Interpreting the Ethiopian developmental regime

Ethiopia’s strong departure from the mainstream development consensus is recognised across both heterodox scholarship (Priewe, 2016, p.1) and by the World Bank (Moller, 2016) and the IMF (2016, p.20). As a result, Ethiopia now often attracts the label of a developmental state in official documents (FDRE, 2016b); the scholarly literature (Fantini, 2013; Lefort, 2015; Jalata, 2015; Clapham, 2018); and from the IFIs (IMF, 2013; World Bank, 2013a). As noted in Chapter 3, senior TPLF officials were aware of the Korean experience as far back as the 1980s (Weis, 2016), although the term only came to be used by the EPRDF to describe is strategy after the TPLF split in 2000-2001 (Vaughan, 2015), thereafter appearing in academic writing by Meles Zenawi (Zenawi, 2006a; 2011). Yet the term’s use in the Ethiopian context is often rather opaque and there is considerable ambiguity over the basis on which the comparison is being made:

Ethiopia’s success; the sizeable role of the state in the economy; its commitment to industrialisation; political characteristics; specific policy choices; or its self-declared use of the term. Without such specificity, the label risks obscuring as much as it clarifies since it tends to hide or minimise (important) differences between Ethiopia and the historic East Asian experience.

One recent nuanced discussion in Chang and Hauge (2019) argues that the EPRDF derives intellectual inspiration from East Asia’s developmental states, and shares with them strong state intervention and high-level commitment to industrialisation. Yet three missing ingredients are also noted: bureaucratic independence; political and societal harmony; and state-business alliances. Similarly Clapham (2018, p.1151) argues that despite the lack of signature state-business alliances, Ethiopia nonetheless ‘provides the

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most significant attempt to implement the idea of a ‘developmental state’ in sub-Saharan Africa’.

However, these arguments need to be qualified at two levels. First, intellectual influence is complicated by strong continuities between the post-2001 period and the transitional economic strategy of 1991, which emphasised the need for industrialisation and strong state intervention long before the developmental state was appropriated. Whilst new elements of Ethiopian development discourse have subsequently been added, including references to ‘market failures’ in order to justify the ‘developmental state’ approach,¹³¹ according to one senior official, these ideas were embraced because they ‘confirmed what we thought anyway’ (EG-13), adding:

[It was] reassuring for us to hear from them and see the analysis behind this work and the analytic basis for their views. But the ruling party is cohesive and emerged from the politics of the left, particularly of the 1960s and 1970s – which was well known for arguments and debates … With that intensity of debate, when we finally reach a conclusion that is the line that we stick to (EG-13).

Of his masters’ degree dissertation,¹³² published under the title ‘African Development:

Dead Ends and New Beginnings’ in 2006, Meles Zenawi said it was ‘my attempt to academically vindicate our already existing policies. In a sense it was an articulation of the policy of the EPRDF in academic terms. It was primarily intended for our own local consumption to see if our policies could stand up to the rigour of some academic scrutiny’

(quoted in Gill, 2010, p.80). Since the developmental state forms one of the main academic critiques of the mainstream development agenda, and, in the words of one senior official, the government considers that ‘neoliberal thinking is the enemy’ (EG-4), this mantle also helps to consolidate the EPRDF’s critique of the mainstream and defence of its long-standing approach. Finally, context-specificity is, as noted in Chapter 3, an essential ingredient of the EPRDF’s approach to development. Here one official noted that whilst East Asia was a touchstone due to its rapid growth, their circumstances

131 For instance, there were dialogues with heterodox economists, such as such as Mushtaq Khan, Dani Rodrik, Howard Stein, and Joseph Stiglitz under the auspices of the Columbia University Initiative for Policy Dialogue Africa Task Force during 2006 to 2009, attended by Meles Zenawi and his senior economic advisors (Vaughan, 2011).

132 In economics at the Erasmus University, Rotterdam, which he began in the 1990s,but which remained unfinished due to the war with Eritrea (de Waal, 2013).

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and approaches were very different to Ethiopia, adding ‘we trying to redefine the developmental state in the case of Ethiopia’ (EG-12).

