The dilemma of exchange rate devaluation arrangements as solution for inclusion

By:-Eyasu Solomon
Exchange rate Volatility is a measure of risk, whether in asset pricing, portfolio optimisation, option pricing, or risk management, and presents a careful example of risk measurement, which could be the input to a variety of economic decisions. What was surprising and interesting about Ethiopia's move is that the devaluation was not undertaken under the usual duress of “macroeconomic adjustment.” Devaluation helps because it increases exports and reduces imports, thereby increasing the foreign exchange position; and it also reduces domestic spending and brings it more in line with a country’s production.In this instance, however, the devaluation seems to target structural change, to boost the tradable sector so that it can provide the basis for long run growth. Volatility of exchange rates describes uncertainty in international transactions both in goods and in financial assets. Exchange rates are modeled as forward-looking relative asset prices that reflect unanticipated change in relative demand and supply of domestic and foreign currencies, so exchange rate volatility reflects agents’ expectations of changes in determinants of money supplies, interest rates and incomes. I see it differently. Tradable sectors and exports can indeed be key for development. And Africa’s tradable sectors are handicapped by aid and natural resource revenues, which tend to promote non-tradable sectors and encourage consumption over production As Ethiopia considering implementing changes in their development strategies, now is an opportune time to investigate the issue of weather alteration, in exchange rate arrangement have an effect on economic growth or to what extent exchange rate volatility may be responsible for variation in the rate of economic production. Because such moves are accompanied by increase in the volatility of both, nominal and real exchange rates. So, three slightly different takes on this Ethiopian move would be the following. First, this devaluation can be seen—not as actively favoring or even subsidizing some sectors as it would be in the case of China, for example—but as offsetting a previous distortion (aid and resource revenues). Second, instead of viewing this as creating investor uncertainty, it can perhaps be seen as a credible and durable pre-commitment to promoting structural change (provided of course future actions are consistent with this move). The private sector can be assured that there would be durable advantage in investing in the tradable sector. Finally, the devaluation is heartening if it reflects a realization on the part of African policy-makers that the key to development is structural change but one that is brought about in a market-friendly manner rather than in the dirigiste manner of the past.
Real exchange rate uncertainty can have negative effects on both domestic and foreign investment decisions. It causes reallocation of resources among the sectors and countries, between exports and imports and creates an uncertain environment for investment. The most important reasons for a devaluation to trigger an aggregate demand contraction include: a redistribution of income towards those with high marginal propensity to save, a fall in investment, an increased debt burden, reduction in real wealth, a low government marginal propensity to spend out of tax revenue, real income declines under an initial trade deficit, increased interest rates, and increased foreign profits On the other hand, aggregate supply may suffer after devaluation because of more expensive imported production inputs, wage indexation programmes, costlier working capital. Frequent devaluation stimulates speculation, leading to confidence erosion.Such
practice of continuous devaluation not only result in distortions in income, consumption, industrial growth and public finance, but also disturb the harmonious blend of internal and external balance, affecting both monetary and fiscal indicators,e.g. exports, imports, manufacturing growth, money supply and so on. Demand for exports depends on economic conditions in foreign countries, prices (relative inflation and exchange rate), and perception of quality, reliability, and so on.According to the orthodox approach, the devaluation enhances competitiveness, increases exports and bends demand toward domestically produced goods, thus expanding the production of tradable. For demand and supply side contractionary effects “Imports” measuring purchases from abroad, add to well being but may displace domestic production and drain financial resources. Changes in imports prices reflect changes in foreign prices, exchange rates and quantity.
The lack of zeal of domestic corporate executives to engage investment in the industrial sector exposes finance capital to the hazard of foreign invasion, which implies thatforeign investors could take this advantage to expropriate the wealth of the nation, and thus hamper the strength of the Ethiopian economy because capital is mobile, and globalization is about interconnectedness and interdependence as the finance capital available in the economy is being moved at will to the economy of other states. Thus, globalization has brought about the domination of the Ethiopian economy since its basic export is woven around raw materials (the basis for production and further production), whereas export in Ethiopia promotes economic diversification abroad and restricts diversification in the domestic setting, placing the Ethiopian economy in an uncompetitive space in the global trade circle. Currency devaluation on the basis of a certain economic policy is something every nation does occasionally, more so amongst the developed nations than developing ones with the exception of China. Some 20 years ago Canada did it to stimulate the economy to pull it out of the early 1990s severe recession. Canada devalued the currency by 45% at some point. Then again, Canada is economically integrated with the US, over 80% is exported to the United States, and for that reason the devaluation was understandable. The timing also did have something to do with, a new trade regime was on its way being implemented (NAFTA) US did not mind for the border town States benefited from the exchange rate advantage of importing Canadian goods and products to present it for the voracious appetite of US consumers.
Although the depreciation would take only a year and half but raising it back to the level it was prior to the recession, it would take over seven years. Because it would be very risky for the confidence of the Canadian economy to maintain that low exchange rate after the economy got its wing to fly, foreign investors cannot get a good return for their PDF created with pdfFactory Pro trial version investment if that low exchange rate was maintained, so instead of attracting few more investors the currency devaluing nation can lose many more investors. So, one has to show confidence on their economy by maintaining strength on their currency to reflect a good management and command.
Given the above example its not a bad idea for Ethiopia to devalue BIRR, however the trade deficit Ethiopia has is far greater to compensate by the export increase it will have no matter how large the export is, because Ethiopia is an 80 million nation with trade deficit is into billions. So devaluing the currency may encourage one time (short term) investors to come and take advantage but they will leave once that advantage runs its course. Those who buy real estate would benefit from the exchange rate advantage it will give them, but all others things will rise immediately after. As illustrated above, Ethiopia is an import economy nation. In the long term the country could lose its ability to maintain that same juice stimulant for an extended period of time knowing the way I know Ethiopia. China on the other hand can manipulate its currency as much as it wants for however long it desires for it has a huge reserve, essentially driving the world currency exchange rate. Alluding to the fact, if one controls the US currency, one has the world in their pocket. Ethiopia does not have excessive reserve like China does, as a matter of fact Ethiopia is running a yearly deficit economy, which means it cannot do what China does and come out unscathed. It may help it for a one time currency collection by giving the labor of the citizens to the foreign investor accumulating the extra 20% and using that extra juice the one time foreign investor can increase the margin of profit by a 20%.
However, that’s where it stops. The nation would have to devalue its currency furtherdown in order to get another stimulant juice; the question then becomes where the devaluing stop does. The basic adjustment policy dilemma may be easily illustrated by the simplest of all open economy frameworks where:exports, imports, aggregate domestic output, consumption, investment and government expenditure. Matters would be relatively clear cut if there were well defined correct and incorrect policies relating to macroeconomic stability, microeconomic efficiency and openness.
A bad harvest, or a fall in export prices may reduce both export revenue and taxrevenue. Or, where sovereign debt is denominated in US dollars, an increase in worldinterest rates or an appreciation in the US dollar will lead to an increase in vernment expenditure expressed in domestic currency. Apart from such exogenous shocks, it may also be the case that the characteristics typically found in Ethiopia make it more of a challenge to conduct macroeconomic management. It may be more difficult to control government expenditure, to increase tax revenue, to avoid monetising fiscal deficits, to control the supply of money and to pursue inflation targeting. Exchange rate depreciation may also be less effective if the inflation it induces impedes its relative price effect, if foreign trade price elasticities are relatively low.
Similarly, the counter-inflationary effects of overvalued exchange rates are unlikely to offer sufficient compensation for the erosion of international competitiveness and the expectations of devaluation to which they lead. Policy prescriptions relating to structural adjustment and the supply side. There is less consensus surrounding the causes of economic growth and the effects of openness, with the consequence that there is more debate and disagreement about what policies will increase aggregate supply in the long run. What is the appropriate role of the state? To what extent will privatization stimulate PDF created with pdfFactory Pro trial version growth? Which elements of government expenditure show the biggest return in terms of economic growth? What is the impact of openness and trade liberalization on growth?
What is the connection between financial liberalization and growth? In what order should Ethiopia exhibit a relatively high degree of export concentration on commodities whose price in world markets is often unstable. At the same time, where the price is denominated in US dollars, variations in the price of the dollar may be another factor in determining how the international purchasing power of a specific volume of exports may change.
So where does this leave us? If it seems to imply that the issues are highly complex, that our understanding of them is still limited, that there is a potentially explosive combination of economics and politics, and that there are no easy answers, then it is because this is exactly what the situation is. But at the same time the absence of easy answers is not an argument for policy inaction. It is a matter of learning by doing, trying to avoid doing harm, and gradually evolving towards a better outcome.The technical (and political) question to be raised is the following: is it really possible – in order to raise and maintain economic growth at 11-15% per year for a longer time - to have a much better exchange rate for the current account balance and, at the same time, a lower nominal interest rate, without igniting inflationary pressures in the Ethiopian economy?
The answer – as always in macroeconomics – is maybe yes. It all depends on inflation expectations, exchange rate expectations, monetary and fiscal policy.Any simple macromodel normally suggests that, in an open economy, inflation is determined by expectations of inflation, the output gap and the rate of exchange devaluation. Additionally, it is well known that the interest rate differential with respect to the rest of the world tends to reflect the expected rate of exchange devaluation. Furthermore, economic growth depends on the existing output gap, as well as monetary and fiscal policy ( in addition to long-term trends, of course, such as productivity and demographics).Even a simple model like this shows that the major challenge is to promote a devaluation of the currency ( under fixed-but-adjustable rates or under dirtyfloating rates) which might be able to bring the expected rate of future exchange devaluations to zero or even “negative” figures. And, at the same time, it must represent a real devaluation, with a small impact on domestic inflation. Is that possible? Again: maybe yes.

