Theory Teacher's Blog

Finfinne Diaries 3: Construction and Inflation — How to Demystify Ethiopia’s So-Called Economic Development?

What impressed me most during my brief 16 days in Ethiopia was the amount of construction. I have never in my life seen so many building projects going on all at once. Concrete and scaffolding were everywhere in Ethiopia’s capital city Addis Ababa and in the other cities that I visited — Jimma, Adama, Dire Dawa, and Harar. In Addis’s new suburban sprawl, I drove through almost a whole mile of recently completed but still empty apartment complexes only to discover yet another mile of halfway built complexes further down the road (a road which was also under construction.) And in Harar, I saw a lone Chinese engineer directing a group of Ethiopian laborers in the laying of phone cable, and at my hotel I talked with another engineer from Nepal who worked for a Japanese company that did land surveillance. I took a lot of photographs to document what I saw, but this morning I found a couple of YouTube clips [here] and [here] that have the exact same stuff I was taking pictures of. The development models in these two clips resemble models I saw on billboards and inside the lobby of the Hilton Hotel. 

This morning I did a little more research on this subject and read the websites for important civil society organizations — the Ethiopian Business Development Services Network and the Construction Contractors Association of Ethiopia — which detail the challenges that they believe the construction industry faces, such as government regulations, lack of resources (e.g., oil and steel), and lack of skilled labor. I also discovered a group called ICDCONGlobal that conveniently lists weblinks to brief articles on the amazing array of new construction projects currently going on in Ethiopia so that you can see them all [here]. And I actually recognize some of those projects, which I can remember driving past.

The intensity of this development is a mystery to all the people with whom I spoke — who wonder how so much construction is happening while their economy is still in bad shape. Where is the money coming from, and what is it all for? And in light of the recent global recession triggered by the bursting of America’s housing bubble, I am very worried what might happen if Ethiopia’s economy crashes. (Though, I should note that unlike the United States whose economy is truly based on land speculation, in Ethiopia all land is technically owned by the government — first under a feudal system and then under a communist system — and is simply leased to private individuals through a complicated bureaucracy, which I had a chance to briefly witness when my friend had to renew his lease. So, it would be a big mistake to draw simple analogies between America’s housing market and Ethiopia’s recent development.)

But in addition to all the construction, what those YouTube clips and websites don’t show are other things that I saw — things such as an enormous “Eastern Industrial Zone” with signs in Chinese letters about twenty miles outside Addis; a billboard with plans for a huge Oromo Culture Center complex right in the middle of Addis; a now completely defunct railroad; a bustling dry port for trucks carrying the standardized containers of global trade; an equally bustling and large khat trade; a bunch of young Japanese white-collar workers having lunch in an upscale restaurant and who could speak Amharic but not English (I talked to them in my limited Japanese); miles and miles of villages of small huts made of the traditional mud and thatch; miles and miles of farms still ploughed with traditional oxen right next to modern industrial farms and right next to miles of industrial-scale greenhouses for the global flower market, etc., etc., etc.

Do you see what I’m getting at? Every day I was struck by the proximity of traditional local economies and global capitalism to each other. The relationship between these two phenomenon was in no way clear to me, since as I mentioned in my blog [here] a few months ago, global capitalism and foreign investment have had both positive effects and negative effects. How do we make sense of all these disparate facts? It was clear to me that foreign investment was producing some good things, but it was also clear to me that some manifestations of global capitalism are little more than government-sanctioned theft. And as this recent article argues and as this YouTube clip shows, some of the big development projects cause tremendous environmental damage and displace thousands of people. One has to wonder about the wisdom of many of the projects, some of which are promoted by far-away business interests without much input from local constituencies.

Meanwhile, the two biggest complaints I heard from various people I talked to (whether they were Amhara, Tigray, Oromo, or whatever) were (1) fears that the Chinese were going to move in and take over, and (2) fears about inflation and the devaluation of Ethiopia’s currency, the birr. The first complaint is largely irrational, and such racist expressions of fear that single out China (rather than any of the many other countries that invest in Ethiopia or the presence of the U.S. military) is in my view simply a paranoid reaction to the real problems of inflation. It should be obvious that some foreign investment has improved the quality of life for many in Ethiopia. To put what I’m saying here in theory-teacher-blog terms, the fear of the Chinese is a psychological symptom that displaces the hard-to-conceptualize vicissitudes of globalization onto the easy-to-conceptualize-but-false metaphors of racial identity. And hence I worry about propaganda in the form of political speeches and TV dramas that would encourage such paranoia. 

