“African Development: Dead Ends and New Beginnings” A Comment on Prime Minister Meles Zenawi’s Incomplete Monograph: By Minga Negash (University of the Witwatersrand, Johannesburg, September 2006)

I. Introduction

While browsing through Ethiopian web pages, I came across a 51 page

long incomplete monograph at http://www.gsb.columbia.edu/ipd/programmes

/item.cfm?prid. The web page is maintained by the Initiative for Policy

Dialogue unit of the Graduate School of Business, Columbia University.

The page is linked to a conference programme, to be held 2-8 August

2006, in Manchester, the United Kingdom. The ‘preliminary draft, not for

quotation’ monograph, was authored by Ethiopia’s Prime Minister, Ato

Meles Zenawi. It was scheduled to be the first paper of the conference.

In the line up for presentation are two documents by Eleni Gebre Madhin

and, another three pages long document that was authored by the Prime

Minister’s official economic advisor, Ato Neway Gre-Ab is also on public

display. The international line up, among others includes key figures on

the British Africa Commission and ex-World Bank officials. Tonny

Addisson, Nicolas Stern, Bruce Greenwald and Nobel laureate Joseph

Stigilitz are among the contributors. There is no other information about

the conference. It is unclear whether independent scholars (discussants)

or scholars with alternative views have attended the conference.

This commentary focuses on the first paper of the Manchester conference.

On its first page the monograph concurs with the spirit of the Initiative for

Policy Dialogue , and aims to contribute to the policy debate. In a nutshell,

in his essay Prime Minister Meles attempts to find theoretical and empirical

literature to show that neo-liberal economic paradigm, and thus liberalized 2

third world economies have failed. He further argues that the liberalization

trend that is being carried out throughout Africa should be reversed.

Unfortunately, what is on public display are only extracts of the

conclusions of the chapters, and it is only two chapters (chapters 17 and

21) that are given in full. It is unclear whether this is by design or it is

meant to support a staged conference. Be it as it may, chapters 17 and 21

contain the main arguments of the essay. The conclusions of the

unreleased chapters, when added to the two chapters provide enough

sources to examine the Prime Minister’s thoughts and contributions, if any.

On its early pages the document outlines sets of promising chapters. It has

planned to deal with neo-liberal political economy and social capital; the

black box of development; market failure in developing countries;

agriculture as an engine of growth; foreign investment and background to

the (Asian) agriculture development (Taiwan and Korea); overcoming

market failure; accumulating technological capability; the political economy

of development in Taiwan and Korea; dependency and development in

Korea; the genesis and crisis of the predatory State in Africa; Botswana

the exception; neo-liberal diagnosis and prescriptions; outcome of the

economic reform; outcome of political reform; some country stories; the

African renaissance and the need for a paradigm shift. Even though the

monograph looks like a party manifesto, rather than a scholarly work of

academic substance, by the line up of the chapters and the intended

audience, the essay raises expectations because it is written by a Prime

Minister who is in office.

As Derrida notes, a text is not a text unless it hides from a first comer, the

laws of its composition and the rules of its games (Derrida, Dissemination,

1981 page 63 ). Prime Minister Meles’s monograph does not hide what

Derrida expected, at least at the first glance. Its conclusion is the same as

its heading. Meles outlines what he alleges are dead ends, but was not

able to show, similar to Lenin, where Africa needs to begin. He asserts

that Africa needs a new-new beginning, and the continent should throw

away the guiding principles that are enshrined in the founding documents

of the African Union, the New Economic Partnership for Africa’s

Development (NEPAD) and the African Peer Review Mechanism (APRM).

Derrida argues that if a supplement supplements, it fills a void. A

supplement is not simply added to the positivity of the presence, but is an

indication of a certain lack of original (of Grammatology, 1976 P. 145 ).

This void is unfortunately accompanied by scholars of substance and

policy advisors, presumably to add credibility, at least by the positivity of

their presence. In this commentary I have attempted to show that the

Prime Minister’s so called “third way”, coined as the democratic

developmentalist paradigm , is neither a new concept, nor is a new set of

policy instrument that African countries did not try in the past. The fact that

market failures are real and not rhetorical, and need corrective measures,

either by policy instruments or by commanding heights, is an old concept

as economics itself is.

In Section II the commentary takes a theoretical perspective while in

Section III Prime Minister Meles’s essay will be examined from a practicalinstitutional-

Ethiopian perspective. I shall attempt to show that Prime

Minister Meles’s Ethiopia did not apply key instruments of liberalization:-

economic or political during his 16 year of rule. Following Derrida, I argue

that one cannot blame neo-liberal economic policies when they were not

present in the first place. Section IV contains concluding remarks.