“Merkato”, The Home of Two Religions

During the Jumaa prayers, Islamic parching (hutba) will be presented by the Imam. Sometimes it coincides with the sound of the Mass prayers from the church. The faithful will be disturbed by a mingled and distorted voice from the two loud speakers. St. Raguel’s Church has a big building on one side of the fence. The shops in the building exhibit the same confusion.
Mohamed Selman-Addis Ababa)

This land, Ethiopia, is a piece of land on which the fear of God (Taqwa, in Arabic) overshadows; if anyone wants to prove this, just visit Piassa and Merakato, where gold is being sold like a pile of grain. I remember one of Addis Neger Newspaper’s articles titled, “Why Do The Ethiopian Poor Not Rob?”–that article had listed “the fear of God” as one reason why the Ethiopian poor do not rob.

There is a saying about the skills of the Merkato thieves: “they can steal your tattoo without touching you”. But these same thieves are known for one thing–they will return your useful documents if they find them in their loot, and try never to kill while stealing. I think these guys would prefer not to steal for their living. What can I say, I am proud of my country’s God-fearing thieves!

Ethiopia is recorded in both of the holy books of the great religions. Repeatedly, while we cannot find the US or the UK even once, Ethiopia is known for giving refuge to the disciples (Sahabas) of the Prophet Mohammed in the 7th century. When we speak about Ethiopia being named in the Bible repeatedly, we have to know that it includes Merkato–just because Merkato is found in Ethiopia.

Among my childhood memories are the “thief beating scenes” in the great Anwar mosque. In the moment when the barefoot faithful go down and up in an act of worship, the shoe thieves are on duty. Some unfortunate thieves will be caught by the faithful and dealt mob justice. Everyone tries to beat the unfortunate thief at least once. Watching heavy people girding up their ceremonial robes to use their hidden acrobatic skills gave me a secret pleasure. These scenes also gave me a chance to contribute to the beating. I liked this scene so much that I even invited my Christian friends to watch it.

