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From Structural Adjustment to WTO

Membership: Squaring poverty!

Why Ethiopia should not become a member of the WTO?
“To have a rested mind is a state of ignorance. One must always find something what he can
do, to think and bring ideas which could be realized for what one is interested, either for the
entire society or for individuals.” - Gottfried Wilhelm Leibniz

“The normative authority of the United States lies in ruins.“ - Prof. Jürgen Habermass

Regarding the application of the EPRDF government to make Ethiopia a member of the
World Trade Organization (WTO), I have published a long thesis in Amharic, and tried to
prove that this application and the possibility of becoming a member of the organization is not
in the interest of our country. The fact that enlightened Ethiopians and those who will be
directly affected vehemently oppose Ethiopia’s WTO membership, Meles Zenawi who is now
a strong ally of the Bush administration in the ‘war on terror,’ is advised to take more
liberalization measures, if Ethiopia has the chance of joining the WTO. Though there are
thousands of scientific evidences which prove that such kinds of membership by no means
helps a country like that of Ethiopia to build an economy based on science and technology
which is the prerequisite of a coherent nation-state, Meles is hasty to totally sell-out our
country to multinational companies so that our people won't see the true light of civilization.

In the last ten or more years, poor people and enlightened forces across the globe have
fiercely protested against the attempts of not only the WTO which promotes free trade
doctrine for the industrialized West, but also against all monetarist policies of the IMF and the
World Bank, which have brought incalculable damages against the billions of poor people in
this world. The sixty years of economic policies which have been practiced in most of the
Third World Countries in the name of free market have proved that these policies have the
sole purpose of pushing these people into more poverty and resource plundering which were
organized by the respective governments of those countries. In spite of the many damages that
the people of the Third World Countries are experiencing, new policies are being formulated
again and again so that these countries become more dependent, and open their doors for
more resource plundering. The fact that no intellectual debate takes place, especially in many
African countries, which economic policy is the best in bringing the necessary economic
development that guarantees the people a decent life so that they live in peace and harmony, it
is convenient for organizations like the WTO, the IMF and the World Bank to propagate their
monster like policies which ultimately destroy the livelihood of those innocent people. It is
therefore our urgent task to oppose any attempt made by these organizations to incorporate
Ethiopia into the global order so that her resources will not be more plundered, and her people
will not live under permanent poverty.

In order to prove why free trade as is propagated by the IMF, the World Bank and the WTO
couldn't bring the desired results, I will show first of all the effects of the structural
adjustment program, henceforth SAP, on the livelihood of the Ethiopian people as has been
practiced over the last 15 years. As I have subsequently proved in the many publications I
made why SAP couldn't bring the promised results, it will be evident here too that Ethiopia's
application to enter the WTO will deepen the poverty of our people, and break-up the existing
social structures, make our country more dependent on outside forces, and make her
vulnerable to any economic shock which comes from outside. From this bleak perspective,
the insistence of the US administration that Ethiopia must liberalize its service sector if she
will become member of the WTO is nothing but a calculated intrigue to destroy the remaining
social ties and create a new social matrix like that of Mexico and other Latin American
countries, which can’t be easily controlled by any government which seizes power.

In this respect, it is of a paramount importance to understand also the theoretical foundations

of these organizations which promote free trade across the globe. Without understanding their
false assumptions, and the basis of their theoretical foundation, it is very difficult to fight for a
civilized Ethiopia, where her people live in prosperity and peace. I will try to prove also that
not free trade as formulated and propagated by Adam Smith and Ricardo, but mercantilist
policies of the 17th and 18th centuries, which had opened the road to more coherent economic
development in those countries that applied this state regulated economic policy. Here too, I
will prove that not free trade which brings economic prosperity for those impoverished
countries like Ethiopia, but a systematic state regulated economic policy, which also favours
all those active forces that are ready to take part in nation building.

The failed promise!! Why SAP has failed!

The introduction of the free market policy and especially the program of the structural
adjustment in Ethiopia in 1993 is a historical turning point in the socio-economic conditions
of our country. With the introduction of the SAP, it was from the outset clear that such kind of
a wide range policy will create new social conditions and social relationships that our country
has never experienced before. By creating new conditions, and formulating new laws, and
practicing new policy that are totally different from the policy of the previous government, the
policy makers were convinced that Ethiopia and its people will march on the road of market
economy that brings prosperity and eradicate poverty once-for-all.

After the experts of the IMF have "studied" the socio-economic condition of Ethiopia, that is
very meagre and unscientific in its formulations, they came to the conclusion that, the EPRDF
government has no option other than implementing a market economic policy program as
prescribed by these neo-liberal organizations. In their beliefs, the previous military regime
had adopted a socialist economic policy, that is not compatible with the neo-liberal market
economic policy, and responsible for the bad performance of the economy and wide spread
poverty. On the other side, one could see easily the theoretical fallacies and empirical
contradictions made by these organisations, that while the majority of the Ethiopian peasants
live under subsistence condition, and when this with the widespread of the informal sector is
the reproduction basis of the Ethiopian masses, how is it possible that one can plan a socialist
economic policy. Under these scattered economic conditions and formations with practically
underdeveloped economic, financial and social infrastructures it is very difficult to practice a
socialist economic planning. What the military government had tried to do was to organize the
people in cooperative farming, and had taken wide range measures that it believed, could pave
the way for a kind of state regulated economic policy. Because of the political turmoil that
the country had to experience, and the contradictory measures that the government had taken,
and its incapacity to execute the policy in a professional manner, and its false understanding
of the socio-economic conditions of the country, it couldn't bring the desired results.
Likewise, the EPRDF government and its mentors, the IMF and the World Bank, knowingly
or unknowingly, couldn't understand the nature of the Ethiopian socio-economic formation.

As a result of this misconception and wrong analysis, they came to their supposed market
economic policy, that by no means solves deep-rooted social and economic crisis like that of
Ethiopia. It is just like this: wrong doctors, wrong diagnosis and wrong medicine that
multiply the crisis and deepen it so that no one could solve. The experiences in many
countries, where SAP and other market economic policies have been practiced prove that
these kinds' of market economic policies never solve social and economic problems, and
never lead those countries to a more integrated capitalist macroeconomic structure. We see
today in Ghana, Nigeria and other Sub-Saharan African countries where SAP was being
practiced that these countries are far away from an integrated and self-reproductive market
economic structures. On the contrary: informal sector and black market activities are the
rule of the system rather than the exception. From this we learn that the identification of
the macroeconomic imbalances by the World Bank and the IMF concerning the African
economic condition is not a correct identification as our Prime Minister, Mr. Meles Zenawi
makes us believe. When there are no macroeconomic conditions like that of homogeneous
labour market, capital market, money market, general inflations rate, etc, according to
the theory of macroeconomic policy, how can one come to the conclusion that there are
imbalances in the economic construction of the Ethiopian society. On the other side, our
Prime Minister can’t specify what he means by macroeconomic imbalances. When and under
what circumstances there are imbalances? What does it mean in such underdeveloped
economy the existence of macroeconomic imbalances? As a matter of fact, imbalances in a
given situation do exist when one aspect of that given situation is more developed than the
other; and due to such disequilibrium situation when there are economic distortions which
block economic development in general. The problem in Ethiopia and in other African
countries is not as such the existence of macro-economic imbalances, but the system is
organized on false principles and guidelines; and therefore that these societies do not know
why they exist. In other words, when a given economy is chaotically organized it disorients
the people; their lifestyles will not have some philosophical backgrounds. The inherent
contradictions of such a system which has its own socio-cultural manifestations, like
disorganized activities, disorientation of the society, loosely connected production activities
with very low value-added effect block economic development. In other words, the
interactions of so many factors, internal and external, and the interwoven of these factors and
their non-dynamism is the real cause of the economic crisis of the African economy. Mr.
Meles talks about economic theory that he has never understood and will never understand,
because the problem lies some where, not of imbalances of the macroeconomic parameters
that do not exist in the African conditions. Because of this wrong identification of the African
economic realities, the neo-liberal ideologists, the IMF and the World Bank came to wrong
policies that they prescribed to all Sub-Saharan African countries and adopted, and led these
countries to more deep-rooted crisis. After these attempted and failed experiments, likewise
our country must also swallow this bitter medicine, that after 15 years of practices our Prime
Minister Meles Zenawi realized that he had chosen the wrong path of economic policy. After
he has destroyed our country and changed the social matrix of our society, the "wise leader"
came to such amazing conclusion, that neo-liberalism is a wrong medicine in curing the
African economic crisis.

As usual, the IMF and the World Bank had prescribed in their policies the known formulas:
The EPRDF must take the following measures if it wants to adopt market economic policy:
devaluation of the Birr in terms of the US-Dollar, price liberalization, state budget
reduction, privatization, liberalization of the foreign trade, etc. From the perspective of
the IMF and the World Bank, if the government practices these monetarist policies, that are
erroneous and unscientific by nature, economic growth and increase of real income become
the rule of the system, and as a matter of fact it encompasses all the areas of the socio-

economic activities, and as a result of this the Ethiopian people will see the true light of
civilization, and become the member of this beautiful global village where billion of peoples
dance hand in hands and enjoy life.

In the eyes of the IMF and the World Bank that propagate neo-liberal policies on a global
scale, devaluation of a given currency will automatically increase demand. In their beliefs,
currencies like that of Ethiopia are overvalued, and hence export prices are expensive and as a
result of this overvalued currency, Ethiopia couldn’t get sufficient demand. If currency
devaluation occurs, the so-called elasticity of demand will be the rule, and that means the
product Ethiopia exports get more buyers. If this elasticity demand applies for those highly
competitive economies, that use scale economies i.e. that operate with high intensive
technologies and decrease production costs, for countries like Ethiopia the formula of
elasticity of demand couldn't be applied. Because of the oversupply of products, like coffee
and other agricultural products, and because of intense competition among agricultural and
raw material producing countries, and because of price dictation and future contracts, that the
coffee and other raw material cartels have at their disposals, devaluation of currencies will not
have automatic positive results as is supposed by the IMF, the World Bank and other neo-
liberal economists that are ideologically blinded and confuse the world. If the Ethiopian Birr
and the currencies of other Third World Countries are overvalued, because of historical
reasons, i.e. in order to protect their markets. From the point of view of importers, it is
advantageous to have overvalued currencies, since the exchange rate in terms of a foreign
currency favours the importers, i.e. with less amounts of their currencies they could exchange
a certain amount of foreign currency, say the American dollar with which they import the
necessary capital goods, durable or other marketable goods.

This being the case, the devaluation of the Ethiopian Birr (Ethiopian Currency), from the
previous 2.05 Birr in terms of US-Dollar, to 5 Birr and later to 8, and to 10 Ethiopian Birr
could not bring the desired results. The devaluation of the Ethiopian Birr has two negative
effects; i.e. as a result of devaluation Ethiopian exporters couldn't find more buyers for their
products. The exporters must export too much of the same products to get the same amounts
of turnover as the previous years or less. On the other side, importers must bring more of the
Ethiopian Birr to buy one US-Dollar, which is not possible. As a result of such kinds of
exchange rate that is not market induced, but taken by the government because of the pressure
from the so-called international community, Ethiopia has to experience negative trade
balances over the last 15 years. As a result of the introduction and implementation of such
kinds of devaluation measures, and liberalization of the foreign trade, the trade balance deficit
had increased from $ -720.6 US in 1991/92 to $-1,101.7 US. The increase of imports in terms
of GDP had increased successively from 23.0 per cent in 1995/96 to 30.3 per cent in 2000/01;
where as the amounts of exports in terms of the GDP had fluctuated between 13 and 14 per
cent for the same years. Export volumes and earnings from coffee couldn't bring the desired
results as the IMF and the World Bank would make the government believe. Due to low
coffee prices at historic level, and increasing oil prices and the heavy fluctuation of the
volume of coffee that Ethiopia exports, the earnings from coffee has decreased from $ 420
million US in 1997/98 to $ 203 million US in the year 2003/4. The terms of trade of coffee to
other imported goods has decreased by 33.9 per cent in FY 2000/01, by another 6.3 per cent
in FY 01/02, and by yet another 8.9 per cent in FY 2002/03. That means Ethiopia must pay
more for one imported good, because of the fall of the prices of coffee. Or she must sell more
of the volume of coffee for one imported good. This clearly demonstrates that, as the result of
the well celebrated devaluation, Ethiopia could neither export more nor earns more dollars
that could be used for the importation of capital goods.

Theoretically seen, devaluation must restrict imports. The practice demonstrates, however,
that Ethiopia must import goods that are not compatible with her internal production capacity,
and with the export income she earns. As a result of liberalisation and emerging of new
consumer class including government authorities, the country was compelled to import
unnecessary consumption goods that shared the meagre hard currencies that she other wise
allocates for other productive purposes. This in turn had spread a unique black market activity
and a kind of Ethiopian speculation, which had benefited the new consumer class. At the same
time, such kinds of market reforms and increasing of imported goods had expanded the share
of the service sector to unknown historical level. Because of the low industrial base of the
country, and because of the internal migration from the rural areas to the cities, especially to
the capital city, and that are also deliberately induced by the government, those who couldn't
find jobs and couldn't be easily absorbed by the new investments and the existing industries,
were compelled to engage themselves in black market activities, to ayer be ayer
(speculation) and other very minor activities. This has swollen the share of the service sector
in terms of GDP, which is 40 per cent now, compared to the industrial sector which had
remained to only 12 per cent over the last 15 years. At the same time, the massive importation
of Handy and the involvement of the EPRDF cadres in such kinds of activities, and the
massive corruption of the Ethiopian telecommunication officials by foreign forces have
radically reduced the use of fixed telephone lines. Telecommunication officials, who could be
easily corrupted, make the existing telephone lines out of operation; and people are compelled
to buy Handy. This kind of insane activity by the Ethiopian telecommunication officials had
expanded the Handy market.

