Mereja Forum

[Qurunde]

Part III: The Fracture of Ethiopian Economic System and Its Maintenance Option

Chapter Eleven: The Achievements of Ethiopian Economy and The Challenge of Quality of Development (Pages155-164)

In this chapter (readers may access review of the preceding chapters here http://aigaforum.com/article2019/Book-R ... -part2.htm), the Author recognized the economic development and social change achieved in Ethiopia in the last twenty eight years. He says, the gross domestic product which was $7.9 billion dollars in 1991 was increased to $84.4 billion dollars in 2018, which is more than ten-fold. The number of population living below poverty line which was 44.2 % in 2000 reduced to 23.5% in 2016. The per capita income which was $164 in 1993 increased to $883 dollars in 2018 and average life expectancy which was 47 years in 1980s increased to 65 years in 2017. He also says the education coverage has been increased.

According to the Author, the achievements in the economic and social sectors happened mainly as a result of public investment in social services and physical infrastructures. The conducive international political environment also created an opportunity for the economic and social development of Ethiopia. As a result, Ethiopia got huge amounts of foreign aid and loans. The finance collected by domestic banks also supported the development of Ethiopia. However, he says, the economic and social developments have problems of quality. He listed high cost of living, unemployment, mismatch of saving and interest for investment, mismanagement of public projects, weaknesses in export sector and shortage of foreign exchange, budget deficit; slowness in structural transformation, contrabands, and illegal trades as a symptoms of lack of quality of the development.

The Author identified two main symptoms of what he said the disease of Ethiopian economy: (1) lack of fair benefit from the development (large gaps in wealth and income among the citizens) and (2) macro-economic problems (budget deficit, debt burden, mismatch of saving and investment, problem of trade balance, and shortage of foreign exchange).

In economics, there is a theory of immiserizing growth proposed by Indian-born American economist Dr. Jagdish Bhagwati in 1958. The immiserizing growth theory refers to the situation where economic growth could result in a country being worse off than before the growth. According to this theory, the economic growth may bring about an increase in level of production in the growing economy and the wealth effect may even be positive but there can be a decline in the welfare of the nation and the lives of the majority may become worse off than before. In other words, the economic growth makes people more miserable. This may happen because various reasons including the deterioration in the terms of foreign trade. Even though the Author didn’t refer to this theory, his argument show that the economic growth achieved in the last 28 years in Ethiopia was immiserizing growth where few got the benefit and the majority became more miserable. Validating or refuting this argument requires detail research.
http://aigaforum.com/article2019/Book-R ... -part3.htm

[Masud]

Oromo intellectuals discussing Medemer

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