They followed me to the mosque, for they also liked this ‘ritual’ In my childhood home, Merkato, even if they were not many, I had Christian neighbors. As the famous song of Teddy Afro goes, “Is it not Raguel (the church), Anwar’s (the mosque) neighbor?” When the time came for Ramadan fasting, our friendship strengthened. We celebrated the “Iftir” feast together. At dusk we went to my home to share the dates, the Asambusa, and sometimes the soup ready for the evening feast. They even sometimes helped me keep the fast by not eating their breakfast until mid-day (of course, this may sometimes have been because they lacked something to eat). We sometimes made fun of each other’s fasting cultures. They teased me, saying, “What is the difficulty in fasting in the day after eating in the night?” “How could you call this a fast since you eat shiro and lentils?” I remember that I was always the winner because my friends ate meat and other animals products so rarely that it was easy for me to mock them in return, chiding, “you are always in the Lent season!”

My friends were happy during Ramadan because we could buy dates and enjoy them. They also repaid me during their Epiphany and Buhe celebrations. I was with them, playing the harmonica, on the day of Epiphany. The celebration of Buhe was also, for us, a day on which we collected money by singing the season’s traditional songs. It was only much later that I discovered that Buhe has a religious meaning. We celebrated those days not as religious holy days in which we acquired spiritual benefits; rather, we celebrated them as cultural feasts.

I have no idea how the word “compromise” started to be used in framing the Muslim and Christian relations in Ethiopia. In my understanding, the Muslims and Christians in Ethiopia live together with love rather than compromise. I don’t like this word when it is applied in this context. I can clearly recall those relations tied with love from my childhood memories. Most of my childhood friends are now slipping out of religion. But some are strengthening their faith.

Nowadays, I hear that singing the Buhe traditional songs is a Christian role. I urged by many not to have a friend who is from a different religion. The spiritual books I read sometimes have no love in them. Most of the literature contains warnings of the coming dangers of my religion and urgings of vigilence against them.

The books that comprise the counterpart are also as dangerous as these ones. Some priests are preaching argumentative sermons. The same messages are being printed on T shirts, CDs and books. My Merkato today is full of these controversies.

Ramadan and “Filseta”: one side of two coins

In these fasting seasons, when the faithful turn their face to their God and the business of the fasting days mounts, Merkato hosts mobile churches and mosques carried by vehicles. Sermons broadcast by different loudspeakers adds chaos to the already busy marketplace. Gospel songs and Menzumas (Islamic songs) spread without limits. These “mobile churches and mosques” Coax bystanders with their proclamations–“buy this cassette and you shall be saved!” Similarly, they strive to increase the numbers of people who go to “Genet” and “jenet’.

The 16-day fast of the Orthodox Church, Filseta Maryam (the assumption of Mary), is the second greatest fasting season–next to Lent.–for summoning the believers to church. Many Christians wearing netelas (Ethiopian traditional cloth) march to the church of St. Raguel. Multitudes of Muslim believers, who number a little greater than the Christians, also stride to the neighboring Anwar mosque. The reason for this is the Muslim’s fasting season, Ramadan. The priest’s mantle and the Muslim cape, the Christian netela and the Muslim robe go together until they reach their respective worship places. This scene reaches its highest peak on Fridays.

The narrow road that divides the church from the mosque permits passage for only one vehicle. The number of the faithful in the worshiping places, on the contrary, far exceeds the space in the church and in the mosque. Because of this, the believers are forced to use the main roads, especially on the central days of prayers. During the Ramadan Jumaa prayers, Anwar mosque–which swells to four or five times its usual attendance—appropriates a third of Merkato as a place of prayer. The southern Cinema Ras, the western Tana Mall, (and sometimes Mierab Hotel), the northern Gojam Berenda, and the eastern American Gibi, mark the ends of the gathering. This forces the Christians and the Muslims to stand together for prayers. The Ramadan evening prayer, “Terawih”, requires a little more time than usual. The faithful park their cars around both of the places of worship. They pray beside the fences of the church, even designating the verandahs of the church buildings as temporary places of worship. I always wish to take photos of these scenes.

During the Jumaa prayers, Islamic parching (hutba) will be presented by the Imam. Sometimes it coincides with the sound of the Mass prayers from the church. The faithful will be disturbed by a mingled and distorted voice from the two loud speakers. St. Raguel’s Church has a big building on one side of the fence. The shops in the building exhibit the same confusion. The upper part of the building houses a school named after the church, while the other floors are occupied by different shops. Most of the shops are selling mobile accessories and mobile phones; the western wing of the building has shops for bags, blankets and Christian songs. The shops of the eastern wing, however, are providing Islamic articles. The building café called “Henny Penny” provides Islamic foods and beverages for the Ramadan season. This cross-shaped building, owned by the church, has shops in which Islamic clothes and other articles for sale. Abaya, Niqab, Hijab, Bourqa, (all articles of Islamic women’s clothing) as well as some mats for Muslim prayers. Some may dismiss this as mere marketing but for me it holds greater significance” Our poor life style and our culture influence our social life, and this is apparent in our religions too. My mom never missed invitations to religious feasts in the house of a Christian priest. I do not remember choosing my childhood friends based on their religion.

Some of my friends still remember the Arabic alphabets and some Qur’anic quotations they memorized in Islamic schools. In the same way, my Muslim neighbors and I have never considered the “Qes timihirtbet” (church based children’s school) to be more than a kindergarten. But this feeling seems to be absent in the new generation. Today’s Muslim friends of mine are more concerned about the issues of Iraq than their country. This might not be a mistake at all, but there seems to be some danger behind their allegiance. Most books in their homes are about “how to defeat the Zionist plot” or how other religions are working day and night to destroy Islam. The weekly newspapers also exaggerate Bin Laden’s destruction on the NATO forces.