The liberalization of the foreign trade had also other devastating impacts on the Ethiopian
economy. Textile products, shoes and other products that are competing with the existing
industries were imported; and are still being imported, and as a result of this many companies
are compelled to reduce the workforce, and produce with very low capacities. The EPRDF
government was not willing to take measures against these kinds of massive importations of
goods that are destroying the very existing industries. All in all, and as experiences from other
countries show, the celebrated liberalization of the foreign trade did not bring for the country
any tangible result that could boost the internal market. The internal market is today more
distorted than ever, and doesn't have any system of internal dynamism that could give
hope for the masses that are desperately looking for jobs.

The shrinking of the home market as a result of weak industrial base, and the reliance of the
government more on indirect taxes for its budget, and the uncertainty of such taxes had
compelled the government to rely more on outside sources to fill its ever-growing budget
deficits. If we look at the development of Ethiopia's accumulated debt over the last 15 years,
the country comes to a point which it cannot cope any more with such kinds of staggering
amounts of debt that shares the huge amount of export earnings. The accumulated debt over
the last fifteen years has increased to $ 10.4 billion US. This means that this huge debt is 173
per cent of the GDP of the country. This is also equivalent to 504 per cent of its foreign trade.
As a result of debt negotiations with Russia and with the international community, the amount
of debt has been reduced to $ 5.3 billion US. Still the country must pay debt service that is
equivalent to 23 per cent from her external earnings.

The liberalization of the foreign trade like the devaluation of the Birr is based on a false
theoretical assumption that doesn't have any scientific basis. When the IMF and the World
Bank make their "analysis" to detect the weak points of the Ethiopian economy, they did not
have the gut and the theoretical instruments with which they could thoroughly analyse the
socio-economic formation of the Ethiopian society, but they simply try to see the situation

from a simple construction of monetarist view, that had blinded their minds. It must be from
the outset clear that monetarism that was developed in the early 20th century is not
constructed to develop a capitalistic economy, but to manipulate it by means of diverse
devices, and was not suitable to serve as a theoretical instrument to analyse such backward
economic formations like that of Ethiopia. As a result of this misconception of social realities,
and biased against other scientifically proved economic and civilization oriented theories, the
IMF and the World Bank have no other option than following this radical ideology that
destroys the basis of human relationships. They are by nature against other alternatives, since
they are ideologically fixed, and don't have any knowledge of human civilization. The fixing
of their attitudes to such ideologically and politically motivated economic theory shows also
that, they have some hidden agendas to misguide those poorly educated guys, and are serving
at the same time to execute the interests of those evil minded oligarchic forces in this world.
The ideological motivation of these institutions prove also that they don't posses any
democratic values in their minds, though they pretend to do so, and are born and grown in the
industrialized societies where democratic values are the norms of their societies. In actual
fact, they behave like dictators, but they differ in one thing; they don't seize guns and don't
posses prisons. Their guns and prisons are their neo-liberal ideology that is not less
dangerous than dictatorship.

The problem of the foreign trade in Ethiopia like that of the internal economy is more of a
structural nature than simple liberalization and monetary problem, that can't be solved by such
kinds of superficial instruments that aggravate the situation rather than solving it. For
generations, Ethiopia is dependent on only very few agricultural export products to earn
foreign currency. As other developing countries, Ethiopia was also compelled to be dependent
on such kinds of few exportable products rather than following an inward development
strategy. Though Ethiopia has been exporting coffee over the last 100 years, its importance
became clear as a new aristocratic and bureaucratic class had seized power after the end of the
Ethio-Italian war. This new aristocratic and bureaucratic class that was led by the Emperor
didn't have any scientific knowledge how it could build a nation-state like that of Ethiopia on
the basis of science and technology, but it had blindly followed the advices of foreign forces,
and concentrated its efforts to expand coffee production, and install the wrong
industrialisation policy, that has very weak internal linkages, and very weak accumulation
effects. This import-substitution- industrialisation and the concentration on coffee production
are the main characteristic features of the Ethiopian economy that have distorted genuine
economic development based on science and technology.

From this vantage point of view, as an economist one should study the structural weakness of
the Ethiopian economy before one come to a wrong conclusion and suggest the wrong policy
that doesn't have any scientific coherency in dealing with those economies like that of
Ethiopia. In a country like that of Ethiopia, where theoretical and scientific debates are not the
rule of the society, and where the intellectual basis of the society is very weak, and where
such kinds of destructive forces like that of the EPRDF seize power, it is very simple to
manipulate and execute once own evil agenda; i.e. to destroy the very foundation of the
nation-state so that the masses live like animals. That is what the IMF and the World Bank
have been trying over the last 60 years, and they have successfully achieved their evil
atrocities against the billions of innocent people across the globe. The mass poverty in
Ethiopia that is growing every passing day prove this fact; the evil nature of the IMF and the
World Bank and their monster like policies. It is our humanistic agenda to fight against this
monster like policy if we want to save Ethiopia as a nation-state, and build it on a strong
foundation; that is science and technology. For how long can humanity be deceived by this

satanic theory that is against natural laws and true Christian Values, i.e. Brotherhood and
genuine civilization based on science and technology.

The case of privatization that is a part and parcel of the total misconceived package of the
IMF is also another intriguing attempt to distort the Ethiopian economy. According to the
IMF and the World Bank philosophy, one of the main characteristic features of those
economies like that of Ethiopia are, there is too much state intervention in the economy that
hinders market economic operation. As usual, such kinds of "massive state intervention"
which can't be proved scientifically, the role of private initiative will be restricted, scarce
resources couldn't be efficiently allocated, and as a result there is price distortion that leads to
disequilibrium situation among the different economic sectors. Therefore, the IMF experts
say, that the only remedy for such kinds of market disequilibrium, and inefficient allocation of
scarce resources, is privatization of the state owned industries. The IMF and World Bank
experts that don't think and analyse in terms of historical process, and that don't believe in
such kinds of comparative analysis, they never pose questions, why there is, according to their
view " too much" state intervention in those economies like that of Ethiopia. On the other
side, this exaggerated state intervention if we compare it to that of the purely capitalistic
economy of the West, doesn't exist. If we look at the economic structure of Ethiopia, either
during the Emperor time or during the era of the Military dictatorship, the role of the state in
manipulating the economy was practically negligible. First of all, the majority of the
industries and other so-called modern sectors are not the basis of the material reproduction of
the masses. Since over 85% of the Ethiopian people rely on the basis of subsistence farming
and informal sector activities for their reproduction, to believe that the state has the greatest
role in conducting the movement of the entire economy is to put things on their head. There is
no any scientific justification on this basis to make us believe that the Ethiopian economy is
slowly growing because of the massive intervention of the state. When we look at the
economic policies of either the Emperor or the Military dictatorship, both have wrong
conception of economic development, and had never thought from a scientific perspective to
develop a coherent and self-reproductive economy. As a result of the built-in mechanism of
the import-substitution industrialization, and due to the historical nature of the Ethiopian
society, the dynamism of the system is very limited. Secondly, the import-substitution
industrialization is a false accumulation model; since it is not backed by machine-tool
industries that has the greatest accumulation effect, and could easily encompass the entire
economy if it is again backed by development and research. The lack of such kinds of
industry is one of the main causes of underdevelopment of the Ethiopian economy, and as
such not the massive intervention of the state in the economy that hampered economic
development. This false accumulation model is not only the problem of Ethiopia; it is the
problem of so many African countries that were compelled to follow such a policy during the
50s and the 60s. When the state had “greater roles” in those economic sectors, not because it
wanted to act like this, but the historical necessity of the country has compelled it to play
major roles in those areas where private capitalists couldn't afford. The fact that Ethiopia was
pushed to follow such a distorted economic policy had compelled money holders not to invest
on productive sectors. Due to the limited historical knowledge of the state and the ruling class,
it was not possible to rare a bourgeoisie class that could play a historical role by investing on
technologies that have greater accumulation effects. The state by opening its door and
foolishly advised by foreign manipulators, had derived those money holders not to play active
role in the economy. As a result of this cooperation between the ruling class and the foreign
forces, the only option for the indigenous class that has remained is to concentrate on those
areas where the turn-over of capital is quick, and becomes rich easily within a short time.
Then the service and the trade sectors were seen as the only alternative economic sectors, and
as times goes the class which is engaged in this sector become culturally bounded and

remained there tightened for generations. When the military government came to power,
whether knowingly or unknowingly, it wanted to correct these kinds of resource distortion
that hampered economic development. But the problem of the military government was that it
had not grasped the nature of the socio-economic backwardness of the Ethiopian society.
Without knowing what socialism is, as any body does, it had started to fight on all fronts, and
by that it produced so many enemies. As a result of blind nationalization and false
understanding of the laws of political economy, its measures were destructive, and did not
have any scientific basis that could alter the Ethiopian society on solid foundation. Such kinds
of hasty measures by the military government, and the all-out propaganda against the
supposed socialism, the west had begun its fierce attack against Ethiopia in order to
destabilize the entire social matrix of the Ethiopian society.

When the EPRDF government came to power, there is no alternative other than advising it to
privatize the state owned sector. The hasty measure of the IMF and the World Bank to control
the situation, and the incompetent nature of the EPRDF government, has created a situation so
that not only the government, but also other forces that were not in favour of the government
saw the policy as a correct strategy that could bring economic growth and eradicate poverty.
The question, when privatization is introduced, how it is sold, and who competes to buy the
industries and other economic activities were not resolved from the very beginning. All have
seen as if there were forces that could afford to buy and ran the industries according to the
principles of market economic efficiency. As times goes it became clear that only those forces
that have direct access to the government or are related to the party, and get easily bank
credits could partake in the privatization process. In Ethiopia too, we observe a Russian type
situation when private persons without prior knowledge of market economic principles, and
without having money, easily get access to bank credit and could buy the industries. As a
result of such kinds of direct and indirect intervention of the EPRDF government few
individuals became rich over night by stealing the country’s wealth. This has created a new
social situation; and new class relationship has been created that is not dynamic by
nature, but arrogant and illiterate that has taken the country to unknown destination as
we see it today. This new class relationship that is created by the holly alliance of the
international community and the ruling class is not in a position to create new wealth by
engaging itself on those areas whose accumulation base is wide; i.e. science and
technology based investments.

This kind of privatization measure that is ideologically motivated rather than economically
and scientifically justified couldn't create a market economic dynamism that brings prosperity
to the country by creating new jobs and raises real income of the worker. When we look at the
entire economic reform that was introduced in the name of a free market, its agenda was clear.
By making the economy more open to global players, that come and make their agreements
with the ruling class and squeeze the maximum profit through such kinds of unequal
arrangements, they want to drive the country to uncontrolled situation. At the same time, this
kind of market reform proves the incapacity and ahistorical nature of the ruling class that has
prostituted itself to the international financial oligarchic class that ruins nation-states across
the globe. In this manner the new ruling class and those who have profited from this distorted
market economic reforms have reduced themselves to a status of slave that obey and do what
their master say. This is unique in human history, and it is against the interests of our nation
that must be combated by any means.

All in all, if we look at the neo-liberal policies of the IMF and the World Bank, the policies
are based on wrong assumptions and identifications that are not existing in those economies
like that of Ethiopia. The problem is not macroeconomic imbalances, but unique structural,

economic, social, cultural and political crisis that arrest technological and scientific
development. The problem lies that Ethiopia has a unique history of social formation of
interwoven mechanisms that arrest the human mind not to go beyond the existing
imaginations and social realities, that could be dealt only by metaphysical instruments of
the highest order, and can't be solved by simple monetarist ideologies that are perverse by
nature and multiply the crisis to a higher degree so that no one could solve them. That is what
the IMF and the World Bank are trying to achieve and confuse the world more and more as if
there are no other instruments other than these misconceived policies that are based on false
paradigm. It is a fundamentalist ideology that is responsible for the death of hundreds of
thousands of people across the globe, and many are still dying every day because certain
foolish governments like that of Ethiopia are practicing it on our people.

Growth without Development!! Market Economy without Capitalism!!