Together, these factors suggest the EPRDF’s appropriation of the developmental state mantle might be better understood as rhetorical adaptation rather than direct inspiration or emulation. Not only has the emphasis on context proved an important bulwark against the imposition of one-size-fits-all policy prescriptions, it also suggests Ethiopia’s trajectory should not straightforwardly be viewed as inspired by or emulating others.

Instead, ideas such as the developmental state have been instrumentalised as much to justify the EPRDF’s policies as to guide their formulation, given its evolving, pragmatic, but ultimately home-grown, developmental trajectory.

The second qualification concerns how best to treat the undoubted differences such as sizeable state ownership, limited state-business alliances and significant ethnic tensions noted above. One problem here it that there is a strong risk of treating these differences as contingent rather than necessary, and in so-doing treating them as secondary to some supposedly higher-level similarity with the East Asian experience. Yet all three of the features highlighted by Chang and Hauge (2019) are fundamental to the EPRDF’s model, both as drivers and enablers of its approach. Indeed, a core feature of the EPRDF’s development strategy has been precisely its creation of balance of social forces considered necessary to implementing its developmental vision, comprising expansive state ownership and a limited role for the (rent-seeking) private sector. This is as essential to its economic strategy as its economic policies. In the words of one senior government official:

[T]he task is creating a political economy where development is the dominant sentiment and attitude. The elite could sell out the long-term in favour of short-term – they have land, power, everything. [But when you are] trying to build a developmental state, it is about trying to build an attitude, vision, objective. If we succeed, the external environment can be managed. If we fail internally, then we will be eaten up by rent-seeking behaviours and that will be the end of it … [the] big fear is a rent-seeking political economy where neoliberalism would dominate – [we] couldn’t have policy space to administer industrial policy for transformation then and for technological upgrading (EG-1).

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This understanding draws on the particular fusion of the economic and political, which Weis (2016, p.17) has dubbed ‘vanguard capitalism’, through which the processes of party, state and market building are all mutually reinforcing, as the EPRDF’s vanguardist political logic conditions the way markets have been established and operate in Ethiopia. The lack of bureaucratic independence also stems from this logic, since strong overlaps between the ruling coalition and state administration is rooted in a perceived need for a ‘political vanguard’ dedicated to transforming the economy on behalf of a poor peasantry (Fantini, 2013). According to the former Prime Minister ‘[the]

key task in this regard is to transform our political economy from one of pervasive rent-seeking to one that is conducive to value-creation … This in turn is predicated on building the constituency of a developmental state and developing the institutions and policy instruments to curtail rent-seeking and promote value creation’ (Zenawi, 2006b).¹³³ As sections 4.1-4.3 indicated, state dominance of the commanding heights, the division of the domestic private sector into a developmental and rent-seeking group, and selective appropriation of manufacturing FDI, are as much strategies for creating a developmentally conducive political economy as strategies for powering economic transformation per se. Simply noting Ethiopia’s greater reliance on state enterprises thus risks missing part of fundamental fabric of the EPRDF’s variety of developmentalism.

Furthermore, the fragile nature of popular support for the EPRDF’s development project, due to the ethnic diversity and tensions discussed in Section 4.3.2 is a further fundamental difference with the East Asian experience, where external threats to the nation state were used secure consensus around its developmental projects. However, again this difference is fundamental to Ethiopian developmentalism since it is precisely these tensions and the threat they posed to the political hegemony of the EPRDF following the 2005 election that prompted the turn toward mass political mobilisation (Fantini, 2013; Vaughan, 2015; Weis, 2016) and a development strategy predicated on

‘development at speed’ (Schäfer, 2016, p.21). As Clapham (2018, p.1154) notes, the drivers of the expanded developmental project lie in these domestic tensions since ‘the regime was widely perceived as controlled by people from the Tigray region from which its initial leadership derived, and this imposed a need to seek ‘performance legitimacy’

through a project of economic transformation’. This was one of central contributory factors to the emergence of Ethiopia’s public-investment driven growth path. This

133 Historically the peasantry formed the EPRDF’s focal social base (see Chapter 3).

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difference with the East Asian experience, and all the specific vulnerabilities this entails (Sections 4.2.2 and 4.3.1), is such an important driver of its development trajectory that once again it needs to be at the centre, rather than periphery, of analysis.

