Neoliberalism Versus the Developmental State

In order to make sense of the transformation underway in one of Africa’s fastest-growing economies, it’s important to understand Abiy’s political project, its social base, and how it operates within the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF).

It’s ironic that the new prime minister’s 2019 World Economic Forum address was received with so much approval from global financial elites. Only seven years ago, Ethiopia’s former prime minister Meles Zenawi hosted the 2012 World Economic Forum on Africa in Ethiopia’s capital Addis Ababa. There, he shocked the international financial elite by telling them that neoliberalism was a failed project.

Meles, who ruled as prime minister from 1995 until his death in August 2012, advocated instead his version of the “developmental state.” In this scheme, the state is in the driver’s seat of development, with ownership over key sectors and a tightly regulated private sector that serves to advance the overall national development agenda.

This model, which became official state doctrine in the early 2000s, is an eclectic mix of social and economic policies, some inspired by the East Asian “tiger” states but also more recently China’s industrial park and special economic zone industrialization model. Ethiopia also implements its own version of import substitution, allowing a small bloc of domestic capital to hold a state-sanctioned monopoly over key imports and local manufacturing.

Meles saw an opportunity for African countries to pursue an alternative development path in the rise of China and the breakdown of the Washington Consensus. This was his response to three decades of IMF policy, which turned Africa into what Meles called a “continental ghetto.”

Meles’s alternative path was financed with investments from China, estimated at more than US $12 billion between 2000 and 2015 and channeled towards infrastructure development (however, many of the country’s megaprojects went nowhere thanks to corruption). For instance, in 2017, a $4 billion railway, built and funded by the Chinese, opened to link Addis Ababa to the Port of Doraleh in Djibouti (where China opened its first overseas military base in August 2017).

Meles’s model, following in a long line of twentieth-century projects built on distortions of Marx, envisioned the development state’s historic role as serving the peasantry, the state’s “class base.” In contrast to neoliberalism, where wealth becomes concentrated among private capitalists, the activist state would ensure that wealth is broad-based and invested in expanding the nation’s technological capacity.

The practical results of two decades of the developmental state have been mixed at best. While the class of domestic capitalists is fairly small, wealth has become increasingly concentrated among a small group of party cronies and those directly linked to the military-run parastatal corporations. Though land is officially publicly owned, nomenklatura figures and business people (domestic and foreign) linked to the party’s upper echelon became extremely wealthy through corrupt land deals and urban Ethiopia’s ubiquitous construction projects. This network has alienated other factions of capital, including among the large US-based diaspora, that were not linked to the political elite. These frustrated capitalists have become the base for the free market push, couched in the language of liberal democracy, in Ethiopia.

Meanwhile, Ethiopia remains one of the poorest countries in the world, with a per capita GDP of about $860 (less than $2.50 per day) and a population of about 100 million expected to double over the next thirty years.

Still, under the developmental-state model, poverty declined from 45.5 percent in 2000 to 23.5 percent in 2016. This despite a population growth from 65 million in 2000 to 100 million 2016. Ethiopia has one of the lowest Gini coefficients (which measures income inequality) in Africa, much lower than neighboring “free market” Kenya. Large-scale and pro-poor investments in social services ensured that primary education (with gender parity) reached 100 percent, health coverage 98 percent, access to potable water 65 percent, and life expectancy at 64.6 years (up from about 50 years in 2000).

However, with Abiy’s Ethiopia aiming to become the world’s next low-wage paradise, inequality could increase dramatically. Foreign direct investment, while highly regulated and limited to certain sectors (mainly infrastructure, construction, agriculture, and textile), has taken on a significant role over the past ten years, growing from US $265,000 in 2005 to nearly US $4 billion in 2018.

With no private sector minimum wage in Ethiopia, low wages are seen as Ethiopia’s “comparative advantage” in the global race to the bottom, with the Ethiopian Investment Commission reporting that “the average wage of workers in the leather factories is US $45 per month, while the minimum wage in Guangdong is about US $300.” The recent Worker Rights Consortium’s investigation also reveals that Ethiopian factories are paying wages far lower than in any other apparel-exporting countries, with an average of 18 cents per hour.