II Commentary: A Theoretical Perspective

In his work, the Pandora box, the reality of science studies, Bruno Latour

shows the link between politics and science, and further outlines how

institutions of knowledge, such as policy study centres and their findings,

can be used to advance the views of those who control the levers of

political power.

In the same line, a beginner’s course in methodology shows that a theory

may fail either because it is inherently wrong (internal validity), or the

model that is used to test the hypothesis or the theory is wrong. Hence, in

simple hypothesis testing exercise, such as examining whether neo-liberal

economic policies have failed or not, two possibilities exist. If a country has

shown GDP growth and its policies somehow can be attributed to neoliberal

policies, the hypothesis that the policy is right is “proved” or at least

the hypothesis cannot be rejected. If however growth patterns are

disappointing, we conclude that both the policy and the model country are

wrong. In the second case it is impossible to decouple the joint hypothesis.

Unfortunately, even if one wants to be sympathetic to the Prime Minister’s

effort, at least from a methodology perspective, he falls into the trap, thus

endangering his credibility as scholar of substance.

Prime Minister Meles does neither state the origin of the “the third way”

concept, nor does he indicate where the new beginning is going to start

from. What is argued in his essay is the return to neo-classics of the ‘State

and the Market’ argument of the 1970s, no more no less. Hence, I hope I

would not be considered to be too critical if I say Ato Meles is the same as

certain post modernists, in that both tend to revisit old or existing

knowledge domains, and rehash them with new colours, apparently for a

new audience.

The two central ideas advanced in the Prime Minister and his associates’

works evolve around two technical phrases. They are market failure and

rent seeking . First, the Tigrean People Liberation Front (TPLF) economists

are correct in that there is a problem of market failure, even in highly

liberalized economies and sectors, such as in organized equity markets. In

their seminal work, Grossman and Stilgitz ‘on the impossibility of

informationally efficient markets,’ American Economic Review, 70[3], 1980,

they show, using mathematical economic models, how the problems of

market failure obstructs the achievement of correct price signals. Stiglitz’s

recent book ‘Globalization and its Discontents’ extends the now wellknown

market failure problem, and argues that markets did not allocate

wealth properly, and worsen the income gap, not only in the United States

but also in the rest of the world.

Thus, the findings that market failure in developing countries is severe

than in organized equity markets is not news. Mainstream development

economists have documented that as far back as in the 1950s (Arthur

Lewis, Amarta Sen, John Kenneth Galbreth, Thomas North). Studies on

financial globalization and integration (see for example Rene Stulz,

Journal of Finance, LX 2005) also indicate the limits to liberalization. For

more work on liberalization, integration and growth, in the context of

emerging economies, interested readers can consult the works of Rajan

and Zingales, Bekaert, Harvey and Lundblad, Greenwood, Goldsmith and

Mckinnon, Krugman and the like. The conclusion of these studies is that

the net gain from liberalization has been positive.

Returning to Ato Meles’s essay, to illustrate “the dead end” of neo-liberal

economic paradigm, the Prime Minister unwisely labours on describing,

although cursorily, the basic problems of markets: market failure,

information, institutions, responsiveness to policy shocks and international

financial and aid system. These are standard economic problems: whether

one is in Asia, Africa or elsewhere.

To show that world development has had a different pattern, Ato Meles

relies on anecdotal economic history, uses stories of the last century,

postwar world economic order, and blames the current international power

equilibrium and world financial architecture. To support his views the

essay cuts and pastes some macroeconomic statistics.

Another observation is Ato Meles conveniently ignores the problems of

governance and accountability. He forgets that markets do fail because of

the failure of institutions (laws, organizations). Several works have shown

that agency and monitoring costs are severe in pubic sector institutions

than in private sector concerns. They are also obstacles to development,

especially in countries where crony capitalism is thriving. In other words,

minimizing the cost of agency is crucial for the creation of the

developmentalist State that Ato Meles wants to establish in Africa.

Finally, from a political perspective, it is important to note that “the third

way” was and is seen to be the middle of the road between two extremes.

It is advanced by the group that calls itself the Progressive Governance

Group , supposedly a network of social democratic parties that includes

Prime Minister Meles. It is common knowledge that social democratic

parties are not new institutions in the world. The mainstream economic

theories, such as neo-Kenysian economics are embedded in the social

democratic paradigm. Today, no one in his or her right mind advocates

Marxism openly. Even the doyens of Marxian economic thoughts

recognize that liberalized markets are better than opaque economies, in

improving the frontiers of the production possibility curve.

