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GDP is like a speedometer: it tells you whether your economy is going faster or slower. As in cars, a speedometer is useful but doesn’t tell you everything you want to know. For example, it won’t tell you whether you are overheating, or about to run out of fuel.
Above all, the speedometer doesn’t tell you whether or not you’re going in the right direction. If you suggest to a car driver that you might be on the wrong road, and the response is “then we must go faster”, you might think that’s pretty stupid. Yet this is what happens whenever complaints about the state of the economy elicit a commitment to boost growth.
So what is the right direction for a modern economy? That’s a relatively easy question to answer: when you ask people, they say much the same things. A good economy meets everyone’s basic needs. It means people are healthy and happy with life. It avoids storing up potential sources of long-term trouble, such as extreme inequality and environmental collapse.
It is, of course, entirely possible for an economy to go faster and faster without getting closer to meeting these goals – indeed, while heading in the opposite direction.
Now the trickier part. What would be the economic equivalent of a compass? We need to measure the direction of economic travel in a way that’s comparable to how GDP measures its speed – easy to communicate, and amenable to being influenced by policy decisions.
The New Economics Foundation (NEF), where I was the Executive Director until December 2015, proposed five indicators in an October 2015 report. Imagine them arrayed like dials on a dashboard that you can glance at for an overall picture, as well as study in more detail if you want. Why five? It’s hard to capture everything that matters in one metric, and psychological research demonstrates that people struggle to hold more than five things in their heads at once.
1. Good jobs. Employment statistics tell us what proportion of people have jobs. They don’t tell us what proportion of those with jobs are paid too little to afford a decent standard of living, or worry about whether they’ll still have work next month.
According to UK government figures, 94% of people were in work in 2014 – up nearly two percentage points in four years. However, the NEF calculated that only 61% were in secure jobs paying a living wage – down a similar amount in the same period.
2. Wellbeing. A growing economy is not an end in itself – it’s a means to improving people’s lives. Few would disagree that the ultimate aim of public policy is wellbeing; we care about GDP because we assume it means more wellbeing. So why not also measure wellbeing directly?
The validity of research into measuring wellbeing, by asking people about their life satisfaction, is now widely accepted. Such measures capture a range of things that people care about and that policies can influence – from income and health to housing and social connections.
Some governments do measure life satisfaction, including the UK (it increased from 7.4 to 7.6, on a scale of 0-10, in the four years to 2014). However, it remains at the margins of policymaking.
3. Environment. The NEF propose a national indicator of lifestyle-related carbon emissions, relative to an allocation calculated from global targets for avoiding dangerous levels of climate change.
In four years, the UK’s position deteriorated from using 91% of its allocation to 98%.As climate is a global problem, this indicator is effectively a measure of responsible global citizenship.
4) Fairness. Research increasingly shows that high income inequality has negative social consequences, while casting doubt on the idea that it incentivises hard work.
Comparing the average incomes of the top and bottom 10%, inequality in the UK has been worsening by an average of 0.8% a year for the last four years.
5) Health. The NEF proposes “avoidable deaths” as a simple, easily-understandable measure that captures the quality of health interventions – not only treatment, but also prevention.
Here, the UK shows a positive trend, but with plenty of room for further improvement – the latest figures suggest 23% of deaths need not have happened.
The NEF designed these measures with the United Kingdom in mind, working with the UK’s Office of National Statistics. But they are, in principle, just as meaningful for other countries.
The shortcomings of GDP, as a measure of what we want from an economy, are not a new discovery. The NEF and others have been making the case for years. But while various proposals for alternatives have engaged the interest of policymakers and technocrats, they have not yet taken hold among politicians.
That’s understandable: any politician who suggests new ways to judge their performance is also creating new ways to fail, and many policies that will pay long-term dividends on these indicators will also impose short-term costs.
More broadly, there remains a reluctance to move away from viewing economics as a hard, mathematical science, and accept the need to incorporate more of a social science mindset. In effect, we need another value shift in economics, comparable to those that shaped the last century – Kenyesianism and neoliberalism.
However, while the problems with the current economic system are increasingly widely appreciated, we still lack a compelling, coherent, simple alternative narrative. I hope these indicators can help that narrative to develop.
The Gross National Income, or GNI, represents the sum of a nation’s Gross Domestic Product (GDP) plus any other net income received from overseas. Therefore, the gross national income measures both the domestic income of a country and the income it receives from abroad.The GNI per capita measures the average income earned by a person in a given country and is calculated by simply dividing the total GNI of the country by the total size of the population. Generally, GNI per capita is used to compare the state of wealth of a population and the standard of living in a country with those of other nations. GNI per capita is expressed in international dollars, and is based on Purchasing Power Parity (PPP), how far the money will go in buying commonly purchased goods in relation to that money’s ability to do the same elsewhere on the planet. When determining a country’s development status, GNI becomes an important economic factor. Taking into account all the considerations listed above, it becomes quite easy to understand why the countries with the smallest GNIs per capita tend to be developing countries which struggle with poor Infrastructure in terms of social welfare and economic development alike.
Malawi’s Economic Issues
According to World Bank data, the country with the smallest GNI per capita is Malawi, with 250 international dollars of income per person. Although the country enjoys a democratic and stable government, the economy continues to operate within a poor fiscal environment, characterized by the country’s high debt levels. The social environment is characterized by a proliferation of inequality and poverty, with over a half of the population being considered as poor, and one-quarter of it living in extreme poverty. The low agricultural productivity is one of the main obstacles in reducing the poverty, further worsened by increasing erratic weather patterns.
Post-Conflict Poverty in Burundi
Burundi, with a GNI of 270 international dollars, is the country with the second smallest GNI per capita. Even if the country is in the process of transitioning from a post-conflict economy to a stable, peacetime economy, poverty remains at troublingly high levels. The country is focusing on developing its basic social services, modernizing the public finance sector, and upgrading institutions and infrastructure across the board. Though it possesses a modernized industrial establishment, it above all relies on the agricultural sector, energy production, and mining for the majority of its revenues. The growing economy will increasingly offer more employment opportunities, and hopefully improvements in the standard of living will be quick to follow.
Underdeveloped Resources in the Central African Republic
The Central African Republic has the third-smallest GNI per capita value (330 international dollars). While it’s true that the country has recently been devastated by a political crisis, the Central African Republic was among the countries with the highest poverty rates well before the recent tumultuous events. The country possesses abundant natural resources but, unfortunately, they are generally very underdeveloped. Subsistence agriculture represents almost one-third of the gross domestic product. Exports of diamonds and wood, while relatively significant domestically, have clearly not been enough to raise the economy to the level of a major global power.
Liberia’s economy was gravely affected by the Ebola crisis that swept Africa for much of the new millennium. Indeed, the outbreak essentially reversed many of the important gains the country has made in the fights against political and economic insecurity and poverty. The quarantines implemented due to the Ebola epidemic affected the production and exports of rubber as workers were restricted in their daily travels, and contamination from African goods became a global concern. The weak business environment constrains the growth of manufacturing industries, and most of the important sectors suffered production disruptions due to the epidemic. The economy of Liberia definitely needs effective implementation of an economic recovery plan
Other Countries With Low per Capita GNIs
Besides these countries, the Democratic Republic of Congo, Niger, Gambia, Madagascar, Guinea, Guinea-Bissau, and Ethiopia are all struggling with extreme poverty as well. Within them, GNI per capita rates vary from 380 to 550 international dollars. This often becomes even more concerning when considering that income disparities often leave the general population in an even poorer state the already bad numbers would suggest. Collectively, these countries need strong economic reforms to begin to fight poverty and increase the welfare of their citizens and secure stronger standings on the global economic scene.
The transaction “utility” (economists’ term for satisfaction) compares the price one thinks is justified (the “reference price”) to the actual price they have to pay. If reference price is less than or equal to the actual price, humans get satisfied.
For free-trade skeptics, buying a relatively varied and less expensive basket of commodities is an alluring development. However, the transaction utility (satisfaction) is severely negative. This is because they are not willing to pay the price of substantial layoffs and unemployment at home (incidents that they perceive chiefly stem from globalisation) in order to get the goods for cheap.
Whether they are right or wrong is another matter, but the heavy moral cost they face because of perceived guilty conscience is too high. This results in a dissatisfaction with the current state of free trade and borderless transactions. In short, they suffer from a negative overall utility.
According to estimates reported by the World Bank, the amount of official development assistant (ODA) Ethiopia received in 2010 was $4 billion but total amount of IFFs during that year was $5.6 billion.
This means in 2010 alone Ethiopia’s IFFs exceeded the ODA it received that year by $1.6 billion. In other words, Ethiopia’s IFFs amounted to diverting the entire aid money of 2010 to foreign banks and then still transfer abroad an additional sum of money. During the entire period (2004 to 2013) the total amount of money that Ethiopia lost due to IFF was $26 billion. This amounts to stealing nearly $300 per citizen. Alternatively, the size of stolen money was about 11 times the total the amount of emergency aid being sought from donors in the current year to buy cereals from abroad and feed the drought victims.
RUSH FOR THE EXITS: WHY IS ETHIOPIA’S CAPITAL FLIGHT ACCELERATING?
By J. Bonsa (PhD), Special to Addis Standard, 9 May 2016
A substantial sum of money has been illegally flowing out of Ethiopia during the last decade. What is even more worrying is not just that the levels of out flows are high but also the sizes of illicit capital outflows have been rising at alarming rates. This rather unique pattern has attracted the attention of the general public as well as those of bilateral and multilateral donor agencies.
I will also attempt to put some flesh on the bones of facts presented in the GFI database. I will do so by shedding some light on the political economy context of the illicit capital outflow (IFFs) from Ethiopia.
Stolen money trails
The natural starting point is to get a sense of magnitude on the levels and trends. The GFI data is summarized and plotted in Fig. 1. For the time being we focus on the total flows, that is the heights of each bar denoting sizes of annual illicit money outflows. The sum of the blue and red colors gives total amount of money illegally moved aboard from Ethiopia during that year. This ranged from USD $0.4 billion in 2004 to USD $5.6 billion in 2010.
The average annual outflow was $2.6 billion during 2004 and 2013. This is a sizeable sum of money by any standard. For instance, according to estimates reported by the World Bank, the amount of official development assistant (ODA) Ethiopia received in 2010 was $4 billion but total amount of IFFs during that year was $5.6 billion.
This means in 2010 alone Ethiopia’s IFFs exceeded the ODA it received that year by $1.6 billion. In other words, Ethiopia’s IFFs amounted to diverting the entire aid money of 2010 to foreign banks and then still transfer abroad an additional sum of money.
During the entire period (2004 to 2013) the total amount of money that Ethiopia lost due to IFF was $26 billion. This amounts to stealing nearly $300 per citizen. Alternatively, the size of stolen money was about 11 times the total the amount of emergency aid being sought from donors in the current year to buy cereals from abroad and feed the drought victims.
One may wonder – who are the culprits responsible for Ethiopia’seconomic fraud at such massive scale? The GFI categorizes possible perpetrators into three groups: (a) financial institutions; (b) complicit business counterparts, mainly importers and exporters; and (c) government officials.
In the Ethiopian case, it is reasonable to exclude financial institutions because there is no foreign bank operating in Ethiopia, and the domestic private banks are extremely tightly controlled. Ethiopia’s most influential banks, the Commercial Bank of Ethiopia (CBE) and the National Bank of Ethiopia (NBE), are owned and run by the government. Therefore, in the context of Ethiopia it is safe to include (a) under (c).
That is to say Ethiopia’s IFF can only be undertaken by importers, exporters or government officials. One would hasten to add that there is a huge extent of overlaps between government officials and big businesses in Ethiopia, since big businesses are highly interconnected with the government and/or they are directly or indirectly owned and run by government officials.
Money diversion channels
Now we can shift our attention back to fig. 1 and consider the breakdowns of the IFFs, the individual component denoted by the blue and red sections in each bar. The GFI applies a methodological framework that accounts for two types of illegal movements of money from one country to another.
The first one is export or import trade misinvoicing. This is measured by using a methodology called Gross Excluding Reversals (GER). This simply mirrors exports by one country with imports of another country and vice versa. For instance, items of imports recorded by Ethiopia should agree with records of exporters to Ethiopia in all aspects – value, quantity and quality.
The second one is various leakages in the balance of payments, measured by using the “hot money narrow” (HMN) approach.The latter one is often referred to as “net errors and omissions” in the balance of payment jargon. For instance, if a donor agency or country recorded $1 million grants to Ethiopia but this does not appear in the records by the authorities in Ethiopia, then the GFI records this as a leakage from Ethiopia’s balance of payment.
It is clear from Fig. 1 that the bulk of illicit money transfer from Ethiopia has taken place using trade misinvoicing, denoted by the blue component of the bar. In 2004, trade misinvoicing constituted only 14% of the total IFFs. In 2013, however, this proportion has grown to 100%, the entire IFFs began to be accounted for more and more by trade misinvoicing. For the entire period under discussion, $19.7 billion (or 76% of the total IFFs) was conducted through trade misinvoicing. The year 2010 is an exception – diversion of “hot money” dominated in that year; it constituted 55% of the total IFFs.
Trade misinvoicing can take place in one of the following four ways: over invoicing exports, under invoicing exports, over invoicing imports and under invoicing imports. In Ethiopia’s case, the GFI report indicated import over-invoicing is by far the most important method of transferring money abroad. During the period under analysis, about $19.7 billion was transferred abroad through import over-invoicing.
It is critical to understand how import misinvoicing hurts the Ethiopian economy. This is important in the context of huge public construction projects with substantially large components of imports of machinery and other equipment. For instance, an acquisition of a set of machinery whose real value is $1 million is recorded with inflated invoice of $1.5 million.
The importer allocates project budget at the inflated import value, pays the real value to the supplier and then siphons-off the difference (in this case $0.5 million) and deposits it in a foreign bank account. The real damage to the economy happens in terms of inflated capital expenditure. Perhaps the opportunity large capital projects provide for corrupt officials could be the ulterior motive for the uncontrollable urge to attach such a high priority to large capital projects in economic development strategies.
However, it should be noted that public capital projects are often financed through commercial loans that should be paid back with cumulative interests in years to come. The economic return to capital project would partly depend on the cost consideration at project implementation stage.
The GFI also finds some export trade misinvoicing in Ethiopia’s foreign trade, over-invoicing by $6.5 billion as well as $3 million under-invoicing. In trade based money laundering, the most common types of misinvoicing are import over-invoicing and export under-invoicing. As noted above, the case of import invoicing has no complications – so much over invoicing has taken place and it explains the bulk of trade based money laundering in Ethiopia. However, the case of export over-invoicing is uncommon.
Export over-invoicing do happen although they are rare, e.g. China’s trade with Hong-Kong. Export over-invoicing is required when there is a need to plough back money from abroad and report it as inflated foreign direct investment. This is likely the case with Ethiopia where the authorities have been desperate to report higher foreign investments particularly in the first half of the period under analysis.
Ethiopia’s capital flights dwarfs rest of developing countries
It would prove useful to know how bad Ethiopia’s IFFs is relative to other countries. Fig. 2 below compares Ethiopia with its neighbors, the rest of Sub-Saharan Africa (SSA) as well as the average of developing countries (DCs). The comparison was done by expressing total illicit money outflowas percentage of GDP. The years are grouped into three intervals. For reasons discussed further below, it would prove useful to contrast pre- and post-2005. Accordingly, I have isolated 2004 and then divided the remaining years into two equal intervals.
This revealed astonishing patterns of illicit money outflow from Ethiopia which starkly contrasted with those for other countries. First, throughout the years Ethiopia’s records considerably exceeded those for its two immediate neighbors, Kenya and Tanzania. Second, a comparison of 2004 across the countries shows that Ethiopia’s illicit money outflow was way below the Uganda, SSA, and the DCs averages.
Third, the situation changed dramatically from 2005 onwards. Ethiopia outstripped Uganda, and then closed the gap with the SSA average. Fourth, Ethiopia’s average annual money outflows between 2010 and 2013 reached 11% of the country’s GDP, considerably exceeding the corresponding figures for the other countries – SSA (5%), DCs (4%), Uganda and Tanzania (2%) and Kenya (0.013%). Fifth, it is important to note that illicit money transfers abroad constituted smaller and smaller percentages of GDP for most countries over the years, implying substantial improvements in transparency in their economic management. The situation in Ethiopia sharply contrasts with this reality – illicit money outflow becoming a larger and larger percentage of Ethiopia’s GDP. This indicates transparency in Ethiopia’s economic management has gone from bad to worse over the years.
It should be noted that the SSA average is largely driven by money being squandered by oil and other mineral resources exporting countries such as Nigeria and Angola. It is telling to note that Ethiopia, a country not known for exporting substantial mineral resources, is now characterized by illicit money outflow to GDP ratio exceeding that of an average SSA country.
Blind spots in accounting for remittance flows
The analysis in the preceding sections relied entirely on the Global Financial Integrity (GFI) report. GFI methodology is strictly confined to official records as starting points and then mirrors records at different places and times. Systemic discrepancies between records are then registered as illicit transactions.
Clearly, then the GFI methodology does not account for illicit money flows that take place through financial transactions in informal or black markets. Remittance flows are riddled with black markets in hard currencies. The situation is even worse in the context of Ethiopia, where official hard currency flows are tightly controlled, and hence creating conditions for prevalence of underground currency transactions.
To the extent that remittances are channeled through formal banking or foreign exchange offices, then the transactions get into the balance of payment records. Leakages from the flow are accounted for through the GFI approach called “hot money” discussed earlier.
However, there are strong evidences indicating that the bulk of remittance transfers to Ethiopia actually happen through informal channels, mainly because of better rates and lower costs.
The informal channels may take one of two forms. First, it is common for Ethiopians living abroad to take hard currencies with them every time they visit home and then directly exchange it to birr in local black markets at better rates by avoiding transfer fees. It also happens that they send hard currencies via travellers they trust so that they give it to their relatives, who in turn get it converted in local black markets. The World Bank estimated that 14% of Ethiopians to whom money was transferred from abroad in 2010 got it through travelers. Since the World Bank has not made a reference to money converted at local black markets, it means the total amount of hard currencies entering Ethiopia by informal channels is much higher than the 14% who regularly receive remittances.
Additionally, there is a more sophisticated black market which operates pretty much like the way foreign money transfer services operate, except that these are operated informally by individuals living abroad. As any Ethiopian living abroad can tell, every big city countries with hard currencies has a few black market operators who offer exchanges of foreign currencies to birr with additional incentives,at least two or three birr on top of the going rate that money transfer agencies offer.