Plenty of such literature is being sold in the road that divides the mosque and the church. The books I saw on both sides while I was writing this article are enough to validate my concern on the issue.

“The Identity of Jesus is Revealed”

“For the Loss of the Scale the Gold Has Lost: Who Oppresses Women, Christianity or Islam?”

“Jesus: is he a Prophet or a Creator”

“Who Authored the Quran?”

“Answer for Muslims: The Identity of Jesus”

It is hard not to conclude that the tension between Anwar and Raguel, is representative of the entire country. Social life is weakening; ridicule for the other side seems to be strengthening. Such tensions were showcased in the recent past. The association known as “The Military Tera Retailers Share Company” conducted a meeting in the auditorium of St. Raguel Church. Because some of the members of the association were Muslims, they attended the meeting wearing their religious capes.

The leaders of the meeting asked the Muslims to remove their capes since they were in the church compound. The Muslim members then demanded to know why they were called to the meeting if this was the case, and walked out of the meeting. Some of them even got physical. Where is the patience? Over the past two years, religious tension is growing and increasingly requiring government interference. Abay Tsehaye, the prime minister’s security affairs advisor, was busy trying to solve the general increase in religious tensions.

The followers of both religions were using their religious holidays to demonstrate how strong their influences are by amassing believers in numbers. Sometimes they speak ill of each other but in an indirect way. They print threatening messages on T-shirts and spread them to their followers. They announced that this “island has no place for other religions. Seeing all of this, I seriously fear that our relationship is on the verge of ruin. The respected history of our relationship may be only history, unless Allah and God intercede for its redemption.

China's economy

CHINA has become the world's second biggest economy according to data released on Monday August 16th. Japan's economy fell behind China's at market exchange rates in the second quarter (it has been number three in PPP terms for some time). These numbers are not strictly comparable: Japan's data have been seasonally adjusted while those for China have not. Quibbles aside, Japan will surely be eclipsed soon, if it has not been already. Data compiled by Angus Maddison, an economist who died earlier this year, suggest that China and India were the biggest economies in the world for almost all of the past 2000 years. Why they fell so far behind may be more of a mystery than why they are currently flourishing.

Harvard Once Again Tops the Best Colleges Rankings

This year, Harvard University regained sole possession of the top spot in U.S.News & World Report's Best Colleges 2011 rankings of national universities. Last year, Harvard and Princeton University tied for first, but Princeton fell to second in the 2011 rankings of these large, research-oriented institutions. Williams College can once again boast that it's the nation's top-ranked national liberal arts college—a category of schools that place a higher emphasis on undergraduate education—as it ranked a spot ahead of fellow Massachusetts liberal arts school Amherst College for the second consecutive year.
This marks the 27th year that U.S. News has published college rankings. Though the top-ranked schools garner much acclaim, the rankings aren't produced simply to benefit students who are considering attending institutions like Harvard and Williams. U.S. News uses its array of college data to provide insight to students of various academic and socioeconomic backgrounds. There is a list of the best schools for B students, rankings of historically black colleges and universities, as well as rankings of the most diverse national universities. And though the worst of the financial crisis seems to have passed, finding value in the increasingly expensive world of higher education is still one of the most important—if not the most important—factors in choosing a school. To meet that need, U.S. News has compiled best value lists for national universities and national liberal arts colleges, which rank schools based on the average cost of attending—after need-based grants are taken into account—relative to their academic ranking.
The National Universities and National Liberal Arts Colleges lists are just two of several sets of rankings that are a part of U.S. News's evaluation of Best Colleges. Regional colleges and universities, which tend to draw heavily from their local area, and tend to have sparse doctoral program offerings, are ranked separately. Villanova University, Rollins College, Creighton University, and Trinity University are the top-ranked Regional Universities—schools that offer degrees up to the master's level and were ranked as "Master's Universities" in the past—in the North, South, Midwest and West, respectively. The top-ranked Regional Colleges—schools that offer bachelor's degrees and were classified as "Baccalaureate Colleges" in previous rankings—are the United States Coast Guard Academy in the North, Ouachita Baptist University in the South, Taylor University in the Midwest, and the United States Air Force Academy in the West.
Though California's public educational system is plagued by financial unrest and budget cutbacks, two of the state's schools are ranked as the top public national universities. The University of California—Berkeley, which is the 22nd ranked national university, is the top-ranked public school, followed by the University of California—Los Angeles. Rounding out the top five publics: University of Virginia, University of Michigan—Ann Arbor, and the University of North Carolina—Chapel Hill.
Though schools at the top of the rankings deserve praise for their sterling academic standards, they shouldn't receive all of the credit. U.S. News asked college administrators to name schools they believe to have made sharp improvements to their academics and campus facilities. Based on the results, U.S. News ranked the top "Up and Comers" across several categories. The University of Maryland—Baltimore County was determined to be the fastest-improving national university and Hendrix College earned top billing for up-and-comers among National Liberal Arts Colleges. The best up-and-coming Regional Universities are Wagner College in the North, Elon University in the South, Butler University in the Midwest and Abilene Christian University in the West.

National Consciousness, Nation-State and the Problem of Economic Development

National Consciousness, Nation-State and the Problem of Economic Development

Discussion Paper for Seminar presented to the Conference on Good Governance,

Peace, Security, Sustainable Development in Ethiopia & the Horn of Africa, from April 9-11



In times of a highly globalised world the essence of a Nation-State does not seem to be an issue for many developing countries. Since many developing countries, especially sub-Saharan African countries are depending on foreign aid, the question of nation-state and its relevance in maintaining social cohesion within given boundaries is not a question to be studied and discussed. It seems that many intellectuals and the political elite in many sub-Saharan African countries are not aware of the relevance of such a crucial question. The economic policies of the last six decades which many African countries had practiced and globalisation have practically eroded the issue of nation-sate from the minds of many leaders.