We are told that, since the introduction of the Structural Adjustment Program or the market
economic reforms in 1993 the Ethiopian economy has grown by more than 7 per cent or on
average by 5.7 per cent year after year. The statistics of the EPRDF led government, the
World Bank's statistics and other neo-liberal researchers that have made wide range analysis
about the Ethiopian economy came to the conclusion that the economy has shown remarkable
growth rate of 7 to 8 per cent over the last 15 years. If we study all these analysis made by all
neo-liberal affiliated institutes that don't derive their researches from the physical economic
science point of view or from qualitative analysis, but take simple quantitative growth model
as their point of departure, the supposed growth rate is not backed by science and technology,
but is simply the extension of the old model of industrialization. The EPRDF government and
its advisors didn't have time to study the nature and the structural weakness of the old
industrialization model that is known as the import-substitution industrialization, but
convinced by their neo-liberal model and continued with the same accumulation model as in
the past as the only viable road of achieving economic growth. Hence, after the government
has taken all the necessary monetarist reforms as it is advised by the World Bank and the
IMF, it perused the same industrialization policy as in the 50s and the 60s.

As wide range analysis and researches show that the import-substitution industrialization
strategy that was introduced as a model of "capital accumulation" and modernizing the entire
society in the 1950s as was imposed by foreign forces in most of the African countries and
including that of Ethiopia, was one of the main factors that had distorted economic
development and responsible for massive waste of resources. First of all, such kinds of
industrialization model was conceived for consumption purposes without being backed by a
machine-tool sector that is the backbone of a true capitalistic model or an extended capitalistic
accumulation. Second, as a matter of fact such a model was detached from development and
researches, without which a coherent economy with its own self-reproduction base can’t
develop and undermine the old modes of production relationships that hamper economic
development. Third, such a model of industrialization was not again backed by any science
led education system that could give it internal dynamism. As is known, the education system
of the 1950s and 60s had produced a white-colour social class that by itself became the victim
of this kind of distorted industrialization model. Fourth, as the total package of the
industrialization model came from abroad, it was heavily dependent for all the input factors
on outside sources. That means, it did not have backward linkages. In other words, this model
couldn't serve as a market for the raw material producing sector, including that of the
agricultural sector. Fifth, its capacity of creating jobs for the million of the job seekers was

very weak, and had only demonstration effects. Sixth, most of the industries were located in
the capital cities, and in other selected cities that were not connected by multiple mechanisms
with the rural areas. On the other hand, such a model had the capacity of absorbing resources
from the rural areas, human and material resources. Job seekers and those young people after
they have accomplished their secondary education came to the capital city to look for jobs,
and this has created perverse conditions in those selected cities. The mass exodus from the
rural areas and villages has created marginalization in the cities. The widespread prostitutions
and with its all kinds of aftermath that is by itself became a kind of industry is the by-product
of such kinds of industrialization model. The spread of informal sector that becomes the only
viable reproduction base of the city dwellers, and that we see it especially in the Mercato( a
dense and chaotically organized market place in Addis) area is a vivid example of this
false industrialization model of the 1950s and 1960s. Seventh, as is propagated in the
universities, such a modernized sector couldn't trickle-down, and encompasses the other
backward sectors due to the limited technological base. Eighth, the workers who are working
in this so-called modern sector earn wages that do not enable them to buy the products they
produce themselves. Hence the money can’t come back to its original place so that capital
accumulation takes place on a higher scale. Only through such kinds of interconnected
relationships and continuous growth of the real income the industry finds its financing sources
that enable it to expand and become innovative. These are some of the handicaps of such
import-substitution industrialization model that threw our society to more deep-rooted crisis.

After the introduction of their nasty neo-liberal model, and after wide spread privatization, the
EPRDF government that does not know other economic policies, continued on a higher scale
with the old industrialization model that has thrown our country to deep- rooted crisis as we
see it today, and which was one of the main causes for the down-fall of the government of the
Emperor Haile Selassie. If we compare the nature and mode of the industrialization between
the pre-reform period, that is before 1990 and after the post-reform period, that is after
1992/1993, we see similarities in the nature and structure of the industries. All analysis made
by the neo-liberal economists including those of Ethiopian economists came to the same
results, without deep analysis about the nature and structure of this kinds of industrialization,
without investigating the restricted accumulation base of such a model. From all the industries
that are categorized under manufacture, still the food and beverage sub-sector is heading on
the forefront, and has a share of 26 per cent from all activities, where as strategic parts, like
machinery, metal and basic iron industries, have a share of only 2 per cent. All other activities
are spread in those sub-sectors whose accumulation base are not wide, and that are weakened
in the last 15 years by the same kinds of products that are imported from outside. In general,
there is no shift in industrial activity from import-substitution industrialization to a more
generalized industrial activity that is based on machine-tool industry that is the basis of real
industrialization process. Interestingly, one could also observe that very few dear to invest in
long term activities; when they invest only on those areas where the turnover of capital is very
quick and promising from short term perspective. As a result of such attitude, the service
sector is the fastest growing sector in the last 15 years of market economic reforms, and has a
share of 42 percent of the GDP. This shows that more and more people are shifting their
activities to areas where the material reproduction base of the society is very narrow. This
shows also that Ethiopia is moving more and more towards a more consumer society, where
very few are producing and the majority are consuming. The importation of luxury goods for
a certain class and with its demonstration effects, and at the same time the massive inflow of
second-hand products that can’t be easily recycled at home become the material reproduction
base of the Ethiopian society, that have altered the mentality of the youth not to engage itself
in activities that are seen as minor and can be performed only by those people whose social
origin is very low by Ethiopian standards. Such kinds of behaviour are also strengthened by

the new education system that is introduced after the reform. The spread of private school
systems which are not that much qualitative by any standard, but that are still seen as better
compared with that of the government schools, and which are producing a new white-colour
class of consumer society, have strengthened this mentality of not being engaged in real
material production that is the foundation of physical capital accumulation. The spread of
private schools is creating class division, and as a matter of fact, those who have
accomplished their education have better chances of getting jobs and become slowly the
social bases of the ruling class.

If we see the overall performance of job creation of the new industrialization model leaves
much to be desired. The increase of wage employment is not that much promising, and rose
only to 95, 707 in 1999/00 from the total employment of 90,070 that was surveyed in
1983/84. This means that the performance of the economic reform on the general employment
level is very negligible. Study shows also that in the real reform period starting from 1992/93
until 1999/00 the total wage employment has increased by only 1.9% per annum, where as
unemployment remains rampant in the cities, where rural-urban migration become acute. The
unemployment rate in Addis Ababa alone as conducted in 1999 by the Labour employment
office is 38%, where as on average across the country lies by about 26%. This shows that the
market economic reform has not brought the desired results as is supposed to be, and instead
it has produced mass unemployment, especially during the privatization period, as the new
owners began restructuring their companies to make more profitable. Those forces that are
seen as redundant must leave their work places at the beginning of privatization. In general,
still the agricultural sector is the main sector that employs about 89% of the total population;
where as the manufacturing sector employs only 2% of the population, and that of the service
sector about 4% of the population. If we look closer at the manufacture sector, there is no shift
in employment over the last 15 years. Study show that according to the Annual Survey of
Large and Medium Scale manufacturing Industries, there is not shift in employment among
the various sub-sectors. Food and beverage industries that were the main employers before the
reform are still employing almost the same amounts of labour force until 1999/00, and the
textile sector employs before the reform 37%, while this share has been reduced after the
reform to 30%. In general these two sub-sectors employ almost 65% of the total work force
from the entire manufacturing sector. The rest of the population is engaged in household
activities. Such an economy with very narrow industrial base has very low accumulation
capacity and the production of value-added on a higher scale and that has organic-links with
other sectors, and that is based on science and technology is practically impossible. Economic
growth without a valued-added chain effect which is in turn supported by science and
technology can’t be called economic growth. Such economic growth as seen in the last 15
years is nothing other than growth without development.

Beginning 1992/93 until 2004/05 about 13 504 projects involving Birr 149.2 billion capital
were licensed. Out of this total projects, 12 067 or 89% were domestic, 1364 or 10% foreign
and 73 or 0.5% are public. In terms of capital investment birr 91.2 billion or 61.1% are
domestic, birr 41.1 billion or 27.7% are foreign, where as birr 16.7 billion or 11.2% are
public. Foreign investments are concentrated in those areas where low value-added gain is
possible, like flower planting and other agricultural producing activities. That means the
foreign involvement in the Ethiopian economy does not have an effect of creation of a new
accumulation base that in turn has the ability of increasing employment and real wage. By
concentrating their activities on those areas where the value-added effect is very low, foreign
investors divert the attitude of domestic investors. In this case the possibility of growing a
home market that is based on science and technology and that could yield internal
cohesion and stability is impossible.

The distribution of the entire investment over the last 15 years remarkably shows the inner
contradiction of such kinds of industrialization model. Like the 1950s and 1960s, the regional
distribution of the investments beginning the market reforms is more or less similar, where as
Addis Ababa and its vicinity take the leading role. Out of the total investment projects, 49.4%
are located in Addis Ababa. Oromia, especially the major towns like that of Nazreth gets 24%
of the share, the Amhara region gets 17.8%, and 5.7% of the investment goes to Dire Dawa.
From this investment distribution only few cities and areas are blessed with such kinds of
attraction, where as the larger area of the country is entirely neglected or not being considered
as an area of investment and accumulation. This necessarily leads to wealth accumulation and
real income distribution and concentration in few areas, and the majority of the Ethiopian
people can’t be integrated into the entire economic activity. This regional disparity in
investment project distribution has wide range consequences for the country as a whole.
Economically seen most of the people remain untouched; human and natural resources can’t
be utilized properly. As a matter of fact, if many areas remain untouched by such kinds of
market reforms, cities and infrastructures can’t be developed. This has the consequence that
there will be cultural differences between those so-called developed and underdeveloped
areas; where as such differences bring new tensions, since the majority of the people feel that
they are not belonging to the system. From this perspective and from the perspective of social,
economic development, and cultural integration and a new psychological make-up that give
our people more confidence that they belong to Ethiopia, it is necessary to totally discard such
a market economic reform that block genuine development. Only, economic policy that is
science and technological driven, and that discards the neo-liberal market reform model, and
that is resource based brings Ethiopia out of the present economic malaise. To materialize
this we need also a democratic culture that is based on true discussion and open debate
without any fear. Without open debates and without presenting once own position to the
people which alternative policy is the best avenue of achieving of a science and technological
driven society with its all cultural facets, like beautiful architecture, literature and other sorts
there is no genuine human development. That is why Ethiopia becomes an arena of cultural
distortion, manipulation and psychological confusion by all those internal forces and their
foreign masters. In this mass confusion and throwing Ethiopia into such a situation that is not
seen by any human history not only the present government is responsible, but also certain
backward minded Ethiopians, young or old that have closed their minds and march on the
path of self destruction. Today we know the visible and main enemy of our country. That is
not the point. The most difficult task lies ahead is to teach all these guys that weave the
Ethiopian flag and shout aloud without knowing for what Ethiopia they are struggling for, and
what true democratic values are.

Now let us come to the theoretical part so that my readers have clarity about the essence of
capitalism, since most of us are trained by neo-liberal models, we can’t grasp capitalism
which is genuinely based on true competition, that has inner logic, dynamism and laws, and
without understanding this inner laws, it is very difficult to grasp market economy that is
falsely preached world wide as the only viable avenue of human destination.

It is very difficult to put and analyse here the inner logic of capitalism on this piece of paper.
There is a great confusion among Ethiopian economists in understanding the inner logic and
historical process of capitalism. Since most of us are trained by neo-liberal manner, and know
mostly by heart such simple constructions, like demand and supply, indifference curves,
substitution effects, macroeconomic parameters, such as employment., inflation, capital
market etc, production possibility curve, that do not show the inner dynamism of capitalism
and that are more or less developed in the 20th century, that means after 400 years of the

development of political economy as a science, we will never grasp the laws of social and
historical process as has been developed and came to such a degree as we see them in most
capitalist societies. Before the development of political economy as a science in the 16th
century, most European societies had undergone major social process, and developed
scientific instruments to cope with the social, economic, cultural problems and natural
calamities that they had faced. Trade relationships with other nations, the development of
handicraft activities from within, and the disintegration of the feudal order and the
development of new forces that began shaping their societies, all have contributed to create a
new system that is more dynamic than the old one. The major break-through in the European
history came through Renaissance of the 15th century, that has laid the foundation for major
city buildings of architectural beauty, the rise of new culture of performing theatres and
operas, that have the unique message of shaping of the new class to take the leading role to
shape the society according to its own image, the spread of handicraft activities and the
emergence of a new merchant class that has developed the habit of accumulating money and
wealth, all these have laid the foundation of present day capitalism. This new culture became
effective and could be built on solid foundation when science became the true source of
creating new devices and technologies, without which one can’t see such kinds of progress.

After the 16th century, when the formation of nation-states become an accepted fact, the
necessary of developing a theory that is instrumental in creating new wealth and maintaining
the society become inevitable. Hence Mercantilism becomes the first theory of political
economy, and that is developed as a true science and accepted by all scientists of great
thinkers at that time. Most of the scientists of the first generation had thought how to maintain
a social order and developing it to a higher order by developing science and technology. The
political philosophers of mercantilism saw in nation-state the materialization of the human
spirit by giving it a new accumulation base. For this they saw in monarchism the instrument
of achieving this material and spiritual necessity. In order to develop the nation-state and
create an integrated economy, they must design new instruments, and support those active
forces that they are dynamic and create wealth for the entire society. The introduction of
manufacture activities, the development of internal trade by destroying all internal barriers, by
introducing a universally accepted money and currency system, that was based either on Gold
or Silver, by controlling the foreign trade in order to protect the infant industries, and by
exporting more etc, these are the first theoretical foundation of political economy, without
which the development of capitalism is inconceivable. The idea of mercantilism as a science
of political economy and that is not only based on simple aspects of economic activity, but on
entire social, economic and political activity, has its central element in creating wealth by
means of manufacture activities that has the capacity of encompassing the entire economic
sectors. This was the central essence of political economy of mercantilism not as toady’s
economists of the neo-liberal garbage teach and preach to create wealth for the few and throw
the majority of the people to slave like situations, and by that to destroy the human soul.