In contrast to the first complaint, the second complaint is very rational, considering that the exchange rate between the Ethiopian birr and the U.S. dollar has been gradually devalued each year since the mid-1990s from 2 to 14, and consequently the prices of basic food staples such as grains and beans (notably the culturally important tef and shiro) have increased dramatically. When it becomes so difficult for the poor to afford food, it’s clear that something is seriously wrong. Economists have long recognized this problem and sought answers; last month, the IMF’s doctrinaire recommendations were, not surprisingly, to promote the private banking sector, reduce tariffs, and liberalize currency exchange, etc., etc., etc., which is the IMF formula for everything and for all problems, no matter what country they are in or what the circumstances are — a rather simplistic formula that the Nobel-prize-winning economist Joseph Stiglitz criticizes in his book Globalization and Its Discontents and  journalist Naomi Klein criticizes in her books No Logo and The Shock Doctrine and in her husband’s movie The Take. It is a formula that some might even suggest would make the problem worse, not better, and instead of helping the average Ethiopian would help the interests of the American, European, and Asian businesses.

But this is a matter of economic debate, and as I always tell my students in my various classes on cultural theory, globalization, and eighteenth-century mercantilist culture, I am not an economist, so they shouldn’t expect answers to basic economic questions. Rather, what they can expect is for Theory with a capital “T” to do three other things: to pose important questions that IMF economists generally do not deal with but perhaps should, to point out the often unseen connections between a cultural phenomenon and an economic one, and to reveal the often irrational or unjust economic decisions and policies that are a result not simply of economic doctrine but of the messy wrangling among various public and private interests whose articulation is always filtered through cultural symbols.

With all that in mind, now is the moment in this blog where I piss off all my friends…. Breathe in… breathe out. 

OK, you’ve breathed and taken a short break, so here it goes. What is obvious to everyone (no matter what their political or economic position) is that sometimes development projects don’t actually lead to real development. The big ideas of Ethiopian bureaucrats, private corporations, the American or Chinese empires, and/or well-meaning charities and other non-government organizations (NGOs) are often misguided or corrupt. However, I don’t think it’s worthwhile to lay all the blame on the corruption of the government… or on the ruthless greed of the corporations… or on the so-called evil empires (whoever they may be)… or on the ignorance of many NGOs… especially since more often than not development projects are enacted through a complex partnership among all of these sectors of society. Considering that such partnerships and collaborations are the norm, let’s forget about the “free trade” mythology, since that’s clearly irrelevant to the reality on the ground. And let’s also move beyond the 1960s version of postcolonial theory which leads us to blame all things on the legacy of Europe’s racist imperialism or on conspiracies led by evil Darth-Vader-like American imperialists such as Dick Cheney. And clearly, with all these various factors in mind, we can’t seriously continue to lay all the blame at the feet of Ethiopia’s infamously corrupt and dictatorial Prime Minister, Meles Zenawi. And let’s please also stop whining about the inability of our world-community leaders (whether they are democratically elected or self appointed, e.g., Barack Obama, the Oromo Liberation Front, the board of the Oromia International Bank… whoever) to simply solve such complex problems for us, since that clearly has nothing to do with anything. (Nothing is more tiresome than listening to the same finger-wagging, moralistic bullshit year after year by old and embittered Oromo expatriates about the failure of their ethnic community’s leaders — speeches full of empty slogans about unity and freedom, blah, blah, blah.)

Instead, we ought to identify real problems and work towards real solutions. One problem — as the civil society activist Kumi Naidoo has smartly argued [here] — is the lack of transparency in how decisions get made and the lack of accountability to local civil society organizations (CSOs). In addition to Naidoo’s argument about transparency and accountability, I also agree with the arguments of many NGOs and activists for the importance of access to various cultural resources (such as schools) and the means of empowerment. In my opinion, these are useful things to think about. In contrast, I think vacuous pronouncements about cultural unity by ethnic nationalists don’t always lead to real forms of empowerment or to real access to cultural resources for the poor. Likewise, vacuous pronouncements about free trade by the IMF do little to promote real transparency or accountability. In other words, it does us no good to pretend that unicorns exist.

