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The Growing Inequality in Ethiopia

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By Solomon Gebre-Selassie

December 4th, 2012 – Even in the eyes of those who never tire in arguing that EPRDF has turned Ethiopia into a land of “Milk and Honey” will be hard pressed to deny the fact that the gap between the rich and poor in Ethiopia is insanely growing, and they must come to turns with the sad but stark face that regardless of the double digit growth we hear so often Ethiopia remains a poor country. There are structural causes for this and no matter what EPRDF tinkers with at the edges, unless these structural causes are changed by policy shifts, the inequality problem will continue to increase. The Global situation in the last 30 years or so, inequality between countries appears to have decreased as once dirt poor countries such as Brazil, China and India improved their economies taking advantage of globalization, technological advances, and their own educated human resources. But within many countries, including the examples cited, and our own Ethiopia , inequality has increased. According to world bank data, more than two thirds of the world’s population live in nations where inequality has increased since 1980. Even conservatives, such as the Economist magazine (Oct. 13/19, 2012) have changed their position from one that said, “inequality is good for the economy by sharpening incentives for hard work and to take risks”, to now a refrain from such talk and counsel that “inequality has reached a stage where it can be inefficient and bad for growth.”

A survey of the World Economic Forum of rich nations meetings at Davos highlighted inequality as the most worrisome problem for the coming decades . In countries like America, disparities in wealth are less visible in people;s everyday lives in that even poor people have televisions, and cars. But income for the richest 1% Americans has doubled since 1980 from 10% to 20% (recall the Occupy Wall Street Movement). However, this is not unique to America. The 1% in the “old rich” (such as Britain or Canada), and the “new rich” (such as India and China) have disproportionately taken their irrespective nation’s national income.

Economists use a notion of coefficient to denote how unequal a nation is. We will not go into details here, but the value that is always between a “0 and a 1” shows a highly unequal society if it is closer to a “1 and a more equal nation if it is equal to a 0”.

For Ethiopia, according to the institute of Development Studies (IDS) (Oct. 2012), the coefficient slightly decreased from 0.30 to 0.298 between 2004/5 and 2010/11. Actually, it is more true to say it remained unchanged for the period (as to the reliability of EPRDF’s data, see below LeFort’s qualifying language that casts doubt on the validity).

Ethiopia’s Development and its discontent

According to the IDS, Ethiopia’s economic challenges are dominated by the need to find secure and improved livelihoods for the second largest population in Africa and by the acute vulnerability of its major economic sector -rain-fed small plot-based agriculture leased from the government. Most private businesses are also small scale. According to the IDS, two thirds of Ethiopia’s economy is controlled by the government through nationalized and para-statal enterprises, including banks, insurance companies, telecommunications,transport and other industry. Most of these are TPLF-dominated. The IDS concludes by saying that “how this centralized and politicized control over the economy evolves ways of creating a more productive economic model that can provide employment for the growing population will be a major factor in determining the future state-society relationships and the balance of power within and between different political structures in the country”.

According to some affiliates of the Yale Global Health Leadership Institute (Oct. 2012), Ethiopia is 167th out of 173 nations on the UN Human Development scale. Its epidemiological profile shows a life expectancy of less than 50 years, and maternal mortality ratio 65 times higher than those in the US. Also, according to them, much of the Ethiopian human resources for health had fled the country.

Some Intellectuals giving the benefit of the doubt to EPRDF are fidgety about the continued dependence of a sizable portion of the population on safety net programs and Western largess.Making this particular dependency worse, the government stands accused of politicizing the aid it gives to the needy. Supporters and sympathizers of the opposition political parties have been systematically excluded from the aid, and told to seek aid from the opposition.

Sounding the same concern as the Yale researchers, a few Ethiopian intellectuals also worry about the brain drain of much needed engineers and medical professionals. Some of those admiring EPRDF’s developmental achievements are also quick to point out the high cost of living as a significant challenge. According to the IDS, between 2007 and 2009, annual inflation in Ethiopia averaged 26%, the third highest in Africa, and was 20% in July 2012. Rene Lefort, in a recent article (Oct.2012), states that inflation hit in September a peak of 40% overall, and 50% for food. According to him, in a 2-year period, civil servants lost around half of their purchasing power, and peasants, half of whom are net buyers of food often claim that “inflation is worse than prison”. On top of this, citizens are ordered to contribute 12% of their monthly income for the building of an expensive dam that needs about 4 billion dollars in capital investment, all of it to be raised from domestic sources.