This first and generalized political economic principle must be fought by new weaves of
ideology that is based more on oligarchic principles, that is empiricism. As is known the
theoretical foundation of empiricism is Sophism that distorts science as is developed by
Socrates and Plato. The science of Socrates and Plato is based on the basis of truth by
constructing dialectic and hypothesis in order to reach to the higher order of human
imagination to create science and bring harmonic development in a given society. According
to Plato, knowledge is given to everybody by birth. As this first knowledge is raw by its
nature it must be cultivated again and again by making dialectic the true instruments of
investigation. In that human beings are different from animals, because they pose questions
again and again, and ask themselves why they are living in this world. The fact that they are

endowed with this peculiar thinking capacity, they form social organizations and develop
them to a higher order by developing the division of labour. The forms and intensity of the
development of the division of labour could be transformed to a higher order when science
becomes again the basis of investigation. When Plato followed his master developed his
philosophy he saw the human development not as empiricist fact that can be reduced to sense
perception in order for present consumption, but as an entire set of activity that can be studied
and practiced as a whole and that can’t be reduced to a simple and single fact. As universe,
human beings and their development must be seen as an integrated whole that must be
cultivated from all aspects so that it can come nearer to God. This philosophy of Plato and the
science developed on this basis was the true source of Renaissance of the 15th century and that
was strictly applied by those great philosophers of that period. As the philosophy of Plato was
seen as a danger to the oligarchic class, new ideologists came to the scene that had deeply
involved in bringing forth the idea of Sophism that was heavily fought by Plato to bring a just
and democratic order. Sophism which is the instrument of the oligarchic class drive all laws
as given by those who are strong, and the basis of science is not dialectical self-questioning,
but sense perception. In other words, all knowledge is derived from what one sees and
observes directly, but not by self interrogation to come to the true human life and create new
scientific devices.

This Sophistic philosophical principle was taken by the English empiricists of the 17th century
like Hobbes, Locks and later by Adam Smith. These new philosophers saw in human being a
self-achieving animal that marches individually to satisfy its needs to the highest degree.
Accordingly, human beings are egoistic by nature, and this built-in character is the true basis
of their rationality, and everybody lives like Wolfs and lives in permanent fear. Everybody
fights against everybody. That is the basis of the English empiricist philosophy that does not
know society as a society, but as sums of individuals that are fighting against each other to
maximize their needs. According to Hobbes, human beings that are not fighting to maximize
their needs behave like animals.

Such individualistic philosophy that opposes the true individualistic philosophy of Socrates
and Plato, and that investigates things not in their entirety, but singularly, and not as if they
are not connected with other objects and social relationships, become the basis of today’s neo-
liberal economic theory. Production for production sake, and consumption for consumption
sake which is isolated from spiritual satisfaction and genuine human relationship becomes the
deriving motive of human activity. In this case business making becomes the central aspect of
human motive from which all other aspects of human lives are derived. On the contrary, the
individualistic philosophy of Plato that sees the materialization of the human need and its
spiritual accomplishment within a given community emphasises that only in this way a
harmonious order which is based on science and technology can be established and
developed. Only through science and technology, through architecture which is harmonious
by nature, through classical music, human beings achieve the highest order of living together
in peace and harmony. This idea which was reinvestigated during the renaissance time and
further developed and practiced during the mercantilist era was halted after the triumph of
empiricism in the 17th century and strengthened further by Adam Smith, Ricardo and all other
classical economists who saw in the state as the opposition of individualistic materialization
as was developed by Hobbes and co. in an empiricist manner. According to Adam Smith who
had elaborated his theory of the division of labour not as a dialectical and organic order, but a
technical aspect which is necessary for the market economy, is the basis of individualistic
materialization which brings economic growth. Only the invisible hand could bring any
society forth, and the basis of such economic progress is private property as was developed by
Locks as accepted fact of any human society. The question of acquisition of private property,

and how it came historically, and how it could be distributed or there is inequality with its
negative impacts was not posed as problems, but was seen as natural and economic necessity.
The triumph of this individualistic market economic principles as is propagated specially by
Adam smith and Ricardo who especially opposed the imposition of the corn law that
restricted free trade and who favoured the rising capitalist class had only a short duration, as is
highly elaborated by economic historians, and especially analysed by Professor John Gray
in his well celebrated books, False dawn which shows the fallacies of free trade. According
to his analysis there is no long duration of free trade or pure market economy in all capitalist
societies, especially in that of England. Only in the short duration of the Victorian age one
could see free market as was propagated by Adam Smith and Ricardo with all its negative

The theory of market ideology based on invisible hand, the division of labour based on private
property was extended to a generalized free trade. Adam Smith has developed a theory of
international division of labour based on absolute cost advantage. Countries which produce
the same products if they engage in exchange activities, should not concentrate on the
production of, say both goods, because if they concentrate on the production of one good they
save costs in absolute terms. In order to justify his theory of free trade and the international
division of labour, Adam Smith took Portugal and England as an example. During the 18th
century, both produce cloth and wine, where as England is more specialized in the production
of cloth, but in terms of production costs she does not have any advantage compared to that of
Portugal that produce also cloth. From the point of free trade and international division of
labour, according to Smith, it is still advantageous for Portugal to concentrate on the
production of wine and leave the production of cloth for England. The unit cost differences in
the production of wine in both countries compared with that of cloth production is big; that
means the unit cost of wine production in England compared to the unit cost of production of
cloth is greater, and in this case it is advantageous for Portugal to concentrate on wine
production, though it has absolute advantages in the production of both of the products.
According to Adam Smith this cost differences is due to climatic condition and geological
formation which Portugal has at its disposal. Therefore not only theoretically, but also
politically Portugal was pressured to abandon the production of cloth and specialize in the
production of wine. As a result of this pressure and concentration on wine production, many
Portuguese farmers left other farm practices, and shifted their activities in favour of wine
production, because they believed that they could sell their products on the world market. As
more and more farmers had shifted their activities to that of wine production, there came an
over production of wine that suppressed prices on the world market, and this had in turn
resulted in trade deficits of Portugal and reduced real income of those farmers who were
engaged in wine production.. The specialization on wine production had also resulted in
monoculture production activities that had brought food shortages in the Portuguese
households. As a result of such one-sided agricultural activities in Portugal, Portugal was hit
by hunger catastrophe that had resulted in loss of lives. This was the practice we know from
this kinds of international division of labour as is forwarded by Adam smith. Though Ricardo
does not differ from this view and stressed more on relative cost advantages, both
aggressively represented the interest of England as the only industrialized and technologically
advanced nation. Other nations are doomed only to specialize in agricultural products. The
theory of Adam Smith was heavily refuted by Friedrich List who saw that such theoretical
formulation prevents other nations to develop entirely, that means as political, social,
economic entities that advances them as nations so that they could function as an organic
whole. According to Friedrich List, who had formulated and developed the infant-industry
argument, every nation is predestined to develop technology, and to expand manufacture
activities so that it could function as a nation-state. Friedrich List emphasised that only

through science, technology and extended manufacture activities, nation-states could be
respected and defend themselves from external aggression. Those countries that follow the
advice of Adam Smith could become easily the victim of external aggression. After
Germany and France had understood the ever growing dominance of the British Empire and
the free trade policy that had negatively affected them, they had to concentrate more on in-
ward looking development. Following the advice of Friedrich List, especially Germany took
more mercantilist economic policy as guidelines to develop a manufactured based economy
that enabled her to surpass England within a span of time.

In the 1940s and especially after the dominance of America as the emerging super power in
all major fields, the theory of Adam Smith was reformulated and advanced as the main stream
of economic development theory as we have learned it in the universities. The so-called factor
endowment theory of Hecksher and Ohlin, that means countries that are endowed by certain
factors, capital, labour and natural resources must specialize in their merits as nature has
endowed them. Accordingly Third World Countries must not waste time in the production of
technologies, but simply concentrate in agricultural activities and raw material extraction.
Only through this kind of specialization economic development will be effected, and a
maximum welfare will be achieved across the globe. The theory of international division of
labour was refined by Paul Krugmann, and he advises Third World Countries not to be
engaged in technological activities, as this brings trade-offs; that means resource waste. His
example of Rose production is a vivid example how economic science has changed to a
simple abstract construction without any scientific basis and confuses especially Third World
students, which believe that they study development economics as is forwarded by Professors
Krugmann and co.

By opposing all physical economic principles as was developed by mercantilist economic

thinkers, marginalism or the neo-classical economic theory was developed in the 19th century,
by taking not production and the division of labour as the basis of economic science as is
formulated by classical economists, but a mathematically formulated consumption model
which is the basis of economic analysis. The basis of this consumption model is exchange,
and not science driven technological economic development. By devising new monetarist
instruments that have more manipulating effects rather than solving real social problems,
economic science become more sophisticated, mathematic and acrobatic. Not given social
relationships and physical economic principles are the basis of economic science and problem
investigation, but privatization, deregulation, monetization all human activities, with by it,
strip it and flip it mentality, become the economic philosophy of the American and British
ideologists that propagate globalization and free trade that is synonymous with resource
plundering and social disorder across the globe. Hence the economic philosophy of neo-
liberalism is not wealth creation as such by developing the human cognitive power into the
highest order, but by developing such economic instruments, indifferent curves, marginal
utility, substitution effect, linear economic scale, opportunity costs, trade-offs, scarce
resources, demand and supply that build the basis of price formation, not labour power as is
developed by classical economists, become the unique characteristic of the neo-classical
economic theory. Such a theory with every increasing sophistications, and being put into
practice to absorb resources from the masses and transfer it to the well-off class as Professor
Gray vividly analysed, bad capitalism has replaced the good capitalism that had operated on
the basis of state intervention by taking the Keynesian model as the instrument of economic
regulation too hinder social and macro-economic imbalances. When such kinds of bad
capitalism as propagated by the Americans and the British starting the end of the Second
World War is being put into practice in those societies like that of Ethiopia where the
intellectual basis of the society is very low, it produces militaristic ideology and cements

those traditional and backward attitudes, and suppress the development of science, technology
and true culture that strengths the social ties of the entire society so that it could function as a
family. The infiltration of the American ideology into the Ethiopian society starting the end of
the 1940s has the effect of, on one hand militarizing the state apparatus by making it more
ferocious, on the other hand produced a ruling class that couldn’t understand its historical role
and that has alienated itself from the rest of the society, that hates the development of science
and technology. This ruling class and the system it has relied on reduced it to a slave like
situation towards the American imperialism, by destroying the traditional social values that
our society had relied on for its reproduction and social cohesion. If one investigates the
social formation of the Ethiopian society and the psychological make up of certain class that
is more affiliated to the American ideology than to the traditional value of the Ethiopian
society, one could observe that such a class becomes cheat, arrogant and resource plundering
that at the end ruined our society. Such kinds of mentality and social formation as is spread by
the Anglo-Americans, one could observe that it becomes the main factors of social instability
in many Third World Countries, especially in Latin American and African countries. We see
this new class that does not posses true knowledge, becomes the basis of war and fascism that
destroys the African society. Accordingly, the present small-headed government of Ethiopia
which is led by the “macro-economist” Meles as the international community attests him, is a
vivid example of a new hybrid class that has fused neo-liberalism with the feudal social order
that does not know any tolerance, and leads our country to unknown destination by creating
permanent social instability and chaos. This is a unique kind of social formation that must be
investigated further, that I cannot dwell longer here for various reasons. From this vantage
point of view one can’t wonder when such a class that is supported by neo-liberal ideologists
ruins the social fabric of our society, and throws the entire society into abject poverty that the
Ethiopian society has never seen before. We have a political, economic and cultural fascism
that is produced and reproduced by the present government of Ethiopia led by the “macro-
economist” Meles and its oligarchic mentors, the IMF and the World Bank.

The Social and Cultural Consequences of the Structural Adjustment Program

Form the outset it must be clear that the objective of any society is to build a harmonious
nation-state that is based on science, technology and classical culture. From this vantage point
of view the development of social and cultural ties with the basis of true science is the
foundation of a coherent society. True economic development that is based on physical
economic principles does not neglect social aspects as if they are not part and parcels of
economic development. The way one lives, buys, consumes, brings children to birth and
educate them so that they become true citizen of a given society can’t be seen isolated from
the general economic development, and hence from the real income one receives. Likewise,
the saving and continuous investment of any given society depends on the income what one
receives as a reward for his duty. In this respect the social condition of any society is not only
a reflection of the given economic development of that society, but also the cultural
consciousness of the ruling class. The more the ruling class is historically conscious, the more
the economic development takes its scientific path. The more the economic development
relies on the basis of science and technology, the more the social and cultural system of the
society is developed and secured. To think or imagine any economic development outside this
context is reducing economic science to a voodoo economy that doesn’t have any scientific
basis. Form this simple perspective let us investigate the social impact of the Structural
Adjustment program in our society before we come to the genesis of the WTO and its
importance as a free trade promoter across the globe.