I selected a couple of major cities and gathered background information for this piece. The margins offered vary across time and space but the current margin on above Western Union conversion rates were at least one birr per unit of USD equivalents of local currencies in London, Dubai, and Kuwait, excluding foreign exchange office fees charged per transaction. This means Ethiopians living abroad have good enough incentive to look for black market operators rather than sending money through formal channels.
The role of the black market is simply to collect and bulk the hard currencies. Where exactly the collected money goes is anybody’s guess. One may hope that importers who face constraints in foreign exchange rationing may smuggle out the hard currency they collected and/or importers may assign agents in foreign countries to collect and bulk hard currencies for them.
In both cases importers may spend the money they bulked on purchasing goods and services that will eventually enter Ethiopia. This is an optimistic scenario since the country may eventually benefit from availability of goods and services in the domestic market, except that the transactions were done informally and the government might have lost some tax revenues.
The upshot of this discussion, however, is that the hard currencies collected from local black markets may get smuggled out and get deposited in foreign bank accounts. Similarly, black market operators residing abroad may also be primarily motivated by a pressing need to convert birr into a hard currency and safely deposit it in a foreign bank account.
It should be noted that the GFI methodology misses out such blind spots in remittance flow accounting, which means Ethiopia’s capital flights discussed in the preceding sections is highly likely to underestimate the size of illicit capital flights from Ethiopia. If so much has been done to move money illegally abroad by abusing formal channels, then it is realistic to assume that the informal channels are even more susceptible to abuses by the same group of actors who seem to be in a rush to the exits.
Why the rush?
At this juncture it is appropriate to pool together different lines of discussions in the preceding paragraphs. The most crucial point here is the timing of dramatic changes in Ethiopia’s capital flight. It is clear from the facts presented in this piece that 2005 was a watershed moment in Ethiopia’s capital flight history in recent years.
For those who closely follow Ethiopia’s political and economic affairs, the fact that dramatic things began to happen soon after 2005 does not come as a surprise. The general election of that year and the upheavals that followed had seriously shaken self-confidence among the elites who held political and economic power. The possibility of losing power and economic advantages that accrues from it began to be felt starting from that year, when the ruling EPRDF snatched power under murky conditions from the hand of the opposition who claimed they actually won the general election.
This argument is substantiated by the following logical reasoning established in our discussions earlier. In the Ethiopian context there are no foreign banks, and domestic banks are very tightly controlled by the government. Also, there is a great deal of overlaps between interests of big businesses and those of government officials.
In that case, corrupt government officials and their affiliated businesses are the likely culprits for capital flights from Ethiopia at such epic proportions. The fact that rampant corruption has crippled the current government is openly debated in local media and among the elite at official forums. The evidence provided in this piece only corroborates the ongoing public debate.
Traditional economics views humans as robotic machines who make calculated decisions based on logic. In contrast, behavioural economics views humans as irrational and emotional beings who are influenced by biases and experience when making decisions. This infographic takes a closer look at just what behavioural economics is and how it can be used.
Read more at:- https://www.b2binternational.com/publications/what-is-behavioural-economics/
The resources are scarce in comparison to our never ending wants andEconomics is concerned with the ‘rational’ management of these resources that have alternate uses to maximise the gains at both micro-macro level.
There are several economic models that have been developed that have distinct characteristics and unique features. Adam Smith’s Capitalist model, the one where the market forces of demand and supply move freely to determine the Equilibrium level represents an ideal system of want origin and its satisfaction in the perfect sense. Any extension of demand will shift the Equilibrium price upwards and this in turn, will motivate the ‘rational’ producers to supply more to the market at the increased price to maximise their profits. This will eventually stabilise the price and eventually Equilibrium will be restored in the market. How simple is that! This model seems stable and logical in every sense, doesn’t it?
Shiller, a behavioral economist, closely tracks investors’ feelings about the market. He believes that emotions can hold the key to market movements. When I saw Shiller late last week for an interview about his new book on the economics of deception (“Phishing for Phools,” written with Fed Chair Janet Yellen’s husband George Akerlof), he told me more investors are worried that the market is over-valued than at any time since the peak of the dotcom bubble in 2000.
“Interest rates have been at zero” for a long time, says Shiller. “The economy has been viewed as sluggish, and yet [corporate] earnings have been growing and prices have been growing at a rapid pace.” That kind of “irrational exuberance,” says Shiller, is exactly what bubbles are made of.
So, why haven’t we seen a major sell-off, one more lasting than the dip we saw a few weeks back, after which the markets quickly rebounded? Because, says Shiller, investors are caught between two dueling narratives about the market.
First, there’s the “New Normal,” story, which is that we’re in a period of low interest rates that will last a long time, and that’s what’s kept markets up. This creates a sense of unease that our recovery isn’t real, but has somehow been genetically modified by central bankers.
“The aggressive monetary policy, which developed as kind of a new approach to managing [the economy] and was largely international, brought us these very low interest rates,” says Shiller. What’s more, “long rates are low, which represents some kind of public attitude that this [new normal] is going to go on for a long time.” As I have written many times, long periods of easy money always create bubbles. Meanwhile, says Shiller, “there’s another not so commonly-raised factor in connection with understanding the market: concern about inequality, which is rising, and also related to that a concern about information technology replacing jobs.”
Both of those things add to the sense that there is bad news lurking underneath those seemingly strong corporate earnings data of the last several years. That makes investors jittery.
But there’s another narrative. America is still the prettiest house on the ugly block that is the global economy. Where else can people park their money, if not in U.S. blue chips? Shiller adds that the growing sense that bad news may be looming can also “encourage people to accept high prices for houses and the stock market because they need to have something for the future.” Rising markets are supported by investors and consumers whoneed them to rise, because it makes them feel richer. “And they’re not going to say, “Oh, this price is too high, I’m going to consume this,” says Shiller. Rather, they accept the higher and higher asset prices – until they don’t anymore. That’s when the bubble bursts.
Those two dueling narratives may be one reason that markets have been volatile of late. People who hold equities have earned a lot of money — the stock market has gone way up. You could conclude, says Shiller, “I’ve got so much money, let’s go on a cruise! Let’s have a lark.” That sentiment drives consumer spending at the higher level. “But maybe you don’t because you’re worried. You have the sense that [things could change] — or maybe you’re worried about your children,” says Shiller. “In 20 or 30 years, I don’t know what they’re going to be doing. I’m just worried. Or maybe they’ll be doing horribly. So let’s keep that stock.” That in turn buoys markets. It’s a somewhat bipolar cycle that fits with the level of volatility we’ve seen all this year, which is much higher than last.
So what happens now? At some point, the market will receive some important new signal. It could be a rate hike from the Fed this week. Or it could be another raft of bad news from China. At that point, we’ll likely see another sell-off. The question then is whether it becomes a stampede. There’s no metric that will answer that question for sure. Emotions, as much as data, hold the key to what the markets will do. No wonder Shiller won the Nobel for saying as much.
In the midst of fastest growth hype and official statistical lies, Ethiopia has been plagued by high rocketed prices for basic goods, intensive and chronic shortages in all sectors of economy. This is the situation of TPLF ( fascist government and monopoly) controlled economy experiencing declining production (supply deficit) relative to citizens demand for basic necessities. In dealing with bureaucratic corruption that tinkers with distribution, citizens are experiencing long queue (disutility) in cities for basic goods for which very limited supply is available. They may be approved or disapproved to get access to the purchase by TPLF local cadres decisions. It has been reported that Ethiopia’s rural areas are in catastrophic famine. Widespread shortages, spiraling inflation and famine are fueling humanitarian crisis.
This is the Ethiopian capital Addis Ababa (Finfinne) where the population of the early morning standing in long lines under the blazing sun (Sunday August 2015) for the purchase of sugar and oil. Cars, children, women, old and adult, all are in never ending line. Source: http://www.ayyaantuu.net/addis-ababa-this-is-eleven-percent-yearly-growth-in-ethiopia-endless-lines-for-sugar/
Although the grievances voiced differed from country to country and from region to region, the belief that the incumbent economic and political system was characterised by inequity and injustice was common to all.
If we are to avoid large-scale societal upheavals in this ultra-connected world, government, business and civil society must come together to rework the current economic system to serve all of humanity rather than just an elite few.
– Fergus Simpson, The Guardian
Widening inequality gap proof of outdated growth model
We need to rework the current economic system to serve all of humanity rather than an elite few, writes Xyntéo’s Fergus Simpson
January saw leading figures from business, government and civil society gather at the World Economic Forum in Davos. A broad spectrum of subjects were debated, including the prospect of a legally binding climate change agreement in Paris this December, Ebola and the nefarious advance of the Islamic State in Mesopotamia. I was particularly encouraged to see one topic keep cropping up – the crisis of burgeoning disparities in wealth.
In a report released in the runup to Davos, Oxfam predicted that within two years the richest 1% of people will have accumulated more wealth than the remaining 99%. The same study found that the wealth of the richest 80 billionaires has continued to increase since 2010, while the wealth of the poorest half has decreased over the same time period. The gap between the haves and the have-nots is growing.
History has taught us that there are moments when people rise up to make a point and say that enough is enough and times must change.
On 25 January 2011, the world witnessed one such moment – pro-democracy protesters occupied Tahrir square in Egypt’s capital, Cairo, demanding self-determination, equality of opportunity and freedom from the shackles of tyranny and oppression. Some 17 long days of demonstrations and civil disobedience followed, bringing the moribund autocracy of longtime Egyptian president Hosni Mubarak to an end.
This event formed part of a much broader social movement that swept across North Africa and the Middle East, toppling sclerotic regimes and corrupt dictators. Before long people in Spain, Greece, the UK and US took to the streets as well. Although the grievances voiced differed from country to country and from region to region, the belief that the incumbent economic and political system was characterised by inequity and injustice was common to all.
And it isn’t just the poor who have been affected – the middle classes have also borne the burden of mushrooming inequalities. Companies have tended to become more productive since the 1970s, but the incomes of middle class workers have remained largely static. Returns from higher productivity have tended to go to owners and investors, not to the workers.
In many ways, inequality has become the defining issue of our time. The popular uprisings that shook the Arab world at the start of this decade were just symptoms of this most elemental of societal ills.
Fortunately, there is no reason to suppose this state of affairs is inevitable.
A promising step forward was announced at Davos, when Ajay Banga, CEO of GLTE partner MasterCard, and Donald Kaberuka, president of the African Development Bank, revealed that they intend to collaborate to foster inclusive growth in Africa.
The MasterCard Labs for Financial Inclusion, funded by an $11m (£7.24m) grant from the Bill and Melinda Gates Foundation, aims to enable more people to access banking services – generating greater equality of opportunity across the world, in developed and developing countries alike. The initiative will soon begin operations in Nairobi, Kenya, and aims to reach over 100 million people globally.
Technological advancements can support the implementation of projects designed to promote inclusive growth, such as the MasterCard Labs for Financial Inclusion. Digital innovations in payment systems and social media, for example, have enabled people to access markets, ideas and information to an extent that is unprecedented in human history.
Indeed, it has been said that the Egyptian revolution started when Whael Ghonim, a marketing executive at Google, saw the bloodied remains of Khaled Mohamed Said – a young man bludgeoned to death by the Egyptian police – pictured on Facebook. Incensed by the injustice that confronted him, Whael created the Facebook page “Kullena Khaled Said” – “We Are All Khaled Said”. Three months later 250,000 people had joined the page. Just one year later the Mubarak regime was no more.
If we are to avoid large-scale societal upheavals in this ultra-connected world, government, business and civil society must come together to rework the current economic system to serve all of humanity rather than just an elite few.
At Xyntéo, we are convinced that the current growth model has become out of date – incapable of meeting the demographic, climate and resource demands of today. Together with our partners, we believe that global business, with its clout, resources and energy, is uniquely placed to overcome this challenge. To us this means reinventing the current growth model so it brings prosperity to much larger numbers of people.
Two remarkable developments during the past 10 days that could have a significant impact in many countries are worth a lot more attention in Canada and the United States.
First, a major research document published by five top economists at theInternational Monetary Fund (IMF)admitted that the strong pro-capitalist policies at the centre of its activities in developing countries for the past 30 years do not work.
One of the IMF’s main roles in recent years has been to bail out countries during financial crises. In return for loans, some 60 mostly poor countries have been forced to follow strict rules, such as privatizing government resources, deregulating controls to open markets to foreign investment, and restricting what they can spend in areas such as education and health care.
Now the paper, Causes and Consequences of Income Inequality: A Global Perspective, says there needs to be a shift and that greater income equality in both developing and developed countries should become a priority.
Dutch told to act on emissions
The other significant but unrelated development which received scant attention, concerns a ground-breaking decision from judges in the Netherlands. They ordered the Netherlands government to slash greenhouse gas emissions by at least a remarkable 25 per cent by 2020.
The ruling came after almost 900 Dutch citizens, headed by the group Urgenda, took their government to court in April in a class action lawsuit to force a reduction of greenhouse gas emissions to tackle climate change. Netherlands has been lagging behind other European countries in tackling climate change.
Significantly, the challenge was based not on environmental law, but on human rights principles. Urgenda asked the courts to “declare that global warming of more than two degrees Celsius will lead to a violation of human rights worldwide.”
The court said, “The state should not hide behind the argument that the solution to the global climate problem does not depend solely on Dutch efforts … Any reduction of emissions contributes to the prevention of dangerous climate change and as a developed country the Netherlands should take the lead in this.”
“A courageous judge. This is fantastic,” said Sharona Ceha, a member of the climate change group Urgenda. “This is for my children and grandchildren.”
The international community is attempting to set limit global warming to 2 degrees Celsius over pre-industrial levels. Countries are to publish their own undertakings to reduce greenhouse gas emissions ahead of a hoped-for global deal to be agreed in Paris in December.
While the Dutch government can appeal the ruling to a higher court, lawsuits against governments and companies in Europe have increasingly been seen as a way to press for action against climate change.
The Amsterdam-based group said the case was the first in Europe in which citizens attempted to hold the state responsible for its potentially devastating inaction and the first in the world in which human rights are used as a legal basis to protect citizens against climate change.
The landmark case could very well set an important precedent for public interest groups in other countries. Cases are already being brought forward in Belgium, Norway and the Philippines.
Perhaps this is a course Canadian environmental groups should consider. Diane Saxe thinks so. As the Toronto-based environmental lawyer told the CBC’s The Current, “The more I read the Dutch court decision, the more I’m getting excited about it, because the arguments made by the three judges could be made in Canada…I think it eventually will happen.”
IMF denounces “trickle-down” economics
In the other story, the IMF report contradicted its long-held position of following hard-nosed capitalist guidelines. It said that the dreaded concept of “trickle-down” economics — which it forced on developing countries and which is practiced by the Harper government — should be abandoned.
“To tackle inequality, financial inclusion is imperative in emerging and developing countries, while in advanced economies, policies should focus on raising human capital and skills and making tax systems more progressive,” concludes the report. Wages and living standards for the bottom 20 per cent should be raised, worker protections improved, and environmental standards implemented.
The practices and policies of the IMF have been controversial for many years.
The rich and powerful countries that control the IMF have used the body’s loans program to force their preferred economic policies on poor countries, even though rich countries themselves did not employ the same strict measures on themselves when they were developing.
The report’s critical analysis also applies to neo-liberal economic policies practiced by most Western governments, including the United States, Canada and several European countries.
The document was enthusiastically received by IMF critics, who have accused the world body of hindering, not helping, development in several poor countries over the years.
“Fighting inequality is not just an issue of fairness but an economic necessity,” saidNicholas Mombrial of Oxfam International in response to the report. “And that’s not Oxfam speaking, but the International Monetary Fund.”
“By releasing this report, the IMF has shown that ‘trickle-down’ economics is dead; you cannot rely on the spoils of the extremely wealthy to benefit the rest of us. Governments must urgently refocus their policies to close the gap between the richest and the rest if economies and societies are to grow,” said Mombrial.
Austerity increases poverty
Critics strongly object to austerity measures that have been forced upon most of the 60 countries where the IMF has been providing loans.
“Such belt-tightening measures increase poverty, reduce countries’ ability to develop strong domestic economies and allow multinational corporations to exploit workers and the environment,” argues Global Exchange, an international human rights organization.
Global Exchange charges that the IMF contributes to poverty instead of alleviating it: “Nearly 80 percent of all malnourished children in the developing world live in countries where farmers have been forced to shift from food production for local consumption to the production of export crops destined for wealthy countries.”
It’s very likely that the IMF will change some of its policies concerning developing countries. However, change may be slow. The IMF is a huge and complex organization where the wheels grind slowly. Secondly, the Western countries that control the organization tend to be strongly influenced by powerful and wealthy people who benefit from “trickle down” economics.
When the IMF finally makes significant policy changes, and if countries were to follow its lead in their own economic planning, many countries could experience a significant change in income distribution. Perhaps it will result in the one per cent no longer owning 48 per cent of the world’s wealth.
Nick Fillmore is a Canadian freelance journalist and blogger who specializes in environmental, finance, and developing country issues. He is a founder of the Canadian Association of Journalists. This article first appeared on The Tyee.
In fact, my standard advice to graduate students these days is “go to the computer science department and take a class in machine learning.” There have been very fruitful collaborations between computer scientists and statisticians in the last decade or so, and I…
Ethiopia ranks at 115 out of 124 countries in the ‘Human Capital Index’ because of its poor performance on educational outcomes, says the Human Capital Report 2015 issued by the World Economic Forum (WEF).
The index is dominated by European countries with two countries from the Asia and Pacific region and one from the North America region also making it into the top 10.
Finland topped the ranking of the Human Capital Index in 2015, scoring 86% of its human capital, followed by Norway, Switzerland, Canada and Japan.
Sweden, Denmark, the Netherlands, New Zealand and Belgium also seized the places in the top 10 list. Ethiopia scored 50.25 out of 100.
The leaders of the index are high-income economies that have placed importance on high educational attainment and a correspondingly large share of high-skilled employment.
The World Economic Forum (WEF) released the Human Capital Report 2015 in Geneva, Switzerland on Thursday 14 May 2015.
The WEF prepared the report in collaboration with Mercer, an American global human resource and related financial services consulting firm.
The report elaborates the status of different countries across the world on the Human Capital Index and provides key inputs for policy makers to augment capacities of human capital in 124 countries it has surveyed.
In the index, WEF highlighted Ethiopia’s scarcity of skilled employees, poor ability to nurture talent through educating, training and employing its people.