In this highly complicated and globalised world the issue of national identity and nation-state become more urgent than ever before. Since many African leaders including the Ethiopian government(EPRDF government) are not governing their own affairs any more, even the uneducated people ask themselves, whether they are living in a sovereign country or not. Many people in Ethiopia ask themselves what could be left for the future generation if political vandalism becomes the order of the system. Leaving aside the problem of other African countries, what is going on in Ethiopia, Eritrea and Somalia needs deep studies and scientifically validated answers if all these three nations will have in the future a functioning government, a dynamic economic system and a social order which can accommodate all groups in all these countries. Since the problem in Somalia directly and indirectly affects Ethiopia, we Ethiopians cannot ignore if things are out of control in Somalia. That does not mean that any Ethiopian government must interfere in the internal affairs of Somalia. What I want to say is the chaotic situation in any neighbouring country will have damaging effects for the stability of the entire region. As long as there is no durable peace the people of the region will be compelled to live in poverty and hunger.

The issue of terrorism and economic globalisation and now land grabbing on a higher scale are putting many countries in a defensive position. Especially the war in Somalia which is going on in the name of fighting terrorism and the displacement of innocent people, and the bleak situation in Ethiopia and Eritrea are worrying some which attract many nations to convert the region to a permanent war field. Therefore it is our task to study the causes of war, hunger and underdevelopment so that we can give proper and durable solution. Political vandalism as we see in Ethiopia and Eritrea is culturally rooted in our society, and it is the result of unsolved and accumulated problems. In societies where integrated and well functioning economic structures and a social order do not exist, such kind of situation is suitable for political vandalism. In regions or countries where political disorder is the rule of the system, where political and social consciousness is not developed, foreign forces use the weak situation of such countries and try to manipulate the leaders to be dragged into war. The result will be dislocation of innocent people and wasting of human and natural resources. In this case what is going on in Somalia and the intervention of Ethiopia in the internal affairs of Somalia and the war between Eritrea and Ethiopia destabilise all the people who are living in that region. If we closely study the situation, the war in this region is a proxy war. The people of these countries are simply the victims of their ignorant leaders, who do not understand social history, and who are not capable of creating a system where all the people could freely exercise their creative power.

In order to understand the complex situation that the region faces, we have to connect the problem of consciousness with the issue of economic development and this with the question of nation-state formation. I maintain that only social, cultural and political consciousnesses are the true foundation of genuine economic development and nation building. In the absence of national consciousness and deep understanding of historical and social processes, no country can build a viable nation-state.

The Issue of National Consciousness

Let me ask some questions. Is there anything that can happen without the involvement of the mind? Isn’t it the mind which guides and controls us to do things in a way we like and plan or is it something else? What kinds of things shape our minds to behave irrationally or rationally? How do we perceive the role of culture in shaping our minds? I think these are some of the questions which we have to pose if we want to understand the role of consciousness in our relationship to a particular nation.

In the academic circle, especially among Ethiopians there is a common belief that the absence of a democratic system is responsible for the plight of our people. Some of us may think that our leaders are by nature brutal and are not shaped by the cultural circumstances which prevail in our country. We have been accusing the Military regime to be brutal without taking into account the social and cultural context in which the military leaders are brought up. We forget that before the military leaders in Ethiopia became `socialists` they were trained by a military ideology which was produced outside the socialist block countries. The present regime of Meles Zenawi is being accused for his dictatorial, dived and rule system without trying to understand the circumstances in which Meles and his compatriots are brought up or were socialized. Such kinds of simplistic approach will not solve the problem in which our country finds itself in. We cannot get answer for such complex problems and irrational behaviour from the perspective of political science as if the issue is a pure political problem. In other words, even if we have a certain kind of `democratic rule` as we wish, the problem of underdevelopment and poverty will not easily be solved. Nor can one cope with the issue of war and hunger. If we want to get a definite answer we have to go beyond conventional politics and supposed democratic rules.

It is not without reason that since three thousand years philosophers and psychologists have tried to investigate the role of the mind in understanding the way human beings feel, think and handle. They have well understood that without taking into consideration the role of the mind and the cultural situation of a given country, one could not grasp the nature of political leaders. From pre-Socratic philosophers to Socrates and Plato, and until the 17th century, the main occupation of philosophers was to investigate the different parts of the mind. Since human beings are different from animals, because they can think rationally and are able to change their environment, some are not in a position to use this God-given mental power to pose questions and behave rationally. They will be driven by emotion and their own will and destroy their own nation. Freud teaches us that there are three parts in our minds which are responsible for our behaviour. The first one is the oldest and most primitive part of the mind. In this part human beings have all sorts of wishes and primitive thinking. This part is devoid of any rational order and is guided by simple egoistic motive. The second part is the part which shapes and characterises the personality of an individual. It can be shaped by circumstances in which certain persons are brought up and are socialized. The role of teachers and parents play crucial roles in shaping this part of the mind. Through time and any kind of positive changes this part will be more and more socialised and becomes conscious. Its thinking and handling will be controlled by the given social circumstances which are prevailing in a given country. There is a permanent struggle between the egoistic or irrational part and the socialized part. In this case the third part takes the role of mediation and tries to balance both of the parts. In other words the egoistic part will be compelled to adapt to the given situation and handles in a way what the given social circumstance expects. According to Freud, the third part is responsible for cognitive thinking of the human mind, planning and decision-making. The problem here is that in certain circumstances the appetitive part will dominate, and irrational behaviour becomes the rule of certain groups. We have seen in history that though certain rulers are brought up in civilized circumstances their thinking and handling become irrational. Hitler is a vivid example of why even education cannot change the already fixed attitude of hate and aggressiveness. Thousands of scientists, philosophers’ musicians and men of theatre blindly followed Hitler and believed in his Nazi propaganda of eliminating the Jews and other minority groups.

