Joseph Stiglitz is a Nobel-winning economist who is also the author of several books on international economic issues. He was chief economist at the World Bank and chairman of President Clinton’s Council of Economic Advisers, and has contributed to many diverse areas of economics. Lately, he has also written incisively about the costs of our involvement in Iraq.
It’s good to be back in Ethiopia, which is abuzz with plans to celebrate its millennium. The country is on the Coptic calendar, which does not have a leap year, and so theirs took place on September 11. Understandably, the government is very worried about a terrorist attack and canceled some events and boosted security around the country as well as in the capital, Addis Ababa. There are checkpoints all across the country and driving into Addis last week from the east near the Somaliland border, we got stuck in traffic behind dozens of trucks, as all vehicles are being searched as they enter the city.
Ethiopia has been an ally with the United States in the war against terror but has also been criticized for its lack of press freedom and the way it handled parliamentary elections in 2005. The controversial elections sparked protests and the jailing of a number of opposition members and journalists who had demonstrated against the government. Prime Minister Meles had said he needed to wait for the courts to make a decision, but hinted that, after the legal process had been given the opportunity to render its verdict, he would give an amnesty to those convicted. That is what he did, and 30 of the opposition leaders were released in July.
I met with the Prime Minister and several of his economic advisors last week to talk about how Ethiopia can keep its economy growing. GDP has expanded by an impressive 10 percent a year since 2003. My first trip to Ethiopia was in 1971 and a lot has changed since then. Even compared to my previous trip, two years ago, there are far more shops in Addis Ababa and there is quite a construction boom going on.
The government has done a lot to boost exports. It has encouraged the expansion of flower exports and these have grown from next to nothing in the late nineties to more than $150 million last year. There have been other successful cases of government intervention — for instance, encouraging an increase in “value added” leather goods. The sesame seed industry is expanding rapidly, taking advantage of rising prices and increasing demand from China. China is here, as it is in much of the rest of Africa, and making large contributions to infrastructure. We benefited from some of their excellent roads as we drove around the country. Ethiopia also receives a lot of aid from Western countries, partly because they feel the government uses it in ways that benefit the vast majority of the citizens. Traveling around, we saw a number of new schools, colleges and universities built by the current government as well as many health clinics and AIDS awareness projects.
Unsurprisingly, much of the support for the ruling EPRF comes from the countryside, especially Tigrey, where the Prime Minister and many of the leaders come from. Before Meles came to power in 1991, the country had been controlled by the Amhara people from the area around Addis Abba. This was the case not only during the oppressive regime of Hailie Selassie but during the even more oppressive regime of Colonel Mengistu Haile Mariam, who took power in a coup in 1974. So bad were matters during the Mengistu regime that per capita income declined from a paltry $180 in 1980-85 to $150 in 1990-1995.
Meles’ overthrow of Mengistu not only ended the Red Terror, but also centuries of domination by the Amharas. Power was devolved toward the regions, and a most unusual constitutional provision, giving regions rights to withdraw, ensured that the center would not abuse its powers.
The challenge now is to make sure Ethiopia’s growth continues. Inflation is on the rise, in part because of higher commodity prices—one of the results of opening up the economy is that it is now buffeted not only by the vagaries of the weather, but also those of international markets. Since food and energy are a large part of the consumer price index, the higher prices for food and energy show up strongly in the inflation numbers. Of course, higher prices are good for farmers who sell their crops even though they are bad for city dwellers who have to buy food.
Ethiopia also suffers from a lack of foreign exchange, which means it can’t afford machinery and equipment. Electricity shortages also make it hard to run heavy industry.
As we travel around the country we are saddened by how poor Ethiopia still is. A little bit of foreign aid would make a huge difference here. Let’s hope that the wealthy countries live up to their commitments.
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