“Talent, not capital, will be the key factor linking innovation, competitiveness and growth in the 21st century,” said WEF Executive Chairman Klaus Schwab releasing the report at a news conference in Cologny, near Geneva, Switzerland.
In sub-Saharan Africa, Mauritius (72) holds the highest position in the region. While another six countries rank between 80 and 100, another 17 countries from Africa rank below 100 in the index. South Africa is in 92nd place and Kenya at 101. The region’s most populous country, Nigeria (120) is among the bottom three in the region, while the second most populous country, Ethiopia, is in 115th place. With the exception of the top-ranked country, the region is characterized by chronically low investment in education and learning.
Except Yemen (40.7) all the 10 poorest performers are African Countries: Ethiopia (50.25), Burkina Faso (49.22), Ivory Coast ( 49.02), Mali (48.51), Guinea (48.25), Nigeria (48.43), Burundi (46.76), Mauritania (42.29) and Chad (41.1).
The countries are ranked on the basis of 46 indicators that track “how well countries are developing and deploying their human capital focusing on education, skills and employment”.
The index takes a life-course approach to human capital, evaluating the levels of education, skills and employment available to people in five distinct age groups, starting from under 15 years to over 65 years. The aim is to assess the outcome of past and present investments in human capital and offer insight into what a country’s talent base will look like in the future.
Poverty can be an outcome of inefficient use of common resources and a result of exclusive mechanisms. Weak policy environment, inadequate infrastructures, weak access to technology and credits can cause poverty. Poverty can also result from the use of mechanisms by some groups in a society or community to exclude others from participating in democratic and economic development process (Ajakaiye and Adeyeye, 2002). This is defined by Hazell and Haddad ( 2001) as social deprivation…From the different reasons mentioned above in relation to poverty in developing countries, it is clear that strategies to alleviate poverty and help poor people must aim at improving the productivity and the living conditions of smallholder farmers and landless agriculture workers who constitute the majority of poor people. Furthermore, agriculture is seen as central to rural development. It is the major economic driver, the hub of rural activities, and permanent estate (IRG, 2002). The improvement in agriculture productivity is based on agricultural research and improved technologies. In many developing counties government must play an important role in this domain. However poor people may benefit from agriculture productivity only if favorable macroeconomic and trade policies good infrastructure and access to credit, land, and markets is in place.
As far as land is concerned, government in many developing countries must undertake land reform program not only for a better distribution of land but also to create mechanism capable to define and enforce property right. Land reform can promote smallholder entry into the market, reduce inequalities in land distribution, increase efficiency and thus boost output.
The ubiquitous problem of poverty continues to confound development practitioners, politicians and researchers alike. In spite of countless efforts to eliminate poverty over the past decade, 2.5 billion people live on less than $2 a day and 880 million people still live on less than $1. Most of these depend on agriculture for their livelihoods (World Development Report, 2008). While some progress has been made in some countries, the ambitious goal of halving poverty by the year 2015 appears like it will not be achieved. The objective of this paper is to characterize the problem of poverty and attempt to proffer possible insights on pathways that may jettison the rural poor out of misery into prosperous economic agents with a brighter hope for the future.
An Anatomy of Poverty
Poverty is a multifaceted concept. It affects many aspects of the human conditions, including physical, moral and psychological. According to Sen…
‘So yes, the media manipulates people into buying things they think they need to become someone they think they should be, but that is not the only way consumerism exists. We are just as easily manipulated by other people and by what is “normal” for our class – or our perceived class – in society. And of course, we always have a choice. The magazine or TV advertisement doesn’t force you off the couch and to the bank to extend your credit card limit, and drag you mercilessly to the nearest mall to purchase that iPhone you need to live . . . so next time your credit card maxes out, don’t be too quick to blame the media and advertising. It’s just as likely something (or someone) closer to home has planted and nourished that seed of consumerism inside you. And even that doesn’t have the final say, you do – so stop blaming the media and the rest of the world, and learn to budget, folks!’
Consumerism can be defined as the creation of material needs in order to swipe money off the unsuspecting consumer. It blurs the line between a need and a want, and companies all around the globe use it, via the media (TV, radio, print media etc.), to manipulate us into thinking we need their products. We will be happier, smarter, more beautiful, more popular . . . you get the picture. But do you want to know the really sad part? It nearly always works. That’s the common perception, anyway.
But is it that simple?
Consumerism is a current anxiety trend regarding contemporary media practices. And rightfully so – media practices promoting consumerism do have detrimental effects on society. Think of all the photo-shopped models in magazines. This is done to convince a person they will be of equal beauty or social status if they purchase the product the model is advertising, without the advertisement actually saying so (because…
‘The industrial age of energy and transportation will be over by 2030. Maybe before. Exponentially improving technologies such as solar, electric vehicles, and autonomous (self-driving) cars will disrupt and sweep away the energy and transportation industries as we know it. The same Silicon Valley ecosystem that created bit-based technologies that have disrupted atom-based industries is now creating bit- and electron-based technologies that will disrupt atom-based energy industries.
Clean Disruption projections (based on technology cost curves, business model innovation as well as product innovation) show that by 2030:
– All new energy will be provided by solar and wind.
– All new mass-market vehicles will be electric.
– All of these vehicles will be autonomous (self-driving).
– The new car market will shrink by 80%.
– Gasoline will be obsolete. Nuclear is already obsolete.
– Up to 80% of highways will be redundant.
– Up to 80% of parking spaces will be redundant.
– The concept of individual car ownership will be obsolete.
– The Car Insurance industry will be disrupted.
The Stone Age did not end because we ran out of rocks. It ended because a disruptive technology ushered in the Bronze Age. The era of centralized, command-and-control, extraction-resource-based energy sources (oil, gas, coal and nuclear) will not end because we run out of petroleum, natural gas, coal, or uranium. It will end because these energy sources, the business models they employ, and the products that sustain them will be disrupted by superior technologies, product architectures, and business models. ‘
If you hold shares in fossil fuel industries, whether coal, oil, or natural gas, or traditional car manufacturers,
And, if Lancaster, CA, is any indication of a trend, a “McMansion” will lose its value because it is powered by (a) fossil fuels, and (b) drawing on centralized power generation which will become increasingly expensive as utility companies’ customer base shrinks. And that assumes that the local municipality doesn’t orphan homes lacking solar power which, if adopted, will drive these homes value down faster.
‘A Brief Introduction to NON-COOPERATIVE GAME THEORY – Like most really powerful ideas, the basic notion of Nash equilibrium is very simple, even obvious. Its mathematical extensions and implications are not, however. The idea of this natural “sticking point” is that no single player can benefit from unilaterally changing his or her move — a non-cooperative best-response equilibrium. Competitive Markets come to rest at Nash equilibrium, and the special structure of competitive markets makes them efficient. (As we will see in another game.) But it is important to recognize that MOST Nash-Equilibria are NOT efficient. What do we mean by not efficient? It’s just the idea of getting the “whole pie” — that if we’re really using the whole pie, then no one can get any more unless someone else takes less. That’s the economist’s basic idea of allocative efficiency. A famous game is called “Chicken,” named after a famous adolescent hot-rod ceremony from the United States of the 1950s. Say that Boeing and Airbus are both considering entering the jumbo jet market, but that because of increasing returns to scale and relatively low demand, there is only enough room for one of them. The game matrix (called the “normal form” of a game) could look like this. (This example is taken from an article by Paul R. Krugman, “Is Free Trade Passe?” in the Journal of Economic Perspectives, Fall 1987.)’
Game theorists use the Nash equilibrium concept to analyze the outcome of the strategic interaction of several decision makers. In other words, it provides a way of predicting what will happen if several people or several institutions are making decisions at the same time, and if the outcome depends on the decisions of the others. The simple insight underlying John Nash’s idea is that one cannot predict the result of the choices of multiple decision makers if one analyzes those decisions in isolation. Instead, one must ask what each player would do, taking into account the decision-making of the others.Nash equilibrium has been used to analyze hostile situations like war and arms races (see prisoner’s dilemma), and also how conflict may be mitigated by repeated interaction (see tit-for-tat). It has also been used to study to what extent people with different preferences can cooperate (see battle of the sexes), and…
‘GDP is a highly inappropriate measure to gauge progress in Africa and moving beyond GDP will open up creative opportunities to fight poverty and achieve sustainable wellbeing. GDP does not capture informal economies, the contribution of subsistence farming, non-commercial agriculture and other localized forms of production and consumption. Through the introduction of new progress indicators that focus on human wellbeing, health and education, decent work and natural welfare, African countries may be encouraged to promote a different development paradigm . A networked economy, founded on localized forms of self-production and consumption would empower the millions of people that are at the moment left out of the apparent African economic miracle.’
‘Moreover, as an aggregate figure (or as an average, in the case of GDP per capita) it hides unequal distribution of income. Against this backdrop, it becomes clear that there are important structural reasons why one should be suspicious of the ‘Africa rising’ mantra. Most fastgrowing African economies are heavily dependent on exports of commodities. This means that when commodity prices drop at the global level, African economies languish. More dangerously, it means that the ‘growth’ we have seen in the past few years is largely the result of a statistical mirage. Most natural resources in Africa are not renewable: once they are taken out of the ground, they do not grow back. GDP does not measure the ‘loss’ of selling out the most precious resources African countries possess. What would the picture look like if such losses were deducted from GDP? The World Bank in 2013 adjusted net savings statistics, which subtracts natural resources depletion and environmental damage from national income, gives us the following: African countries have been reducing their wealth at the tune of 1.2% a year. Rather than growing, our continent’s economies have been shrinking.’
GSDR 2015 Brief How moving beyond GDP may help fight poverty in Africa
By Lorenzo Fioramonti*, University of Pretoria
The gross domestic product (GDP) is the world’s most powerful statistical measure. Its underlying economic principles have contributed to splitting the planet into two worlds: the ‘developed’ and the ‘developing’ countries and/or the North and the South. Paradoxically, the GDP mantra was imposed on poorer nations in spite of its creators’ conclusion that its approach should not be applied to countries largely dependent on informal economic structures, as these are not considered by income accounts, which are threatened by policies designed to increase GDP (Fioramonti 2013). The economist Simon Kuznets, one of the architects of the GDP system, is also known for having demonstrated how income inequality rises in times of fast GDP growth. His famous ‘curve’ shows how relative poverty is exacerbated, especially in under-industrialized countries, leading to a concentration of resources and income in the hands of a few. This brief makes the argument that GDP is a highly inappropriate measure to gauge progress, especially in the so-called developing world. It will therefore focus on Africa to show how moving beyond GDP may open up creative opportunities to fight poverty and achieve sustainable wellbeing. How the GDP measure is misleading Africa In May 2013, even the billionaire turned philanthropist Bill Gates, who is a fervent supporter of metric-driven approaches to development, publicly contested the validity of GDP: “I have long believed that GDP understates growth even in rich countries, where its measurement is quite sophisticated, because it is very difficult to compare the value of baskets of goods across different time periods,” but this problem is “particularly acute in Sub-Saharan Africa, owing to weak national statistics offices and historical biases that muddy crucial measurements” (Gates 2013). GDP does not capture informal economies, the contribution of subsistence farming, non-commercial agriculture and other localized forms of production and consumption (Jerven 2013). According to estimates published by the IMF in 2002, informal economies accounted for up to 44% of economic output in developing nations, 30% in transition economies, and 16% in the OECD countries (Schneider and Enste 2002), which fall outside the GDP net. Moreover, as an aggregate figure (or as an average, in the case of GDP per capita) it hides unequal distribution of income. Against this backdrop, it becomes clear that there are important structural reasons why one should be suspicious of the ‘Africa rising’ mantra. Most fastgrowing African economies are heavily dependent on exports of commodities. This means that when commodity prices drop at the global level, African economies languish. More dangerously, it means that the ‘growth’ we have seen in the past few years is largely the result of a statistical mirage. Most natural resources in Africa are not renewable: once they are taken out of the ground, they do not grow back. GDP does not measure the ‘loss’ of selling out the most precious resources African countries possess. What would the picture look like if such losses were deducted from GDP? The World Bank in 2013 adjusted net savings statistics, which subtracts natural resources depletion and environmental damage from national income, gives us the following: African countries have been reducing their wealth at the tune of 1.2% a year. Rather than growing, our continent’s economies have been shrinking. Sierra Leone has experienced net losses of about 20% of its entire GDP, Angola of 40%, Chad of 50% and the DRC of over 57%. The Bank confirms that “in poorer countries, natural capital is more important than produced capital,” thus suggesting that properly managing natural resources should become a fundamental component of development strategies, “particularly since the poorest households in those countries are usually the most dependent on these resources” (World Bank 2006: p. XVI). The real costs of GDP growth in Africa are the elephant in the room of the world’s economic debates. The current GDP paradigm sacrifices nature, which must be commoditized to become productive. It also neglects important components of the real economy, such as the informal sector, because they are not part of the formal market system. Policies that are designed to support GDP growth thus replace the informal (e.g. street vendors, subsistence farming, flea markets, family businesses, household production) with the formal (e.g. shopping malls, commercial farming, large infrastructure). While some can take advantage of this concentration of wealth, many are left behind. The OECD has confirmed the intimate link between rising inequality and GDP growth across the world (OECD 2011). This is further amplified in those countries where the informal economy provides a fundamental safety net to many poor households, as is the case throughout Africa. Why going ‘beyond’ GDP may create new opportunities The GDP model of growth privileges the formal at the expense of the informal, the big at the expense of the small. While complacent politicians, economists and the media celebrate Africa’s GDP ‘miracle’, there is another part of the continent rising. Disillusioned with the limited gains of market society, many Africans are raising their collective voices, whether through service delivery protests (as is the case in South Africa) or through permanent mobilizations (as we have seen in North Africa). This could very well be the beginning of a new era, in which more and more citizens repudiate an economic model that is losing traction also in the West, to explore new forms of human progress. Going beyond GDP in Africa may open a myriad of possibilities to redefine progress in the continent. Through the introduction of new indicators that focus on human wellbeing, health and education, decent work (rather than superficial counting of ‘employment’) and natural welfare, African countries may be encouraged to promote a different development paradigm. Various elements of Africa’s local cultures, from the widely heralded (and often abused) concept of Ubuntu to traditional experiences with cooperative schemes of production and consumption as well as communitydriven governance, may provide a fertile ground for localized and decentralized forms of development, in which enhancing human capabilities will overtake nominal income as the key objective of economic progress. Moreover, the abundance of solar energy should make it possible for entire communities to become energy independent through small-scale offthe-grid solutions, thus reinforcing a transition to a citizens-driven development model, rather than an economic paradigm based on exploitation of nature and mass consumption. A networked economy, founded on localized forms of self-production and consumption, in which the distinction between producers and consumers becomes increasingly fuzzier (this is a concept encapsulated in the idea of ‘prosumers’) would challenge the GDP conceptualizations of production and asset boundary, thus resulting in lower rates of nominal growth. Yet, it3 would empower the millions of people that are at the moment left out of the apparent African economic miracle. It would for instance allow for alternative forms of governance of natural resources, in which local communities would need to identify the best ways to interact with their ecosystems in a sustainable fashion, rather than resorting to the structural exploitation we have seen throughout the continent in times of state-led or market-driven accelerated growth. It would mean respecting the commons for what they are, rather than subjecting them to marketization and commodification as dictated by the GDP mantra.
* Lorenzo Fioramonti is the director of the Centre for the Study of Governance Innovation at the University of Pretoria, South Africa (www.governanceinnovation.org). He is one of the leading voices in the ‘Beyond GDP’ debate and the author of the bestselling books Gross Domestic Problem: The Politics Behind the World’s Most Powerful Number (2013) and How Numbers Rules the World: The Use and Abuse of Statistics in Global Politics (2014), both published by Zed Books. The views and opinions expressed are the authors’ and do not represent those of the Secretariat of the United Nations. Online publication or dissemination does not imply endorsement by the United Nations.
Money flows clockwise and goods flow counterclockwise.
Equilibrium is the point at which the demand and supply curve meet. If the market price is above this, there is a surplus. If it is below there is a shortage. Eventually the shortage and surplus will decrease and go back to equilibrium.
When there is a shortage, consumers bid the price up to comet for goods until the price goes back to equilibrium.
An increase of demand causes a shortage until equilibrium is reached at a higher price and quantity.
When there is a decrease in demand, there is a surplus. The excess goods decrease the price until a new equilibrium is reached.
A shift in supply and and demand causes a change in the quantity and price. One is always the indeterminate.
A price ceiling sets the maximum price that can be charged for a good, like rent control…
“The conventional public’s view of Central Banks is that a man walks into a bank and deposits money. Another man walks in and borrows it and the interaction of savings and borrowing with regard to risk and security form the rate of interest. IS-LM goes a bit further to explain this.
The reality – The Socialist Dictator Model. The Socialist Dictator is the Governor of the Central Bank. The Committee are the other board members. Together they ‘plan’ the interest rate for the entire country or continent i.e. ‘forward guidance’. Instruments; The Base Rate is short term market manipulation, Quantitative Easing is long term market manipulation. The Committee have the objectives of low, stable inflation and ‘financial stability’.”
The conventional public’s view of Central Banks is that a man walks into a bank and deposits money. Another man walks in and borrows it and the interaction of savings and borrowing with regard to risk and security form the rate of interest. IS-LM goes a bit further to explain this.
The reality – The Socialist Dictator Model. The Socialist Dictator is the Governor of the Central Bank. The Committee are the other board members. Together they ‘plan’ the interest rate for the entire country or continent i.e. ‘forward guidance’. Instruments; The Base Rate is short term market manipulation, Quantitative Easing is long term market manipulation. The Committee have the objectives of low, stable inflation and ‘financial stability’.
Assuming position x1;
The government can increase aggregate demand (the total amount of demand in the economy i.e. AD = C + I + G + (X – M))…
Billionaires are getting richer, according to a new study from Oxfam. Gather together the wealth of the world’s richest people, and you now only need 80 of them before there’s enough in the pot to equal everything owned by the poorest 50% of the rest of the world combined. Back in 2010, you’d have needed 388 of the world’s richest to balance those scales.
The richest of the top 1%, the top billionaires on Forbes’ rich list, have seen their wealth accumulate faster over the last five years than even the rest of the super-rich, Oxfam said. In 2010, the richest 80 people in the world had a net wealth of $1.3 trillion. By last year, that was up to 1.9 trillion, an increase of $600 billion.
Together with the rest of the 1%, that group owned 48% of global wealth in 2014. That’s more uneven than in 2010, when they owned a little over 44%.