First of all, it must be clear that from the structural adjustment point of view social chaos and
poverty must be produced and reproduced so that they could be tackled later as externalities
of the economy policy practices. This is what the World Bank and the IMF have been
practicing over the last 30 or more years when they have been promoting their monetarist
ideology in the Third World Countries. From this very intriguing malpractices of the neo-
liberal ideology, the social situation of the Ethiopian people according to the survey
conducted by the Ethiopian economists from 2003-2004 compared to the situation at the
beginning of the 1970s shows little or no improvement. The basis or the methodological
survey of this study is the consumption pattern and the income or the buying power of the
households investigated. As the survey affirms, this non improvement or the deterioration of
the living standards of the Ethiopian people shows that the supposed economic development
has no any scientific basis; and it is not designed to solve such kinds of problems. The
document pinpoints that as if the situation is out of control, and shows the incapacity of the
government to cope with these very complicated problems that are produced by such kinds of
unscientific economic policy. The study presents with lucid example that, especially the
majority of the people who are living in the rural areas are out of human civilization with no
or meagre contacts with the modern world. Access to communication net works or the
capacity to get information via radio compared with the other Sub-Saharan countries is very
underdeveloped. Likewise, the transportation system is out of human imagination so that the
possibility of reaching them in case of natural catastrophes is very hard or practically

As the study shows, because of the primitive nature of farm practices that have been practiced
since time immemorial, and the meagre land holding system that one peasant household has at
its deposal, and the repeated farm practices are the main factors that cause soil erosion and
reduce the productivity of the land. This is equivalent to 0.08 hectare land per household, and
could not generate enough production beyond subsistence. The study shows that many
peasant households buy more than what they are producing. This is in light of the propagation
by the government that agriculture could be the basis of industrialization. When the majority
of the peasants are not in a position of producing even for their subsistence to sustain their
entire family, how is it possible that one claims that with the present situation of farming
practices the agricultural sector could produce enough surplus for the supposed
industrialization. Following the study, there is a growing class that has neither land property
nor capable of producing enough subsistence to sustain itself. Therefore, as the study
demonstrates, the peasant class is loosing its reproduction base every passing day, and
becomes redundant without having any futurity. On the other hand, the consumption pattern
and differences among the Ethiopian population is not that much different with the Gini
coefficient of 0.29, where as in the cities, especially in Addis the consumption pattern and
differences is wide. Other study shows, as the result of the structural adjustment program,
inequality becomes the inner logic of the system that affects more and more people who are
living in the cities. This shows that there is a new consumer class that is involved in the
international hierarchical consumption pattern without becoming productive or being involved
in technological developments as a dynamic class. The class that drives modern cars, like
BMW, Mercedes, Land Cruise and others, and phones with Handy and listen MP3 Player, and
dances on the streets of Addis on one hand, on the other hand the majority of the poverty
stricken people that observe this new consumer class as if it comes from another planet,
proves that the social matrix of our society is entirely changed. And this new social problem
and the consumption gap that is prevailing, is hard to correct, as the new class thinks that any
correction of this pattern of consumption endangers its new social status. In light of this very
contradictory development, the poverty rate in the rural areas is almost 45 percent, and birth
rate outstrips agricultural production.

The study shows that the more the people are uneducated the more they are prone to poverty
and hunger. This is the case in rural Ethiopia where the majority of the people do not have
access to modern education system or follow modern information that helps them open their
minds and become creative. They are neither capable of sending their children to school,
though there are no school fees. As the majority of the people are uneducated, they could be
easily the victim of any kinds of disease that can be prevented easily. Most of the illness in all
areas of the country is caused by malnutrition, bad hygienic conditions that reflect the living
conditions of the majority of the people. Lack of sanitation, which is a reflection of the bad
housing condition of our people, lack of clean water which is one of the main causes of
diarrhoea, and the bad performance of the sewage system and the bad smell that prevails in
the cities, especially in Addis, and the average life expectancy of our people proves that how
the economic reform of neo-liberalism doesn’t have answers to such kinds of problems.
Instead it creates new social fabrics that aggravate the existing situations. The unscientific
nature of the economic policy must produce such a situation that throws our society into a
situation never seen before. As a result of the unscientific nature of the economic policy and
as a result of the liberalisation of the foreign trade, and opening the door to foreigners,
Ethiopia is exposed to new kinds of incurable diseases like AIDS that is encompassing many
people. Study that is surveyed in the year 2003 shows that 4.4 per cent of the population is
infected with AIDS, where as 2.6 per cent in the rural areas, and 12.6 per cent in the cities.
When we compare the increasing number of infected people with AIDS, with that of the
Military dictatorship, during that time only 0.003 per cent of the population was infected with
AIDS. The 4.4 per cent in comparison to 0.003 is an increase by almost 1466 per cent in 15
years. Thanks to the “miraculous” structural adjustment program that has created new social
conditions and produced new sexual habits, our people must face new challenges which they
can’t surmount easily. Inevitably this is the by-product of the neo-liberal economic policy and
the well propagated globalization. As study shows, because of the rapid spreading of
HIV/AIDS, adult mortality rate has passed by far child mortality rate; and 300,000 people are
dying every year because of this rapidly spreading disease.

When the EPRDF government seized power in 1991 and as the country marches towards
anarchy for a short while, many fled from the rural areas to the cities, especially to the capital
city. The migration of people from the rural areas to the cities was again reinforced, when the
government introduced and began practicing its ethnic based politics. Especially, those
Amharas and the Gorages fled from small towns and rural areas, because of fear of executions
by other nationalities. Until then, all Ethiopians lived together in relative harmony without
being harassed against each other. The inflow of thousands of Ethiopians to the cities,
especially to Addis Ababa had worsened the living conditions of the people there; and
housing conditions could not accommodate the rising migrants that come from the rural areas,
and that is estimated to 7% annually. It is estimated today that from 4 to 7 million people are
living in Addis Ababa alone that has jeopardized the living conditions, and brought fear
among the city dwellers, because of the rising criminalities. As the result of the worsening
living conditions of the Ethiopian people, and because of the structural adjustment program
and the market economic reforms, over 100 000 boys condemned to live on the streets. In
Addis Ababa alone there are over 40 000 street boys that are condemned to sleep on the
streets and in tunnels, without any perspectives. The present EPRDF government is doing
nothing to tackle this problem, and see it as if it is a natural product. Such a situation which
has never seen in the Ethiopian history to a scale of this kind is endangering the social fabric
of our society, and it is out of control. The answer to this rising explosive situation by the
government is harassing the street boys and insulting them as if it is they are naturally
condemned to live like this. The living conditions in the cities have brought also sexual

harassment by boys against girls, and the unsafe sex had increased the number of Aids
infected youth.

This being the case, the Structural adjustment program and the celebrated market economy
that has been going since the last 15 years, have brought incalculable social and cultural
damages in the Ethiopian society. The fact that a new consumer and wealthy class has
appeared on the scene, the behaviour of this class has dramatically changed that is destroying
the mentality of the youth. Instead of cultivating new culture that is based on science and
technology, the new consumer class with new consumption habits is compelled with
malpractices which are not compatible with the social norms of our society. A new sexual
habit that was never known in the Ethiopian society, a new way of attitude is becoming
normal in certain social strata and is s destroying the social fabrics of the societies. Child
abuse, which is not known before in the Ethiopian society, the spreading of abnormal sexual
habits are becoming the norms of particular groups. The spread of discotheques, especially in
the capital city has created new kinds of sexual habits, and unusual dancing that can’t be
accepted by any society, which is even tolerated by the government, is damaging the culture
of our society. As the youth is being engaged more and more in such kinds of malpractices,
the government can’t be confronted, and the people can’t think politically. Besides thi, the
spread of drugs and chat consuming has become common among the youth, and the
government deliberately tolerates such kinds of activities that can’t be controlled later.
Foreign forces that are going to Ethiopia without being controlled, and those without any
purpose become common phenomenon that can be tolerated only in that poor Ethiopia,
because we have a government that has at its aim to completely confuse the mentality of the
youth so that no science and cultured based economic development is no more possible. With
this, the importation of dirty Hollywood films, and the spread of video shops have compelled
the youth to consume crime films that disturbs its minds and become again by itself sadist.
One hears and observes today in Addis that sadism becomes a part of certain groups. Those
Ethiopians who have lived long in certain American cities and Europe that have never
engaged themselves in true cultural and scientific activities while they were living there,
either exporting bad habits or take with them unnecessary mode of thoughts and consumption
patterns that are contradicting the cultural lives of the Ethiopian people and destroy the social
cohesion of the system. Due to the dollaraization of certain parts of the economy, and due to
the inflow of hard currencies, certain groups that are engaged in black market activities, and
do not know how to invest the money they have acquired without any work, driving consumer
prices to a rate which can’t be paid even by the normal salary receivers. Because of
uncontrolled price systems, hotels and restraints charge more than what they have to charge.
This uncontrolled system has made life, especially in Addis unbearable. All in all, in the last
15 years Ethiopia become an experiment ground of bad cultures, and all sorts of activities that
are contradicting the true human norms. The uncontrolled spread of foreign agent services
that have the sole purpose of spreading bad habits, like in many Latin American countries, the
spread of gangsters that is imported from certain America cities, has put in question the
viability of our society to exist as a nation-state. It is therefore very hard to correct all these
cultural damages, even if a new government which is democratic seizes power. Thanks to the
Weyane government, and thanks to those few educated Ethiopians who can’t think further,
and who don’t have cultural and social responsibility, our country is heading towards an
unknown destination. Whether we like it or not this is the outcome of the market economic
reform that has been practiced over the last fifteen years, and become a phenomenon of many
countries that have adopted such policies.
In addition to these uncontrolled situations, the importations of second hand cars, that have
filled the streets of Addis, and the environmental damages they inflict, create new situations,
that can’t be tackled easily. Because of the absence of well regulated traffic systems and lack

of alternative transportation systems, like underground metros and street cars( trams), and the
narrow road system that doesn’t cope with the increasing numbers of cars, the loss of lives
due to car accident is becoming rampant. Many cars that are not fit to be derived on the cities,
especially in Addis, because of their weights and hugeness are damaging the streets, which
are not well constructed and designed. The heavy traffic system and the CO2 emission are
becoming the main factors that endanger human lives and cause illness. In a country that
doesn’t know any ecological standards, and doesn’t have institutions that study the effects of
such kinds of environmental damages, the uncontrolled importations of second hand cars is
unwise, and must be restricted.

From this vantage point of view, the structural adjustment program and the so-called
Washington Consensus, henceforth the fascist consensus, as it creates new social conditions
and favours few individuals that are internationally linked to each other by different mutual
interests, are endangering the existence of many nation-states, and creates social chaos which
can’t be controlled easily. The Washington Consensus which was formulated at the
beginning of the 1980s by Milton Friedman and co. and that has become the main guidelines
of the IMF and the World Bank policies, has this aim of bringing the world into the sphere of
the American imperialism by producing a new fascist class that opposes science and classical
culture. Meles and his gangs and the celebrated Alamudi are the products of this new fascism
that are throwing their dollars to destroy Ethiopia so that our country can’t exist as a well
functioning nation-state. To think beyond this and to accept this fact as a normal social
process, it is just like collaborating with their evil agendas. The book of Professor Gray, False
Dawn, and the book of Nederveen Pieterse, Globalisation or Empire clearly prove this fact as
analysed above.

Squaring Poverty! Becomimg member of the WTO Blocks Sience

& Technology based Economic Development!!

In order to make clear to my readers whether becoming member of the WTO for a country
like Ethiopia is that much worthy, I would like to analyse the genesis of the WTO as a
promoter of American free trade ideology.