Human beings are like monads. They are active and perfect. They are self-contained, independent and act by themselves. They have internal power. Whereas the monads do not have windows, human beings can be influenced by external circumstance. If they are not in a position to question and analyse they will be victims of false ideology. In most cases human beings do not use their internal power to develop as an independent agent and act actively. Due to false education and ideology, the inner power that each possesses by nature will be eroded. In this case individuals will become the victim of false ideology, and their minds will be intrigued by hate and anger. They are not conscious any more of what they are doing. Even if they are educated they lack profound thinking. They will become suspicious and are not ready to accept criticism. Their minds will be closed for new ideas. Because they already have a fixed idea, they distance themselves from the masses. The lack of self-confidence makes them traitors and they are ready to sell their mother land. Such people do not understand the role of an individual in shaping its society and the relationship between an individual and the society in general. Concepts, such as society, individual freedom, genuine economic development and nation-state are not integrated in their minds. They think that a society is a loosely organised structure, in which everybody comes and does whatever he/she likes. When any country is governed by such kinds of unconscious elements, and when it has thousands of so-called educated people, the country in question cannot be an arena in which the citizens exercise their true freedom. Unfortunately, Ethiopia is governed since immemorial by such kinds of elements, and there are thousands of Ethiopians who become the victim of such kinds of manipulated education system.

Now we can come to the role of culture in shaping the human mind. It is well investigated and studied that in early childhood stage proper education has a positive impact on the thinking capacity of a child and its handling. Likewise the entire circumstance, environment, school system, the role of parents and teachers, neighbourhood and other factors have roles in shaping the mind of a growing child. The humanness of a person, his love for others and his country and his entire environment depends on the education system in which one is brought up from the beginning of childhood. Especially the love of the parents is imminent in shaping the behaviour of a given child. One cannot regain the lost opportunity once a person is matured enough. By chance or with special therapy it may be possible to positively shape the character of an individual.

To be concrete, when it comes to our country, why does Ethiopia have to experience such bloody years? Why its people have been suffering all the last four decades by those forces who are born, grown and went to school in Ethiopia? Though going to school means to get proper education in order to behave properly and humanly, why did those children become murderous? What motivates some to become agents of foreign forces which are struggling to dismantle Ethiopia? Why did they raise arms in the name of freedom though there are other means to bring smooth changes into our society? Can we blame as we usually do that a particular ideology did play a role in masterminding the so-called revolutionaries to behave irrationally? In our country and even in many earlier socialist countries communism as an ideology is being blamed for what happened in all these countries. The relative prosperity in many western capitalist countries including the United States over the last 5 decades has blinded our minds. We all have forgotten the atrocities committed by these so-called civilized countries against Africa and other Third World Countries. The First and the Second World War, though it is not a world war in the true sense of the word, had happened in the civilized Europe. It is become common to accuse a certain ideology in order to cover ones` own agenda.

Though ideology has a certain role in shaping the human mind, those persons who became acquaintance with the socialist ideology at the age of twenty or more had a different historical background which is fixed in their minds. In this case I do not blame Marxism for the political vandalism and murderous act that the student movement had inflicted and the Military government including the present have done against our beloved country. I maintain that the cultural context in which we are brought up, that is the rigid feudal attitude is responsible for our inflexible and inhuman attitude. With this the education system, with which we are brought up makes us anti-nationalistic and subversive. Regardless of what the leaders of the student movement wrote on their banners, in essence they have created a situation for anti-Ethiopian sentiments. What matters is not the intention in this case. The bloody war which was committed in the name of the revolution bothers many people. The deaths of their children and relatives have wiped all the joys form their minds and they are condemned to live in permanent sadness. On the other side all ethnic based so-called freedom fighters had one thing in their minds. If we take all the organisations which rose arms in the name of freedom their intention was and is to dismantle Ethiopia. Undoubtedly they became victims of foreign forces, and were mislead to destroy their own people. They are at the same time the victims of their unconscious act. They could not pose questions, or try to behave like normal people to check their thinking and handling. As Freud said they are driven by their irrational motives to take power and install their own dreams. All what is identified as Amhara culture is associated with Ethiopia. Ethiopia as an “Empire state” must be vanished from the map of the world. Though culture and the formation of nation-sates are like biological processes, these so-called freedom fighters could not understand why the supposed Amhara culture had its beginning in the north and could spread southwards. All nations and cultures had taken more or less the same path. When we study and understand the formation of states, we can understand the necessity of building a nation-state.

What makes our country unique is the incomplete nation-state building and the unconscious role of our rulers and the special circumstances that our country has been experiencing over the last thousand years. All these factors including the so-called modern education system are responsible for misguided thinking and handling. In this case our consciousness and our love for our country cannot be seen isolated from the entire socialization process within which we are brought up. The question arises: How can we turn these bad circumstances in which we are finding ourselves, and can behave normally and play a positive role to build a democratic and strong Ethiopia. When certain groups still believe that Ethiopia in general has been ruled over the last thousand or so years by Amharas and Tigrians, how could we convince them that this was not the case and that the situation must be studied thoroughly through a different prism. The issue of ethnic nationalism is not the problem of the masses. It is an elite problem, which cannot understand its own role, and is being languished by an inferiority complex. The Ethiopian masses in general do not have any problem in identifying themselves with their culture and country. The masses are ready to learn new things and change themselves, whereas the elites of different nationalities are not ready to do so.

The Issue of Nation-State

The concept of nation-state is a historical concept and it must be seen as a biological process. In Europe, where the nation-state formation has taken more or less a unique path it is not problematic for the people of Europe to identify themselves with their own nation. In countries like Ethiopia, where some think that the formation of the Ethiopian nation is abnormal and not a historical necessity, it is very difficult to make them understand that all countries have passed difficult roads to come to the situation that we witness today.