However, according to Oxfam’s data, we’ve been here before. Back in 2000, the 1% owned a higher percentage of global wealth than they do today. For a few years, the trend seemed to show that number falling, as the world’s poorest clawed some of it back. But in the past five years, that’s reversed.
Part of the problem, as identified by Oxfam, is that the rate of increase for the rich has speeded up, and it’s now so much higher than that for everyone else that it’s increasing the gap.
The 1% has entered parlance, but who’s included? And do they constitute a problem or an asset?
Who are these people?
With a world population of 7.2 billion, there are around 72 million people in the top 1%—not all of whom are billionaires. In 2014, there were 1,645 people listed by Forbes as being billionaires, with Bill Gates back at the top after a year off. Of these, 90% are male, and 30% are American. And there’s evidence they’ve been running the show for a long, long time.
Supply and demand is perhaps one of the most fundamental concepts of economics and it is the backbone of a market economy.
Market Economy is a system largely determined by free enterprise. It is a system in which decision regarding investment, production and distribution are based on supply and demand, and prices of goods and services are determined in a free market and free price system. Markets determines the allocation of resources and economic resources are privately owned.
Market is made up of people, consumers and entrepreneurs, attempting to buy and sell on the best term possible. Through the grouping process of give and take, they move from relative ignorance about others’ wants and needs to a reasonably accurate understanding of how much can be bought and sold at what price. The market function as an ongoing information and exchange system.
‘Economics is the study of choices we make among our many wants and desires given our limited resources. With unlimited resources we wouldn’t have to worry about scarcity.
Resources are inputs that we use to produce goods and services. These include Capital, Entrepreneurship, Land and Labor (CELL). Capital is the goods we make to produce other goods. Entrepreneurship are machines that are used to make products. Land is our natural resources and Labor is the human effort put into making products. Scarcity is defined as products that are desirable but limited. These cause us to change our decision and and give up opportunities that we value, this is known as the Economic Problem.’
Economics is the study of choices we make among our many wants and desires given our limited resources. With unlimited resources we wouldn’t have to worry about scarcity.
Resources are inputs that we use to produce goods and services. These include Capital, Entrepreneurship, Land and Labor (CELL). Capital is the goods we make to produce other goods. Entrepreneurship are machines that are used to make products. Land is our natural resources and Labor is the human effort put into making products.
Scarcity is defined as products that are desirable but limited. These cause us to change our decision and and give up opportunities that we value, this is known as the Economic Problem. Every person, worker and firms all face the Economic Problem. Consumers have to decide what to buy, save and how much of their money to invest. Workers have to decide where to work, what to do…
The global economy is still struggling to gain momentum as many high-income countries continue to grapple with the legacies of the global financial crisis and emerging economies are less dynamic than in the past. After rising marginally in 2014, to 2.6 percent, world GDP will grow by an estimated 3.0 percent in 2015 and 3.3 percent in 2016, supported by gradual recovery in high-income countries, low oil prices, and receding domestic headwinds in developing countries. Developing economies are expected to see an increase in growth from 4.4 percent in 2014 to 4.8 percent and 5.3 percent in 2015 and 2016, respectively. Lower oil prices will lead to sizeable real income shifts to oil-importing countries from oil-exporting ones. Risks to the global outlook remain tilted downwards. Weak global trade growth is anticipated to persist during the forecast period, potentially for longer than currently expected should the Euro Area or Japan experience a prolonged period of stagnation or deflation. Financial conditions could become volatile as high-income economies tighten monetary policy on diverging timelines. Rapid reassessment of risk could also be triggered by a spike in geopolitical tensions, bouts of volatility in commodity markets, or financial stress in major emerging market economies. Worryingly, the weak recovery in many high-income economies and slowdowns in several large emerging markets may be a symptom of deeper structural weaknesses.
Developing countries face significant policy challenges in an environment of weak global growth and considerable uncertainty. Fiscal buffers need to be rebuilt to ensure the effectiveness of fiscal policy in the future. Central banks need to balance policies to support growth against measures to stabilize inflation and currencies or to bolster financial stability. Progress on implementing structural reforms must be continued to boost long-term growth. The fragile global outlook makes the implementation of growth enhancing policies and structural reforms even more urgent to improve the odds of achieving the World Bank Group’s goal of ending extreme poverty by 2030.
The current juncture presents a window of opportunity for reform. The sharp decline in oil prices means that policymakers could implement subsidy and tax reforms to help rebuild fiscal space or finance better targeted pro-poor policies while removing distortions that hinder activity. The challenge now is for policymakers to seize this opportunity.
Kaushik Basu, Chief Economist and Senior Vice President
The World Bank
“A developed country is one, where all its people are literate, have respect for their fellow beings around them, have job security, medical insurance, a well planned and organized retirement for elderly, an organized system of operating private business, an organized system of security, both for individual, family, business and as well as society, and most importantly, a vision to develop with science.”
‘The world’s debt situation has become a gigantic Ponzi scheme that makes all others look like children trying to sell candy to a baby. So what is the world situation on oil supply? There is currently an excess of supply and a reduction in usage. China is no longer using oil at a burn rate that makes the Americans look like Sunday drivers. But that is not all that is happening. Commodity prices are falling greatly due to lack of demand. China is no longer building factories and cities that will never be used. Their demand for electrical production has been reduced through lack of industrial activity and gigantic construction projects. In the past ten years the play was in commodity speculation and boy did the speculators speculate, steal, even. Not that demand has collapsed the prices for raw commodities has collapsed with it. Australia is hurting and will suffer some severe economic reverses. Already mines are closing and layoffs appearing. Their housing bubble is bursting as it their job markets. And they are the only ones. Many developing countries are starting to see their trade with China decline. Right now China has become the middle man in the world markets. Where it once produced products using its own labor forces and factories, it has out sourced the unfinished parts to the various undeveloped countries where labor is still cheaper. But here in America we have seen a downturn in demand of goods coming from China.’
There is an old saying about markets: “The market can remain irrational longer than you have money.” And the fact is, there is very little rationality to the market whether it be stocks, bonds, commodities, or Forex. These past two years have seen great difficulty for the rational investor to make money by reason of sane investments, only the trend followers are able to pursue profit that appears to be more the making of lucky circumstances than anything else. Indeed, investing these days is more akin to betting against the house. And no wonder since the quantitative easing by the Federal Reserve and the issuance of an extreme amount of debt over the several past decades has made investment an exercise in statistical probabilities rather than an analysis of price to earnings, return on investment, and the other measures commonly used in the evaluation of stocks. The chase after ever…
Decolonising Development:The Political and Cultural Locations of Nationalism and National Self-determination (the Case of Oromia)
Several scholars have argued that national self-determination is a claim for cultural independence and that nationalism in general is based on the right to cultural autonomy, right to a culture. In the Oromo context, national self-determination is about the representation of collective identity and dignity. It is the demand of the Oromo people to govern themselves. Practically, this can be interpreted as let us be governed by people who are like us, people of our nationality or people who accept and respect our value system. For the last hundred years and so, the Oromo nation has suffered from Abyssinian expansionism, social, ecological and economic destruction and continuous and intensive cultural and physical genocide. The Abyssinians and Oromians connections have been the coloniser (refers to the former) and the colonised (refers to the latter) relationships. Contrary to the Ethiopianist discourse, they have not developed a common unifying identity, social and political system. While the Abyssinians feel a sense of glory of their kings, warlords and dictators, the Oromians feel victimisation to these rulers, so they have not emerged a common ancestry, culture and collective memory, which can result in common ‘Ethiopian’ identity. From the perspective of Oromo social construction, the present Ethiopian domination over Oromia is a continuation of what pervious generations of Oromo nation had experienced. Thus, the Oromo people, sees the present political arrangement as illegitimate because it is a rule by the people who have engaged in destroying them. So, they claim not only cultural but also political independence. Oromo nationalism is also very democratic. It follows the UN principles of self-determination for the citizens of Oromia, claiming independence from the tyranny of Ethiopian Empire. The latter has been constructed based on Amhara-Tigre nationalism. The Oromo nationalism also offers democratic solutions to the ethnic minorities in the Ethiopian Empire. Scholars of Oromo studies claim that there is fundamental behavioural, linguistic, ethnic and cultural differences between the Abyssinians (northern) and their subjects (Southern). The Oromo, Sidama, Afar and the Ogaden (Ogaden Somalians) nations, beyond their common Cushitic progeny, they have common experiences of victimisation and illegitimately absorbed by Abyssinian southward expansion. Their collective memory of past experiences and present victimisation are making common identity. This identity is a key to understand politics there and to work together for self-determination, to recover their lost humanity.
For the early version of this article, see Temesgen M. Erena, The Political and Cultural Locations National Self – Determination, Oromia Quarterly, Vol. II, No.2, March 1999; Temesgen, M. Erena, Oromia: The Nation and the Politics of National Self – Determination, Oromia Quarterly, Vol. I, No.2, December 1997, ISSN 1460-1346.
Man knows himself only insofar as he knows the world, and becomes aware of the world only in himself, and of himself only in it. Every new object, well observed, opens a new organ in ourselves.
-Goethe, Maximen und Reflexionen, VI Build therefore your own world. -Ralph Waldo Emerson, Nature
The passions of national freedom and national interest are probably the strongest in the whole political spectrum that characterises the present world. Kellas (1998) holds that it is stronger than the passions aroused by religion, class, individual or group interest. This passion is not all futile, either. In Gellener’s (1983) understanding, nationalism has been considered as essential to the establishment of a modern industrial society. According to Smith (1991), it is ‘the sole vision and rationale of political solidarity.’ For Kellas (1998), it provides legitimacy to the state, and inspires its citizens to feel an emotional attachment towards it. It can be a source of creativity in the arts, and enterprise in the economy. Its power to mobilise political engagement is unrivalled, particularly in the vital activity of nation building. It is intimately linked with the operation of popular democracy. Indeed, the global pattern is a mosaic of political drives, economic interests, linguistic pride, cultural imperatives, psychological needs and nations seeking identity. These factors are manifesting as a powerful staying power in a modern Africa, either. As European colonialism and socialism melted away, the perpetual existence of the backlash against ‘neo-colonial’ colony colonialism and the reviving of national selfdom become more and more significant in social and political dynamics of contemporary multi-ethno-nation African societies. The African experience is motivated by the same aspirations as that of elsewhere. At its root is a need for freedom, dignity, for the right of people of distinct social communities to function freely and independently. In this regard, Oromia represents the case of rejuvenating claim for national freedom and the struggle against more than a century old Abyssinian Empire colonialism in Africa. Oromia is a homeland for an Oromo nation, a group of people with a common culture and value system (seera fi aadaa), language ( Afaan Oromo), political institutions (Gadaa), and historical memories and experiences. Oromia is the single largest, homogeneous and endogenous nation in Africa with a population of 40 to 45 million. Both in terms of territorial and population size, more than two-third’s today’s sovereign states that are making members of UN (United Nations) are smaller than Oromia. The Cushite (see Demie, 1998) Oromo people have inhibited their homeland, Oromia, since pre-history and in antiquity were the agents of humanity’s documented Cushitic civilisation in terms of science, technology, art, political and moral philosophy. The links between the Oromo and the ancient civilisations of Babylon, Cush and Egypt has been discussed in Asfaw Beyene (1992) and John Sorenson (1998) scholarly works. Utilising prodigious evidence from history, philosophy, archaeology and linguistics, Diop (1974 and 1991) confirms that the Cushite Egyptian civilisation was emerged from the Cushite civilisations of North East Africa, particularly, the present day Western Sudan and upper Nile Oromia (also known as Cush or Punt). Indeed, except the name of places, saints and prophets, many of the Old Testament and the Holy Koran moral texts are copies of the Oromo moral codes. The formers are written documents while the latter are orally transmitted. Since the late 1880s the Oromo people have disowned their sovereignty. They disowned their autonomous institutions of governance, culture, education, creativity, business, commerce, etc. Thus, they have been claiming for national self-determination, national-self government and the right to their own state and resist the Abyssinian Empire saver (supremacist’s) nationalism. The Oromians are not only against the quality of Ethiopian Empire governance but also against the philosophy on which it is based: domination, dehumanisation, inequality, double standard, hypocrisy, deceit, exclusion, chauvinism, war institution, rent-seeking, extractive state, conservatism, feudalism, Aste fundamentalism (Aste Tewodros, Aste Yohannis, Aste Menelik, Aste Haile Sellasie), etc. The political goal of national self-determination (national self-government) is asserted in the outlook and attitudes of the Oromo political and social organisations. Of course, the Oromo nationalism, which supports the interests and identity of the Oromo people, is a more subtle, complex and widespread phenomenon than common understanding and observation. It is within this context that we are going to discuss the Oromos’ politics of national self-determination and the search for the national homeland, the demand for reinventing a state of their own in the following sections.
Defining Nation, Nationalism and Self- determination
To define nation and nationalism is as Benjamin Akzin (1964, pp. 7-10) discussed five decades ago, to enter into a terminological jungle in which one easily gets lost. Different scholarly disciplines have their own more or less established and more or less peculiar ways of dealing with nation and nationalism. Ideally, our definition of nation and nationalism should be induced of elements of nationalist ideology. Getting at such a definition has confirmed phenomenally strenuous. Hugh Seton-Watson, an authority in this domain, has deduced that ‘no scientific definition’ of a nation can be concocted. All that we can find to say is that a nation exists when significant number of people in a community consider themselves to form a nation, or behave as if they formed one (Seton-Watson, 1982, p.5).Van den Berghe (1981) defines a nation as a politically conscious ethnic group. Several attempts have been made at making a cardinalist definition of the term, pointing out one or more key cultural variables as defining variables. Among those tried are language, religion, common history/descent, ethnicity/race, statehood and common territory (homeland). For a group of people to be termed a nation, its members typically have to share several of these characteristics, although historically, one criterion may have been predominant (for example, language in Germany, or culture and history in France). In the case of Oromo, common language (Afaan Oromo), common territory (Biyya Oromo, dangaa Oromiyaa or Oromia), common historical experiences (victimisation to Ethiopian Empire rules or Abyssinocracy) are particularly very significant. Stalin made his undertaking in 1913. His definition includes four criteria: the members of a nation live under the same economic conditions, on the same territory, speak the same language, and have similar culture and national character (Seton-Watson, 1982, p.14). Neither Ernest Gellner nor Eric Hobsbawn, two influencials, gave definite definitions of the nation in their major achievements. Indeed, they are very hostile towards what they define as nationalism. ‘…For ever single nationalism which has so far raised its ugly head…’ (Gellner, 1983, p.45), this is a Gellner’s conception and sees the world as naturally divided into nations, each with its own individuality. This implies an acceptance of the nationalist self-perception. There are also other conceptualisations. A social anthropologist, Thomas Hylland Eriksen (1992, p. 220) says ‘a nation is an ethnic group whose leaders have either achieved, or aspire to achieve, a state where its cultural group is hegemonic’, Anthony H. Birch (1989, p.6) considers that a nation is best defined as ‘a society which either governs itself today, or has done so in the past, or has a credible claim to do so in the not-too- distant future. Kellas (1998) defines the nation as a group of people who feel themselves to be a community bound together by ties of history, culture and common ancestry. Nations have ‘objective’ characteristics, which may include a territory, a language, a religion, or common descent, and ‘subjective’ characteristics, essentially a people’s awareness of its nationality and affection for it. In the last resort it is ‘the supreme loyalty’ for people who are prepared to die for their nation. The definition of ‘nation’ which we will make use of in the following is one suggested by Anthony D. Smith (1983,pp. 27-109, 1991, p. 14; 1995); a definition mastering well the ‘sounding board’ dimension. Smith here defines a nation as ‘a named human population sharing a historic territory, common myths and historical memories, a mass, public culture, a common economy and common legal rights and duties for all members. A recent definition of Smith holds nationalism, one manifestation of national-self-determination, as ‘an ideological movement for attaining and maintaining autonomy, unity and identity on behalf of a population deemed by some of its members to constitute an actual or potential ‘nation’ (Smith, 1991, p. 73; 1995). For Smith nationalism has a deep ethnic roots and rejuvenates itself in response to global and domestic impulses. While the phenomenon of globalisation and technocratic culture are there, nationalism is an eternal nature and nourishes and propels itself on technocratic innovations. In this context, national self-determination may be defined as many part aspirations of a nation: To be free to freely determine one’s own national identity, culture, including language, education, religion, and form of government, to be free of rule by another ‘nation’, that is to overcome social and political systems of domination and exclusion in which nations other than one’s own wield predominant power. To be free to select its own form of government; and those governed within it have the right of unflagging consent.
