The Future is Bright
It is not a calling in favor but the world-famous economist, Professor Joseph E. Stiglitz had pronounced that “Ethiopia’s economy is doing well.” He won’t hesitate to repeat now what he affirms four years ago when he was in Addis to give a lecture on growth and globalization. When was invited by the Ethiopian Economic Association and the Ethiopian Development Research Institute in 2013, Joseph E. Stiglitz not only commended Ethiopia’s economic performance, but also he had set his concerns over the challenges Ethiopia may face to keep the growth sustainable.
On the meeting that was held in March 2013 at headquarters of Economic Commission for Africa, Joseph Stiglitz had recognized that Ethiopia was able to manage to keep its impressive economic growth sustained, by some ten percent, for over four consecutive years. This trend solidly continued for another four years in row.
Then, Joseph Stiglitz was not only impressed by what Ethiopia has done to sustain its economic growth, but was also struck by the most egalitarian nature this economic growth that made possible an equal distributions of income amidst the world suffering from a high levels of inequalities. At that moment, what has struck Stiglitz with admiration is the source of Ethiopia’s economic growth.
According to him the growth registered in some of the developing countries over the last several years is a result of increase in commodity prices; as is particularly the case with China. Nonetheless, the success of Ethiopia clearly has got to do with an increase in the production output, diversification, and going into new areas, he argued.
The professor had then asserted that the challenge ahead of Ethiopia will be to keep the growth it has registered for a longer period. Hence, he advised Ethiopia to ponder on how to make widely shared national cake and keep the economic growth sustainable.
In fact, in the eyes of Joseph Stiglitz and other economists, Ethiopia has one of the most egalitarian distributions of income in the world. Contrary to the case in Ethiopia, in many developing countries there were not only high levels of inequality, but also the level of this inequality has continued to increase dramatically. Even in China, which has been very successful in reducing poverty, the level of inequality has once reached at alarming point.
According to the professor, the notion of “trickle-down economy” is proved to be wrong. The belief that everybody would eventually benefit from the economic growth as long as there is sustained growth is mistaken. As a matter of fact the principle of “trickle-down economy” does not take care of the trouble in income distribution.
The world-renowned economist, Joseph E. Stiglitz, had underscored that there was no good economic theory behind the trickle-down economy and no evidence to support that claim. Therefore, an increase in inequality both within and between countries has been building up a real challenge for anybody concerned with egalitarian growth.
For instance, the number of people living in poverty has greatly increased in the US, while the US GDP has been showing substantial increase from time to time. Now most Americans are poorer than they were three or six years ago. The benefit of this economic growth has gone to the people at the very top and the growth registered is far from being pro-poor. This worrisome phenomenon is happening in many parts of the world.
Though we have heated debate on inequalities of in-come, still the situation in Ethiopia is very encouraging and there are a number of things that Ethiopia (other African countries) could do in order to help keep its growth egalitarian and sustainable.
As we know, one of the most important aspects of Ethiopia’s economy is the role the state play in the developmental processes of the country. Granted, no country has been successful without having an important role from the government. Hence, at one time or another, the government will play an important role be it in the US as well as Europe. The market failure is one area where the Ethiopian government is playing an important role in the economy.
Although there is governance problem, Ethiopia has identified its comparative advantages in the global economy and is working hard to maximize the benefit it reaps by focusing on selected economic sectors that would create huge employment opportunity for the youth. Therefore, development in Ethiopia is on firm footing and the country is trying to take its economy to the next level.
The end of 2016 had provided us with an opportunity to take stock of current economic performance and its future prospects on Ethiopian or African level. The year 2016 has been tumultuous for Ethiopia as well as for Africa largely due to a commodity crisis and the global economic slowdown. Yet there were still pockets of good growth which display the huge potential of the African continent, such as Ethiopia.
The countries that are hardest hit by the crisis are working hard to recover from the economic reversals of the past few years. Since the start of the new millennium, average economic growth across Africa has been stronger than the global growth rate. Growth across the continent is averaged 5%. Ethiopia’s growth rate is much higher than the African average.
This situation has spurred the “Africa rising” narrative and has permeated public discourse on an “African Lion” referring our country Ethiopia. And the political and economic reforms paved the way for a growth in foreign investment. Urbanization and a burgeoning middle class have expanded consumerism while growing mobile phone and internet penetration spurred the services sector. Increased innovation influenced investment and private consumption.
The economic optimism of the past two decades has increased productivity while creating and driving employment. Ethiopia’s economy, unperturbed by widespread drought and rising insecurity and instability in the Horn of Africa, continues to move forward without a slowdown by rebalancing itself in every tip as it chart the way ahead in 2017 and beyond. Ethiopia is still among the fast-growing economies of the world, but this growth did not stem poverty and inequality altogether. However, its future is so bright.