The IDS report adds that rapid economic growth and improving prospects for some has come with rising urban income inequality and surging inflation. Inequality continues to be high in urban areas (the coefficient of 0.47) where unemployment is higher compared to rural areas (0.27 percent). Between 2000 and 2005, the share of people living below the urban poverty line remained almost unchanged, but numbers increased in real terms.According to Prof. Asayehgne Desta (Oct. 2012),the poverty ratio of people living on less than $1.25 a day in Ethiopia is very close to about 30 million people. The IDS report concludes that countries like Cameroon have made greater strides in reducing poverty, despite smaller per capita income growth, by significantly improving income distribution. For Ethiopia, however, because the economy is skewed by the political domination of the TPLF, the challenge remains on how to decouple political domination from sane economic policy.

The outward signs of inequality in Ethiopia are unmistakable: gleaming and top-of-the-line cars in the streets of Addis fighting for space with a swarm of beggars; secluded and exclusive neighborhoods for the rich in cities like Addis and Mekelle while the homeless crowd out the downtowns and central market places; the rich getting medical attention at exclusive private hospitals and often abroad in Thailand and India, while the poor lie in piles on the floor in public hospitals for lack of bedding; while the Rift Valley Lake areas and now Mombasa are the vacation playgrounds of the rich and Qatar and Abu Dhabi their shopping spree destinations, the Ethiopian poor daily worry about the affordability and the availability of the next meal.

Corruption is also endemic in the Ethiopian political economy so much so Meles himself blamed “government thieves” as part of the problem. Due to TPLF’s political dominance and allergy to tolerating a free, investigating press,very little is known about the extent and reach of corruption. The economic empire of TPLF and its affiliates, such as EFFORT, are beyond government auditing. So too is the incestuous relationship between the wealthiest man in Ethiopia, Al-Amudi and the EPRDF that is not well understood. The semi-independent weekly, Reporter, tried to delve into the issue and shed some light on the illegal
benefits the Sheik and his companies are accruing as a result of a special treatment he gets from the government in terms of bank loans, access to land, taxation, and privileged bidding for government contracts. The corruption is so perverse it is also infecting non -governmental organizations, such as the Ethiopian Patriots’ Association, and the Red Terror Memorial.

Education that is the ultimate equalizer, and a gateway to offering equality of opportunity for all Ethiopians, is without exaggeration in shambles. Instead of focusing on the quality of education, and the creation and development of responsible and patriotic citizens, the Ethiopian education system under EPRDF is primarily an incubation ground for party hacks and political cadres. Teachers who should have been helped with professional training and whose input into the betterment of education should have been sought, are instead politically indoctrinated constantly, harassed for independent thinking, and locked with the government in a never-ending war. A party that had 300,000 members in 2001 now boasts a staggering 5 million members. The education system has itself now cleaved into a dichotomy -one, poor quality mass education with focus on recruiting future EPRDF cadres, and another, a private track that usually leads to education abroad, and which only the off-springs of EPRDF officials, businessmen, and other haves can afford. Based on studies, in government schools, the student-teacher ratio is 65:1, and the number of pupils per section is between 75 and 82 while 30:1 in private schools. Although weighed down by these structural traps,the EPRDF system of governance has managed toeke out a few development projects.

According to the IDS,

* economic growth over the past decade. Ethiopia is Africa’s fastest-growing non-energy economy with annual GDP growth averaging nearly 10% between 2006 and 2011 though some question the regime’s data.* Ethiopia has made important progress in reducing poverty. The country’s head count poverty ratio fell from 55% in 2000 to 39% in 2005, outpacing poverty reduction in sub-Saharan Africa as a whole. The incidence of income poverty declined from 38.7% in 2004/5 to 29.6% in 2010/11. The food poverty head count index declined from 38% to 28.2% over the same period. The report adds that despite this progress, helping the very poorest 10% (more than 7 million) remains a challenge.