Culture and the Politics of Self-determination
Nation, nationalism and national self-determination are commanding attentions. One of the perennial issues within nationalism is whether national self-determination can stand alone, or whether it requires a ‘qualifier’ from within cultural or political ideas or both to clarify its precise cultural and political location. Several scholars have argued that national self-determination is a claim for cultural independence and that nationalism in general is based on the right to cultural independence and that nationalism is based on the right to a culture. Nielson, for example, peers a nation as groups of people whom ‘perceive themselves as having a distinct culture and traditions’, and Tamir presents that a nation is a community in which individuals develop their culture, and they therefore regard their place within a nation as membership in a cultural group. Indeed, she argues that ‘the right to national-self determination stakes a cultural rather than a political claim, namely, it is the right to preserve the existence of a nation as a distinct cultural entity.’ Will the people who demand national self-determination be satisfied with such an arrangement? Tamir gives credence to that the idea of basing the right to self-determination on the right to a culture is the one that has best conformity with a liberal internationalist viewpoint. That is thinkable, but international liberalism is incompetent on this particular matter. A nationalism, which is based on culture and cultural distinctions, was not very long a go. It is a concept that characteristic the thesis of right wing, or romantic theorists such as Herder. Indeed, Herder’s nationalism was not political, and it distrusted a state as something external, mechanical, not emerging spontaneously from the life of the people. Nevertheless, in the Oromo context the claim for national self-determination is a political rather than a cultural one. If we look at the distinction between the two, it would seem that the claim for national self-determination involves more than a demand to be tolerated while the cultural question is. For example, the Catalan’s and Quebecois’ culture and identity have been tolerated and respected to some extent, and yet many of them thought that this did not reflect a situation of self-determination. Indeed, meeting their claim would involve legislation and redefinition of institutions within the state, and perhaps even a new state. In the Oromo case the demand is actually the claim to have control over their lives. This does not mean over every individual’s private life, but over the public aspect of one’s existence, i.e. the system of mutual relationships, which reflect and sustain one’s membership of a certain collective. Here the self is conceptualised within the context of community, but one that has to be real, actual, and functioning and performing. Otherwise these communal ties are too abstract, which makes it impossible for the self to be defined by them. The statement of Cohen has to be recalled: ‘A person does not only need to develop and enjoy his powers. He needs to know who he is, and how his identity connects him with particular others. He must… find something outside himself which he did not create… He must be able to identify himself with some part of objective social reality’ (Cohen, 1988). Moreover, self-realisation, however, cannot be merely a mental situation; thus this community cannot be only cultural. It must be a political situation at least so that, in order for the Oromo people to realise themselves, they must not be dependent on the goodwill of a second party. They then must be certain that their self-realisation in all spheres of life will not be prevented by the Abyssinian government, the TPLF, the Orthodox Church, and so forth. They should therefore be politically active and watch such institutions carefully. In addition, they must participate in politics in order to decide collectively upon public matters, which influence their self-realisation. So the Oromos claim for national-self determination is about the realisation of their potential status, ability and collective character, which may be achieved only through participation in autonomous political institutions. But for more than a century Oromos have been denied access to these institutions, either officially or in practice. In other words, if Oromos as a nation achieve self-determination they will better able to participate, better represented, better able to deliberate, gain much more control over their life than formerly and more autonomous. The Oromos demand for national self-determination thus, aims at establishing those institutions, which are needed for the realisation of the self-determination. When an Oromo demands national self-determination, he/she is not asserting that he/she would like to control his/her private life, e.g. his/her job, his/her shopping activities, his/her love affairs. Many Oromos do not control these aspects of their lives and yet nevertheless demand national self-determination. But the same principle also applies to cultural life. The Oromos may be allowed more-or-less to use their language, have their own newspapers and theatre, and the freedom of worship, etc. which are making cultural freedom. Actually, these rights are hardly exist at present. But when they claim national self-determination they are not only referring to these aspects of life, as political community: they want to be able to form and choose among and vote for the Oromo political parties, to observe the Oromo constitutional laws, to pay taxes to an Oromo authority, and to have a history (and indeed, myth) of independent Oromo state, from which their identity and self-determination can derive. Thus, the Oromo’s Declaration for Independence will emphasise parliamentary participation and the need to form a constitution, rather than cultural activities. In general the Oromos demand for national self-determination entails that the individuals in this nation should be citizens, engaged in politics as members of a community committed to the realisation of certain (their own) common goods, rather than participating as individuals who seek their self-interests, as it is implied by the right- to- culture school of thought and Liberal Internationalists. Perhaps for this reason Margalit and Halbertal revise the right-to- culture argument, arguing that the right is to a certain culture rather than to culture. A certain culture, then, becomes a common good. And yet, this is not enough, because they still regard the common good in cultural rather than political terms: ‘shared values and symbols… are meant to serve as the focus for citizens’ identification with the state, as well as the sources of their willingness to defend it even at the risk of their lives (Margalit and Halbertal, 1994). Why, then, do theories adhere to the culture discourse? Of course, for most of the Western theorists, the term national self-determination is affiliated to the strive to become part of humanity, to regain the human condition of autonomy; it is adjoined to the struggle to be part of the free world, of the more progressive forces; it is seen as decolonisation, as civilisation, as an attempt made to become part of the world of liberty, rights, and justice. But, it is seen as part of centrifugal forces, from the centre to the global, universalism or what Lane (1974) calls as ‘total situation’ or citizenship based on individual freedom and social justice. These theorists, therefore, universalise the notion of national self-determination: they make it part of liberalism. The liberals’ universal approach tends to be uniformist. This makes a society rootless and a citizen far removed from those who control his/her destiny. On the other hand, the notion as it is put forward and used by the Oromos that the demand for national self-determination is also centripetal, from the global and the greater units to the smaller ones. These groups demand the disengagement from the ‘other’, the global, the colonist, even from other humanity, by asserting that ‘we are not merely the essential equal and part of humanity, but rather we are also different and distinct: we have our own political identity, which we want to preserve, sustain, and establish institutionally, like the Scottish vision in multi-nation state Europe. This is the language of liberation from colonisation. It is also the language of particularisation within the universal or the global, and it seems that the uniformist approach is not sensitive enough to the real Oromos problems. Thus, the Oromos quest for self-determination involves the ultimate goal of particularism (its own unique space), reinventing the Oromia State, owning the national homeland. Of course, in a heterogeneous society of the Ethiopian Empire, though uniformity may simplify system of control, social justice will not be attained in one vast monolithic block of oppressed by colonial legislation, bureaucrats and its armies. An important work of Professor Asafa Jalata, an authority in the study of Oromo nationalism kindly quoted as’ The Oromo question involves both colonialism and ethno nationalism. Ethiopian colonialism has been imposed by global capitalism on the Oromo nation. Ethiopians, both Amharas and Tigrayans, through establishing settler colonialism in Oromia, have systematically killed millions of Oromo and expropriated their lands and other resources from the last decades of the nineteenth century until today. Ethiopian colonialists already destroyed the people called Agaw by taking their lands, systematically killing them, and assimilating the survivors. They attempt to do the same thing to the Oromo by destroying the Oromo national movement, confiscating Oromo lands, and forcing the remaining Oromo into ‘settlement villages’ or (reservations). Many times, some Oromo organisations attempted to democratize Ethiopia so that the Oromo would achieve equal citizenship rights and maintain their ethno cultural identity. Determined to maintain their colonial domination and to destroy the Oromo cultural personality through ethnocide or assimilation, Ethiopian colonialists destroyed or suppressed those Oromo political forces that attempted to transform Ethiopia into a multinational democratic society. Therefore, most Oromos are convinced that their rights and freedom cannot be obtained and respected without creating their own state, or state that they can create as equal partners with other ethno national groups interested in forming a multinational democratic society to promote ethno cultural diversity and human freedom. Hence, Oromo nationalism is an ideology of the subjugated Oromo who seek human rights, freedom, justice, and democracy’ (Jalata, 1997). In fact social justice can be attained when and only when the oppressed majority able to rule its homeland. The Oromos work for national self-determination is the great humanist and historical task in terms of Freire (1993) argument ‘To liberate themselves and their oppressors as well. The oppressors, who oppress, exploit, and rape by virtue of their power, cannot find in this power the strength to liberate either the oppressed or themselves. Only power that springs from the weakness of the oppressed will be sufficiently strong to free both. Any ‘attempt to soften the power of the oppressor in difference to the weakness of the oppressed almost always manifest itself in the form of false generosity; indeed, the attempt never goes beyond this.’ In this context, for Oromos in order to have the continued opportunity to express their ‘generosity,’ the Habasha colonist must perpetuate injustice, too. Tyranny is the permanent fount of this ‘generosity,’ that sustains at the price of death, dehumanisation, despair and poverty. ‘True generosity consists precisely in fighting to destroy the causes which nourish false charity.’ (Freire, 1993). For further discussions on Oromo nationalism, universalism, globalism, Ethiopianist discourses and Oromo Nationalism, see Sorenson (1998) and Sisai Ibssa (1998).
Man as a social animal always seeks his own territory and belongings to a social group in which his identity and sense of community is observed and respected. In the defence of the cause for social justice and social ecology, these are basic tenets to backlash against the danger of the rhetoric of universalism, polyarchy and false perspectives of social uniformity, which appear to appreciate the social problems from a single privileged point. Georg Hegel, The Phenomenology of Mind ( New York, 1967 edition), in his famous philosophical discussion of the relationship between ‘lordship and bondage’ maintained that a single consciousness could know itself only through another, even in a condition of totally unequal power relationship. According to this philosophical model, the lord (the oppressor) is lord only through the relationship with a bondservant (the oppressed, the one whose humanity is stolen). In the relationship, however, the other is annulled. The self of the mastery, the lord, derives from the conquest and negation of the servant, the bond. Only recognition of the selfhood of the other permits for its annulations. Thus, lordship covertly recognises the separate identity of the dominated. They are normally equal selves locked into unequal hierarchy. Metaphorically, Hegel’s dialectics of lordship and bondage is very important to understand the Ethiopian domination over Oromia. However, in the Ethiopianist discourse, the essential equality of the selves has been escaped totally. Rather, the persisting hierarchy has taken for granted. According to Sorenson (1998), Ethiopianist scholars like Clapham, Sven Rubenson and Levine because of their attachment to one version of the Ethiopian past and present make them either or unwilling to engage with the full complexity of the problem. From this point of view, to accept the unchanging polarity of Ethiopia and Oromia in the lordship-bondage relationship is to succumb to a structure of Ethiopian aggression and colonialism. The Oromians demand for national self-determination is, however, the civilised step out of the polarity upon which the coercive hierarchy relies, it is the collective political demand, as its main purpose is to achieve the good of the social whole, humanisation, the essential liberation of the Oromo national identity, dignity and the reinvention of Oromia as a sovereign state. The Abyssinian occupation of Oromia, the existence of the Abyssinian Rule, war-lordism and their armies in Oromia and the making of Finfinnee their garrison station, the centre of their crowds is not only an act of conquest, aggression and colonialism but also, from Oromo perspective, such elements are symbols of bondage and slavery that negate the Oromo selfhood as equal essential. For the last over hundred years, the Oromo nation has disowned selfhood, its own state or administration, and lived as a bondage of Abyssinia. The Abyssinian administration which has undermined the Oromo national traditions, exploited it economically, and maintained order through mechanical and repressive means- such a nation actually must seek national self-determination to foster within its politics, to bring dignity, justice, freedom and democracy and to survival as essential equal, as a nation and as part of humanity and its civilisation. It is necessary for Oromians to build the world of their own, a world which make them capable to sustain as a group of human people. They must able to liberate themselves and the violent, the oppressor too. In this context, the Oromo issue is a test case to the deceptive ‘democracy world-wide’ which is being advocated in the USA foreign policy and manipulated by the neo-nafxanyas (see Ibssa, 1998). It is a challenge to contemporary theories of democracy and polyarchy (Robinson, 1997) and actors of post cold war Ethiopian politics who simply take for granted that the boundaries and powers of political community in the ‘Horn’ have already been settled. Thanks to the dedicated works of human rights activists, particularly the OSG (the Oromia Support Group) and its UK based publication, Sagalee Haaraa, we have been well informed on plights of human population and their environment in the entire region. We are interested to recommend this publication to all actors of the region. In this context, we are confident to say that Ethiopian democracy rhetoric or federalism sham politics is nothing more than a fig leaf, covering up the continuation of an extraction of the ‘politics of the belly’, in terms of Bayart (1993) from ‘prudish eye of the West.’ Its democratic rhetoric is a new type of rent seeking (extracting economic rent). By making believe, it enables the collection of international aid that includes diplomatic, military and humanitarian. It enables the seizure of the resources of the modern economy for the benefit of the Tigrayan elites. The situation is not in democracy’s favour, rather it is a situation that the Tyranny is retaining control over the security forces, economic rents and the support of the West. Such manipulation is not new for Africa. Menilik, Haile sellassie, Mengistu, Mobutu, Biya, Senghor and Diouf did the same thing either in Ethiopia or elsewhere in the continent at one time or another. The Quote from Bayart’s (1993) African analyis comes to our mind ‘…The support of western powers and multilateral institutions of Bretton Woods and the Vatcan, who despite having waved the flag of democratic conditionality and respect for human rights, have not dared to pursue such sentiments to their logical conclusion and have continued to think in terms of ‘Mobutu or Chaos’ where Gorbachev given up saying ‘Ceaucescu or chaos’…’. Indeed, very recently, we have read the deceptive descriptions to neo-Mobutu, neo-Mengistu, etc.: democratic, new generation, confident and pragmatic, etc. Sadly, everything changes so that everything stays the same. Nevertheless, the oppressed Oromos are not passive objects, either. They have not allowed themselves to be ‘captured’, as in the past they have demonstrated their historical ability to resist dehumanisation, despair and poverty, and predictably will continue to resist until the justice will come to them. An everyday Oromo coins the following: ‘Victory to the Oromo people! Oromia shall be free!’ We feel moral and social responsibility to support the just cause of fellow humanity.
Listen to Oromo Voice Radio (OVR) Broadcast Afaan Oromo interviews with Dr. Almayayyoo Birru on topic of Self-determination:
‘External self-determination, in particular, seems to carry dual meaning. On the one hand it is taken to mean full independent statehood, while on the other hand it is taken to mean external recognition by other states within the
Most economists agree that Oil is considered to be a normal good, by normal we mean that as your income goes up you would buy more of that good, that is a basic definition. As oil prices fall you would expect that oil consumption would increase, however in the short-run that is not the case. Oil in fact is inelastic in the short run, inelastic means that its consumption is not sensitive to price. Companies still need to operate at the same rate to satisfy their operations and people still need to drive to get to work. It takes time for markets to adjust and people to change their way of living. The long run is a different topic by itself and is out of the scope of this post. You are not going to buy a 8 cylinder pick up after you hear oil fell this month are you?
We can then agree that oil consumption would not change in the short run. Now we can check the graph that I have made to illustrate a theoretical approach of what consumers are going through at this point of time.
Most economists agree that Oil is considered to be a normal good, by normal we mean that as your income goes up you would buy more of that good, that is a basic definition. As oil prices fall you would expect that oil consumption would increase, however in the short-run that is not the case. Oil in fact is inelastic in the short run, inelastic means that its consumption is not sensitive to price. Companies still need to operate at the same rate to satisfy their operations and people still need to drive to get to work. It takes time for markets to adjust and people to change their way of living. The long run is a different topic by itself and is out of the scope of this post. You are not going to buy a 8 cylinder pick up after you hear oil fell this month are you?
The AU Commissioner for Economic Affairs, Anthony Maruping, told journalists in Malabo on Monday that the Fund would work to correct balances of payment positions across Africa.
He said such positions were mainly caused by low export of commodities and high import volumes which exerted negative burden on currency stability.
The AMF would be established to basically help to tackle macro-economic matters in Africa, he added.
The commissioner said, “It is not true that there has been an economic leadership gap in Africa. We are creating an African institution because the UN Economic Commission for Africa is a global body.”
Mr. Maruping said the Fund was expected to create proper lending system in Africa to correct imbalance in payments within the continent and ensure exchange rate stability.
“It will also work toward African currency convertibility, ensuring that currencies across Africa can be exchangeable. The Fund will promote monetary cooperation on the continent and speed up economic development. To achieve these objectives, the Fund will design formulas to lower the debt burden and other debt management policies in Africa and facilitate development of the African financial markets,” he said.
The AU official said the Fund would have an authorised share capital denomination of $100 (N16,285) per share with a callable share capital of 50 per cent of the authorised share capital, which is $11.32 (N1,845).
The paid up share capital would be at least 50 per cent of the callable share capital $5.66 billion (N922 billion) denominated in $100, he added.
He said South Africa was expected to get the highest allocation of the 500,000 shares, with an 8.05 per share, translating into nearly $1billion (N163 billion), followed by Nigeria at 7.94 per cent, translating into $899 million (N16 billion) in capital contributions.
Egypt, Africa’s third largest economy, was expected to subscribe for 6.12 per cent of the shares, contributing $693 million (N112 billion), followed by Algeria, to be allocated 4.59 per cent of the shares at $520 million (N84 billion).
Each country was expected to pay for its subscription at once or in four instalments of 25 per cent of the amount and payment period would last between the initial four years and eight years.
The first payment is expected 60 days after the AMF treaty enters force.
The countries are also allowed to issue bonds in U.S. dollars which are non-interest earning.
The Fund would invest in international financial markets and expected to maintain a sound credit rating.
The AMF will be based in Yaounde, Cameroon.
See also The Creation of the African Monetary Fund @ http://openanthropology.org/libya/AUamf.pdf
In today’s busy world, we’ve become a people obsessed with productivity and “work hacks.”
Getting more done in less time allows us to get ahead, and even gives us more availability to do the things we love outside of work.
The problem we run into is that it is easy to get motivated, but hard to stay disciplined.
Most of us look at productivity in the wrong way: task management tools are shiny at first and then go unused. Being chained to your desk is as unhealthy as it is unproductive.
Achievement isn’t about doing everything, it’s about doing the right things–productivity means saying no.
Focus and consistency are the bread-and-butter of being truly productive. Right now, we’ll take a look at the science behind how the brain works in the synthesis state, and what changes you can make for the better.
The first thing to acknowledge in the pursuit of getting more done is the mountain of evidence that suggests willpower alone will not be enough to stay productive.
According to research by Janet Polivy, our brain fears big projects and often fails to commit to long-term goals because we’re susceptible to “abandoning ship” at the first sign of distress.
Think of the last time you went on a failed diet.
You stocked your fridge with the healthiest foods and planned to exercise every day… until the first day you slipped up. After that, it was back to your old ways.
To make matters worse, research by Kenneth McGraw was able to show that the biggest “wall” to success was often just getting started. Additional research in this area suggests that we’re prone to procrastinating on large projects because we visualize the worst parts; the perfect way to delay getting started.
According to researcher John Bargh, your brain will attempt to “simulate” real productive work by avoiding big projects and focusing on small, mindless tasks to fill your time.
“Big project due tomorrow? Better reorganize my movie collection!”
Perhaps worst of all, numerous studies on the concept of “ego-depletion” have provided some evidence that suggests our willpower is a limited resource that can be used up in it’s entirety. The more you fight it, the more gas you burn. An empty tank leads to empty motivation.
With all of that stacked against us, what can we possibly do to be more productive?
In order to figure this out, one of our best bets is to observe the habits of consistently productive people.
The habits of productive people
If I were to ask to describe the practice regiments of world-class musicians, you’d probably envision a shut-in artist who plays all day long and then tucks in their instrument at night.
Amazingly though, research by Anders Ericsson that examined the practice sessions of elite violinists clearly showed that the best performers were not spending more time on the violin, but rather were being more productive during their practice sessions.
Better yet, the most elite players were getting more sleep on average than everyone else.
How is that possible?
Subsequent research by Anders reveals the answer: the best players were engaging in more “deliberate practice.” You’ve heard the term, but beyond the hype, what is it all about?
It’s nothing more than spending time on the hardest tasks, and being better at managing your energy levels.
Think of it this way: If you were trying to get better at basketball, you’d be much better off practicing specific drills for two hours rather than “shooting hoops” all day long.
Since deliberate practice requires you to spend more brainpower than busy work, how can you implement it without draining your willpower?
The first answer isn’t very sexy, but it’s necessary: the best way to overcome your fear of spending a lot of energy on a big project is to simply get started.