By historical chance, some groups or nationalities develop some kinds of division of labour. They develop a language and by that a culture. The development of a certain culture, division of labour, and written languages are sometimes accidental, because some groups may have contacts at earlier time with the outside world. These kinds of cultural developments cannot and will not remain fixed in one area. Through trade relationships and through various kinds of movements, because human beings are mobile, there come contacts with other communities. The expansion and intermingling of culture and language will become a historical necessity. Since all groups could not develop equally, because of social and cultural uniqueness of the various groups, the developed culture will be taken by other groups. In this way all cultures across the glob could develop and march towards the formation of any kind of state system. The development of state, social structure and nation-state are a historical necessity. Since human beings are condemned by nature to live within a community and are compelled to form any kind of social organization, individual self-realization can only be achieved within a given community. For various reasons, like lack of cultural and historical consciousness, the group that holds political power cannot bring the necessary development. In this case, and due to external manipulation and pressure, certain countries could not develop into an accomplished nation-state. The case of our country is a vivid example, why especially the elites of various nationalities do not feel that they are belonging to Ethiopia. They think like this because they misread history and they overstate the consciousness of the political elite that had shaped the history of Ethiopia over the last 800 years.

The Ethiopian feudal system was a unique social structure that did not allow the development of division of labour. Handicraft activities and trading were seen as activities which could only be carried out by inferior groups. The taste and the limited need of the ruling feudal elite could not pave the way for the development of various kinds of commodities. Manufacturing activities were not known. In areas where it was not possible to develop a division of labour based on manufacture activities, it was not possible to develop cities. The absence of a generalised division of labour blocked social mobility. As the people remained confined to their areas, the development of language and culture on a higher scale was practically impossible. Accordingly they could not become creative, and transform their lives. Added to these Ethiopia did not have trade and cultural relationships with the outside world. All these circumstances and the rigid nature of the political system could arrest the entire society. As a consequence poverty, hunger and mass dislocation became the stigma of the society. The ruling classes could not see beyond their own circumstances. Though there were attempts by certain rulers to modernize the system, some had resisted because they felt that their status will be diminished. The transformation and modernization of the Ethiopian society must be postponed.

One could observe that starting in the 14th century there were attempts to expand the imperial systems to various regions without modernizing the economic foundation. From the 17th century onwards the struggle became fiercer and nation-state formation became inevitable. With Atse Yohannis, Atse Tewodros and Emperor Menilik II, the crystallization of the system became clearer and Ethiopia was marching towards a kind of nation-state. Atse Tewodros and Emperor Menelik II had clearly understood that without changing the social system and without modernization it was not possible to build an imperial system. Menelik II had laid the real foundation to build Ethiopia as a nation-state. But due to various historical circumstances and because of the changing international politics, it was not possible for him to go further. There were no social forces which could develop his idea and accomplish his mission. Ethiopia did not have any middle class and intellectual force which could grasp the idea of Menelik II and put it into practice. There were no well established social structures in other areas on which one could expand the system of nation-state building. It is therefore unwise to accuse our leaders for what had happened during the middle and late middle ages. We have to understand the nature of social history through the prism of nation-state formation in Europe.

One could admit today that Emperor Haile Selassie did not understand his role as a ruler. Nor did the bureaucracy understand its role. First of all Emperor Haile Selassie had re-installed feudalism and the feudal structure after the defeat of the Italian fascism. Secondly, he let the British steal which the Italians had built over 60 years. The British imperialists had stolen all the infrastructure and industries that the Italians built within a couple of years. Because Emperor Haile Selassie was only interested in his power, he could not understand what steps he should take to build a coherent nation-state on the basis of science and technology. His alignment with America and other western powers did not help him to build a strong and developed Ethiopia. The monetisation of the economy could not pave the way for the development of capitalism. The economy becomes peripheral and subsistence in general. The social structure was contradictory and there was no social cohesion among the various groups and nationalities. There was no cultural development which makes the people creative and innovative. Such a contradictory system gave room for unconscious elements to put their evil dreams into practice. The student movement was born out of this contradictory situation not to challenge the nation-state concept but to build a modern and egalitarian Ethiopia with the help of the ideology of Marxism-Leninism. I do no want to dwell on what went wrong with the student movement. Only professional historians and critical researches could answer this part. I want to affirm that the student movement in general is not anti-Ethiopian. Its an uncritical approach to social history and misreading of the Ethiopian history and its meagre understanding of human psychology compelled it to solve the problem by means of arms. This is the greatest crime that the student movement had inflicted upon our society. The past is past. We do not have time to lament on things what happened in the past. Our historical role is to study the Ethiopian social system through a different prism and struggle for a nation-state based on science and technology. Our mission is not to be caught with revenge and accuse against each other. Our main agenda must be to struggle for a nation-state where science and technology flourish and our people live in peace and prosperity. For that we must have a clear understanding of economic mechanisms which help us to shape Ethiopia as a modern and dynamic social structure.

The Issue of Economic Development

As we misread nation-state and the necessity of nation-state we also have problems in understanding the meaning of genuine economic development. This is because we all are trained within the neo-classical paradigm which reduces everything to scarce resources and satisfaction of human needs. As far as I know nobody has tried to attach the problem of economic development with nation-state formation. If we do we completely misunderstand the meaning of economic development, and detach it from nation-state formation and building a genuine social order. In our concepts economic development becomes equivalent to market economy. Not only we Ethiopians have problems in understanding the nature of genuine economic development. The elite of many Third World countries have problems in understanding the true meaning of a genuine economic development. In the time of globalisation, the problem is multiple, economic development is seen dissociated from true human civilization. Globalization is a great challenge for many developing countries, and millions of people are thrown to slave like labour to satisfy the global capitalist system. Third World countries, especially African countries are hindered to see beyond the conventional wisdom of market economy. They are not allowed to formulate an inward looking strategy which enables them to mobilize all the available resources in order to build a coherent and a chained economic structure.

