Recently, global hegemonic institutional neo-liberal financial arms (IMF) have pledged around three billion US dollars and vow to do more for the so called “home-grown financial reform”—FX regime and capital account liberalization. To assure this credit wave, there were diplomatic rallies made by different state actors, including Prime Minister Abiy Ahmed (PhD.), to the Paris Club of creditors. However, IMF’s Stand-By Arrangement (SBA) has resulted in hostile economic and political outcomes. Concerning this, I would try to descry the recent “economic reform” using the primordial nationalist economic thought—Mercantilism—which has similar intents to many nationalist governments (civic nationalism) including Ethiopia. Thus, to support my argument I shall bounce back to the early 16th century and pick the Mercantilists’ view, which has two pertinent concepts to the present world: economic nationalism and protectionism.
Ownership of capital and other factors of production have strong implications on capital deployment, destination, responsive tendencies to risks, and uncertainty in the nation. Capital owned by an Ethiopian citizen is different from foreign-owned capital in terms of the above stated implications.
The so-called home-grown economic reform, which ultimately opens up the economy to foreign owned capital is not home-grown by its nature, intent and ultimate goal. Since it is a mirror policy prescription advocated for by the Bretton Woods institutions in the early 1980s under the Soviet era couple: Ronald Reagan and Margaret Thatcher.
And it has resulted in economic bankruptcy following the implementation of Structural Adjustment Programs (SAP). The IMF itself has admitted its failures during evaluations of capital account liberalization and austerity measures policies on the IMFs financial development magazine dubbed “Neoliberalism Oversold?” in 2016.
The basic elements of SAP that led to the bankruptcy of many African countries like Ghana were liberalization, deregulation, contractionary fiscal policy, open doors to international trade, and open index (FX and interest rate regime) etc. All those elements of the global hegemonic neoliberal policy prescription has led to a weak government which lacks capacity to address eminent and basic public needs.
Moreover, it also depletes the economic sovereignty of states, ultimately leading to state capture by foreign capitalist interests, like in Ukraine. Finally, these policies don’t even adhere to the founding canons of reciprocity advocated by the third actor of the “unholy trinity,” the WTO. As exhibited in recent development of the trade war between China and US, Mercantilists’ view of economic nationalism and protectionism seems to grow across the global north.
Thus, the so-called home-grown economic reform that is accelerated by a go bung EPRDF-led government, with its legitimacy contested and perceived as a transitional government by many, shouldn’t decide on strategic issues with long-term socio-economic implications. If not, it will result in two hitches. The first impact is that Ethiopian capitalists may be swallowed or will disappear from their own sovereign economic landscape because of the foreign capitalist’s high weight and incompatible capital and technology.
Secondly, the government’s basic economic roles of stabilization, allocation and distribution would be very much weakened resulting from the prescribed policies of privatization and deregulation. Last, but not least, its ability to protect national capitalists would be lost due to its lack of control over powerful policy execution instruments and institutions.
So, the Ethiopian capitalist as a citizen and Ethiopia as a nation could face similar fates of former European colonies like Kenya, South Africa, and Senegal, among others. In short, executing the colonialist’s dependence policy prescription at this point of time would lead Ethiopia to not be for Ethiopians, in terms of protecting and advancing national economic interests. Rather, it makes Ethiopians a consumption dump site for foreign capitalists. The rhetoric of recent Ethiopian political nationalism should also be repeated in economic nationalism unless pseudo-nationalism is doomed to fail.
Publication Details
- Originally Published At: February 15, 2020
- Originally Published On: Ethiopianbusinessreview