The Zeigarnik Effect (mentioned above) is a construct that psychologists have observed in numerous studies on “suspense.” One such study gave participants brain-buster puzzles to complete, but not enough time to complete them. The surprising thing was, even when participants were asked to stop, over 90% of them went on to complete the puzzles anyway.
According to the lead researcher:
“It seems to be human nature to finish what we start and, if it is not finished, we experience dissonance.”
It’s the same thing that happens when we become engaged in a story in a book, movie or TV show: we want to see how it ends.
You can use this knowledge to your advantage by just getting started on that next big project; in the most basic sense, don’t focus your motivation on doing Activity X. Instead, focus on making Activity X easier to do.
Start the night before. Is your to-do list already written up? Is your place of work ready for you to get started? Break down barriers of friction before relying on willpower.
On working like an expert
A multitude of research has shown us that discipline is best maintained through habits, not through willpower.
According to Tony Schwartz, CEO of The Energy Project, most people hold their productivity back by not rigidly scheduling work and rest breaks throughout the day.
Since most of us are worried about willpower, we don’t push ourselves to maximum output: instead of “giving our all” for brief sessions, we distribute our effort throughout the day, leading us back to busywork to fill our time.
What should we do instead?
Schwartz often cites a research study conducted by the Federal Aviation Administration that revealed how short breaks between longer working sessions resulted in a 16% improvement in awareness and focus.
Research from Peretz Lavie on ultradian rhythms matches up with these findings: longer productive sessions (of 90 minutes) followed by short breaks (of no more than 15-20 minutes) sync more closely with our natural energy cycles and allow us to maintain a better focus and higher energy level throughout the day.
Both of these studies on energy management match up with the practice schedules of the violinists: the most common regimen for the cream of the crop players was a 90-minute block of intense practice followed by a 15-minute break.
The moral of the story is that it’s hard to be productive while trying to maintain high energy levels through your entire day.
It’s much easier to work intensely when you know that a break is just around the corner, not at the end of the day. Instead of trying to conserve energy for hours, break big projects down into smaller chunks and plan a recovery period right after.
For projects done on your own time, try scheduling blocks of 90-minute work sessions with a planned cool down time of 15 minutes directly afterwards. When you know a break is on the horizon, you won’t try to “pace yourself” with your work, and will be more inclined to dive into the difficult stuff.
While great for tackling the toughest parts of large projects, this technique doesn’t really address many problems related to discipline, an important part of staying productive for more than just a day or two.
The art of staying disciplined
One segment of the population known for struggling with discipline are those who are addicted to hard drugs.
Given their disposition for being unable to commit to many things, you might be surprised to find that during an experiment testing the ability of drug addicts to write & submit a 5 paragraph essay on time, those who wrote down when and where they would complete the essay were far more likely to turn it in.
These findings have some interesting correlation with those related to discipline in other people: in a study examining the ability of average people to stick with a strict dieting plan, researchers found that those participants who rigorously monitored what they were eating were able to maintain far higher levels of self-control when it came to maintaining their diet.
Last but not least, Dan Ariely and colleagues conducted a study involving college students and found that students who imposed strict deadlines on themselves for assignments performed far better (and more consistently) than those who didn’t.
These findings were especially interesting because Ariely noted that students who gave themselves too generous of a deadline often suffered from the same problems as students who set zero deadlines: when you allot yourself too much time to complete a task, you can end up creating a “mountain out of a molehill.”
Since we now know that tracking our progress is a key component of productivity, how can we implement this practice into our daily routine?
One method is to use an accountability chart to track what work you’ve completed during your 90-minute productive sessions, similar to how the dieters tracked their food consumption.
To easily implement one, simply create two-columns on a piece of paper, Google Docs spreadsheet, or even a whiteboard.
Column 1 will list the time-span of one of your productivity sessions.
Column 2 will list what tasks you’ve accomplished in that limited time-span.
Don’t include any columns for your 15-minute breaks, as those times are for your own sake and means to replenish your willpower.
This works well for 2 specific reasons:
Dr. Kentaro Fujita argues that tracking your progress in this way is helpful because you’ll be exposed to the work you’ve actually accomplished, and not the (inaccurate) assumption of work you might construe in your head.
Forcing yourself to write down the fact that you spent 2 hours on YouTube isn’t about shaming, it’s about awareness; you’ll be less likely to do it again.
Progress tracking is also a known strategy for stopping yourself from engaging in robotic behavior (also known as busywork), a habit that researcher John Bargh describes as the #1 enemy of goal striving.
Productivity and multitasking
With a work schedule, an energy management strategy, and a task-tracking system in place, the last challenge we have to face is that of multitasking.
According to a 1999 study, we have a tendency to view multitasking as effective, even when it isn’t.
However, researcher Zhen Wang was able to show that on average, multitaskers are actually less likely to be productive, yet they feel more “emotionally satisfied” with their work—creating an illusion of productivity.
“We were absolutely shocked. We all lost our bets. It turns out multitaskers are terrible at every aspect of multitasking.”
When working on the computer, the best thing you can do is turn on Airplane Mode; no need for temptation when you can’t even access the web. If you’re unable, help yourself with tools like StayFocusd to block distracting sites.
The next best strategy is to create an evening planning ritual where you select a few priority tasks to accomplish the next day.
The reason this method works far better than planning your daily tasks in the morning? Research from the Kellogg Schoolhas shown that we miscalculate the amount of focus we’ll be able to maintain in the future. We strongly believe that we’ll be able to quickly plan our day the next morning, but when tomorrow rolls we stumble off track.
You can create an evening planning ritual with a simple pen & paper or use an online tool like TeuxDeux each night. List only priority tasks (the “big 5”) for the day.
Instead of listing “Work on research project” as a daily goal, try something like “Finish introduction” or “Find additional sources” as a task you can actually complete.
The instant replay
Let’s play that all back real quick:
Willpower alone is not enough: Your productivity shouldn’t be reliant on your sheer force of will alone. Mental toughness will go a long way, but in order to stay disciplined you’re better off relying on systems.
Give yourself the ability to go “all-in”: Working harder on the stuff that matters is going to drain you mentally & physically. Don’t be afraid of giving yourself multiple breaks throughout the day. It’s better to “chunk” productivity sessions into 90 minute periods (in order to keep yourself sharp and to alleviate the stress of pacing your energy throughout the entire day.
If it’s not worth measuring, it’s not worth doing: Tracking has been proven to be the best way to stay diligent about your progress. Create an accountability chart to list what productive things you’ve gotten done throughout the day. You’ll see how much you’re really accomplishing.
Multitasking is your enemy: Treat it as such. Block out unwanted distractions and as Ron Swanson would say, “Never half-ass two things, whole-ass one thing.” Plan your day the night before so you won’t get consumed with the wonderful distractions of the internet when you start your day.
Read from its source @ http://qz.com/315903/how-to-get-more-done-and-in-less-time/
The WDR 2015 holds new insights on how people make decisions; it provides a framework to help development practitioners and governments apply these insights to development policy.
Research in the WDR suggests that poverty constitutes a cognitive tax that makes it hard for poor people to think deliberatively, especially in times of hardship or stress.
When used with existing policy approaches, new tools ranging from simple, low-cost changes such as better framing of messages and changing the timing of aid, can significantly improve outcomes.
Real people are rarely as coherent, forward-looking, strategic or selfish as typically assumed in standard economic models—they sometimes do not pursue their own interests, and can be unexpectedly generous. Such dynamics should be factored more carefully into development policies, a point made in the World Development Report 2015: Mind, Society, and Behavior.
The newly launched report argues that development policies based on new insights into how people actually think and make decisions will help governments and civil society more readily tackle such challenges as increasing productivity, breaking the cycle of poverty from one generation to the next, and acting on climate change. Drawing from a wealth of research that suggests ways of diagnosing and solving the psychological and social constraints to development, the WDR identifies new policy tools that complement standard economic instruments. For instance, an experiment in Colombia modified a cash transfer program by automatically saving a part of the funds on behalf of beneficiaries, and then disbursing them as lump a sum at the time when decisions about school enrollment for the next year were being made. This tweak in timing resulted in increased enrollments for the following year. “Marketers and politicians have long understood the role of psychology and social preferences in driving individual choice,” said Kaushik Basu, Senior Vice President and Chief Economist of the World Bank, “This Report distills new and growing scientific evidence on this broader understanding of human behavior so that it can be used to promote development. Standard economic policies are effective only after the right cognitive propensities and social norms are in place. As such, this WDR can play a major role in enhancing the power of economic policymaking, including standard fiscal and monetary policies. My only worry is that it will be read more diligently by private marketers selling wares and politicians running for office than by people designing development interventions.” To inspire a fresh look at how development work is done, the Report outlines three principles of human decision making: thinking automatically, thinking socially, and thinking with mental models. Much of human thinking is automatic and depends on whatever comes to mind most effortlessly. People are deeply social and are influenced by social networks and norms. Finally, most people do not invent new concepts; rather they use mental models drawn from their societies and shared histories to interpret their experiences. Because the factors affecting decisions are local and contextual, it is hard to predict in advance which aspects of program design and implementation will drive the choices people will make. Interventions therefore need to take account of the insights found in the report and be designed through a ‘learning by doing’ approach. The Report applies the three principles to multiple areas, including early childhood development, productivity, household finance, health and health care, and climate change.
This Report distills new and growing scientific evidence on this broader understanding of human behavior so that it can be used to promote development. Standard economic policies are effective only after the right cognitive propensities and social norms are in place.
Kaushik Basu Senior Vice President and Chief Economist, World Bank
When it comes to assisting poor people, a key message from WDR 2015 isthat poverty is more than a deprivation in material resources. It is also a “cognitive tax.” Take the case of sugar cane farmers in India, who were asked to participate in a series of cognitive tests before and after receiving their harvest income. Their performance was the equivalent of 10 IQ points higher after the harvest, when resources were less scarce. Policy can be designed to reduce some of the impact of poverty on the ability to make choices and plan for the future. Policy makers should try to move crucial decisions out of periods when cognitive resources are scarce. This may mean shifting school enrollment decisions to periods when poor farmers’ seasonal income is higher. There may also be ways of simplifying typically complex decisions such as applying to a higher education program. These ideas apply to any initiative in which good decision making is a challenge. Poverty in childhood, which is often accompanied by high stress and neglect from parents, can impair cognitive development, according to the report, so public programs that provide early childhood stimulation are critical. A 20-year study in Jamaica found that a program aimed at altering the way mothers interacted with their infants led to an increase in earnings by 25 percent once those children became adults, as compared to others who did not participate in the program. All major developing regions are featured in the Report, including the following examples:
In Malawi, a small performance incentive to encourage farmers to work with their peers increased the take-up of productivity-enhancing agricultural technologies (Ben Yishay and Mobarak 2014). This intervention used social networks to amplify the effects of information programs.
In the Philippines where encouraging saving was a challenge, one effective fix was to create products that allow individuals to commit to certain savings goals and not allow them to easily renege. When savings accounts were offered in the country without the option of withdrawal for six months, nearly 30 percent of those offered the accounts accepted them (Ashraf, Karlan, and Yin 2006). After one year, individuals who had been offered and had used the accounts increased savings by 82 percent more than a control group.
In Asia, a new approach, focused on establishing new norms that holds promise is Community-Led Total Sanitation (CLTS). In CLTS, leaders work with community members to make maps of dwellings and the locations where individuals defecate in the open. The facilitator uses a repertoire of exercises to help people recognize the implications of what they have seen for the spread of infections and to develop new norms to protect against the damaging effects of open defecation. A set of these programs in Indian villages lowered open defecation by 11 percent from very high levels. (Patil and others 2014).
According to the Report, because the decisions of development professionals often can have large effects on other people’s lives, it is vital that development actors and organizations put mechanisms in place to check and correct for their own biases and blind spots. Ultimately, behavior change matters for all actors in the development process. http://www.worldbank.org/en/news/feature/2014/12/02/world-development-report-2015-explores-mind-society-and-behavior http://www.worldbank.org/content/dam/Worldbank/Publications/WDR/WDR%202015/WDR-2015-Full-Report.pdf
” The benefits of trade have been well documented throughout history. The economic case is quite straightforward. Opening up to trade allows countries to shift their patterns of production, exporting goods that they are relatively efficient at producing and importing goods at a lower price that they can’t produce resourcefully at home. This lets resources to be allocated more efficiently allowing a nation’s economy to grow. Fruits of trade can be seen in many countries. In the last 30 years, trade has grown around 7% per year on average (WTO, 2013). During this time period, developing nations have seen their share in world export increase from 34% to 47% (WTO, 2013) which at first glance seem incredible. However if we dig a little deeper, it is quickly apparent that China is the key reason for the majority of the growth and that a bulk of these developing countries aren’t benefiting fully from international trade. Why is this? Many developing countries depend on the export of a few primary products and in some cases a single primary commodity for the majority of their export earnings. In fact, 95 of the 141 developing countries rely of the export of commodities for at least 50% of their export income (Brown, 2008). This is where the problem starts. Prices in the primary good’s market tend to be highly volatile sometimes varying up to 50% in a single year (South Centre, 2005). Often, the fluctuation of these products are out of the hands of the developing countries as they individually have only a small portion of the world supply which is not enough to affect world prices. At the same time, some shocks (ie. Weather) are unpredictable. The unstable commodity price brings uncertainty, instability and often negative economic consequences for the developing countries. This also affects the policymaking in the country as it is hard to implement a sustainable development scheme or a fiscal expansionary policy with uncertain revenue. Positive shocks do increase income in the short run however a study by Dehn (2000) found that there are no permanent effect on the increase on income in the long run. Furthermore, there is often very little scope to growth through primary products as it is very hard to increase volumes of sale. This is due to the demand being inelastic. The over dependence on the export of primary products also causes another problem – a risk of a large trade deficit. Several studies (Olukoshi, 1989, Mundell, 1989) have shown that primary commodity prices are the main cause for the debt problems in many developing countries. In an empirical research done by Swaray (2005), he shows the main reason behind this is the deteriorating terms of trade, developing countries face. Terms of Trade is equal to the value of export over the value of import. Over time there has been a general trend of primary products falling in value. 41 of 46 leading commodities fell in real value over the last 30 years with an average decline of 47% in real prices, according to the World Bank (cited in CFC, 2005). This has occurs due to inelastic demand for commodities and lack of differentiation among producers hence making it a competitive market. The creation of synthetic substitutes has also suppressed prices. At the same time, manufacturing products (which generally developing countries tend to import) see a general rise in prices. Put these trends together, over time, developing countries have seen their terms of trade worsen. A study by CFC (2005), shows that the terms of trade have declined as much as 20% since the 1980s. This, alongside the difficulty to increase volumes of sales has meant many developing countries have a trade deficit. According Bhagwati (1958), it is possible that this decline in the terms of trade could result in diminished welfare. In other words, growth from trade can be negative rather than positive. ”
The benefits of trade have been well documented throughout history. The economic case is quite straightforward. Opening up to trade allows countries to shift their patterns of production, exporting goods that they are relatively efficient at producing and importing goods at a lower price that they can’t produce resourcefully at home. This lets resources to be allocated more efficiently allowing a nation’s economy to grow. Fruits of trade can be seen in many countries. In the last 30 years, trade has grown around 7% per year on average (WTO, 2013). During this time period, developing nations have seen their share in world export increase from 34% to 47% (WTO, 2013) which at first glance seem incredible. However if we dig a little deeper, it is quickly apparent that China is the key reason for the majority of the growth and that a bulk of these developing countries aren’t benefiting fully…
This list is naturally a subjective endeavor, so readers are welcome to fault me for selecting one of my own articles for the list. Many of these articles are from the Miscellany section in the Journal of Political Economy from the days when George Stigler was the editor, or a similar section in Economic Inquiry., which I oversee. Many of them are in the compendium of economics humor that I maintain on my website or in Caroline Postelle Clotfelter’s 1997 bookOn the Third Hand: Wit and Humor in the Dismal Science. Clotfelter is one of the few women engaged in the field of economics humor, and I have high hopes that women will be more prominently features in future Top Ten lists of economics humor.
1. “Life among the Econ” (1973) by Axel Leijonhufvud
I have hopes that Economic Inquiry will republish this article on the 40th or 50th anniversary of its original publication.
[S]tatus is tied to the manufacture of certain types of implements called “modls.” The status of the adult male is determined by his skill at making the “modl” of his “field.” The facts (a) that the Econ are highly status-motivated, (b) that status is only to be achieved by making “modls,” and (c) that most of these “modls” seem to be of little or no practical use, probably accounts for the backwardness and abject cultural poverty of the tribe.
The dominant role of “modl” is perhaps best illustrated by the (unfortunately very incomplete) accounts we have of relationships between the two largest of the Econ castes, the “Micro” and the “Macro”… If a Micro-Econ is asked why the Micro do not intermarry with the Macro, he will answer “They make a different modl,” or “They do not know the Micro modl.”
It would be to fail in one’s responsibility to the Econ people to end this brief sketch of life in their society without a few words about their future. The prospect for the Econ is bleak. Their social structure and culture should be studied now before it is gone forever.
2. “The theory of interstellar trade” (1978/2010) by Paul Krugman
The paper might have disappeared had it not been for Joshua Gans told me that he was Krugman’s TA in 1993 and ended up with a paper copy of the article, which came up “in 2008, [when] a discussion arose on the Internet about interstellar trade.” Gans sent Krugman a scanned version of the article, which Krugman posted , noting that “Thirty years ago I was an oppressed assistant professor, caught up in the academic rat race. To cheer myself up I wrote — well, see for yourself.”
This article extends interplanetary trade theory to an interstellar setting. It is chiefly concerned with the following question: how should interest charges on goods in transit be computed when the goods travel at close to the speed of light? This is a problem because the time taken in transit will appear less to an observer traveling with the goods than to a stationary observer. A solution is derived from economic theory, and two useless but true theorems are proved.
Many critics of conventional economics have argued, with considerable justification, that the assumptions underlying neoclassical theory bear little resemblance to the world we know. These critics have, however, been too quick to assert that this shows that mainstream economics can never be of any use. Recent progress in the technology of space travel… make this assertion doubtful; for they raise the distinct possibility that we may eventually discover or construct a world to which orthodox economic theory applies.
3. “The effect of prayer on God’s attitude toward mankind” (1980/2010) by James Heckman
Heckman wrote this paper in 1980 was not published until2010. (It is unknown if Heckman ever submitted it for publication in 1980.)
This article uses data available from the National Opinion Research Center’s survey on religious attitudes and powerful statistical methods to evaluate the effect of prayer on the attitude of God toward human beings.
