The Late Prime Minister Meles Zenawi of Ethiopia and the Neoliberalism Discord

By Alazar Kebede
September 9, 2012

Today, it has been exactly one week since the late Prime Minister of Ethiopia, Meles Zenawi, who ruled Ethiopia for the last twenty one years, was put to rest in a grand state funeral which is the first of its kind in the modern political history of the country. The entire nation mourned for twelve days. Since the beginning of his unusual disappearance from the public’s eye, and due to the total blackout of official information about his condition, his death was the hottest product of the country’s rumors mills. However, the first official announcement of his death by unexpected “infection” really shocked the entire nation top to bottom. Since then, tens of millions of people in the four corners of the country and in every walk of life, expressed their deepest condolences and paid their last tribute in his funeral.

The late Prime Minister Meles had a number of future personal plans that he wanted to accomplish when he would have retired from his post as Prime Minister and chairman of the ruling party EPRDF in 2015. In an interview with Richard Dowden, Director of the Royal African Society (RAS) on 12 May 2012, Meles stated that “I will retire in 2015 and probably teach at the leadership academy and maybe do some writing. I am not interested in an international or Pan-African role but I can’t say no if I am asked to go to a meeting for a week or two, but not permanent”.

Unfortunately, for the deep sorrow of the nation, his regional and international friends and admirers, he passed away at the prime age of 57, as the saying goes not as he wished, but as God wills. His legacy, however, is well recorded in the modern political, social and economic history book of the country.

Concerning his accomplishments, for some, the late Prime Minister Meles is a valiant person, a man with an iron fist with no tolerance for any dissent. For tens of millions of others, he is a real hero and a towering icon to be revered the most. The debate on this issue is mainly based on their value judgments.

Voltaire in his book “Letter on the English” relates that during his stay in England, in 1726, he overheard some well educated men discussing the question “Who was the greatest man – Caesar, Alexander, Tamerlane, or Cromwell?” One speaker maintained that Sir Isaac Newton was beyond a doubt the greatest man. Voltaire agreed with this judgment, for “It is to him who masters our minds by the force of truth, and not to those who enslave them by violence that we owe our reverence.” It doesn’t matter whether Voltaire was convinced that Isaac Newton was the greatest man who ever lived or was simply trying to make a philosophical point.

Thus, as Voltaire said, as there are people who: “enslave them by violence that they owe their reverence”, there are tens of millions of Ethiopians who have: “their minds mastered by the true force of his truth.” For his admirers, Meles is their most important and the greatest leader of all. For them, he is the Manmohan Sing of Ethiopia who stirred them and the country into a commendable economic development. He is widely regarded by them as the principal architect of the county’s economic revival from a country of famine into a country of the “African Tiger”.

The fact is that without any doubt, the late Prime Minister Meles Zenawi, in his decades long tenure as the leader rebuilt a new Ethiopia with new political and economic system. No other leader in the modern political history of the country influenced both the nation and its people. In his twenty one years in power, the late Prime Minister Meles showed a number of distinct leadership qualities which helped him to garner both local and international respect and admiration. His peculiar and unique leadership qualities excelled his contemporaries and transformed him into a formidable continental leader.

Particularly, his extraordinary intellectual caliber distinguished himself from his African leadership peers. Nothing proves this more than the different testimonies of African and international leaders at his funeral last Sunday, particularly that of the US Permanent Ambassador at the UN, Suzan Rice. As she poetically expressed it, the late Prime Minister Meles was indeed an extraordinary leader with a “world class mind.”

As a continental leader, the late Prime Minister Meles left a shining legacy which will last in the many years to come in the international arena, among other things, as a prominent and formidable African pro-poor economic activist. He was an ardent economic ideologue who staunchly and consistently voiced his well defined, organized and articulately presented arguments against the neoliberal economic school of thought.

The subjective framework of globalization primarily includes knowledge and ideology. Powerful knowledge sets and compelling ideological discourses are fundamental to eliciting consent and lessening reliance on the material and coercive instruments of a hegemonic order. In the debate on ideologies and the globalization agenda, there are ways in which some exemplar ideological works frame agendas for globalization and alter globalization.

The first among others is the neoliberal thinking. Neoliberalism is usually more associated with trade, capital and the state regulation of these. It is characterized by a move to open markets, low state intervention, free movement of capital and goods and privatization of previously nationalized industries. The state still has a role to play in providing defense and financial infrastructure, but it is more laissez- faire than interventionist.

These conditions of free trade and free movement of capital and goods allow multinational and transnational corporations to flourish. Neoliberalism is also the macroeconomic template employed by the major global financial institutions, i.e. the IMF, the World Bank and the WTO. Thus neoliberal values are at the core of economic globalization and have been increasingly popular with Western governments since the end of World War II though even more so since the 1970s with the turn away from welfare state models, unionism and Keynsian economics towards trust in the rule of the market and emphasis on individual responsibility rather than community or state responsibility.