In response to the International Trade Unions Confederation (ITUC) denouncing exploitative wages in Ethiopia’s manufacturing sector, local business-friendly media were quick to warn that it’s too soon to ponder wages. “The one prime opportunity the nation can offer investors is low-cost labour,” they argue, “and taking that away will only have negative consequences. It will just drive investment elsewhere and exasperate unemployment in the country.”

In a particularly telling convergence between the aid-industrial complex and Western foreign policy agendas, these low-labor-cost industrial parks double as European migration-control tools. Donors have pledged to mobilize $500 million for two industrial parks, as long as Ethiopia reserves a third of the projected 100,000 jobs for refugees. The necessary proclamation permitting refugees to work in the formal labor market was passed in January 2019. This was advocated for by Western governments who would never dream of proposing a 30 percent refugee quota on job-creation schemes at home.

Revolutionary Versus Liberal Democracy

Meles not only borrowed state-led industrialization strategies from China, but also a China-inspired version of “development-first democracy.” Meles maintained that democracy would come after development was achieved, and when the base of the developmental state (the traditional, noncapitalist peasantry) had been transformed into an industrial proletariat.

Until then, a political system was required that would not dispute the fundamentals of the national developmental project. In Meles’s historic mission of ending Ethiopia’s “humiliation of poverty,” there was no place for a political opposition that could jeopardize the country’s long-term objective of development.

The 2005 elections, which were somewhat freer than later elections, proved a shock to the Meles regime. The opposition swept all seats in Addis Ababa and initially appeared to have won a majority of parliamentary seats. Yet when official results were released four months later, the ruling party was declared to have won 59 percent of seats.

Since then, the democratic space became even more restricted, with an increasing number of political prisoners, intensifying legal repression (such as declaring opposition groups terrorist organizations or the very restrictive NGO law introduced in 2009), and forcing people into silence or exile.

The systematic and brutal clampdown of dissent ensured that the ruling party won 499 out of 574 seats in the 2010 elections and, finally, a China-style 100 percent of seats in the 2015 election. Critically, the harsh reactions and condemnations by the West have also strengthened the ties between China and Ethiopia given the former’s policy of not interfering in domestic affairs.

This model of authoritarian pro-poor growth, including protectionism and state subsidies for agricultural inputs, ensured that the large mass of rural poor saw some real material improvements in their living standards in return for relative loyalty to the state. The massive expansion of EPRDF party membership, especially at lower administrative levels, also provided an army of local party spies for the police state that could immediately stifle dissent.

The numerically tiny middle class, mostly based in Addis, became largely apolitical after the brutal crackdown in 2005, when postelection protests resulted in the deaths of at least two hundred protesters.

The urban middle class primarily focus on securing their own — fragile, as wealth does not run very deep — material status, including through petty tax-evasion schemes, profitable black-market currency exchanges, and acquiring smuggled Western brand-name clothing, iPhones, and laptops. For those who can attain a middle-class lifestyle — signaled by a car and modern housing (with a live-in maid, mainly young girls from rural areas who earn approximately $40–60 per month) — political freedom was not worth the prospect of imprisonment. Instead, they preferred to “sit out” the Meles regime while securing their own little piece of the economic and real estate boom. This class focuses on accruing enough cash (access to credit is very restricted) to lease a plot of land and build a property that will rise in value alongside the country’s spectacular growth rate.

The Qeerroos

When protests erupted in the countryside in 2015, the middle class failed to understand the revolt’s class nature. Instead they reduced it to an expression of backward ethnic chauvinism. In reality, the protests, led by Oromo youth known as Qeerroo, foregrounded struggles over class, exploitation, and discrimination.

The trigger for the unrest was the government’s controversial proposal to expand Addis Ababa into the surrounding Oromia region, threatening local farmers with mass evictions. The government’s continued use of excessive force against protesters resulted in a death toll of more than 900 people between 2015 and 2017. The government also jailed tens of thousands of mostly ethnic Oromo political prisoners, turning a land dispute into a much larger protest for Oromo ethnic self-determination and “national liberation.”

