The former World Bank Chief Economist and Nobel Laureate, Joseph Stiglitz, following the economic crisis in the United States and Europe, published a book under the title “The Price of Inequality.”
In his book, Stiglitz challenges the classical-liberal market principles. He argues that market forces are not fair and genuine in distributing national wealth equally among nations.
The market forces in their true sense are demand and supply factors. These two factors have never distributed wealth equally. In fact, this claim is against the notion of Anglo-Saxons free market orthodoxy. But Stiglitz was not the only economist who doubted the free market principles.
There are different leaders, politicians and scholars who equally challenge neo-liberal principles. Among the leaders, US President Barack Obama is one. Following the 2008 economic crisis in the US and Europe, President Obama in one of his speeches said: “…this crisis has reminded us that without a watchful eye, the market can spin out of control.”
This statement clearly implies that state intervention in the economy is essential and avoidable. Most scholars and politicians have no convergence on state interventions in different parts of the world.
Their difference lies on when the government should intervene in the market? Should the government wait until the market gets tough like it happened in Europe or beforehand?
In terms of cost, which one is effective? Should it be before or after the market has failed? We have seen that the US government and others in Europe have pumped billions into the market after it worsens. Bailout and austerity measures were their instruments. But it did not help the economy to recover shortly.
There are two major points one can draw as lessons learned. The first one is that government intervention in the market is inevitable whether it is in rich or poor countries. The other most important point is that without government one cannot easily normalize a failed market.
When it comes to Ethiopia, indeed the role of government in the economy is clearly stated in the constitution. The government is also clear on its direction and aspirations. Its main focus is pursuing a democratic developmental state model. In fact this model has two unique features. It has both developmental and democratic behaviors.
The reality on the ground also justifies it. In addition, the goal of the Ethiopian government is to create a modern nation. It is believed that this can be achieved through rapid economic development.
This aspiration demanded the Ethiopian government to have both the democratic and developmental state behavior. That is why it claims to have unique features. This behavior also emanates from the constitution.
The Ethiopia democratic developmental state model grand objective is transforming the country into a middle income one. The government clarified its key functions.
In this regard, the end result is achieving rapid economic growth and transforming the economy towards industrialization in a relatively short period of time.
Given that South Korea, Singapore and other countries of the region have passed the same path. But these countries have their own contexts. These countries have developed initially under authoritarian regimes and have an undemocratic political system.
Also part of the debate is whether the Ethiopian democratic developmental state model is an interim politico-economic arrangement or not.
The Ethiopian constitution acknowledges free market economy. From that phrase in the constitution one can easily understand that it is an interim arrangement to set the stage for a free market economy.
Obviously without the emergence of the middle class and necessary capital accumulations and the intended capitalist system, it cannot be realized. During the interim period the government’s role is to develop the political/social/institutional conditions that can help see the grand objectives in place.
The government has and should function as a facilitator to realize capitalism. Thus, democratic developmental state model is not an alternative political ideology rather it is the stage to transform either to social democracy or liberalism. So how popular is this concept?
Why is there low understanding of the concept? The only case may be related with low levels of explanation from the right source. The divergence of interpretations reflects lack of clarity.
In most cases those who consider the developmental state a transitory to social democracy refer to the South Korean experience as the best case and others who consider the developmental state model as an alternative to the political system regard China’s and Singapore’s experience as the ideal showcase.
But Ethiopia’s democratic developmental model, with all its achievements is not well popularized as an emerging nation. In spite of all the divergence, the democratic developmental state model is in place to achieve its primary goal, which basically is to enhance economical growth and transformation.
Often the developmental state model is defined by the role it plays in the economy such as leading and guiding towards the direction of economic development.
In general, the idea of this developmental state is closely related with Chalmers Johnson in his seminal analysis of Japan’s very rapid, highly successful post-war reconstruction and re-industrialization.
According to Johnson, Japan’s industrial renaissance was a consequence of the efforts of a ‘plan rational’ state. In this sense, a developmental state is one that determines the direction and pace of economic development by directly intervening in the development process rather than relying on the uncoordinated influence of market forces to allocate economic resources.
Indeed the Ethiopian government applied a democratic developmental state model for more than two decades and through this model it is achieving some successful results.
However, there are some unclear issues that require the government’s attention. Thus, it is imperative to clarify and familiarize those gray parts that I have indicated. It will help to minimize confusion on the function and goal of the democratic developmental state model in Ethiopia.
Ed.’s Note: Abebe Aynete is a Senior Researcher at the Ethiopian International Institute for Peace and Development (EIIPD). The views expressed in this article do not reflect the views of The Reporter.