As I have analysed in my previous articles and here above, the free trade concept was
developed first of all by Adam Smith and Ricardo who wanted to defend and maintain the
dominance of the British Empire as the only industrialized economy. As we have seen the
intriguing theory of Adam Smith and Ricardo have reduced many nations to appendages of
England in the 18th and 19th centuries. The international division of labour has worked in
favour of the British Empire, while science and technology couldn’t be internationalized. As
science and technology remained tightened to certain areas, the spread of knowledge become
uneven, across the globe. The dominating role of the English economy has also compelled
many nations to accept the sterling pound which was supported by Gold as the only
international reserve and trading currency. As a result of this dominance in all spheres, other
nations could exist with the blessings of England. As some nations have began realizing that
they are loosing grounds and couldn’t exist as nations-states, they have to find means how
they will come out of this vicious circle of economic dependency. Germany and France and
earlier the United States of America had to take bold measures to free themselves from this
permanent yoke and degradation, and began the golden road of industrialization that ensures
them true freedom and prosperity. These nations had to fight all the sabotages of the English

imperialists, and fought vehemently against internal and external enemies. Especially,
America by applying a strict mercantilist economic policy until 1933, it could build a strong
economy that it in turn makes her super power

The mercantilist policy that America had followed until 1933, and the deterioration of the
British Empire, and its incapacity to administer the vast colonies was no more possible for
England to continue like that. With this, the increasing trade balance deficit of England and its
transfer of Gold to other countries and becoming more and more as a debtor nation had
shrunk her supremacy. The Pax-Britannica must leave the way to Pax-America. Though the
basis of free trade was laid in 1934 by the Roosevelt government, by the so-called reciprocal
act, and this could not be practiced widely due the deterioration of international trade, and
because of the Second World War that had consumed millions of human lives and
incalculable damages against material resources that had depressed economic development.
After the victory of the allied powers and especially after the United States becomes the
dominating power, it began dictating the world economy and political situation. In 1944 in the
Bretton Woods meeting, both England and the United States brought two opposing ideas to
improve world production and smooth international trade by creating favourable conditions.
The British Empire represented by Keynes suggested that the world needs a new international
currency which is out of the influence of any nation, and he called this artificial currency
Bancor. In order to become operative a clearing union must be established through which
surplus nations transfer to the deficit countries. At the beginning, Keynes demanded $ 36
Billions of dollars that was opposed by the United States, because this falls on the shoulder of
the United States alone. The discussion between the two contenders was not friendly, because
the Americans wanted to impose their own interests without taking into account the
intellectual approach of Keynes. Keynes was surprised by the approaches of the American
representatives and realised at the end that he was dealing with people who have different
understandings of international politics. Later on he said: “ I went to Savannah to meet the
world and all I met was a tyrant”( Keynes, cited in Robert Skidelsky, John Maynard
Keynes) Blinded by their dominating role and discarding the suggestions made by Keynes,
the representative of the United States forwarded, that the dollar must the main trading and
reserve currency, and not only one nation takes the burden but all member nations must take
part in this burden sharing. Accordingly, deficit countries must fulfil certain criteria if they are
legible to get credit. At the end the proposal of the United States was accepted and become
the international economic frame work which all participating nations must practice. The
dollar is fixed to Gold, as the United States holds during that time almost 70 per cent of the
world Gold reserves. In turn the United States was obliged to covert dollars reserves outside
its country into Gold that had worked until the break-up of the Bretton Woods agreements in

The General Agreement on Trade and Tariffs (GAT) was an extension of this world wide
dominance of the United States; and with the free trade ideology it becomes clear that the
United States has clear advantages to impose its own interests. In order to make more
acceptable, the free trade ideology is propagated as an instrument of welfare maximization
across the globe; and countries that participate into this global trade regime will get direct
benefit. As economic development is associated with trade, all countries that become member
of this free trade regime must put their efforts on products which promise the best returns.
Hence the Reciprocal Act of 1934 that was formulated by the Roosevelt administration
became the basis of GATT; and it was entirely overtaken as a system of the new international
trade regime. The Reciprocal Act has empowered the president of the United States and
undermined the role of the congress, which has practiced until 1933 by emphasizing
restrictive trade regime. With the new empowerment at his hand, the president could take any

policy in the area of free trades that promotes the interests of the Unites States. Accordingly,
bilateral agreement is no more the rule of the system as it was practiced before the Second
World War. This principle of multilateralism became the basis of the GATT. To form the
GATT there were preliminary meetings in 1946 in London and in 1947 in New York, in
Geneva and at the end, in Havana. At the Havana conference, because of differences in the
area of economic development, which the Latin American countries brought as their main
interests, the United States opposed to include the idea of development in the trade agreement.
With the excluding of all important provisions, like economic development, supporting raw
material prices, restrictive trade and services, the GATT was formed to reduce only tariffs.
During the final meeting of forming the GATT 23 countries were represented.

The main tenet of GATT in its initial formation was to reduce tariffs, and tariff reductions that
are introduced once must not be overrun by other instruments. The basic elements of GATT
were written in 35 articles; and from these the most important is the non-discrimination act,
which is stated between article one and three. According to this principle, non-discrimination
means that imported goods have the same status with homely produced goods. In other words,
no extra price increases on imported goods that favour homely produced goods to boost
internal market. The other very essential agreement of the GATT is the most-favoured trade
agreement, which says that the agreement between two member countries applies to all
member countries. With this article the multinational nature of the trade regime is firmly
established. Other elements, like the fixing of quotas and other non-tariff barriers are major
aspects of the trade regime that were written in the article and must be accepted by all
member nations. Other mechanisms of regulating external trade, such as prohibition of other
products which hinder the movements of goods between member countries were also strictly

There are many rounds held in different countries to advance the sprit of GATT to be more
acceptable by many countries of the world. One of the main of these first 6 rounds was the
Kennedy round that lasted from 1962 until 1967. The main agenda of this round was
concentrating the discussion on non-agricultural products, and reduce tariffs step by step on
non-farming products. In this 6th round it was no more possible to come to final agreements.
Many Third World Countries that became member of the organization could not bring the
agreement into their favours. As the many participating countries did not have the chance of
seeing promoting their interests in the Kennedy round, they began implementing economic
policies which they believed advances economic development out of the scope of the
international trade regime as seen be the free trade agreements.

In the Tokyo round, that began in 1973, and lasted almost 6 years, was also another setup,
since many industrialized countries were hit by the oil crisis and must experience crisis from
within. The economic crisis and the decreasing of demands, the break-up of the Bretton
Woods system and the unilateral action of the United States to end the dollar-gold standard,
and the rapid fall of raw material prices that had affected many African and Latin American
countries overwhelmed such a round. New countries became member, as they thought that
they could get benefit that favours economic development in their countries. Though there
was intensive discussion over the reduction of tariffs on non-agricultural products, no
agreement was reached. Especially, new member countries from Africa and Latin America
hoped that tariff reduction in this area could advance economic development from within.

The Uruguay round that lasted from 1986 until 1993 was also a kind of meeting to cope with
the ever increasing economic crisis; and it was an answer to the second oil crisis of 1979 that
affected many countries. 125 countries had participated, and 91 countries were from

developing countries. In this round the issues of tariff reduction on farm products and textiles
were the main agenda of the discussion. These parts are of more interests for developing
countries, which hope that they could export more of their farm products to the industrialized
countries that dictate and dominate the world market. On the other hand, developed countries
wanted to concentrate more on the service sectors, so that many developing countries open
their market for the global players. Other areas of concern are the so-called intellectual
property right(TRIPS) and trade related investments which the industrialized west had
concentrated to impose as the main trade regime of the GAAT. Starting the 1980s the service
sector become the major aspect of economic activity in major industrialized countries, and the
encompassing of the service sector into the GATT arrangements will favour industrialized
countries to advance their interests in all Third World Countries that are member of the
organization. The pharmaceutical industry and the banking sector were the main actors which
were pushing their governments to incorporate these elements into the GATT agreements.
With contradictory aims and ambition, diverse interests, by agreeing on certain elements, like
reducing tariffs by 1/3 on manufactured products, the Uruguay round was signed in 1994 in
Marrakech, in Morocco. From this time on, within ten years all restrictions must be abolished
on textile products. Trade related investment was also one of the agreements reached at this
round. As hoped many developing countries could not profit much from the agreement,
because Japan and the EU had persistently refused to reduce farm subsidy, which was the
main focus of especially African countries. Especially those countries like Argentina, Brazil
and South Africa, which are known as Cairns groups, and which are major exporter of
agricultural products fought in vain for the reduction of subsidy, which was not considered by
the industrialized west. With this round the way to the World Trade Organization (WTO) is

The post-Uruguay round was overshadowed by many disagreements. Many developing

countries wanted to see the implementation of the previous agreements reached by the
Uruguay round. On the other hand, developed countries wanted to focus on trade related
investments, on the role of the governments and on areas through which they could penetrate
the markets of developing countries and control the vital resources. The issue which was
raised in Singapore was whether one should concentrate on old issues or on new areas. The
conference in Seattle in 1999 which was overshadowed by demonstration proves that even
many people in the west are not interested to leave the field of economic activities to
Multinational Corporations which become more and more dominant to twist the rules of the
GATT in their interests. The closed-door discussion over multinational investments between
the GATT and the multinational companies is a direct indication how these global players
wanted to use this trade regime as their instrument to dictate international trade and
investments. In this closed agreement, multinational companies could easily penetrate in the
economies of the Third World Countries and control all major economic activities in their
favour and by at the same time blocking internal development based on science and
technology. The new international economic order which had replaced Keynesianism of the
cold war has created new situations that favour multinational companies.

Starting 1979 on wards the world has seen a major shift in many areas of international
economic activities. The counter-revolution of the monetarist economic philosophy in
England that was introduced by Margaret Thatcher and Roland Reagan in the United States
was indeed a shift away from welfare economic principles to less state intervention in the
economy. All major achievements of the cold war between the state, the trade union and the
capitalists must be smashed so that the invisible hand of Adam Smith must get the upper
hand. Privatization, deregulation and globalization become the main aspects of economic
policies that must be applied all over the world. All movements that hinder the global play of

the market principles must be smashed, and universities and colleges must be restructured in
accordance of the need of the market. Social cohesion which was the main tenet of
Keynesianism, investments in other areas of social activities and theatres are seen as
hindrances of economic growth based on individual participation. This philosophy of market
deregulation and philosophy of hire and fire mentality become the principles of many
corporations that dictate the lives of millions of people across the globe. From this
perspective, the expansion of multinational companies and the systematic control of the WTO
and the imposition of their interests in many areas is a step backward to limit the activities of
many sovereign nations and create new volatile situation that endanger social cohesion,
especially in the Third World Countries. In other words, the WTO becomes a part and parcels
of the few corporations, which saw that their interests could be realized through the
complicated agreements of the trade regime. In this case the Doha and the Cancun
agreements were major steps in laying the grounds for the formation of the WTO as an
organization, which could be also conducted on ministerial level.

The question here is what will be the consequence for a country like Ethiopia that has a very
weak industrial base and over 80 per cent of the population live under poverty line. When
over 70 per cent of trade and investments are controlled only by three country blocks, Japan,
EU and America, how could a country like Ethiopia which is on a very fragile situation build
a coherent economy and exist as a nation-state. What are the experiences of many Third
World Countries which became member of the WTO? Are they marching on the path of
economic development or are they on the brink of collapse as nation-states? Could Ethiopia
get any benefit if she becomes the member of the WTO as is believed by the present
Ethiopian regime that does not have any political legitimacy to rule the country? These and
other points are relevant to be analysed here.

The situation in many countries that became already members of the WTO is not that much
promising as is widely believed. Reports from India show that in the last 10 years almost 150
000 peasants had made suicide, as they couldn’t withstand the pressure from multinational
corporations that control the fertilizer, seed and insecticide industries. The activist Dr. Shiva
Vandana of Indian origin, and the alternative price winner shows in her many publications
and radio interviews how the Indian peasants become poorer and poorer after India became
member of the WTO. The penetration of the agro-business industry in the Indian farming
system and the break-up of small and medium family holding agricultural activities must be
replaced by more “ profitable” farming practices which are producing with high tech
machines helped by hybrid seeds and chemical fertilizers. Some farmers that were heavily
indebted as the result of this kind of intensive competition make suicide or leave their farm
lands and join the reserve army in the cities. The situation of the Mexican farmers is not
different from that of India. Mexican farmers who are the victims of the North American Free
Trade Agreement must also experience pressures from other multinational companies. The
border area which is a free trade zone had benefited corporations from the United States to
squeeze the labour force with very meagre wage. The social conditions in this free trade area
are out of control; and because of the desperate situation the social matrix of the Mexican
society is out of control. The 20 million city of Mexico is being controlled by drug cartels.
Religion sects which come from the United States are creating new situations that have
inflicted heavy damages on the society. New religious fundamentalism of the United States is
slowly spreading and confronting the traditional catholic religion of the Mexican society, and
there are reported clashes between the two religions.

We have seen above that the introduction of the structural adjustment program has altered the
social matrix of the Ethiopian society, by throwing many people into desperate situations. The

concentration of wealth in the hands of handpicked people and the mass poverty which is seen
in the country in general is two sides of the same coin. Market economic reforms as dictated
by the World Bank and the IMF have not by any means increased the production capacity of
the Ethiopian society; instead Ethiopia becomes more dependent on outside sources for her
very existence. In light of this situation that Ethiopia finds itself, becoming member of the
WTO doesn’t hold her out of the present economic and social crisis. Instead the situation will
be aggravated.