Without having a developed economic structure based on science and technology the concept of nation-state is inconceivable. The true foundation of a nation-state and a well functioning social system is to develop a science and technology based economic system. Only through science and technology could any country become dynamic and will be integrated from within. Only with a developed economic and social infrastructure any nation can be respected. The development of culture on the basis of science is only possible when there is an effort of creating a science and technology driven economic development. True individual freedom can be achieved only through science and technology. People of a given nation will get mental power when they are able to understand the meaning of science and technology. The development of well structured cities and villages is the prerequisite of an integrated home market. In short, without science and technology there is no social transformation. Those countries which still rely on the production of agricultural products and mineral resources will never see the true meaning of civilization. They will remain the victim of their own leaders and foreign forces.

Until now the struggle on a world wide scale is to get supremacy on all fields. Only few countries have taken for granted that they have a monopoly on science and technology while the rest of humanity remains as supplier of raw materials. School books are deliberately written, and teachers are masterminded to spread such kinds of propaganda. The international division of labour and trade system become the foundation of this misconceived ideology, and this becomes equal to science. Science becomes synonymous with exploitation, and enslaving the labour of Third World countries. Unfortunately we are condemned to think in this category. Those who think differently and fight for a science and technology driven economy are seen as abnormal and their approaches is taken as an unscientific. I think we have to reverse this ideology of brainwashing and must unmask the true mission of neo-liberalism. In my capacity I have tried to clarify some of the misconceived ideas in my recent article, in “The Great Confusion”. For further and elaborative clarification, the works of Professor Erik Reinhardt and Prof. Gunnar Myrdal are very interesting and should be studied.

It is important to understand the market economic philosophy of the IMF and the World Bank if we want to bring a science and technology driven social transformation in our society. Experiences in many countries have taught us that the IMF and the World Bank policies do not bring the necessary transformation what we need. The Chinese have clearly demonstrated that without the intervention of the IMF and the World Bank experts they could build a strong economy within three decades. Since the Chinese have the will to develop they could mobilise all the resources that they have at their disposal. Especially a country like Ethiopia, which becomes the victim of international finance oligarchy headed by the IMF and the World Bank, needs genuine transformation based on a holistic approach. As I have tried to analyse in my work, only a conscious economic policy based on philosophy and sociology can help Ethiopia to bring some kind of economic dynamism. With this, as Gunnar Myrdal clearly demonstrates, institutional reform is needed if we want to achieve a dynamic economic structure.

The present Ethiopian government which has sold its soul for the international financial oligarchy has thrown our country into an economic system which is mere service oriented. According to the philosophy of the regime, only trading activities and export of unprocessed agricultural products must be the basis of economic development. Ethiopia must not build a strong home market on the basis of science and technology. The economic policy of the Meles regime is a policy of quick acquisition of money. It is not based on a long term strategy to bring real development through technological development in all areas. The “strategic” part of the economy is being controlled by the ruling class, and the system hinders the development of capitalism. It seems that the government works in the service of foreign forces so that no genuine economic development takes place. Fertile land is allocated for flower plantation and crops which could serve to extract diesel. Peasants are deliberately compelled to divert their attention to crop farming and flower plantation for the world market. On the other hand the government imports dehydrated cereal products from the European community and America. Instead of building an internal market, by creating linkages in all areas the government deliberately destroys the production capacity of the society. Over the last 20 years the country has produced an omnivorous class which absorbs the wealth of the society and lavishly spends the money in bars. This unique and uncultured class becomes a kind of bridge for the infiltration of bad culture from abroad. With its arrogant behaviour and spreading of bad habit it destroys the mentality of the youth. The system becomes out of control.

More or less the situation seems like this, and the Ethiopian people are frustrated by the vulgar nature of the system. They are longing for a system which transforms their lives and make them self-reliant. It is our duty to show the road to true civilization. In this case we have to challenge the neo-liberal economic paradigm which is presented as the only panacea of solving economic and social problems. Over the last 30 years many African countries have been practicing the so-called structural adjustment program of the IMF and the World Bank. None of them could build a dynamic and free economic structure. All countries that have applied this program could not transform the lives of their people. I think this must be a lesson to us. The history of nation building proves that poverty, hunger and underdevelopment cannot be eradicated by market economic instruments, but only through conscious state economic policy. We can eradicate poverty and hunger if we accept this fact and open our mind to new ideas. The experiences of Western Europe after the Second World War, the great efforts of Japan and South Korea are good examples which help us to draw lessons. All these countries could build strong economies not by applying a pure market economic policy but through the combined activities of state intervention and private initiative.

Thank you for your understanding

Fekadu Bekele, April 9, 2010

Ethiopian Banker Leads Development Agency for Obama Administration

As chief of the Millennium Challenge Corporation, Daniel Yohannes, is the highest ranking Ethiopian American in Obama's government.

An Ethiopian immigrant is making history as the highest Ethiopian-American official in the Obama administration. Daniel Yohannes was born in the Ethiopian capital. He completed his elementary school at Addis Ababa’s Nativity Boy’s School and later transferred to St. Joseph’s, a prestigious Catholic high school in Addis Ababa. “In those days people of my generation were idealistic, full of energy, with a lot of love for each other, as well as love and respect for our parents, elders, and teachers,” Yohannes says Yohannes tells about some of the successes. Ghana, he points out, is making commercial agriculture more profitable and reduce the cost of transporting food from rural areas to markets. In Lesotho, the MCC is helping the children of HIV-positive mothers live long and healthy lives by renovating health care centers and establishing clinics to distribute anti-retroviral medicines. And in Burkina Faso, 400 classrooms have been built exclusively for girls.