Furthermore, it is important to note that the liberalization regimes of 53

African countries cannot be the same. Africa is too big and too diverse to

be put in one basket. Hence, its institutions (law, organizations), value

systems, ownership and social structures, labour market and level of

information asymmetry are different. Hence, one medicine fits all is not

only wrong but perpetuates the failed policies of the World Bank and the

International Monetary Fund (IMF). Unfortunately Prime Minister Meles is

doing the same, and his attempt to produce an anti-thesis of neo-liberal

policies and a model for Africa, is a matter that is often observed in novice


III Commentary: An Ethiopian Perspective

Ethiopians are used to Prime Minister Meles’s astounding statements. In

many respects the present essay is not different from the previous ones.

First his theory for Africa has never been tried in his own Ethiopia.

Furthermore, unfortunately neither his long bibliography nor parts of his

essay refer to the previous works on the Ethiopian economy by Ethiopian

scholars. Evidently Ato Meles is not the first Ethiopian who wrote on

African and Ethiopian economies. For instance, Gebrehiwot Baikedagn,

the Ethiopian scholar who lived around the beginning of the 19th century,

stated the role of the market and the state , in the context of the then

international economic order as far back as in c1902 (for an annotated

translation of Gebre Hiwot’s work and the link between the development

thought of 19th century scholar and dependencia theory, see the works of

Tenkir Bonger). Furthermore, for an excellent summary of the early

thought of development and modernization in Ethiopia, Bahiru Zewde’s

Pioneers of change in Ethiopia: The reformist intellectuals of the early

twentieth century, East African studies (2002), is a must read.

Focussing on the present, the works of the late Eshetu Chole (on fiscal

federalism and poverty alleviation); Desalegn Rahmeto’s series of papers

on land reform and productivity; Fasil Gebre Kiros and Dejene Aredo’s

papers on rural poverty and female headed households; Befekadu

Degefe’s works on macroeconomic policy; Mesfin Wolde Mariam’s series

of works on food policy and governance are essential readings.

After the birth of the Ethiopian Economists Association in the early 1990s,

the quality of economic research started improving. The papers became

more analytical, and in terms of policy oriented research, the association’s

show case, vision 2020, was by far the best work Ethiopian economists

have been able to document, in a language that is well understood by

millions of Ethiopians. Unfortunately the participants of the gathering in

Manchester do not read Geez scripts, and hence would not be able to

access this body of indigenous knowledge. Furthermore, to complicate

matters, many of the contributors of that piece, including the association’s

president, Berhanu Nega, are in prison.

The failed reform in Ethiopia has nothing to do with NEPAD and APRM.

The essay confuses ‘good’ governance with ‘democratic’ governance. It is

important however to note that the two are not the same. ‘Good’

governance can be achieved under benevolent, autocratic, mono-party

and even under a feudal governance system. The key criterion of ‘good’

governance, in the context of neo-liberal governance paradigm, NEPAD

and APRM is multi-partism and contestable power entry and exit system.

The APRM process is nothing other than a performance scorecard. It

covers four substantive areas: democracy and political governance,

economic governance and management, corporate governance and socio

economic development. Ato Meles has yet to undergo through the APRM

process. By calling for the so called “third way” Prime Minister Meles and

his TPLF dominated government are doing nothing other than refusing to

subject themselves to a performance evaluation.

The remaining parts of sections III will focus on two issues. The first is

about political governance, and the second is about property right and

economic governance. At the end of the section the reader is challenged

with one question:- whether neo-liberal liberalizations, as we know them,

have been implemented in Ethiopia or not.

Neo-Liberal Instruments of Governance:-

The key to any neo-liberal governance systems is a constitution that

focuses on individual liberty and that establishes effective checks and

balances. The checks and balances attempt to curb the dysfunctional

behaviour of politicians. They limit the term of office of the

Presidents/Prime Minister, provide for an independent judiciary, including

a constitutional court, an auditor general, an independent election

administration and security system that is loyal to the State than to those

that control the levers of political powers. The bill of right, among other

things, states the sacrosanct nature of private property and of course its

tradability. In short, a neo-liberal constitution, despite its limitations,

creates and empowers institutions of accountability. It is up to the reader

to gage whether these instruments of governance have been created

during Ato Meles’s 15 years of tenure. The answer is clear and it is not a

matter of degree. Indeed Africa and Ethiopians can see for themselves

that the essay is self-serving.