The technique—due to Singh (1977)—is briefly described here. Let Y be God’s attitude arrayed on a scale ranging from 0 to 1. This is an unobserved variable. Let X be the intensity of prayer in the population. It too is scaled between 0 and 1. The population density of prayer is summarized by a univariate density f(X), which has been estimated by Father Greeley (1972).
The empirical conclusion from this analysis is important. A little prayer does no good and may make things worse. Much prayer helps a lot.
4. “The conference handbook” (1982) by George Stigler
There is an ancient joke about the two traveling salesmen in the age of the train. The younger drummer was being initiated into the social life of the traveler by the older. They proceeded to the smoking parlor on the train, where a group of drummers were congregated. One said, “87,” and a wave of laughter went through the group. The older drummer explained to the younger that they traveled together so often that they had numbered their jokes. The younger drummer wished to participate in the event and diffidently ventured to say, “36.” He was greeted by cool silence. The older drummer took him aside and explained that they had already heard that joke. (In another version, the younger drummer was told that he had told the joke badly.)
Economists travel together a great deal, and there is no reason why the discussions which follow the presentation of papers should not utilize a handbook of commentary. The following is a preliminary list of numbered comments, which itself will cover a large share of the comments elicited in most conferences.
I can be very sympathetic with the author; until 2 years ago I was thinking along similar lines.
This paper contains much that is new and much that is good.
Theorizing is not fruitful at this stage: we need a series of case studies.
Case studies are a clue, but no real progress can be made until a model of the process is constructed.
The conclusions change if you introduce uncertainty.
The central argument is not only a tautology, it is false.
5. “Macroeconomic policy and the optimal destruction of vampires” (1982) by Dennis Snower
Although human beings have endured the recurring ravages of vampires for centuries, scarcely any attempts have been made to analyze the macroeconomic implications of this problem and to devise socially optimal policy responses.
Over the past few centuries, a number of prominent investigators… have suggested that all vampires should be destroyed… [We show that] such a policy would not be socially optimal.
6. “American economic growth and the voyage of Columbus” (1983) by Preston McAfee
Since the imaginative, pathbreaking, inventive analysis of Robert Fogel (1962), the counterfactual analysis has intrigued and scintillated a generation of economists. Fogel considered the state of the American economy in 1890, had the railroads never been invented. He found that less than 10 percent of the American output could be attributed to the single innovation of railroads, thus demonstrating irrevocably that the loss of trains would not derail the American economic juggernaut.
In order to perform a valid test of the invincibility of the American economic cornucopia, the counterfactual must predate the development of the celebrated entrepreneur and the waves of immigrants whose sweat was an important input into the production process. Consequently, it is hypothesized that, rather than stumble upon the two American continents, Columbus fell off the edge of the earth. Certainly this is a valid test, for if America were to be virtually unchanged, despite not being discovered, certainly the “American century” was inevitable. I choose the year 2000 as a target date, and compare America as it will be in the year 2000 to the way it would have been then, had Columbus fallen off the edge.
7. “Mankiw’s ten principles of economics, translated” (2003) by Yoram Bauman
This paper, which launched my own career as “the world’s first and only stand-up economist”, was written during my graduate school days at the University of Washington in Seattle and eventually published in AIR. (Also available on YouTube.)
The second table below summarizes my attempt to translate [Gregory] Mankiw’s Ten Principles into plain English, and in doing so to provide the uninitiated with an invaluable glimpse of the economic mind at work. Explanations and details can be found in the pages that follow, but the average reader is advised to simply cut out the table below and carry it around for assistance in the (hereafter unlikely) event of confusion about the basic Principles of Economics.
8. “Can financial innovation help to explain the reduced volatility of economic activity?” (2006) by Karen E. Dynan et al.
This paper was not meant to be humorous. But given how financial innovation has increased economic volatility since the Great Depression, it arguably deserves a place in this list. It is a modern equivalent of Irving Fischer’s proclamation three days before the 1929 stock market crash that “Stock prices have reached what looks like a permanently high plateau.”
The stabilization of economic activity in the mid-1980s has received considerable attention. Research has focused primarily on the role played by milder economic shocks, improved inventory management, and better monetary policy. This paper explores another potential explanation: financial innovation. Examples of such innovation include developments in lending practices and loan markets that have enhanced the ability of households and firms to borrow and changes in government policy such as the demise of Regulation Q. We employ a variety of simple empirical techniques to identify links between the observed moderation in economic activity and the influence of financial innovation on consumer spending, housing investment, and business fixed investment. Our results suggest that financial innovation should be added to the list of likely contributors to the mid-1980s stabilization.
9. “Japan’s Phillips Curve looks like Japan” (2008) by Gregor Smith
Smith’s webpage used to link to a version of the paper with this note: “The title is also the abstract and, frankly, most of the text.”
Japan’s Phillips Curve is shown in the right-hand panel of Figure 1. The data are monthly from January 1980 to August 2005.
For ease of viewing, the left-hand panel of Figure 1 rotates the Phillips Curve around the vertical axis so that minus the unemployment rate now is on the horizontal axis. Clearly visible are the islands of Hokkaido and Honshu, though it is somewhat difficult to separately distinguish the southern islands of Kyushu and Shikoku. The Noto-Hanto Penninsula is evident to the north of the southern end of the main island of Honshu. Tokyo Bay is also visible. The data point to the far left in Figure 1 is the island of Fukue-Jima.
10. “On the efficiency of AC/DC? Bon Scott versus Brian Johnson” (2009) by Robert Oxoby
Unfortunately, Steven Levitt failed to get the joke, prompting him to post on the Freakonomics blog that “This is what happens to people who listen to too much AC/DC… I hope for this guy’s sake he has tenure.” Oxoby wrote in the comments that “I have tenure” and added some details on the paper: “The paper was written using old data from a grad student studying the effects of different genres of music on behavior (following previous research identifying the effect of different genres on heart rate, etc.; her original interest was on the use of music in behavior therapy). She abandoned the project and has since disappeared from her program. The AC/DC spin was due to a mistake in the protocols: different songs were played in two sessions.” The next day Levittacknowledged that “There is hope for economics: The AC/DC paper was a joke”:
Abstract: We use tools from experimental economics to address the age-old debate regarding who was a better singer in the band AC/DC. Our results suggest that (using wealth maximization as a measure of “better”) listening to Brian Johnson (relative to listening to Bon Scott) resulted in “better” outcomes in an ultimatum game. These results may have important implications for settling drunken music debates and environmental design issues in organizations.
Acknowledgments: We thank Steven Levitt for his support and popularization of this research (see, for example, Levitt 2007). We thank Nathan Berg, Gary Charness, Bill Harbaugh, and Kendra McLeish for valuable suggestions and comments. We also thank a delayed Air Canada flight and a bar in the Vancouver airport for providing the time, space, and resources necessary to pursue this research. All errors are attributable to Air Canada.
11. “An option value problem from Seinfeld” (2011) by Avinash Dixit
Abstract: This is a paper about nothing.
In an episode of the sitcom Seinfeld (Season 7, Episode 9, original air date December 7, 1995), Elaine Benes uses a contraceptive sponge that gets taken off the market. She scours pharmacies in the neighborhood to stock a large supply, but it is finite. So she must “re-evaluate her whole screening process.” Every time she dates a new man, which happens very frequently, she has to consider a new issue: Is he spongeworthy”? The purpose of this article is to quantify this concept of spongeworthiness.
When Elaine uses up a sponge, she is giving up the option to have it available when an even better man comes along. Therefore using the sponge amounts to exercising a real option to wait and spongeworthiness is an option value. It can be calculated using standard option-pricing techniques. However, unlike the standard theory of financial or many real options, there are no complete markets and no replicating portfolios. Stochastic dynamic programming methods must be used.
Change is variation, impermanence, acceleration, flux. Heraclitus, an ancient Greek philosopher, said: “Change, the state of flux, is a permanent feature of nature”. Greeks philosophers were fond of paradoxes. Another ancient Greek philosopher, Parmenides disagreed: “Change is ephemeral and things truly staid the same”. Greek philosophers were fond of disagreement. The dictionary says it’s the process of becoming different. Men have lamented the constancy of Change and decried the lack of Change. Barack Obama won a presidency promising Change.
The interesting thing about Change is that many, if not all, equations describing change look about the same. Let’s say Change is C, some driving force prompting the change is DF, and resistance to change is R. Then the generic form for most equations describing change is:
C = DF * 1/R
If this Universal Law of Change applies to many different Changes, perhaps it also applies to the economic and social Changes? For example:
Influx of Mexican immigrants to the United States, driven by the difference in hourly wages, and resisted by the high “coyote fees”, border patrol and vast deserts.
A flood of Central American children to the Texas border, driven by fear of death or injury from the local gangsters and resisted by the distance, and other resistances mentioned above.
Implementation of green energy generation driven by the fears of climate change, but resisted by the high cost of the green energy.
As mentioned, there are many laws describing change is physical systems that look about the same. For example, here’s Newton’s famous law as it is commonly written:
F = m a
Or force is mass times acceleration. In this case, acceleration, “a”, represents change. Acceleration occurs when something is at rest or traveling at a constant speed, and then it accelerates (positive acceleration) or decelerates (negative acceleration). Rearranging the equation:
a = F * 1/ m
So change, a, is equal to a force F driving for a change, acting on the object with the mass m. A heavy bowling ball has more mass, so it’s harder to make it accelerate than, let’s say a tennis ball. So m is resistance to change. Given the same driving force, the bigger m, the less change there is. Broadly interpreted, Newton’s law is a mathematical representation of change:
Change = (Driving Force) * (1/Resistance to Change)
In fluid dynamics, a science describing fluid flow, there’s a famous equation called the Bernoulli’s equation:
V12/2g + P1/ρg + Z1 = V22/2g + P2/ρg + Z2
Looks complicated, but rearranged into the Change = (Driving Force) * (1/Resistance to Change) it looks like:
Change is variation, impermanence, acceleration, flux. Heraclitus, an ancient Greek philosopher, said: “Change, the state of flux, is a permanent feature of nature”. Greeks philosophers were fond of paradoxes. Another ancient Greek philosopher, Parmenides disagreed: “Change is ephemeral and things truly staid the same”. Greek philosophers were fond of disagreement. The dictionary says it’s the process of becoming different. Men have lamented the constancy of Change and decried the lack of Change. Barack Obama won a presidency promising Change.
The interesting thing about Change is that many, if not all, equations describing change look about the same. Let’s say Change is C, some driving force prompting the change is DF, and resistance to change is R. Then the generic form for most equations describing change is:
(Washington Post, 26th June 2014), There’s a lot of recent scholarship suggesting that non-democratic regimes grow faster than democratic regimes. This has led some people not only to admire the Chinese model of growth focused authoritarianism, but to suggest that it may be a better economic model for developing countries than democracy. However, this research tends to assume that both democracies and non-democracies are telling the truth about their growth rates, when they report them to multilateral organizations such as the World Bank. Is this assumption safe? The answer is no, according to aforthcoming article (temporarily ungated) by Christopher S. P. Magee and John A. Doces in International Studies Quarterly.
The problem that Magee and Doces tackle is that it’s hard to figure out when regimes are being honest or dishonest about their rates of economic growth, since it’s the regimes themselves that are compiling the statistics. It’s hard to measure how honest or dishonest they are, if all you have to go on are their own numbers. This means that researchers need to find some kind of independent indicator of economic growth, which governments will either be less inclined or unable to manipulate. Magee and Doces argue that one such indicator is satellite images of nighttime lights. As the economy grows, you may expect to see more lights at night (e.g. as cities expand etc). And indeed, research suggests that there’s a very strong correlation between economic growth and nighttime lights, meaning that the latter is a good indicator of the former. Furthermore, it’s an indicator that is unlikely to be manipulated by governments.
Magee and Doces look at the relationship between reported growth and nights at light and find a very clear pattern. The graph below shows this relationship for different countries – autocracies are the big red dots. Most of the dots are above the regression line, which means that most autocracies report higher growth levels to the World Bank than you’d expect given the intensity of lights at night. This suggests that they’re exaggerating their growth numbers.
The two countries with the biggest difference between their reported growth and their actual growth (as best as you can tell from the intensity of nighttime lights) are China (although the discrepancy was considerably larger in the mid-1990s than now) and Myanmar. More broadly:
If democracies report their GDP growth rates truthfully, then dictatorships overstate their yearly growth rate by about 1.5 percentage points on average. If democracies also overstate their true growth rates, then dictatorships exaggerate their yearly growth statistics by about 1.5 percentage points more than do democracies.
(OPride) – Over the last decade, Ethiopia has been hailed as the fastest growing non-oil economies in Africa, maintaining a double-digit annual economic growth rate. The Ethiopian government says the country will join the middle-income bracketby 2025.
Despite this, however, as indicated by a recent Oxford University report, some 90 percent of Ethiopians still live in poverty, second only after Niger from 104 countries measured by the Oxford Multidimensional Poverty Index. The most recent data shows an estimated 71.1 percent of Ethiopia’s population lives in severe poverty.
This is baffling: how can such conflicting claims be made about the same country? The main source of this inconsistent story is the existence of crony businesses and the government’s inflated growth figures. While several multinational corporations are now eyeing Ethiopia’s cheap labor market, two main crony conglomerates dominate the country’s economy.
Meet EFFORT, TPLF’s business empire
The seeds of Ethiopia’s economic mismanagement were sown at the very outset. We are familiar with rich people organizing themselves, entering politics and protecting their group interests. But something that defies our knowledge of interactions between politics and business happened in 1991 when the current regime took power.
Ethiopia’s ruling party, the EPRDF, came to power by ousting the communist regime in a dramatic coup. A handful of extremely poor people organized themselves exceptionally well that they quickly took control of the country’s entire political and military machinery.
In a way, this is analogous to a gang of thieves becoming brutally efficient at organizing themselves to the extent of forming a government. Once in power, the ruling Tigrean elites expropriated properties from other businesses, looted national assets and began creating wealth exclusively for themselves.
This plan first manifested itself in the form of party affiliated business conglomerate known as the Endowment Fund for Rehabilitation of Tigray (EFFORT). EFFORT has its origin in the relief and rehabilitation arm of the Tigrean People Liberation Front (TPLF) and the country’s infamous 1984 famine.
As reported by BBC’s Martin Plaut and others, the TPLF financed its guerilla warfare against the Dergue in part by converting aid money into weapons and cash. That was not all. On their way to Addis Ababa from their bases in Tigray, the TPLF confiscated any liquid or easily moveable assetsthey could lay their hands on. For instance, a substantial amount of cash was amassed by breaking into safe deposits of banks all over Ethiopia. Those funds were kept in EFFORT’s bank accounts. TPLF leaders vowed to use the loot to rehabilitate and reconstruct Tigray, which they insisted was disproportionately affected by the struggle to “free Ethiopia.”
Intoxicated by its military victory, the TPLF then turned to building a business empire. EFFORT epitomizes that unholy marriage between business and politics in a way not seen before in Ethiopian history. According to a research by Sarah Vaughan and Mesfin Gebremichael, EFFORT, which is led by senior TPLF officials, currently owns 16 companies across various sectors of the economy.
This figure grossly understates the number of EPRDF affiliated companies. For example, the above list does not include the real money-spinners that EFFORT owns: Wegagen Bank, Africa Insurance, Mega Publishing, Walta Information Center and the Fana Broadcasting Corporate. The number of companies under EFFORT is estimated to be more than 66 business entities. Suffice to say, EFFORT controls the commanding heights of the Ethiopian economy.
While it is no secret that EFFORT is owned by and run exclusively to benefit ethnic Tigrean elites, it is a misnomer to still retain the phrase “rehabilitation of Tigray.” Perhaps it should instead be renamed as the Endowment Fund for Rendering Tigrean Supremacy (EFFORTS).
MIDROC Ethiopia, EPRDF’s joker card
In Ethiopia’s weak domestic private environment, EFFORT is an exception to the rule. Similarly, while Ethiopia suffers from lack of foreign direct investment, MIDROC Ethiopia enjoys unparalleled access to Ethiopia’s key economic sectors. Owned by Ethiopian-born Saudi business tycoon, Sheik Mohammed Al Amoudi, MIDROC has been used by the EPRDF as a joker card in a mutually advantageous ways. The Sheik was given a privilege no less than the status of a domestic private investor but the EPRDF can also count it as a foreign investor. For instance, the United Nations Conference on Trade and Development reported that about 60 per cent of the overall FDI approved in Ethiopia was related to MIDROC.
MIDROC stands for Mohammed International DevelopmentResearch and Organization Companies. Despite reference to development and research in its name, however, there is no real relationship between what the crony business says and what it actually does. Ironically, as with EFFORT, MIDROC Ethiopia also owns 16 companies. But this too is a gross underestimation given the vast sphere of influence and wealth MIDROC commands in that country.
Like EFFORT, Al-Amoudi’s future was also sealed long before the TPLF took power. He literally entered Addis Ababa with the EPRDF army, fixing his eyes firmly on Oromia’s natural resources. Shortly after the TPLF took the capital, Al-Amoudi allegedly donated a huge sum of money to the Oromo People’s Democratic Organization.
Why the rush?
The calculative Sheik sensed an eminent threat to his business interests from the Oromo Liberation Front (OLF), a groups that was also a partner in the transitional government at the time. In return for its “donation,” MIDROC acquired massive lands in Oromia – gold mines, extensive state farms and other agricultural lands. In a recent article entitled, “The man who stole the Nile,” journalist Frederick Kaufman aptly described Al Amoudi’s role in the ongoing land grab in Ethiopia as follows:
In this precarious world-historic moment, food has become the most valuable asset of them all — and a billionaire from Ethiopia named Mohammed Hussein Al Amoudi is getting his hands on as much of it as possible, flying it over the heads of his starving countrymen, and selling the treasure to Saudi Arabia. Last year, Al Amoudi, whom most Ethiopians call the Sheikh, exported a million tons of rice, about seventy pounds for every Saudi citizen. The scene of the great grain robbery was Gambella, a bog the size of Belgium in Ethiopia’s southwest whose rivers feed the Nile.
It is little wonder then that Al-Amoudi said, “I lost my right hand,” when Ethiopia’s strongman of two decades Meles Zenawi died in 2012. If EFFORT is a curse to the Ethiopian economy, MIRDOC is EPRDF’s poisoned drink given to the Ethiopian people.
