Economic Growth: Running to catch the tail?!
Evidence clearly suggests that the economy is failing to provide basic necessities to the Ethiopian people, despite the government claims of economic growth. Officials need to examine and discuss the quality of life beyond the GDP growth.
Birhanu Tekletsadik (not his real name), a thirty-four-year-old physics teacher at one of the high schools in Addis Ababa, has been in the teaching profession since 2001. If you knew him four or five years ago, you likely remember him as the best teacher who used to tell everyone how much he loved teaching. This is understandable, as he was one of only a few among his fellow staff members admired by their pupils for their teaching methodology and good manners.
Birhanu is a completely different chap today. He has lost his appetite for going to work and meeting his professional obligations. For him, there was no correlation between his willingness to teach and his salary earnings even during the first few years of his career. Now, it seems that those “good old days” are gone. “Imagine living on a monthly disposable income of Birr 1754 and worrying about my professional competency,” he grumbled.
Five years ago, Birhanu was able to cover at least his monthly expenses for basic necessities with a salary of Birr 1250. “I also used to save some amount of it,” he explained. Despite the fact that his salary was raised three times over the last five years, he is no longer able to cover his basic necessities today, let alone save for the future. “The question is not how to save but how to survive.”
Being paid this sum of money may seem a luxury to the majority of Ethiopians; many wish they could get even half of it. Unfortunately, the tangible facts suggest otherwise. The real value of such an amount indicates nothing more than the face value of the currency. The prices of major commodities bundles have tripled in recent days and significantly devalued the Birr.
The high price trend that the country is currently experiencing is causing the living standards of many people to plummet to the worst possible conditions. Until last week, 39 percent of people were classified as living in extreme poverty, on a $1.25 per day threshold. That is the old story. A “new” day has arrived to polish the old threshold, at least theoretically. Even worse, a new study tells us that even Ethiopian professionals like Birhanu now also fall below the minimum living standards.
The new poverty index developed by Oxford University and the United Nations Development Programme has come up with new findings. The Multidimensional Poverty Index (MPI), which measures multidimensional aspects of poverty, shows that 90 percent of the Ethiopian people are today living in extreme poverty.
The MPI is intended to assess the nature and intensity of poverty at the individual level according to three critical dimensions, namely education, health and standard of living. According to the study, Ethiopia has the lowest performance indices in all three aspects and said to be the poorest of the poor. For the last two decades, the “$1.00 per day” and then the “$1.25 per day” thresholds have been highly criticised for focusing solely on income. Economists have argued that family income cannot be the only determinant, whether that particular family is extremely poor or not. As Nobel Prize winning economist Amartya Sen clearly points out, using income as a major determinant to measure human progress offers a narrow view of development. Simply earning more than $1.25 per day cannot, for instance, clearly show whether children have access to school and health care. Considering those critiques, the new index tries to address both individual and national poverty levels by using 10 indicators. Thus, educational access for children, health services for infants and mothers and many other dimensions are assessed when measuring poverty levels. More than answering the usual “who is poor” question, it also tells us how they are poor. The MPI, expected to be officially released in October 2010, estimates the poverty levels across 104 developing nations; the greater the MPI value, the greater the level of poverty in a country. This value reflects both the incidence (percentage of people who are poor) and intensity of poverty–the sum of weighted deprivations that each household faces at the same time. Accordingly, the MPI value of Ethiopia is 0.58. This value is even greater than that of neighbouring countries such as Somalia and Kenya.
At home, however, the music is different. According to Ethiopian government statistics, poverty levels have been decreasing as a result of the “double-digits economic growth” rhetoric. It has been proclaimed over and over again that the quality and access to basic education and health services have improved. Yet the MPI indicates that school enrolment in Ethiopia is far below the sub-Saharan average. 84.9 percent of school-aged children are not attending schools in years one to eight; 81.5 percent are further deprived of schooling, unable to complete even five years of education. The living standard of the majority of Ethiopians is also declining. The MPI indicates that 94.1 percent of people are poor and deprived of at least three of the living standard indicators–primarily assets, cooking fuels, electricity, floor (a household is said to be deprived in floor if the household has dirt, sand or dung floor.. for instance, 87.5 people of Ethiopia is said to be poor and deprived in floor), water and sanitation. Consequently, 54.3 percent of the people lack access to clean water, while 89.8 percent cook using dung, wood or charcoal. Evidence clearly suggests that the economy is failing to provide basic necessities to the Ethiopian people, despite the government claims of economic growth. Officials need to examine and discuss the quality of life beyond the GDP growth. Rather, they prefer to stick with their double-digit rate projections, although no research can be seen to support their claims. In the meantime, the quality of life for Birhanu and his colleagues is diminishing, and most of them are joining the poor majority. This begs the question: who will comprise the intended middle class group if Birhanu is slipping behind?