Becoming membership of the WTO means that Ethiopia must open her markets to member
countries that have more advantages. As the many rounds show, EU, Japan and the United
States are not ready to reduce farm subsidy. Since this entails high political risks, there will
not be any improvement in this area in the coming years. In this case, the situation of the
Ethiopian small peasants will be jeopardised, and the Ethiopian market will be overwhelmed
by farm products from these countries. The last 15 years of economic aid has proved this; and
many farmers were frustrated by the low prices of their farm products, as wheat and maize
which were imported from EU and the United States were thrown on the market. Due to the
structural adjustment program and market reforms, many peasants were compelled to buy
seeds, insecticides and fertilizers by borrowing money. Reports show that many farmers
couldn’t pay back the money they have borrowed; and most must quit their farm practices and
join the reserve army in the cities. If Ethiopia becomes member of the WTO this situation will
be aggravated, and those that are not in a position to cope with the new situation will be
compelled to leave their long farm practices. The situation in India and Mexico are clear
examples which must be taken as lessons. On the other side, we have seen that the European
farm products are not that much competitive, since they get subsidy from their governments.
The fact that they use scale economics which has another law in comparison to that of the
industrial sector doesn’t mean that they produce with minimum costs. Since land is a natural
product and can’t be replaced by another land like a machine, the cost of cultivating with such
kind’s of intensive farm practices doesn’t make it cost effective. Only under severe conditions
of farm practices by constantly applying chemical fertilizers and insecticides and new variety
seeds, the high yield of the farming system could be increased from time to time. Such kinds
of farm practices in many countries of Europe have brought soil damages, and the poising of
agricultural products affected the health situation of many people in Europe. Intensive
farming means also spreading of monoculture production activities that absorb water heavily
from the soil and reduces the water table. This is the case in North America, where high
farming practices become the rule of the system. With such kinds of farm practices there is no
class in Ethiopia which is in a position to invest and compete against the European farming
products. If certain farmers apply this technique, as experiences show us at the end of the 60s
and beginning of the 70s in some parts of Ethiopia, expulsion of the very weak farmers will
be the rule, since applying high tech means farming with few labour forces. The labour force
will become redundant, and we will be having a new vagabond class that endangers the
security of many people. We have already this in Addis; and become member of the WTO
will square the situation. This is one side of the coin. The other side of the coin is that the
importation of food from Europe and the United States and other member countries will alter
the traditional food habit of the Ethiopian people, which is healthier than that of European
farm products that entail heavy concentration of insecticides, if it is studied and applied well.
It is in the philosophy of the United States which promotes free trade through the WTO to
homogenise the food habit of the world and create unhealthy situation. Studies and reports
from England and the United States show that Diabetics and other food related illness are
increasing at an alarming rate and encompassing even children and young people.

Ethiopia’s membership will have many negative facets which can’t be controlled by any
government. First of all, there is unequal development, since the government can’t apply a
resource and scientifically based development policy as we have experienced in the last
fifteen years. It will be compelled to apply more and more monetarist economic policies that
benefit the few and produces mass poverty on a higher scale. Monetarism means less state
intervention, and more privatization. As the private sector is weak the probability of inducing
new investments and creating new job opportunities will not be that much promising. On the
other side, as we saw in the last fifteen years the weak industrial base Ethiopia has will be hit
by the products from China and other industrialized countries which are competing for more
market shares. The textile and other economic activities which apply less technology will be
destructed, as those who could afford to buy shift their consumption habits from home made
to foreign made products. As reports in the last three or four weeks show the General
Secretary of the WTO Mr. Pascal Lamy, and trade delegations from the United States are
advising the EPRDF government to liberalize the service sector. In other words, the water
sector, the Banking sector, the telecommunication sector, the electricity, the health sector
must become private affairs, and must be soled to those who could buy and ran them. As
experiences in the Philippine, in Argentina and other Third World Countries which have sold
some parts of the service sector to global players did not see any new investments which
create new job opportunities and bring new technology, the fate of Ethiopia can’t be the
exception. The service sectors which were sold to foreign companies must be restructured,
and selected so that they become profitable and have synergic effects. After so many years of
wait and see practices some of the governments in these countries must buy the service sector
with high costs. As history shows, the service sector is a government affair, and it must
remain always under the control of the state for the general welfare of the society. Since
private firms operate under cost-benefit principles they are not interested to invest as long as
they are not rewarded by maximum profits. In Europe, no government dears to privatize the
service sector; if they are privatized they will be controlled from time to time. In countries
like Ethiopia where no effective government and institutions exist the privatization of the
service sector will damage the Ethiopian society, and those unable to pay can’t drink clean
water; will not have access to electricity and health, and couldn’t afford to send their children
to schools. That means the situation is bleak and Ethiopia will never have any investment
advantage by becoming member of the WTO. As private investors want to reduce costs, the
work force must be reduced from all the sectors which become the victims of these kinds of
malpractices. Loosing jobs means adding more people to the reserve army and increasing
more and more poor people in the country which have very minimal buying powers. With
such higher and fire practices even the informal and subsistence sector will be hit since these
sectors loose their customers. The principle of market economy teaches us that only those
who could afford to buy and consume, have the ability to exist and the rest will be excluded
from the economic activity. In a country with no social plan the chance of being helped is

If the situation is so bleak and the experiences of market economy of the last 15 years are
crystal clear why is the EPRDF government that was once weaving the flag of Marxism and
Leninism marches towards to this death squad. The situation is mysterious on one hand, on
the other side it is a matter of ignorance of political economy. Since by definition, and as is
propagated that through exchange becomes growth, our leaders have taken this inverted and
assumed fact as their principles of policy handling. The fifteen years of market reforms
couldn’t illuminate their minds, and couldn’t ask themselves why poverty and hunger are
hovering over our people which disintegrate more and more our society. As I have tried to
show some where the Meles clique by bowing to the financial oligarchic class that dominates
the world wants to preserve its power by being more and more integrated in the system, since

it doesn’t see any other option other than implementing this bitter medicine which brings
more deaths than cures. It is the duty of those patriotic forces to protest against the economic
policy of the EPRDF regime, and its application to become member of the WTO. Since this
equally endangers the very existence of our society, since without a solid economic
foundation that is based on science and technology there is no a well functioning nation-state,
it is very important to protest against the economic policy of the government. Political
protests alone are meaningless unless one doesn’t combine with economic protests which
touch the lives of millions of people. Before politics people must eat, drink and get shelter.
Only thorough solid economic foundation they could articulate better and fight for political
freedom. On the other side the substitution of the present regime by a democratic and patriotic
government is the precondition of any tangible change in the field of economy which
improves the lives of our people. From this vantage of point of view our position to the
market economic practices of the regime, the neo-liberal policy of the IMF and the World
Bank, and the Free Trade regime of the WTO is clear: We say that Ethiopia shouldn’t become
member of the WTO, and must not apply again the neo-liberal paradigm that destroys the
material reproduction base of our society.

The Alternative
Many people may ask, if somebody opposes the policies of the IMF, the World Bank and the
free trade doctrine of the WTO, what is the alternative therefore that brings a poor country
like Ethiopia out of the present quagmire. Is it possible that while the entire world is marching
towards a global economic and political order that such countries like Ethiopia could build a
coherent economy out of the concept of this global economic order? Even some think that
globalization has benefited all countries irrespective of some negative consequences as we see
them today. Some think and believe that, even if there is a regime change in our country,
there is no alternative other than implementing the kind of economic policy as is forwarded by
the IMF and the World Bank, since Ethiopia can’t be the exception. Some politicians and their
adherents see the problem of political crisis in Africa, and especially in Ethiopia not due to the
market economic policy per se, but the political nature of the regime and the lack of
democracy that hinders the materialization of such kinds of monetarist policies. With such
kinds of misconceived analysis, they dissociates the political philosophy of the regime from
the economic philosophy of the IMF and the World Bank, which seek such kind of a regime
that can practice their neo-liberal market policy that can produce poverty, and creates wealth
for the few. Only under unenlightened regime the practicing of such a policy which
undermines the existence of a nation-state is possible. It is therefore unwise not to see both of
the market economic policy and the political handlings of the regime as two sides of the same
coin. The dissociation of the two aspects, and the efforts by some groups not to consider the
roles of the IMF, the World Bank and the American Imperialism as the main causes of
political and economic disorders in our country and other Third World Countries, leads us to
political miscalculations that prolong the misery of our people. Only correct analysis, and the
clear understanding that not market economic philosophy of the IMF and the World Bank
type free our society, and paves the way for a science driven technological development, that
brings us nearer, make us capable to show for our people the road of genuine emancipation
and civilization. Any attempt to solve the social and economic crisis of our country within the
paradigm of the IMF and the World Bank, will be doomed to failure, and can be seen by
enlightened Ethiopians as an intrigue to see a weak and poverty stricken Ethiopia for the
coming 10 or more years. From this perspective, let me try my policy option, not as program,
but as analysis to make it more understandable.

Before I give my own alternative I will try to clarify the confusion about globalization, since
some see in it as a historical necessity, and it is the only alternative which we have to accept,
and no one could withstand such a monstrous economic construction as we experience today.
Historically, as human beings started to organize themselves in communities and developed
division of labour it became historically necessary to go beyond their limited boundaries and
started to communicate with other communities to exchange their goods with which they
couldn’t produce. As communities became stronger and experienced that such kinds of
communications with other communities are beneficial they expanded their scope of thought
and develop cultural ties. Traders of one community took some of their cultures and goods
and moved far away for trading, either came back to their original places or remained there
for ever and expanded their activities and integrated in the community where they had settled.
In this way we learn from history that with out constant trade and cultural contacts humanity
couldn’t have achieved the present development. In history there have been always contacts
among different countries that shaped the fate and the development of the respective societies.

If we study the human history in general, the first global trade and cultural ties had positive
impacts on some countries that helped them to construct beautiful cities, mosques, churches
and through that they came together and build strong communities. As they integrated more
and more and live in communities, their scope of attitudes began expanded. But this positive
impact of the first wave of globalization was halted as many European countries began
developing nation-states. With the rise of racist theories in the 18th century, trade relationships
were turned to become a one sided affair, and by using their naval, military power and
economic strength, some European countries began subjugating weak nations and tried to
change them as their peripheries. As capitalism developed from within certain groups had
constructed theoretical frame works how they could justify exploitation and subjugate them as
undeveloped societies. As many European countries turned to imperialism they even went
further to attack other countries militarily, and distorted their initial social organizations and
compelled them to produce raw materials and agricultural products for the further
accumulation in their country. This second wave of globalization, subjugating other nations
and developing their own economy become a natural fact which is given only to certain
selected European countries, and developed different devices to manipulate these subjugated
nations so that technology and science couldn’t spread across the globe. The third wave of
globalization becomes even intricate and subversive so that one couldn’t understand at face
values. States in the peripheries become simply instruments of internal subjugation and
exploitation, while European and American firms supported by their states could manipulate
the weak states of Africa and Latin American Countries. States organs, like the civil, military
and security apparatus become strengthened and detached from their societies and become
manipulative objects for the sake of international capital accumulation. Because of false
internal accumulation models and unequal expansion of capital, poverty was produced and
reproduced on a higher scale. With the rise and strength of international organisations, like the
IMF, the World Bank and the WTO, western imperialist powers, especially the United States
of America gets in its hand direct manipulating instruments how it could transfer wealth from
Africa and Latin American countries. As the economic boom of the 1950s and 60s faded
away most African countries became the victim of this globally organized manipulation and
compelled to transfer wealth through unequal trade, debt bondage, and manipulating raw
material prices, which could be bought before they are being harvested, and sold with
exorbitant prcies. At the end of the 1960s and at the beginning of the 70s most African
countries become practically incompetent to go further with their first form of economic
development, i.e. import-substitution-industrialization. As raw material prices fell dawn, most
African countries could not generate sufficient income to finance their weak industrialization
model which had absorbed much resource and brought unequal development from within.

They were compelled to borrow from European and American governments and international
organizations. In order to get credits they have to swallow the bitter medicine of the IMF and
the World Bank which had distorted again and again the internal structure of their societies.
Through such kinds of debt bondage systems and depending on one or two commodities for
exports many African counties caught in vicious circles of economic crises and disintegrated
social systems.