Until recently, most critiques of neoliberal economic system focused on its effects in developing economies, where the impact and costs have been starkly visible. Many developing countries seek foreign currency loans to finance continued or new debt obligations, and to secure such loans they must accept a variety of neoliberal conditions imposed by the World Bank and IMF stabilization programs.

These policies in effect impose neoliberal development strategies on borrowing countries, regardless of country specifics and existing economic strategies. This has often meant a shift from state support for import substitution strategies which have the benefit of producing for local/domestic consumption and developing local industries to export-oriented strategies that require a favorable environment for private and foreign investment.

As a leading African economic ideologue and staunch advocate of global economic justice, the late Prime Minister Meles argued the neoliberal economic policies as the main impediment of the development of developing countries particularly Africa. Meles vehemently argued that these policies resulted widespread poverty, misery, and serious derailment of autonomy and sovereignty of Africa. In his unpublished book and many of his scholarly articles, he presented a well crafted theoretical criticism of the neoliberal paradigm prescriptions.

In one of his writings, Meles argued that, the neoliberal paradigm is a dead end incapable of bringing about the African renaissance. To this effect, he adamantly recommended a fundamental shift in paradigm and the need for African states to move towards becoming developmental. In similar fashion, PM Meles in his unpublished book titled ‘African Development Dead Ends and New Beginnings argued the need for replacing the neoliberal paradigm with a developmental state paradigm in Africa.

Concerning the issue of neoliberal political economy and social capital, Meles presented that creating the proper blend of norms, values and rules to reduce uncertainty and transaction costs is a critical factor in accelerated growth and development. He noted that the creation of such social values and norms is called social development or social capital accumulation. Social development is thus not only an essential element of development but also a critical instrument of accelerated economic growth. He explained that the accumulation of social capital, which plays such a critical role in accelerating economic growth, is a public good which has increasing returns to scale.

Concerning the role of agriculture as an engine of growth, Meles commend the neoliberal school of thought as absolutely correct in taking agriculture as the engine of the early phases of development. He explained that market failures related to technology, capital markets, weak and absent markets is even more pronounced in agriculture than in the other sectors leading to a number of vicious circles and poverty traps. A state whose intervention in the economy is very limited would be unable to overcome the vicious circles and poverty traps. Due to this fact, Meles argued that the neoliberal paradigms advocacy of such a state in developing countries is thus likely to keep such countries mired in poverty traps.

Meles also argued that the neoliberal school’s focus on resource transfer as the key linkage between agriculture and non-agriculture is misplaced. Moreover, its focus on the price mechanism to carry-out this resource transfer is also misplaced. According to Meles, the neoliberal assertion that getting prices right is the efficient way of carrying-out the transfer and that getting prices right means liberalizing agricultural products markets is fundamentally wrong.

He explained that getting prices right means getting the non-market determinants of agricultural prices right. Once the determinants of agricultural prices are right various price and non-price mechanisms that can be used to carry-out the transfer without negatively affecting the incentives to farmers. Meles further noted that, if the determinants of agricultural prices (non-market determinants) are wrong, liberalization of agricultural prices will not ensure the right prices. The single minded focus on liberalization of agricultural prices at the expense of dealing with the real non-market determinants of these prices will lead to the continuation of the pervasive market failures in agriculture.

Meles stated that the analysis which is supported by historical evidence shows that equitable distribution of assets in the rural areas plays a critical role in accelerating agricultural development and overall development and structural transformation. For him, equity accelerates the adoption and diffusion of agricultural technology and plays a vital role in the establishment and strengthening of market support and other rural organizations and institutions.

According to Meles, the neoliberal assertion that inequality will have to increase during the development process and decrease later is not based on any theory but on an empirical assessment that the rich save more than the poor and that increased saving through inequitable distribution of wealth is crucial for accelerated growth. He explained that the view that the savings rate of a country is higher when wealth distribution is skewed has been and can be contested empirically.

Dealing with the Black Box of development, the neoliberal paradigm correctly identifies technological change as the heart of the development process and as the only source of continuous increase in per capita income. However, Meles argued that it treats technological change as an exogenous factor, as a sort of a Black-box and thus does not even attempt to explain it in economic terms.

In relation with technological change, Meles explained that developing countries cannot compete simply on the basis of factor endowment, or by buying up the latest machinery. In this regard, Meles allied with the Nobel Laureate economist, Joseph Stiglitz who plausibly argues that the neo-liberal theory is fundamentally inconsistent with technological change. Where there are competitive markets and prices are equal to marginal costs there is no room for technological change, where there is room for technological change there are no competitive markets.

Meles concludes his argument by stating that when it comes to the heart of accelerated economic growth, when it comes to technological development, the neoliberal assumption of efficient competitive markets has no basis in fact or theory.

In the neoliberalism discord, Meles has his own version of developmental state, democracy and development in which I will deal with in another column.

* This article is dedicated to the memory of the late Prime Minister Meles Zenawi.