Thanks for the timely and wonderful analysis about the current state of affairs in Ethiopia. I came back from visiting Ethiopia two days ago and I must say it was one of the most difficult trips I ever had to endure to my homeland. It is unimaginably impossible to explain how expensive life has become in today’s Ethiopia. My best friend, who works as a translator with two children, gets about 3,500 birr per month, but he told me that he is now living hand to mouth, can you imagine? It is palpable to anyone to see how crushing and debilitating life has become for the overwhelming majority. From the unscientific survey I conducted, it will not be an exaggeration to say 95% of the urban dwellers now live below poverty lines. The illegitimate government (since they don’t have a proper democratic mandate by the majority), has now come out with a very blatant policy. Forget about freedom, democracy, justice and rule of law since we are looking after your Economic wellbeing. This premise is an absolute contradiction to what is happening in reality, but even if it wasn’t, what gives the illegitimate government the right to deny Ethiopians there God given right? Isn’t it about time we all stood up and closed ranks to alleviate the misery by the many? Let us all be a people of action! God bless Ethiopia!
Dear Zerihun,
Thank you for bring this topic.
These TPLF thugs are building the “Shifta Economy” and this economy is not governed by any law of economics and reality check.. It is a Voodoo economy. They are using economic growth as a propaganda tool to hold their grip on power and maintain the political and economic power of the “NEW CLASS.” TPLF’s economic growth propaganda is BIG LIE which is Goebbelian and borrowed from Hitler’s Mein Kampf. TPLF’s Big Lie is “repeated distortion of the truth on a grand scale for propaganda purposes like releasing falsified documents to bolster the big lie that the Ethiopian Economy is growing at double digit”. This is what Hitler said about the big lie:
“…in the big lie there is always a certain force of credibility; because the broad masses of a nation are always more easily corrupted in the deeper strata of their emotional nature than consciously or voluntarily; and thus in the primitive simplicity of their minds they more readily fall victims to the big lie than the small lie, since they themselves often tell small lies in little matters but would be ashamed to resort to large-scale falsehoods. It would never come into their heads to fabricate colossal untruths, and they would not believe that others could have the impudence to distort the truth so infamously. Even though the facts which prove this to be so may be brought clearly to their minds, they will still doubt and waver and will continue to think that there may be some other explanation. For the grossly impudent lie always leaves traces behind it, even after it has been nailed down, a fact which is known to all expert liars in this world and to all who conspire together in the art of lying. Adolf Hitler , Mein Kampf, vol. I, ch. X
This big economic growth lie is the propaganda of Zenawi who is both a pathological and expert lair and Berhanu Tekletsadik is the a living example of Ethiopia’s lowest performance indices measured by the Multidimensional Poverty Index (MPI).
thank you for a very controversial piece!
would you kindly reactivate the links in your article (MPI and growth) so that we learn how 90% of Ethiopians are considered to leave under extreme poverty (innocent questions, only interested in the methodology). Also, i wonder whether this figure shows an improved or worsened condition over time (2003-2009)? How did we perform in comparison with the rest of Africa? if poverty is 90 % in Ethiopia, one would really love to know how much it is, for example, in Sierra Leone and Central African Republic. i can’t wait to read the report when it is due!
Having said that, let me try to provide my take on this piece.
Although it is undesirable, rising cost of living is not necessarily an evidence of worsening economic condition. Note that prices will not rise in dormant economy where demand is constrained even when supply rigidities are prevalent (I have to admit this is a quintessential characteristic of our economy). Economy in recession rarely experience price hike (stagflation). rather some resemblance of inflation goes hand in hand with growth. Korea and many of the newly industrialized Asian tigers experienced a sustained inflation reaching 25 % during their take off in 1970s and early 80s.
Obviously inflation has eroded the purchasing power of urban dwellers whose wage rises slower than the hike in price levels. Notwithstanding conspiracy theories, this is partly explained by rampant and a bit populist government spending in different areas including security, education, infrastructure and health services provision. In the presence of a very weak private sector, pouring some money into some segment of the society (people directly employed in this sectors) fails to produce any consumer goods. this has created huge mismatch between private demand and goods supply, resulting in whooping price levels. There is too much paper money in the economy that does not reflect the production realties of the economy (IMF advised against this in 2006 long before the inflation hit but the government was in no positions to exercise restraint as it would come at a cost i.e. lower growth figures). anyway, the inflation has also an up-shoots for those that supply the few commodities ( services) in the market and those that wholesale and retail, who are making handsome buck out of it. i haven’t met any trader complaining about inflation, they actually wanna have that as it creates information asymmetry between current prices and expected prices creating a self fulfilling momentum. Now who is caught in the middle? exactly someone like the teacher whom we got to know in this piece. a person that doesn’t have any say in the price determination equation; he neither produces directly consumable good nor retails it. A farmer, for example, can simply raise the price of his wheat or Teff and the transporter of farm produces will add some on it, the retailers will fuel it even further but now how about the teacher. He is left powerless as he can not directly affect transaction of the good and his wage is purely determined by the government. Solution is the private sector, more room for the private sector that is capable of using the infrastructure the government built to produce consumable goods and hence mitigate the upward pressure on prices.