A final question raised by this discussion is Ethiopia’s relationship with neoliberalism, especially given the way the developmental state and neoliberal market-driven agenda are often presented as opposing development models. Despite its strong opposition to the latter and complex relation to the former, during the period of assertive developmentalism Ethiopia has emerged as one of the fastest growing countries in the world using a deeply unorthodox developmentalism – yet one which has both propelled and enabled Ethiopia to emerge as a low-cost labour pool for the extension of global production to new low-wage destinations in the face of rising costs in Asia. Thus at the same time as offering one of the world’s most successful challenges to neoliberal orthodoxies, and defying neoliberalism at the national level, Ethiopia has become constitutive of its reproduction and stabilisation globally. Nonetheless it is Ethiopia’s heterodox state finance-infrastructure-industry nexus and strong state intervention that have created the infrastructure to power Ethiopia’s emerging integration into these production structures. Indeed, preserving this nexus from IMF-induced dismantling also forms a key reason why the GVC strategy has been embraced. This therefore represents a hybrid form of development strategy in which the mainstream-conforming embrace of comparative advantage and FDI has been harnessed to enable the survival of a broader approach to late development which departs in almost all other respects from the neoliberal development consensus. This deeply contradictory relationship with neoliberalism also suggests that developmentalism in the current conjuncture may require a very different political economy than in the post-war period, where it is precisely the absence of powerful domestic political and economic elites aligned with deeper international integration that may be the most vital contributor to Ethiopia’s developmental approach and success to date.

Conclusion

This chapter has charted the evolution of the more assertive form of Ethiopian developmentalism which has emerged since 2002, and how it related to the foundations laid during the defensive moves to build a market economy in the 1990s. It thereby

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suggested the division of Ethiopian developmentalism into two periods should be sensitive to these strong threads of continuity. This is strongly evidenced though the growing role of the state finance-industry-infrastructure nexus and decidedly unorthodox high rates of public investment (powered by several heterodox instruments) as a motor of Ethiopia’s economic transformation. Its experience also exposes the contradictions in the global neoliberal order, since despite forcefully rejecting the neoliberal development agenda, Ethiopia has emerged as a leading global recipient of World Bank concessional lending, thereby leveraging the international financial architecture in support of a deeply heterodox developmental approach.

However, the very successes of this approach have contributed to an increasingly challenging set of global and domestic constraints. Fostering linkages between GVCs and the domestic economy will undoubtedly be complicated by the growing dependence of the EPRDF on foreign capital, which it is relying on to resolve the deepening foreign exchange-related constraints. However, Ethiopia’s distinct advantages in the global trade regime, which mean it can (for now) delay joining the WTO and remain competitive in highly aggressive light manufacturing sectors nonetheless provides a rare form of policy space in the context of a country pursuing a manufacturing-driven strategy in the neoliberal period. Furthermore, Ethiopia’s integration into the global GVC regime should be chiefly evaluated with reference to its foreign exchange and employment generating capacities, and thus its capacity to alleviate political and economic pressures, rather than through the upgrading prism which forms the main preoccupation of the GVC literature.¹³⁴

Finally, through its entanglements with the IFIs and increasing integration within GVCs, Ethiopia’s form of developmentalism has not only been forged and shaped by the constraints of the neoliberal period, but evolved to take on a highly contradictory relationship with neoliberalism itself. The state has sought to instrumentalise key features of the neoliberal global economic order such as IFI financing and the transnationalisation of production to help sustain its contemporary heterodox developmentalism, rather than internalising either a neoliberal form of capitalism or adopting a comprehensively neoliberal development strategy. This embodies a curious

134 In the Ethiopian context, meanwhile, some have argued the challenges of GVCs are not all that different to those faced by Korea and Taiwan in the 1950s and 1960s (Hauge, 2018).

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convergence of interests between a decidedly anti-neoliberal government and the interests of global capital¹³⁵ – a state of affairs which the developmental state paradigm and its methodological nationalism noted in Chapter 2 offers limited insight into.

135 Indeed, the international business media now enthusiastically describes Ethiopia as the ‘last development frontier’

(Aglionby, 2017).

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Chapter 5 Vietnam 1986-2000: The emergence of a contested