* economic vibrancy appears in Addis Abeba and other major cities as construction boomsand the consumption economy grows. Yet, rising unemployment is a problem. Between 2005 and 2008, employment grew by 2.2% while unemployment grew by 4.4%. Unemployment is most acute in urban areas, particularly among young people. Nationally, urban unemployment is 17.5%. Youth unemployment between 15 and 19 years is 21.6% nationally rising to 29.6% for the 20-24 years age group. In Addis, youth unemployment is 22.3% for the 15-19 year olds and a whopping 34.2% for those aged 20-24. However, these employment numbers belie the fact that there is a lot of under-employment in Ethiopia, especially among college graduates most of whom do odd jobs, including the faddish “cobblestone” laying of alleys and roads, and the tens of thousands of young women that leave the country for the Middle East in search of jobs in slavery-like conditions.

According to the Yale Global Health researchers, health indicators are impressive in Ethiopia:

* deaths from malaria fell by more than 50% from 2005-2007, while the number of people starting HIV treatment increased more than 150-fold for the period 2005-2008.

* during the same period, the Ministry of Healthhas built 4,000 health posts, trained and deployed more than 30,000 health extension workers, and developed “a new cadre of hospital administration offcials”. Unfortunately, the country does not seem to have a systematic and voluntary family planning program as evidenced by the ballooning population census, now hovering between 80 and 100 million, and making the country the 2nd most populous in the continent.

* according to pro-government sources, about 11 dams are being built including the most expensive called Hidassie Dam for the construction of which citizens are coerced to buy bonds and make contributions. It is not clear how the daunting problem of financing the dams and their infrastructure to transmit the generated light would take place.

* roads and other infrastructure, including nearly 31 universities have been built although questions about their quality linger (only 24% Ethiopian school children complete primary and secondary schools, and it is concerning how the regime plans to meet the MDG of a 100% elementary educationfor all children in 2015).

Again, according to Rene Lefort, the reality of EPRDF’s achievements, particularly its claim of a double-digit growth since 2004 is questionable. He attributes it to a vicious circle. The regime sets absurdly ambitious targets. The work of every public servant is assessed against those targets. Their career depends on it. And, of course, they claim they have achieved them. The lie becomes institutionalized. He adds “the gap between basic national realities and the image the authorities perceive and communicate from summit to base has become so great… Sooner or later, the authorities will have to deal with the shock wave that results when the truth inevitably comes out”.

Causes of Inequality

In some countries like China and Ethiopia, credit is siphoned off to state-owned companies and well-connected insiders; the states have huge
control over resources, either directly through state-owned enterprises, monopoly control of industries, or the distorted financial system, where interest rates are artificially depressed and access to credit and bank loans are influenced by politics.
At least in China, a model EPRDF seems to strive to copy, corrupt Communist Party officials are from time to time exposed by zealous citizens, and the Party takes strenuous measures against them, including execution. In Ethiopia, however, the unwritten motto appears to be “watch my back, and I will watch yours”, as no meaningful actions have been taken to stem out corruption in EPRDF’s 21 years. The details of the case of the $8 billion stolen money taken out of the country and widely reported about remain unknown. The politically dominant elite evade taxes and gain from monopolies in various economic sectors. In Russia, cronyism plays a major role, while in the US, Wall Street reaps special advantages. Many wealthy people and businessmen become politicians or wield political influence.

For emerging economies in general, urbanization and industrialization have resulted in increasing inequality. As farmers and peasants leave subsistence farming to look for work in urban areas, inequality has risen. The elite in these nations have insider access to land, natural resources, and government contracts.

EPRDF at times alludes to the growth of the Asian Tigers as its model that increased prosperity in the 1960s and 1970s in countries like Japan, Hong Kong, South Korea and Taiwan. But in these economies as prosperity increased, income gap also shrank. Japan’s coefficient fell from 0.45 in the early 1960s to 0.34 in 1982; Taiwan’s from 0.5 in 1961 to 0.3 by the mid-1970s. So, the “Asian Growth Model” is, unlike the EPRDF’s, that combined growth with equity.

The Remedy

The world has sufficient examples of old and new types of models of more equality and more efficient. According to the Economist, the most equal country is Sweden. It is also one of the fastest growing and fiscally stable countries in the rich world. Its coefficient is 0.24 (although 0.25% higher than a generation ago, still a lot lower than the rich-world average of 0.31).