Property Right and Rent Seeking :-

A quick glance to the TPLF authored constitution shows that both urban

and rural land belongs to the Government. In present day Ethiopia, land is

a non-tradable asset, legally. It cannot be used as collateral for debt

finance. The result is obvious. By making the means of production a nontradable

asset, Ato Meles can only blame himself (other than natural

calamities like drought and floods) for the failure of agriculture in Ethiopia.

With regard to urban land, there is no coherent policy. Despite the official

rule which states that urban land is “freely given”, the reality is that it is

cheaper to own a three bedroom family dwelling in Johannesburg than in

Addis Abeba.

With regard to trade and finance, it is a well known fact that under the

cover of privatization, the previous state owned enterprises (SOEs) were

given to the politically connected. TPLF companies not only became the

owners of the “privatised” SOEs, but inherited the economic rents. Worse

those that grant the licences, allocate foreign exchange and channel credit

were politically and socially connected to the ruling regime.

Hence, in almost all the sectors of the economy and governance, political

and ethnic connections were critical. Therefore, what has failed in Ethiopia

is not neo-liberal economic paradigm. The abandonment of neo-liberal

economic policies (if any) will only entrench the crony capitalism that the

TPLF government has been trying to build. Crony capitalism can be

reversed either through neo-liberal economic revolution or through

nationalization. During the 17 years of the military rule Ethiopians saw the

failure of nationalizations. The May 15, 2005 election result was in part a

rejection of TPLF’s “revolutionary democracy”. Therefore, the evidence

suggests that there is no “third way”.

IV Concluding Remarks: Why the Right is Wrong

Without sounding an arms chair critic of the Prime Minster, by several

accounts, his reaction to neo-liberal economic ‘paradigm’ has been

erroneous. This commentary however is not about advancing the “free

market” paradigm. It is an attempt to show that market failure is an economic

concept that can be applied to almost any situation. In fact there is no

economy or market that does not show some degree of inefficiency. With

regard to economic behaviour, both rational and irrational (behavioural)

economics show the rent seeking behaviour of individuals and groups. The

difference is a matter of degree. In crony capitalism it is worse as monitoring

is costly, and disfavoured groups will tend to use corruption methods to break

the opacity. Furthermore, it is to show that under neo-liberal economic

paradigm the existence of the commanding heights is not disallowed.

In the context of Ethiopia, it is the absence of neo-liberal economic paradigm

that has stifled growth and democracy. TPLF’s revolutionary democracy has

worsened both rural and urban poverty. This policy has been tested at the first

competitive multiparty election. It is an open secrete that liberalization has

brought many problems to Ato Meles and his regime.

Concerned by these problems, in a paper entitled Ethiopia’s post election

crisis: Institutional Failure and the Role of mediation, I proposed a two stage

solution to the May 15, 2005 election crisis; a political liberalization problem.

The release of political prisoners, negotiation with power contenders and

independent (preferably international) investigation were proposed. Ato Meles

shrugged off, not only the simple idea of conflict resolution, but did not budge

to numerous pleas and threats, even from his close supporters in the West.

His response to the domestic problem has been to use force, disinformation,

hiring consultants and directing government’s bureaucracy to “development”.

The state controlled media (see for example official web page at walta) does

not report anything other than “development”. In the political front his

speeches and essays did not contain reforms. These policies, together with

the change in the geopolitics of the region, have brought him some success,

in releasing donor held funds and getting the services of foreign consultants.

However, the political crisis in Ethiopia is like a Cheshire cat, sometimes one

sees it, at other times one does not. The civil disobedience seems to have

been crashed. On the other hand, the otherwise rival clandestine and legal

political groupings have started to consolidate their forces, to the extent of

forming an alliance. Whether this alliance is going to be different from other

failed alliances is yet to be seen. However, it is important to note that the

present alliance is allegedly supported by Ato Meles’s arch enemy, Ato Isayas

of Eritrea. Foreign based Ethiopian web pages suggest that there are at least

three conflict zones. There is also a possibility that some of them are

surrogate wars, and the ‘border problem’ is still in the pan. When this is added

to the civil discontent and the series of bombings, the problem becomes

complex. As of August 2006, the discontent has started to spread into the

army, resulting in the defection of a highly placed commander. The recent

development in Southern Somalia is an additional headache for Ato Meles.

Hence, all the above suggest that Prime Minister Meles needs to focus on

resolving the internal crisis, and probably defer the completion of his essay.

He needs to require more from his consultants and advisors. If he prepares a

peaceful transition so that his successors can implement policies that can be

ascribed to a neo-liberal paradigm, this part of his work will almost certainly

outshine the essay. He would leave a better legacy, which might earn him a

credible honorary degree, who knows, it might be from Columbia!

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