The protests’ base of rural, unemployed, and underemployed youth was the product of the past twenty years of fast-paced but uneven development and rapid population growth. As in the “Arab Spring,” social media played a critical role in shaping the Qeeroo movement’s collective identity, while facilitating the coordination of rallies, boycotts, and roadblocks (since Addis is surrounded by the Oromia region, protestors managed to cut the capital off from fuel and other supplies). This large generation of young people — 50 percent of the country’s 100 million people are eighteen or younger — is also increasingly literate. Youth literacy (15–24 years) increased from 27 percent in 1994 to nearly 70 percent in 2015.

Critically, protestors carried out many attacks against factories. They especially targeted joint ventures between foreign investors and local non-Oromo elites, who the protestors accused of land-grabbing and denying decent jobs to locals.

Fears began to mount that the prolonged violence and increasing international scrutiny of the government’s heavy-handed response would push away foreign investors. This played into the hands of reformist forces within the government, many allied with the US-based Ethiopian diaspora. These forces highlighted the developmental state’s failure to ensure stability and the superficial compliance with human rights (with the notable exception of labor rights) demanded by US and EU investors.

Still, protesters had little to lose in material terms and, unlike the middle class, no stake in the authoritarian development model. The protests continued for more than two years despite the government’s repeated implementation of states of emergency and total internet blackouts.

Real cracks within the EPRDF became visible in 2017 when Lemma Megersa — president of the Oromia region (and close ally and mentor of Abiy) and then-chairman of the Oromia’s regional EPRDF member party Oromo People’s Democratic Organization (OPDO) — began challenging his own ruling party’s heavy-handed response. He became the first “oppositional voice within,” preparing the blueprint for Abiy’s takeover of the EPRDF in the spring of 2018.

Dismantling the One-Party State From Within

When Hailemariam Desalegn — Ethiopia’s prime minister since Meles’s death in 2012 — stepped down after years of unrest in February 2018, few expected systemic change from within a party that ruled the country since 1991. After all, more than 60 percent of Ethiopia’s 100-million-strong population were born after 1991 and have never experienced another ruling party in their lifetime.

Real change also seemed unlikely given that the new prime minister was elected through a secret vote by the EPRDF’s opaque 180-member Council. Despite rumors of a division within the ruling party, it was unexpected that the party would elect Abiy. As an ethnic Oromo with a rural background and a base of support among Oromia youth protesters, he seemed set on implementing the opposition’s agenda.

But Abiy had another side. The urban middle class — silent through the years of mass repression of rural protesters — immediately flocked to support Abiy. He embodied the urban middle class’s cosmopolitan aspirations: his US resident wife and children relocated to Ethiopia only recently (his three children all attend Addis’s most expensive international school) and he works out regularly at one of Addis’s most upscale health clubs. Abiy’s most recent vanity projects highlight his bias towards an urban middle-class base: a digital museum, a mini-Ethiopian theme park, a zoo with 250 animals, and a $1 billion riverside greening project in Addis.

Upon gaining power, Abiy broke with the party’s biggest taboo by making peace with Eritrea, thus removing the permanent state of war and raison d’être for a strong police state. He then ended the state of emergency and released tens of thousands of political prisoners. In Davos, Abiy proudly announced that today there are no journalists in Ethiopia’s prisons (adding a cheeky comment that sometimes Western countries could learn from Africa too).

Abiy not only invited back exiled opposition leaders but installed a former political prisoner and high-profile opposition leader as the head of the Electoral Board and appointed a 50 percent female cabinet. He also passed amnesty laws, started the process to repeal Ethiopia’s repressive NGO law, and unshackled the media. And importantly, he began to bring military-run parastate organizations, responsible for embezzling billions of dollars, under government control.

The Social Question

While Abiy has largely delivered on promises of political freedom, his new government has so far been silent on the social question. Similar to other charismatic liberal darlings such as Obama or Trudeau, Abiy has enthusiastically embraced identity politics (within the culturally acceptable realm of a traditional and deeply patriarchal society such as Ethiopia), while treating poverty and inequality as issues best addressed through the market and technocratic means.