The main source of egalitarianism in Sweden and elsewhere in Scandinavia is redistribution by the state. Under the old welfare system people paid higher taxes and got lots of social services and big transfers in return. The new model of that nation broadly retains most of the services but has cut the taxes and transfers. Although government spending has shrunk in recent years, and it spends much more than Anglo Saxon countries do on everything from early childhood education to job search and training. According to the OECD, more than 70% of the children of the poorest fifth of Swedes are in state financed child-care and education schemes, compared with fewer than 30% in America.

In Latin America, poor people’s incomes have surged over the past decade, leading to a big drop in inequality. In most Latin American countries, the coefficient in 2010 was lower than in 2000 (recall from above Ethiopia’s remained unchanged from 2004/5 to 2010/11, and it is also worthy to note
the coefficient for rural areas is very low compared to urban areas, and this is important when we compare urbanized countries like those in Latin America, and agrarian societies like Ethiopia). The region’s average at 0.5 is down from almost 0.54 a decade ago, and lower than at any time in the past 30 years, though still high relative to other regions.

How did a continent that had been historically unequal since the conquistadors colonization suddenly change course? Three reasons can be given: First, the democratization of the continent that includes both leftist and rightist governments that has resulted in a stable, and peaceful power transfer. Second, the premium for skilled workers has been falling; a surge in secondary education has increased the supply of literate, reasonably well-schooled workers and years of steady growth have raised relative demand for the less skilled in the formal workforce as construction workers and cleaners. Third, governments around Latin America have reinforced the narrowing of wage gaps with social spending targeted at people with the lowest incomes. These include more generous pensions and conditional cash transfers -schemes that offer payments to the poorest families in return for meeting specific conditions, such as making sure their children go to school.

There, the most striking change has been in education. According to the Economist, In the past, Latin American governments lavished cash on universities. State primary and secondary schools were underfunded and of appalling quality (any similarity with EPRDF’s Ethiopia?). That bias in favor of tertiary education, perversely, most benefited the children of the rich, who had attended private primary and secondary schools. But since the early 1990s education spending has become much more progressive, with a huge expansion in public secondary education among the poor. Latin American governments, on average, now spend a large share of GDP on education for the poorest 20% of children than does America. Many Latin countries are also championing pre-school education. Rio’s city government, for instance, has dramatically increased its network of nursery schools since 2009, building 74 new ones in the past 3 years. Any child from a family below the poverty line is guaranteed a free place in a nursery from the age of six months. Conditional cash transfers reinforce this focus on schooling. These stipends cost relatively little (0.2-0.8% of GDP) but influence the priorities of many.
About a quarter of Brazil’s population now gets some money from Bolsa Familia, the country’s cash transfer system. State and local governments piggyback on top. In Rio for instance, the city supplements Bolsa Familia payments for 700,000 of its poorest families. If children do exceptionally well in exams, a bonus is paid. If they miss school,the payment stops. Better education leads to social mobility, thus closing the gap between rich and poor. Mexico City has a also a similar social assistance program to the old and most vulnerable under a leftist Mayor that subsidized payments for such expenses as transportation.


In the 1970′s, a generation of young progressive Ethiopians had given its life, and its limbs to see the inequality in Ethiopian drastically reduced. EPRDF cannot simply hide behind the assertion that the increase of inequality as a global phenomenon about which no one can do much about. We have seen above how nations in Latin America have achieved to reduce inequality while at the same time democratizing their societies. The leading nations there call themselves social-democratic. Political pluralism and economic development with equity are not mutually exclusiveas Latin America shows. The Latin nations stand in contrast to the ethno-nationalist, authoritarian EPRDF regime. The regime that has permitted Arba Minch, one of Ethiopia’s biggest Southern cities, to be used by the US as a launching pad for its drones and constantly meddles in Somaliaas part of the national interest of foreigners, and occasionally engages in rendition to curry favor with the West, in an irony, calls its opposition and civil society disparagingly as “neoliberals” and “messengers of neo-liberalism”. As to the drones, according a Stanford and NYU law schools September 2012 study, drones can’t distinguish between terrorists and innocent civilians, and for instance, for Pakistan, the number of high level targets killed as a percentage of total casualties, is just 2%.

The EPRDF seems to have placed its faith in billing itself a “developmental state” and in achieving some economic development by keeping at bay civil society and the political opposition and continuing to entrench itself in political power.

But, according to Professor A. Desta, EPRDF is not a developmental state fitting the models suggested by no less than 4 writers on the issue. Using their assessment, the professor asks 6 questions that can only be answered in the negative, thus disqualifying EPRDF as a developmental state, and showing the structural causes of growing inequality in Ethiopia that have to be changed.

