegemony! In other countries, by contrast (for example India), corruption is across the board the thieves take their cut by lowering the quality of construction and manufacturing.

Rent-seeking is getting an income or a reward for doing nothing except occupying a position. It can be entirely legal. In fact, if the rent-seekers are in government they can write the laws to suit them.

Corruption and rent-seeking are connected. Rent-seeking is the perfect environment for corruption to thrive. You can have the most perfect macroeconomic policies but if the politics are wrong, you have the wrong class alliance with rent-seekers in power, it is a recipe for corruption. And once the institutions of government have become controlled by rent-seekers it is almost impossible to uproot corruption. Look at the way in which anti-corruption drives simply become a mechanism for a leader to purge his rivals and opponents.

AdW: What are the obstacles to the developmental state?

MZ: Development is not a process of capital accumulation but should be defined as technological capacity development. Hence it is essential to focus on education, especially secondary and tertiary, research and development. The day-to-day practice of producing goods contributes to this, in a dialectical approach to capacity building. This is part of the process of making value-creation into the driving hegemonic value in our society. But technological capacity development takes time. And in the meantime, we face enormous obstacles, some of them external (such as the inevitable fluctuations in the conditions of the global market, which can wipe out any of our infant industries virtually overnight) and some of them internal (most threateningly, the constant temptation of rent-seeking). We need to power ahead to achieve middle-income status so that we have met the threshold conditions for sustainable growth.

AdW: My concern here is that you have both underestimated and mischaracterized the challenges to sustainable growth. You identify corruption as an economic problem. But it is also a political problem. The most dangerous form of political corruption occurs when political loyalties and services can be bought and sold on the market, not just in individual transactions or one-off deals, but in a systematic manner as in market. We see different kinds of political marketplace in neighboring countries. In Somalia, it is obvious.

MZ: You are correct: our attempts to identify the basis for a developmental state in Somalia have so far completely failed, and all we can do is operate on a tactical basis. We rent loyalties of Somali factions on contracts that typically last 18 months, no longer.

AdW: In Sudan, it is also obvious though it is more complicated, because there is a market among the political-commercial elites within Khartoum, and the institutions of government resemble Weberian institutions on the outside, but are run on the basis of supply and demand on the inside. And in Kenya, political competition has been so thoroughly marketized that elections have become an exercise in competitive political financing, and the cost of loyalty has become so high that the political parties are literally consuming the state to pay for their political ambitions.

MZ: But in Kenya the political financiers are the domestic capitalist class and they will always stop short of going over the precipice. When their politicians take them to that point, and when the level of plunder of public resources gets to the point of implosion, and when the politicians turn to incentivizing their supporters by rioting and looting, the national bourgeoisie will step in and say, enough is enough.

AdW: And that is exactly what we have seen, first in stepping back from the brink in 2008, and subsequently in the new devolved constitution, which is quite explicitly a mechanism for giving those elites who lose at the national level, a second chance to eat at the provincial level.

MZ: The most sophisticated political marketplaces are India and the United States. In India, you can calculate exactly what it costs to buy an election, but the big national issues have been settled by the economic elites in advance, so the issues settled by the election are only the secondary ones. And in the U.S., do you ever wonder why big corporate donors give money to both parties? Of course, they want some influence on whatever candidate wins, but the fundamental reason is that they want to keep the price of power high so that ordinary citizens can’t influence the process. If they donate to everyone, the American oligarchs can keep the barriers to entering the market as very high.

AdW: But the reason I raise this is, of course, because of its relevance to Ethiopia. I think your framework for the developmental state underestimates the possibility that there can be reversals—some of them catastrophic reversals—in the process of developing institutions and creating a viable capitalist economy. The driving force behind those reversals can be the logic of the political marketplace: political power becoming tradable, and elections becoming expensive. Ethiopia doesn’t possess the kind of national capitalist class that can give a pull on the reins to keep this under control. I wonder what an Ethiopian political marketplace would look like?

MZ: We have been thinking about how the EPRDF as a party should engage with the private sector. It’s best to keep the private sector at a distance and keep the party financed by membership dues. We should avoid business finance which would determine the short term activities of the party. But we need alternative means of engagement with them. Their representatives can attend our congress through a mechanism of private sector associations. We are moving in this direction; most of the private sector is becoming supportive of the EPRDF.

AdW: I’m sure this is a good approach, but it’s at the level of tactical policy engagement and regulation, not systemic. The danger is that the regulator will be vulnerable to capture by well-financed businesses or foreign governments.

MZ: You mean that the Ethiopian state could be bought? I don’t see that happening short of a counter-revolution, in which case, the rent-seekers will sell anything and everything. If that happens, well, Ethiopia won’t be a failed state so it won’t be a laissez-faire open political market like Somalia. We are not a rentier state so we won’t become an oil-based kleptocracy like Sudan. Or for that matter a one-man mafia-style business as in Eritrea! The Kenyan example is more intriguing, but we don’t have that national business class. But you are correct: your analysis is a powerful tool for the archetypical African state, and it demystifies the actual conduct of politics on the continent. You need to elaborate further. At the moment you are dealing with the political elite, you should bring in the masses in the rural and urban areas, how are they affected? You need to explain which social forces generate deeper rent-seeking: are they inside the state structure or outside it?

AdW: We don’t have a good framework for this. The vocabulary of authoritarianism and democracy doesn’t capture it. The notion of state capture—when a configuration of private interests takes over the apparatus of institutional government—is closer.

Ethiopia also belongs to that special category of liberation movements in power, and we can see different trajectories for how they have adapted. Some become big man patrimonial systems (such as Uganda or Zimbabwe). Some become monopolistic business states (such as Rwanda). Some achieve limited liberalization (such as Mozambique). But one category to which we need to pay particular attention is the emergence of a rivalrous oligarchy. What happened in Algeria was that different power bases within the ruling coalition established a modus vivendi in which they collide, but also compete in a limited manner.

I like to frame it as political firms that operate in various configurations of a market: a public service utility which is a genuine monopoly, a free market in which anyone can trade, or a limited competition oligopoly. Ethiopia is basically a public service utility, in which the consumer-citizens can only take the service on offer at a fixed price.

MZ: Is this a metaphor or are you saying that politics actually functions like this? You should refine this framework.

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