The Future of Ethiopia: Developmental State or Political Marketplace?

(II) QUESTIONS FOR ETHIOPIANS TODAY

This second part of the paper poses a number of key questions that arise from the previous conversations and the current predicament. I use the conceptual vocabulary of the developmental state and the political marketplace, as well as nationalism and identity politics, to pose some questions.

What agenda is PM Abiy setting?

In the few short months since Abiy Ahmed was elevated to Prime Minister, he has set about changing Ethiopia’s political landscape at an extremely fast pace. He has dominated the political agenda in an unprecedented manner: not even Meles at the height of his powers was able to tackle so many issues at the same time. Abiy is certainly setting a political agenda in the sense of making the running and compelling everyone else in Ethiopia to respond to his initiatives.

Two questions follow.

First, is this his agenda or is this an agenda imposed from elsewhere? Some of the priorities of the Abiy administration seem to reflect those of the U.S. (and some influential think tanks in Washington DC) and key U.S. allies in the region (notably the United Arab Emirates). That alignment should not be taken at face value. The U.S. coalition with Egypt, Israel, Saudi Arabia and the UAE is currently the dominant force in the wider region and it would be foolish not to play along with it, at least tactically.

Second, does Abiy have his own strategic vision for Ethiopia? Has he taken on the basic precepts of the existing EPRDF economic, political or security strategy, and merely adjusted them to current realities? Or has he developed new thinking which will emerge in due course?

Insofar as the PM has advisors who are drawing on the dominant strands of international scholarship on liberalization and democratization, I caution strongly against applying general models to the Ethiopian case. There are too many historical particularities in Ethiopia—the extraordinarily rapid economic development, the complexities of the federal system and identity politics, the regional security context— that militate against using general blueprints. Ethiopian intellectuals often undervalue their indigenous tradition of political thought. The right balance is needed between general lessons and Ethiopian specificities.

Is Ethiopia still a developmental state?

Ethiopia is growing fast—it is developing. But is it a developmental state? This has three components: (1) the strategy of state-directed economic growth; (2) the commitment to pro-poor welfare policies; and (3) the nature of the state institutions themselves.

I will not ask whether Ethiopia is following Meles’s blueprint, because that would be a misreading of his intellectual style. He did not write a sacred doctrine and demand that his followers parrot it: what he did was to apply an analytical method to the Ethiopian predicament to arrive at a diagnostic, relevant to the immediate circumstance, and derive a set of policies from that. So the questions to ask are: (a) is Ethiopia a developmental state in its general sense, namely a state, autonomous from domestic and international private sector interests, that is committed to sustainable economic growth and transformation? And, (b) what stage in such a historic process has Ethiopia reached, and what does this imply? The two questions are interlocking.

So, question (1): is the state-directed strategy of economic growth intact?

The core metric of Ethiopia’s developmentalism is economic growth. For all its shortcomings, it is the measure used around the world and the one that was used and celebrated by Meles and his immediate successors. Thus far, Ethiopia’s GDP growth has not stalled. Economic development continues apace. In 2012, the year of Meles’s death, Ethiopia’s GDP was $43 billion; in 2018 it will be close to $90 billion. At this rate of growth, Ethiopia will become a middle-income country by 2022.

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The character of the Ethiopian economy is changing fast: state control becomes less necessary and less effective as the economy grows and diversifies.

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The fact that Ethiopia has recorded its fastest-ever period of growth in the last six years can be interpreted many ways: as a testament to Meles’s vision and legacy; as a testament to his successors’ competence in economic management; as the outcome of favorable circumstances.

Under any theory of the developmental state, profound changes will occur as a country becomes middle-income. These changes affect the structure of the economy, many aspects of social relations, and the nature of politics.

The character of the Ethiopian economy is changing fast: state control becomes less necessary and less effective as the economy grows and diversifies. Reforms such as lightening the regulatory hand, privatizing state-owned corporations, and opening up the economy to closer integration into the African and global market, are all compatible with a developmental state.

The first subordinate question is whether the country has reached the stage of development where any such liberalization is possible without losing the developmental vision and ethos. There is no clear answer, but some of the benefits, costs and risks can be identified. The partial privatization of the banking and telecom sectors, and Ethiopian Airlines, will bring help fill immediate gaps in the national finances, especially foreign currency. There will be a tradeoff in terms of future state revenues and control. And, given that the domestic business class is weak, it is likely that the main stakeholders will be foreign corporations or states (perhaps sovereign funds): whoever buys a controlling stake will have enormous political leverage in the country.

The decision, taken in March, for Ethiopia to join the African Continental Free Trade Area (AfCFTA) is also a step away from the previous strategy of protecting key industrial sectors and pursuing an infrastructure-led integration strategy. Among other things, this will have repercussions for how business is conducted with Eritrea, as the Eritrean economy is even less well-placed to take advantage of market integration, should it take steps in that direction. However, there are still key policy decisions to be taken about the pace and details of the implementation of AfCFTA integration.

This leads to the second subordinate question, is how the reforms are handled. If they lead to a broad-based shareholder economy and the growth of a national class with a stake in Ethiopian corporate capitalism, they will definitely be a step in the right direction. On the other hand, if the reforms are managed with an eye to short-term gains, the likely outcome will be takeovers by those with an eye on windfall profits and future rent-seeking through access to influence over the state. That would be a regressive step. Meanwhile, the Ethiopian diaspora—which has capital, expertise and global business networks—could be a swing player, either helping to consolidate a national capitalist class or else facilitating the international takeover of the commanding heights of the economy.

The developmental nature of the Ethiopian state is therefore in the balance.

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