The 6 questions are:

1. Is Ethiopia’s commitment to the democratic development state goal supported by a strong vision that is tailored to trigger a process of profound societal transformation?

2. Is the development state planning process in Ethiopia designed by competent, efficient and autonomous professional bureaucrats who work collaboratively with the private sector in policy-making efforts?

3. Is the developmental state plan in Ethiopia managed by competent, professionals that are solely recruited on meritocracy to work autonomously -free from forming close relations with the politico-legislative elites?

4. Are the Ethiopian elites free from corruptionand rent-seeking?

5. Is the Ethiopian business climate equipped with an investor-friendly environment to attract foreign investment?

and finally,

6. Is the Ethiopian developmental state operating in a democratization process that calls for accountability, transparency, and the participation of the public in policy-making?

In fact, the professor says “…the institutions within which the various functionaries operate are not autonomous. The higher positions in governmental departments are assigned in an ethnic-based quotasystem..the perception held by the public is that the bureaucrats are expected to operate in line with their ethnic affiliation…rather than the pursuit of the national interest”. As to attracting foreign capital, EPRDF has largely only managed to sell away large tracts of land in a land grab and the author states that “contrary to arguments that the country could face depleted soil, dry aquifers, and a ruined ecosystem from chemical over use, Ethiopia is leasing virgin farmlands and bestowing tax holidays and tax relief to foreign investors”.

To that effect, the so-called developmental state has been frantically battling civil society and the opposition in its 21 year rule. It has promulgated a Charities and Societies Proclamation to restrictand curtail human rights, media freedom and civil rights, rights even its own constitution confer to citizens. It has also enacted an Anti-Terrorism Proclamation under which any one dissenting and advocating peacefully an alternative thought is branded a terrorist, jailed and sentenced. Although this foolishness has been unmasked by regime foe and friend alike, it has not so far deterred EPRDF from going down this destructive path.

There is a reason for that. EPRDF hopes to continue its political domination of the nation through controlling the economy of the nation, and enforcing its will by controlling the army, the security and the court system. It further hopes that some economic growth would satisfy the needs of a growing and youthful population and detract it from engaging in politics and challenging its power. Hence, the emasculation of elementary and secondary education in its failure to instill citizenship and Ethiopiawinet, and instead in being a recruiting ground for the party faithful. Hence, the party’s unhindered attempt to turn a great majority of the population as members and supporters of its party and affiliates -youth, women, and other wings. Hence the stealing of elections at local and national levels becauseit cannot win a fair and free election. Hence the uninterrupted ad nauseam propaganda by its supporters on the media it controls inside Ethiopia and supporter web sites about the multitude of development projects and accomplishments. But we have seen above, however many these developmental projects, since they are undertaken under the stress and strain of structural problems, they have not lessened the inequality rate and cannot adequately address a growing and youthful population’s demands.

Those are the reasons the EPRDF is bent on keeping its power indefinitely, and hoping the few projects it succeeds to erect would mollify the citizenry and acclimatize it to the suppression of its human rights and the growing inequality. The nations we saw above that have succeeded in closing the gap between the rich and the poor have a democratic governance system where political power is peacefully contested and fair elections result in coalition governments or single party takeover. These are the real developmental states that respect their citizens rights while increasing the capability of their citizens by removing the life hurdles. On a philosophical level, forcing everyone to toe the party line, and coercing citizens to sing from the same hymn book obliterates creative and independent thinking and is the major reason that led to the downfall of existing socialism in Eastern Europe. Independent thinking is the engine that creates new products, and points to new ways of doing things, and the prime examples of this –the young men and women of the Ethiopian freepress – should not be hounded out of existence and thrown in jail, or forced to flee their country. That is why EPRDF has never been able to stop the bleeding brain drain of the country’s best and brightest professionals. Developing the country without its skilled human resources is a chimera EPRDF wastes its time on.

EPRDF is at a crossroads now more than ever because of the passing away of its strongman. Once again, the choices for it are continuing on the beaten and destructive path of battling civil society, religious communities, and the opposition,or making peace with Ethiopians and respecting their citizenship rights to change or support their government as they freely wish. The coming decades will decide which choice EPRDF makes, and what the Ethiopian people do about that choice.

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