After 1973 and later on we see a new global organized economic system, by which some
nations are becoming more and more integrated in the global economic order where as
African share in the global world trade distribution of direct investments become more and
more negligible, and remained now by 1%. Where as strong trade relationships and direct
investments become the affair of the tirade that means, Japan, EU and the United States most
African and Latin American countries remained in their distorted developments. With the
begging of the 1980s we see a new trend of bringing the entire global order under the
influence of the American corrupted model, and many nations must accept the so-called
Washington consensus as the ideological frame work of this global free trade regime. More
and more countries consume what European countries, Japan and the United States of
America produce, while they are internally disorganized. In other words, their production
potential must be reduced to a minimum level so that few could consume and the rest remains
as helpless and poor. The privatization process across the globe, acquisition and merging with
other companies, this is a new trend of globalization, without being engaged in direct
investments. With the triumph of finance oligarchies, with the development of new financial
instruments, investment banks and hedge funds could buy here and there objects, machines
and other properties to acquire more and more profits. Under the triumph of finance capital
everything that yields the highest profit becomes speculative object. Apartment blocks, once
built by the states for social needy people under the direct participations of some individuals,
Hospitals, Water and Gas supplies, Electricity and others which were run by city
municipality, were sold to Anglo-American investors, which ran here and there like locusts,
eat and destroy and ran to other countries. Because of such kinds of arbitrary handlings of
people’s wealth so many people must live in permanent fear, because the new speculators will
throw them away from their apartments. Today the world is controlled by few finance and
industrial capital which are organized under multinational corporations, and have assets worth
of $ 35 trillion US and yearly turnover of $ 11 trillion US. These financial and industrial
complexes controls many states, and international organizations like the IMF, the World Bank
and the WTO, and the amalgamation of the military and industrial complex which is waging
wars across the globe in order to test its new high tech war machines on the innocent people
of Africa and the rest of underdeveloped areas is the new international political order. In this
respect globalization and waging wars with different intensities become two sides of the same
coin. These kinds of military supported globalization and the Americanization of the world
consumption pattern, McDonaldization and CoaCacolization are other faces of the global
order. The diverse cultures, consumption patterns and production structures must be organized
under monotonous way of living and monoculture products. The American way of lives must
be internationalized and must be accepted everywhere. We the citizen of this world must
dream the American dream, by discarding our own cultures, history and the desire of true
human civilization. In our own action we must be individualistic and self-achieving,
aggressive and destructive, and live under permanent tension and fear, because everybody
stands against everybody. That is the American dream. See the major big cities of the United
States, where drug, criminality and sexual abuses become the phenomena of the society.
When almost two million people are sitting in prisons, and 60 per cent of them are blacks, this
tells a lot. Not because that these prisoners are criminals by birth, but the system produces
such kinds of human vandalism. And against this background of growing criminality rate, the

well-off class must live with video camera protected houses. Such kinds of living styles are
also expanded in Mexico and in other Latin American countries, where the rich has adopted
the American way of life. This form of globalization with buy it, strip it, and flip it mentality
becomes the norms of the global economy, and norms of these investment banks and hedge
funds which disorganize many societies, tear up existing social cohesion by minimizing the
role of the sates in many countries. This is in short what they call us globalisation, which
couldn’t distribute wealth, direct investments and knowledge across the globe equally. From
this perspective Ethiopia and other African countries can’t and must not expect too much if
they want to build strong economies and social organizations. If the situation is so
complicated and bleak, it is our own natural right to go our own way and formulate economic
policies which create wealth and bring harmonious development. This is the natural right of
every human being, and as a matter of fact this natural right can’t be ordered or blocked by
any other superpower. To miss this fact or to interpret it differently is to submit for this global
order which produces and reproduces poverty on a higher scale. Now let me come to my

It is clear that societies must be organized in any form which are suitable for them and are
scientific. Societies which are not organized under certain rules and norms and from scientific
point of view their fate is disorientation and purposeless. Any society must have principles
and guidelines by which it organizes itself and move from the lowest to the highest stage of
social organization. As human beings are creative by nature and differ by that from animals
they are capable of organizing themselves under certain rules and develop instruments by
which they create wealth and develop themselves as societies. The forms of social
organization and developing new production techniques depend on the intellectual capacity of
certain groups and on the political forms of organization under which they are living. The
more the system is enlightened, the more it is easier to become free and creative. Hence it is
easier to develop new techniques and instruments to exploit nature and use it in proper way so
that the society under consideration develops permanently. To understand ones own role in a
given society and partake in the social forms of organization, it is also essential to understand
the role and essence of economy in any given society. When economic science as we learned
in the universities is simply reduced to the division of labour as Adam Smith had postulated,
and to demand and supply and then to exchange the produced products it is hard to transform
a given society from one stage to higher forms of economic and social organizations. This is
what we see and experience in many African countries and including Ethiopia. Since
economic science as formulated by Samuelson and others have overwhelmed the African
school systems, it is very difficult to organize such societies and give the people a decent and
harmonious life. From this vantage point of view, let us try to define what economics is, and
what one must understand if he wants to contribute something valuable for his society.

Economics is not as such demand and supply, but the transformation of one thing from one
state to the other by applying energy and through the help of human labour. In this way one
form of raw material is converted to the other by applying some form of energy either to be
consumed directly or being used as instruments of labour or building materials. The
conversion of raw materials to the next stage and its quality and the productivity of the human
labour depends again by the forms of energy one applies and the quality of knowledge what
one posses. The less dense the energy form is the more time it takes to produce a given
product. Likewise, the lower the technological development one has at his disposal the, lower
the quality and the productivity of the labour and the machines. Therefore the forms of
economic and social organizations are purely dependent on the quality of the energy system
one has and the quality of the machines one applies. In order to develop higher and intense
forms of energy and produce qualitatively better machines one must make constant researches

and developments. As social organizations become complex and dense, and as population
grows, it is likewise important to develop constantly to organize and feed the many people
scientifically. Metaphorically, any society must be organized like our bodies. Since the parts
and organs of our bodies have division of labours, and since every part of the organ performs
its works and combines with others so that we can exist as human beings and breathe and
walk, social systems must be organized in like manners. Since what we consume couldn’t be
absorbed entirely by our body the waste must get out of our body so that we live healthy. The
health condition of our body and our active participation in the society depends on the types
of food we eat and drink. If we become excessive in our handlings, and are not caring for our
health, the probability that we become easily seek is great. Accordingly, if we want to have a
healthy and good functioning society, it must be well organized and maintained. It must be
well designed and so that the system works without major disturbances.

In order to produce certain products there must be some of organic, social and technological
division of labour. Without constantly organized and improved social and organic division of
labour there is no social and economic development. Among the different sectors and social
organizations there must be exchange. The intensity of the economic exchange depends again
how the system is effectively organized on the basis of certain philosophy and scientific
thought. Again the quality of the division of labour and the possible exchange of the products
and their transportation from one area to the other depends on two vital aspects: In any
country there must be well organized cities and transportation systems. If there are no well
developed cities and transportation systems one can’t create markets. The effective
organization of market systems within a given country depends again on the existence of well
designed and organized cities, and well established transportation systems. Since market
economy operates within space and time, and since the two aspects are the decisive
parameters to effectively organize a market economy, the development of capitalism needs
the constant improvement of cities and transportation systems. Without the developments of
infrastructures and transportation systems one can’t talk about the development of market
economy. Historically all major European countries which understood the necessary of nation
building began first of all constructing well designed cities and market places. Only through
that they could organize their societies. Today’s monetarist economists miss this fact and
confuse the entire globe as if humanity could exist without having well designed shelters,
market places and transportation systems. Their aim is simple: the rest of the globe must be
converted to a plantation economy and supermarkets by which the majority of the people
produce and live like slaves where as few live luxuriously. That is the philosophy of
monetarism and the global player which are twisting the world as they like. Unfortunately this
inverted form of thinking has become the philosophy of many Third World Countries that
hold their people as hostages. There people must live like animals without any social and
economic order. Since economic organization is totally detached from nation building and
social organization, billions of people have become the victim of this kinds of inverted

The problem of economic theory and market economy as we have learned at the university is
very confusing, and it is seen as an end by itself. The necessary of organizing economic
activity to satisfy human needs is not the core of economic teaching, and as such the material
production is detached from spiritual needs. Since development is associated with market
economic activity, the necessary of developing a given society through science and
technology is not the foundation of economic theory. The interaction of man with nature, the
biological, physical and chemical process of producing a given product can’t be found in any
conventional economic books. For example to produce furniture we must see the entire

metabolism of the production system, from growing tree, cutting , and drying it and
converting it to furniture by applying energy, human labour and machine. As the tree needs
water and minerals, and sunlight to grow, its conversion as a finished product is a physical
and chemical process. The aesthetical design of the furniture and its constant improvement is
a matter of metaphysical act; that means the application of our mental activity to give
particular furniture unique beauty so that it will become attractive for the consumer. Form
this vantage point of view development economics in general, and economics theory in
particular can’t see the production of a particular product an act of biological, physical and
chemical process. Likewise, since production factors are seen scares by nature, the production
of certain products has always its limitation. The problem of scarcity which is the central
element of the neo-classical economics can be overcome when one takes the metaphor of the
development of embryo as an example of self expansion and growth from the lower stage by
multiplying and differentiating in the different directions to the higher stage until it comes as
fully developed body. Likewise, through the development of the cognitive power of the
human brain one can produce multiple products from one particular element or matter. From
this perspective the problem of scarcity has limited application, i.e. to natural products, like
land, water etc. which couldn’t be produced by man. Since economic theory operates within
this limited boundary, it halts from the outset the imagination and creative activity of human
beings to transform their social systems from the lower stages to the higher stage. It is
therefore very important to detach oneself from this very limited boundary and thinks further
and broadly to organize a given social system from different perspective so that the entire
society could take part in developmental process.

The problem in Ethiopia is not as such to organize the society under the principles of market
economy, since market economy is not the ultimate aim not only our society, but any society.
But on the other hand any society needs any kinds of market exchanges. Since production,
exchange and distribution takes place within time and a given space, some forms of market
organizations which operate under certain rules and norms are necessary. The development of
a market economy as is organized in capitalist societies is dialectical and historical process
and not outcomes of monetarist constructions. From this perspective, if we want a well
functioning capitalist economy which is based on science and technology, and which will
have also social and cultural character, such kind of a system must not be the affair of certain
individuals and international organizations, but must be the affair of the state. Without
enlightened state apparatus and without well educated class capitalism which is based on
science and technology is inconceivable. In this case the organizing of the state apparatus
democratically, and the dismantling of the backward oppressive structures which hamper
development it is of a paramount importance for any genuine and resource based

Among most intellectuals there is a great confusion in understanding the nature of a given
state and the kind of functions it practices in order to maintain a given social order. The state
in general is the organized principle of any society through which societies bring their
interests and articulation. Any state can’t be instruments of any class nor a manipulative
object by which certain groups materialize their interests. As the state is a historical and a
natural product it can be formed and improved in accordance with the need of the society in
question so that technological development and scientific thought will be advanced. A state
which is incapable of organizing the society according to certain philosophies and scientific
principles must be dismantled, and therefore any state can’t be above the needs and aspiration
of its people. There is a great misunderstanding concerning the nature of the state in any given
society since certain powers in order to manipulate the majority of their people and exploit
them by reducing them to the status of animals, they propagate as if the state is equivalent to

God, which can’t be put in question even, though it destroys the wealth of the society
through diverse mechanisms by absorbing from innocent people and organize the state
apparatus in order to reduce it to the service of certain groups who have money and power.
From this perspective if we want to transform our society from the present state of
underdevelopment it is necessary to organize the people under democratic principles and rules
so that they could have the power of controlling the state organ. If this is clear let us go to the
next step.

In any society the state is part and parcel of the society, and as such it must have the power
and role to develop always new economic instruments through which it can advance
economic development. If the society is not well developed the existence of the state will be
put into question, and therefore it is in the interest of any government to advance the interests
of the society generally without favouring one particular group or becoming instrument of a
certain class which is oligarchic by nature. Therefore such a state must have the power of
organizing the society so that science, technology and cultural activities could be developed.

We have to reject therefore the view of liberals and neo-liberals alike which undermine the
role of the state in a given society by organizing the economy, where as on the other side
shout under the slogan of law and order to convert it as instrument of certain groups by
making it more oppressive and subversive in its action to control the entire society through
refined methods. Since the state and all its organs and those who ran the system earn salaries
which are collected from innocent people in the form of taxes and some other forms of
tributes, the people have the right to demand equality in any form so that they could exist as
human beings.

If the role of the state is so clear the next step is to organize institutions of various types,
which promote and articulate the wishes of the people. These institutions could be either part
of the state structures which are autonomous in nature or non-governmental in character.
Development related institutions, ecological institutions with various capacities, institutions
which control and study the development of cities, those which control the nutrition and food
system of the society, whether these are compatible with human health or not and others. Only
in this way any society which is viable and sustainable could be organized and promoted.

If the function of the state is like this, it must further organize the financial and the banking
sectors so that cheap credit could be allocated for those active forces which want to participate
in the economic organization of the society. The central bank must have the purpose of
allocating the necessary amount of money in accordance to the need of the society. Money
transactions and black market activities, and including money exchanges outside the control
of the banking system must be forbidden and must be punishable. Only so the system can get
the necessary financial instruments for productive activities. Without organizing various
financial instruments to mobilize the money which is available in the society and allocating
this for productive purposes, to develop the economy in an effective manner is practically
impossible. As is propagated by monetarist economists that saving creates investment, the
other way round must be the rule, as Keynes teaches us. That means it must be first of all
invested, in order to create income and through generating income one can create saving. This
has been always the history of capitalistic development. In this case investment through credit
creations and mechanisms is the engine of capitalistic development.

If is this the role of the state and the related institutions, different groups must be organized
and must get advice to take part in the economic process. For this they must be trained how
they invest, in what areas they can invest and how they generate the necessary capital to

finance their projects. The organizing of the private sector effectively and efficiently in a
modern way and protect it from internal aggression could bring genuine capitalist
development. The promotion of small and medium sectors of investments, and their equal
distribution across the entire country is the precondition of equal development which has the
power of mobilizing the human and material resources of the society. Besides this, the joint
action of the state and private investors to mobilize huge resources to finance infrastructures,
like rail road systems, and other strategic investments is crucial important to bring a
generalized social and capitalist accumulation. Through generating enough capital and
through joint actions, and by organizing different state related and non-governmental
institutions which could mobilize the entire labour power and material resources, we can
develop Ethiopia within one generation as a well functioning society. To follow the
monetarist line and practicing it again and again will lead us to social disintegration and create
at the end permanent social chaos. The road of human civilization is not monetarism, but
physical economic principle that brings forth the cognitive power of our people and gives
them real power so that they could build a society based on science and technology. The road
of monetarism is slavery and self destruction, while the road of physical economic principle is
the road of equality and harmony.

March 18, 2007

Fekadu Bekele, Ph D
A researcher in human civilization, Fekadu Bekele teaches International and Development
Economics at colleges. He can be reached at

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