Now, all of that said, I must acknowledge that the arguments of ethnic nationalists do carry some important weight, considering that the chauvinist government of Ethiopia has for over a century systematically redistributed much wealth from the hands of one ethnic group into the hands of another ethnic group. For instance, as we were driving down the main street of the town of Metahara (a town in a largely Oromo region), one of my new friends pointed out to me that almost every hotel and restaurant was owned by Tigray and Amhara rather than by Oromo — most likely due to the ethnic prejudice and corruption rampant in Ethiopia’s land tenure system. And it was pointed out to me that inside the city of Jimma the main language is Amharic and the main religion Orthodox Christianity, but outside the city the main language is Oromifa and the main religions Islam and Protestant Christianity. But arguments about ethnic unity will not solve the corruption problem and might instead just replace one corrupt government with another. Nor do slogans about cultural unity and freedom necessarily lead to the building of schools or the engendering of local civil society. And such slogans most definitely do not give us the tools to think through the challenges of governance in a world whose dominant economic form is global capitalism. Such slogans are, after all, the manner in which a culture mystifies the real relations of production and daily life.

And likewise, I must also acknowledge that the IMF has a good point that the Ethiopian government’s rigid control of land and its obstruction of capital flows not only impedes economic growth but also encourages the kind of corruption that leads to badly conceived development projects. However, because the IMF measures the quality of life in terms of the stock market and GDP, it is painfully tolerant of economic exploitation and the growth of slums, and its economists are often willfully ignorant of the economic, environmental, and cultural effects of global trade on local communities who struggle to adjust. This is why the work of ethnic nationalist to recuperate their local cultures is not anachronistic to modern capitalism as the IMF economists wrongly believe, but rather such cultural work is an essential feature of globalization. To put it another way, it is never good for the economy in the long run when the traditional culture that binds a community together rapidly disintegrates or when its drinking water is polluted and other essential features of daily life destroyed; hence, leadership by ethnic nationalists can be important to the local economy in that they maintain a sense of community. Moreover, such local cultures are often able to build local civil society whose unique knowledge and skills might be crucial to the successful implementation of any development project. And beyond the notion of economic development narrowly conceived, local cultures can suggest viable alternatives and real solutions to problems that IMF economists and Ethiopian bureaucrats are too arrogant to recognize.

So, what to do? I have no answers today, but stay tuned for future blog posts.


July 3, 2010 - Posted by | finance, global, Oromia, Theory--capital T


  1. I just stumbled across this article that says Ethiopia is the 5th fastest growing economy in the world.

    Based on what I saw, that claim makes a lot of sense to me. Ethiopia also has the 17th largest population. I wonder how economic growth correlates to population growth.

    Comment by steventhomas | July 9, 2010 | Reply

  2. There is certainly a relationship between population and economic growth. What’s important to note when considering these factors is the average age of the population.

    A young population like that of Ethiopia is a great asset but can just as well be a liability if not properly utilized. While generally an exploding population actually counteracts on economic growth, if properly utilized, it can be harnessed to be a catalyst for accelerated economic growth. However, Ethiopia needs to reduce its population growth rate if it expects to maintain its current economic trend.

    What this means is that while an exploding population is generally a burden on the resources of a developing nation, if it manages to reach a point where population growth is controlled and/or curbed, the young population that grew as a result of the explosion then becomes an economic asset from which the country stands to reap a population dividend.

    This is a phenomenon that normally happens quite naturally as a nation develops, as had been the case with most western nations. But it can also be artificially induced through government enforced policies and educational campaigns. That is what China did. It is probably the single biggest factor in China’s 20-30 years of accelerated economic growth.

    The danger for China’s one child policy, however, is that the extremity in the rewards of its dividend will also probably come with the extremity of future liabilities. As the current working population ages, every two elders will have one child that bears the financial and social burden of taking care of them. And as a society that is foreign to, if not contemptuous of, the notion of placing a parent in a nursing home or some government facility, a financially strained population leading to a crippled economy may be an inevitable eventuality. But for now and the coming decades, its massive population will remain its most valuable commodity.

    Comment by Micah | July 15, 2010 | Reply

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