The marriage between politics and business has had damaging effects on the country’s economy. One of its most far-reaching consequences is the total breakdown of trust between the EPRDF and the Ethiopian people. In economic policy, trust between private investors and the government is paramount. The deficit of trust is one of the hallmarks of Ethiopia’s much-touted development.
After all youth unemployment hovers around 50 percent. Every year, hundreds of young Ethiopians risk their lives trying to reach Europe or the Middle East, often walking across the Sahara desert or paying smugglers to cross the Red Sea or Indian Ocean aboard crowded boats. The desperation is a result of the lack of confidence in the government’s ability to provide them with the kind of future they were promised.
Ironically, aside from their crony businesses, the EPRDF does not have any confidence in Ethiopian entrepreneurs either. It is this mutual distrust that culminated in the prevalence of an extremely hostile environment for domestic private investment.
This is not a speculative claim but a well-documented fact. The World Bank’s annual survey, which measures the ease with which private investors can do business, ranks Ethiopia near the bottom. In the 2014 survey, Ethiopia came in 166th out of 189 countries in terms of difficulties in starting new business or trading across borders. Moreover, year on year comparison shows that the investment climate in Ethiopia is actually getting worse, sliding down the ranking both in the ease of doing business and trading across borders.
Farms but no firms
The TPLF cronies do not engage in competitive business according to market rules but act as predators bent on killing existing and emerging businesses owned by non-Tigrean nationals. However, the ruling party, which largely maintains its grip on power using bilateral and multilateral aid, is required to report its economic progress to donors (the regime does not care about accountability to the people). In this regard, the lack of foreign direct investment (FDI) has been a thorn in the throat of the EPRDF. Donors have repeatedly questioned and pressured the EPRDF to attract more FDI. The inflow of FDI is often seen as a good indicator of the confidence in countries stability and sound governance. Despite widespread belief in the West, the EPRDF regime cannot deliver on these two fronts.
To cover up these blind spots, the regime has persuaded a handful of foreigners to invest in Ethiopia, but until recently few investors considered any serious manufacturing venture in the country. Besides, considered “cash cows” for the government, banks, the Ethiopian Airlines, telecommunication and energy sectors remain under exclusive monopoly of the state. They provide almost free service to the crony businesses. Any firm looking to invest in manufacturing and financial sectors have to overcome insurmountable bureaucratic red tape and other barriers.
One sector that stands as exception to this rule is agriculture. Since the 2008 financial crisis and the rise in the global price of food, the regime opened the door widely for foreigners who wanted to acquire large-scale farms. These farms do not hurt their crony businesses but they do harm poor subsistence farmers. Vast tracts of lands have been sold to foreigners at ridiculously cheap prices, often displacing locals and their way of life.
Contrary to the government rhetoric, the motivation for opening up the agricultural sector has nothing to do with economic growth but everything to do with politics – to silence critics, particularly in the donor community who persistently question EPRDF’s credibility in attracting FDI. In essence, hundreds of thousands of poor farmers were evicted to make way for flower growers and shore up the government’s image abroad. This tactic seems to be working so far. Earlier this year, Ethiopia received its first credit rating from Moody’s Investors Service. In the last few years, in part due to rising labor costs in China and East Asia, several manufacturers have relocated to Ethiopia.
Addis’ construction boom as a smokescreen
Crony businesses and flower growers may have created some heat but certainly no light in Ethiopian economy. EFFORT and MIDROC were in action for much of the 1990s and early 2000s but GDP growth was not satisfactory during that time. In fact, since other private businesses were in dismal conditions (and hence domestic market size is very limited), even the crony businesses encountered challenges in getting new business deals.
The setbacks in political front during the 2005 election shifted EPRDF’s strategies to economic front to urgently register some noticeable growth. This partly explains the motives behind the ongoing construction rush in and around Addis Ababa. In several rounds of interviews on ESAT TV, former Minister d’etat of Communications Affairs, Ermias Legesse, provided interesting accounts of cronyism surrounding Addis’ explosive growth and its tragic consequences for Oromo farmers.
It is important to understand the types of construction that is taking place around or near Addis. First, private property developments by crony estate agents mushroomed overnight. A lion’s share of land expropriated from Oromo farmers were allocated to these regime affiliates through dishonest bids. Luxury houses are built on such sites and sold at prices no average Ethiopian could afford, except maybe those in the diaspora. The latter group is being targeted lately due to shortages of hard currencies.
Second, EPRDF politicians and high ranking military officers own multi-storey office buildings, particularly aimed at renting to NGOs and residential villas for foreign diplomats who can afford to pay a few thousand dollars per month. It is a known fact that the monthly salary cap for Ethiopian civil servants is around 6000 birr (about $300). As such, that these individuals could invest in such expensive properties underscores the extent of the daylight robbery that is taking place in Ethiopia.
Third, the government was engaged in massive public housing construction but under extremely chaotic circumstances. The condominium rush in Addis is akin to the Dergue regime’s villagization schemes in rural Ethiopia. Families are uprooted from their homes without any due consideration for their social and economic well-being.
Most households that once occupied the demolished homes in Addis Ababa’s shantytowns made a living through informal home businesses such as brewing local drinks and preparing and selling food at prices affordable to the poor. It was clear that the condominiums were not suitable for them to continue doing such businesses. The construction of the public houses was financed by soft loans from various donor agencies to be sold to target households at affordable prices. However, the government often priced them at the going market rates for condos.
As a result, the poor households simply rented out the properties to those who could afford, while struggling to find affordable houses for themselves. Solving the public housing crisis was never the government’s intention in the first place, as they were only interested in creating business opportunities for their crony construction companies.
Fourth, roads and railway networks are by far the most important large-scale public sector construction projects taking place in Addis. There is no doubt that Addis Ababa’s crowded roads, equally shared by humans, animals and cars, need revamping. But, what is happening in the name of building roads and railways simply defies belief. First, the sheer scale and magnitude as well as the obsession with construction makes the whole undertaking look suspicious. Every time I travelled to Addis, I witness the same roads being constructed and then dug up to be reconstructed over and over again.
The ulterior motive behind these projects is nothing more than expanding TPLF’s business empire and benefit crony allies. Having exhausted opportunities within the existing perimeter of Addis, the so-called master plan had to be crafted to enlarge the size of “the construction site” by a factor of 20 to ensure that the cronies will stay in business in the foreseeable future. In effect, the large-scale construction projects are being used to siphon off public funds. And there seems to be no priority or accountability in the whole process from the project inception, planning to implementation.
Lies and damn lies
The construction boom in Addis serves as a two edged sward. On the one hand, the funds generated from selling Oromo lands to private property developers adds to the ever-expanding business empire of Tigrean political and military elites. On the other hand, the appearances of several high-rise buildings and complex road networks give the impression that Ethiopia is witnessing an economic boom. The target audience for the latter scenario is foreign journalists and the diplomatic community in Addis Ababa, some of whom are so gullible that they fall in love with ERDF’s economic “miracle” from the first aerial view even before landing at the Bole airport.
The fact remains however: no such economic miracle is actually happening in Ethiopia. A pile of concrete slabs cannot transform the economy in any meaningful way. After all, buildings and roads are only intermediaries for doing other businesses. For instance, it is not enough to build highways and rural roads – a proportionate effort is required to enhance production of goods and services to move them on the newly built roads in such a way that the roads will get utilized and investments made on them get recovered. Otherwise, the roads and buildings can deteriorate without giving any service, and hence more public money would soon be required to maintain them. This is exactly what is happening in Ethiopia.
Meanwhile, the EPRDF has been engaged in a frantic effort to generate lies and damn lies to fill the gap between the rhetoric and the reality of Ethiopia’s economy. The government-controlled media has been used for extensive propaganda campaign to create a “positive image” in the eyes of ordinary citizens. They literally compel viewers or listeners to see or feel things that do not exist on the ground. The Ethiopian television zooms onto any spot of land with a colony of green grass or lush crop fields to “prove” the kinds of wonders the government is engineering.
Barring rain failures, much of Ethiopia’s lush-green countryside has a decent climate for agriculture. But the EPRDF regime tries to convince the public that anything positive that occurs in the Ethiopia is because of its economic policies. But, as evidenced in ongoing multifaceted grievances around the country, the government is fooling no one else but itself (and perhaps a few gullible individuals in the diplomatic community).
Its lies also come in the form of dubious economic statistics, which are generated in such a way that EPRDF could report double-digit economic growth year after year. The story of the double digit economic growth rate in Ethiopia has been such that a lie told hundreds of times, no matter how shambolic the numbers are, is becoming part of the western vernacular. Donors often point to the abundance of high-rise buildings and impressive road networks in Addis Ababa in regime’s defense.
In a brief conversation, it is not possible to take such casual observers through details of the kind I have attempted to narrate in the preceding paragraphs. And, unfortunately for millions of Ethiopia’s poor, in the short run the government’s lies and crony capitalism may continue to ravage the country’s economy until it begins to combust from within.
*The writer, J. Bonsa, is a researcher-based in Asia.
“Compare free development in Botswana with authoritarian development in Ethiopia. In Ethiopia in 2010, Human Rights Watch documented how the autocrat Meles Zenawi selectively withheld aid-financed famine relief from everyone except ruling-party members. Meanwhile democratic Botswana, although drought-prone like Ethiopia, has enjoyed decades of success in preventing famine. Government relief directed by local activists goes wherever drought strikes.”- http://time.com/23075/william-easterly-stop-sending-aid-to-dictators/
Traditional foreign aid often props up tyrants more than it helps the poor. It’s time for a new model.
Too much of America’s foreign aid funds what I call authoritarian development. That’s when the international community–experts from the U.N. and other bodies–swoop into third-world countries and offer purely technical assistance to dictatorships like Uganda or Ethiopia on how to solve poverty.
Unfortunately, dictators’ sole motivation is to stay in power. So the development experts may get some roads built, but they are not maintained. Experts may sink boreholes for clean water, but the wells break down. Individuals do not have the political rights to protest disastrous public services, so they never improve. Meanwhile, dictators are left with cash and services to prop themselves up–while punishing their enemies.
But there is another model: free development, in which poor individuals, asserting their political and economic rights, motivate government and private actors to solve their problems or to give them the means to solve their own problems.
Compare free development in Botswana with authoritarian development in Ethiopia. In Ethiopia in 2010, Human Rights Watch documented how the autocrat Meles Zenawi selectively withheld aid-financed famine relief from everyone except ruling-party members. Meanwhile democratic Botswana, although drought-prone like Ethiopia, has enjoyed decades of success in preventing famine. Government relief directed by local activists goes wherever drought strikes. In the postwar period, countries such as Chile, Japan, South Korea and Taiwan have successfully followed the path of free development–often in spite of international aid, not because of it. While foreign policy concerns have often led America to prop up dictatorial regimes, we need a new rule: no democracy, no aid. If we truly want to help the poor, we can’t accept the dictators’ false bargain: ignore our rights abuses, and meet the material needs of those we oppress. Instead, we must advocate that the poor have the same rights as the rich everywhere, so they can aid themselves.
Easterly is the co-director of New York University’s Development Research Institute and author of The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor.
The Tyranny of Experts takes on the notion that autocracies deliver stronger economic growth than freer societies. Easterly argues that when economic growth occurs under autocratic regimes, it is more often achieved at the local level in spite of the regime’s efforts. In some instances, growth under autocracies can be attributed to relative increases in freedoms. He points to China as an example of this, attributing the country’s phenomenal growth to its adoption of greater personal and economic freedoms, especially compared to the crippling Maoist policies of the past.
Easterly also rejects the myth that dictators are dependable and that a certain level of oppression should be overlooked for the sake of economic growth and overall prosperity. Most recently, the violence and chaos following the 2011 Arab uprisings has made some nostalgic for the stable, if undemocratic, governments that kept civil unrest in check, allowing for a measure of economic development to take hold. Easterly stresses that instability and tumult in the wake of ousting a dictator is not the fault of an emerging democracy, but instead an understandable result of years of autocratic rule. The answer is not to continue to support autocrats in the name of stability, but rather to start the inevitably messy process of democratization sooner.
Still, the hard questions remain: how to help those without economic and political freedoms? And when should donors walk away from desperately poor people because their government is undemocratic? Easterly argues that the donor community should draw the line with far more scrutiny than it does today – not just at the obvious cases, such as North Korea, but with other undemocratic countries, such as Ethiopia, where human rights abuses are rampant. He debunks the notion that aid can be “apolitical,” arguing that it is inherently political: giving resources to a government allows it to control and allocate (or withhold) resources as it sees fit. The aid community should focus on ways to help oppressed populations without helping their oppressors. For example, scholarship programs, trade, and other people-to-people exchanges can give opportunities to people in need. At the very least, Easterly argues, development actors should not praise oppressive regimes or congratulate them on economic growth they did not create.
Rather than being seduced by “benevolent dictators,” Easterly urges donors to focus their energy on “freedom loving” governments that need help. The Millennium Challenge Corporation is a step in the right direction but, as Easterly pointed out during the CFR meeting, MCC’s approach is undermined by other U.S. aid agencies, such as USAID, that continue to assist countries even when they don’t meet certain good governance and human rights standards.
March 26, 2014 (The Seattle Times) — SOMEHOW — probably my own fault — I have wound up on Bill Gates’ list of the world’s most misguided economists. Gates singled me out by name in his annual 2014 letter to his foundation as an “aid critic” spreading harmful myths about ineffective aid programs.
I actually admire Gates for his generosity and advocacy for the fight againstglobal poverty through the Bill & Melinda Gates Foundation in Seattle. We just disagree about how to end poverty throughout the world.
Gates believes poverty will end by identifying technical solutions. My research shows that the first step is not identifying technical solutions, but ensuring poor people’s rights.
Gates concentrates his foundation’s efforts on finding the right fixes to the problems of the world’s poor, such as bed nets to prevent malarial mosquito bites or drought-tolerant varieties of corn to prevent famine. Along with official aid donors, such as USAID and the World Bank, the foundation works together with local, generally autocratic, governments on these technical solutions.
Last year, Gates cited Ethiopia in a Wall Street Journal guest column as an example, a country where he described the donors and government as setting “clear goals, choosing an approach, measuring results, and then using those measurements to continually refine our approach.”
This approach, Gates said, “helps us to deliver tools and services to everybody who will benefit.” Gates then gives credit for progress to the rulers. When the tragically high death rates of Ethiopian children fell from 2005 to 2010, Gates said this was “in large part thanks to” such a measurement-driven program by Ethiopia’s autocrat Meles Zenawi, who had ruled since 1991. Gates later said Meles’ death in August 2012 was “a great loss for Ethiopia.”
Do autocratic rulers like Meles really deserve the credit?
Gates’ technocratic approach to poverty, combining expert advice and cooperative local rulers, is a view that has appealed for decades to foundations and aid agencies. But if technical solutions to poverty are so straightforward, why had these rulers not already used them?
The technical solutions have been missing for so long in Ethiopia and other poor countries because autocrats are more motivated to stay in power than to fix the problems of poverty. Autocracy itself perpetuates poverty.
Meles violently suppressed demonstrations after rigged elections in 2005. He even manipulated donor-financed famine relief in 2010 to go only to his own ruling party’s supporters. The donors failed to investigate this abuse after its exposure by Human Rights Watch, continuing a long technocratic tradition of silence on poor people’s rights.
Rulers only reliably become benevolent when citizens can force them to be so — when citizens exert their democratic rights.
Our own history in the U.S. shows how we can protest bad government actions and reward good actions with our rights to protest and to vote. We won’t even let New Jersey Gov. Chris Christie get away with a traffic jam on a bridge.
Such democratic rights make technical fixes happen, and produce a far better long-run record onreducing poverty, disease and hunger than autocracies. We saw this first in the now-rich countries, which are often unfairly excluded from the evidence base.
Some developing countries such as Botswana had high economic growth through big increases in democratic rights after independence. Botswana’s democrats prevented famines during droughts, unlike the regular famines during droughts under Ethiopia’s autocrats.
Worldwide, the impressive number of developing countries that have shifted to democracy includes successes such as Brazil, Chile, Ghana, South Korea and Taiwan, as well as former Soviet Bloc countries such as the Czech Republic, Poland and Slovenia.
If the democratic view of development is correct, the lessons for Gates are clear: Don’t give undeserved credit and praise to autocrats. Don’t campaign for more official aid to autocrats. Redirect aid to democrats. If the democratic view is wrong, I do deserve to be on Gates’ list of the world’s most misguided economists.
The UK government is providing financial aid to human rights abusers in Ethiopia through funding training paramilitaries, who perpetrate summary killings, rape and torture in the impoverished African country, local media reported.
Through its foreign aid budget, the UK government provides financial support to an Ethiopian government security force known as the “special police” as part of its “peace and development programme”, which would cost up to £15 million in five years, The Guardian reported.
The Department for International Development warned in a leaked document of the “reputational risks” of working with organizations that are “frequently cited in human rights violationallegations”, according to the report.
The Ethiopian government’s counter-insurgency campaign in Ogaden, a troubled region largely populated by ethnic Somalis is being enforced by the 14,000-strong special police.
This is while police forces are repeatedly accused by Human Rights Watch of serious human rights abuses.
Claire Beston, the Amnesty International’s Ethiopia researcher, said it was highly concerning that Britain was planning to work with the paramilitary force.
There are over 870 million people in the world who are hungry right now. I’m not talking about could use a snack before lunch hungry, not even didn’t have time for breakfast hungry, but truly, continually, hungry. Of these 870 million people, it’s been estimated by the World Food Programme that 98% live in developing countries, countries that perversely produce most of the world’s food stocks. So why is this the case?
In Ethiopia an alarming 40.2% of population are undernourished.The 2011 Horn of Africa drought left 4.5 million people in Ethiopia in need of emergency food assistance. Pastoralist areas in southern and south-eastern Ethiopia were most severely affected by the drought. At the same time, cereal markets experienced a supply shock, and food prices rose substantially, resulting in high food insecurity among poor people. By the beginning of 2012, the overall food security situation had stabilized thanks to the start of the Meher harvest after the June-to-September rains resulting in improved market supply — and to sustained humanitarian assistance. While the number of new arrivals in refugee camps has decreased significantly since the height of the Horn of Africa crisis, Ethiopia still continues to receive refugees from Somalia, Sudan and South Sudan. The Humanitarian Requirements Document issued by the government and humanitarian partners in September 2012 estimates that 3.76 million people require relief food assistance from August to December 2012. The total net emergency food and non-food requirement amounts to US$189,433,303. Ethiopia remains one of the world’s least developed countries, ranked 174 out of 187 in the 2011 UNDP Human Development Index.