I’m not arguing inflation is a perfect predictor of growth but we have to understand that it’s usually the inevitable consequence of growth in a dynamic economy. I believe the writer of this article is engaged in futile exercise trying to confuse people with little understanding of Economics by just pulling one strings.
Although, the regression in the political arena is not up for debate, the modest economic progress should not be ridiculed because of the former.
By the way, for Economic figures please visit world bank’s WDI; University of Pennsylvania’s world penn table,IMF and Economic Intelligence Units data base and this site
http://www.economywatch.com/economic-statistics/country/Ethiopia/
GOD Bless the Greatest Nation on EARTH, Mother Ethiopia!!
“Very controversial piece!”? Chuna– you must joking. Foe me there is nothing controversial about the piece as it is stating the bleeding obvious.
God bless you
20 years have passed since the father of lies, Meles Zenawi predicted that in 10 years he will provide 3 meals a day. Chuna, please do not confuse people. We have hunger and famine in Ethiopia. I do not care what you make of your theory. we want food in Ethiopia. And if you cannot provide it leave and let those who can do the work.
To chuna the economist who belittled the writer for expressing his opinion.
Your attempt to portray the economic activity in Ethiopia as “normal”… as an economy going through the negative consequences of a “booming” economy is laughable.
This is a government that has squandered the huge economic opportunity of the last decade as a result of its incompetence and mismanagement.
Explain to us how we should factor in the 20 years of peace, the billions in loan, the billions in budgetary support and hundreds of millions of remittance money to measure the economic performance of this government.
I don’t know about you but through my numerous visits to many African countries I have witnessed the signs of great African economic renaissance which unfortunately our beloved Ethiopia may not be part of
The invisible economic growth!!!
People are starving and the econonmy is growing by two digit.
How come!!!!
God bless Ethiopia.
I am surprised at the level of skepticism and ignorance of some of the people in the Diaspora. Things would not be easier and less messier for people like Mezegebe (above) to be able to grasp it, it’s not as easy as black and white.
No one ever said Ethiopia is growing from 1991 onwards and we have started eating three time a day, even by the Juntas own admission growth was achieved only from 2003 onwards. and whether we like it or not data from international institutions (i have provided some of the list above) confirms this. and Alama why do you misquote people. I have neither said the Ethiopian economy is “normal” nor “booming” read well before you ridicule people. This is exactly what i said “supply rigidities are prevalent (I have to admit this is a quintessential characteristic of our economy)” and on inflation i said it’s inevitable in a “dynamic” economy; dynamic implying growing . as i said repeatedly whether the economy is growing or not is not up for debate at least among level headed people,
the questions should rather be about
the reliability of the growth figures (we know it is positive but is it really double digit ? honestly i don’t think so and some think growth didn’t exceed five percent. for example, IMF’s prediction for 2010 growth is 4.6 % but the government puts it at much higher level, 10.1 %.
Second, is the current public spending fueled growth sustainable? many think it’s not because of weak private sector
which segment of the society is benefiting most from the growth? and is it fair?
of course it’s anybody’s guess
what happens to macroeconomic climate (say exchange rate, international reserve, BOP)if donors are reluctant to provide aid for one or other reason?
it’s quite likely that it will be unmitigated disaster particularly for the very poor.
better to figure out these questions than to hammer each others head while engaged in an unproductive discussion.
I think we do not have to look at our compatriots in disdain and contempt just because they happen to have asymmetrical outlooks. we should let them speak and we can argue back only from the facts on the ground rather than drawing ideas from the bountiful pool of hate, then we will be able to communicate in civilized manner.
GOD Bless Ethiopia !
Chuna
I’m not sure your reasons to call this piece controversial or to accuse the writer trying to misled or confused his readers. This is a well written article with enough/strong evidences to back it. you must be one of those emotional Aabeshas who doesn’t want to accept the realities. however the fact remains the fact. Ethiopia is/remains one of the poorest nation on earth, standing still at the bottom, sometimes below Somalia(a country without a government). Stop daydreaming, wake up, and as you side, lets think how we got into this mess and the way to get out of it.
hi Zerihun!
Your analysis begin with the teacher and I thought you are talking about my history even not specifically. I liked it. You brought a fact that many shares not only teachers. So, simply we are in crisis. Plc keep it up!!
Chuna,
Zerihun you are intitled to your opinion.
But, Chuna very well put. Your arguments are much more balanced and unbiased (compared to the main article).
We need more of Chuna’s and less of Zerihun’s.
Long live ‘Africa’s pride’ Ethiopia