Abiy’s agenda is now clear: He intends to set Ethiopia on a path to (more) free market capitalism, reducing the role of the state while increasing the role of Western investors and the private sector more broadly.

However, Ethiopia’s political economy and development model remains dominated by China. Abiy may preserve the independence of Ethiopia’s development path by playing China and the West off one another. As one of the only two African countries that was never colonized, ensuring independence through strategic alliances and concessions would be a very Ethiopian approach (and in line with Abiy’s current careful regional maneuvering between Qatar and Saudi Arabia).

Meles said that during the 1990s, when neoliberalism was the only game in town, the government carried out its state-led development model “in stealth” to keep the Washington Consensus powers close. Abiy, who joined the EPRDF as a teenager and grew up politically under Meles, may pursue a similar dual strategy: short-term gains and additional non-China FDI through implementing just enough neoliberal reforms. Meanwhile, long-term Chinese funding will help maintain the primacy of the state and sustain the developmental agenda of pro-poor growth within a liberal-democratic setup.

The partial opening of the economy will meanwhile weaken the previous regime’s economic base, particularly its allies in domestic capital and the military. After all, one should not forget that while Abiy spoke eloquently at the World Economic Forum, he is also fluent in Meles’s two languages: his mother tongue Tigrinya, and the language of the developmental state.

In any case, progressives must insist that the ongoing political reform reflects not just “liberal” democracy but a radical one, in which “human rights” are indeed workers’ rights and women’s rights. Not in the Hillary Clinton sense of equal representation in top leadership positions, but through rights and protection of the country’s millions of female informal workers, women’s access to land, progressive sexual and reproductive rights, and an overhaul of the country’s legal and law enforcement sector that brings material rather than a symbolic change in women’s lives.

A progressive platform must reject a development strategy that is built on exploiting the country’s rapidly expanding working class and demand that the spoils of economic growth finance the expansion of universal and free essential social services.

Progressives must reject the neoliberal depoliticization of economic policy and the supposed supremacy of the free market. More importantly, progressives must insist that poverty and inequality are inherently political and man-made outcomes of social struggles. They must urgently organize and build a radical democratic agenda for Ethiopia that combines political with social and economic rights.

The renewed scramble for Africa shows that competing factions of global capital are itching to extract billions of profits from the African continent. Meanwhile, many African governments are willing to sell out their people and natural resources for a shameful price to remain competitive and “attractive for foreign investors.”

At times, this may be because local leaders are under pressure to quickly bring in money and jobs at terms they do not dictate. They hope to create a minimum level of economic opportunities for the growing number of young people who have nothing to look forward to and for whom the state has nothing else to offer. For some, this may be an issue of short-sighted state survival, and the lack of time or public support to try an alternative path when people are, quite literally, hungry.

Looking Ahead

From an international socialist perspective, the issue with Abiy’s speech at the World Economic Forum is not the speech alone, but the Forum and the power relations it represents.

As long as the global economy continues to serve the interests of a neoliberal financial elite — where in 2018 the world’s richest twenty-six billionaires owned as much as the bottom half of the world — there is only so much say the poorest countries can have in today’s international governance, shaped as it is by imperialist legacies.

It is the responsibility of socialists in the West to support political forces committed to implementing a socialist and anti-imperialist agenda that will change the rules of the game of the global economy, which are still mostly made in the Global North. For instance, much of the suffering in developing countries could be prevented if we had a UN Security Council with a President Sanders and Prime Minister Corbyn. They could even begin dismantling the Security Council from within. This is very much within the realm of the possible in the next two years.

At the same time, the global left should not leave “capacity building” to McKinsey, the Clinton Foundation or other Western NGOs. For young Ethiopian progressives, this is likely the first time in their lives that there is space to organize and build a left-wing political project. They need to learn very quickly before the “invisible hand” turns Meles’s “development without democracy” into Abiy’s “democracy without development” for Ethiopia’s poor.