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Rotten Flowers of the Spring reform: Democracy and Economic Sovereignty under Prosperity Party

Abiy Ahmed (PhD) and Temesgen Tiruneh, President and Deputy President of the ruling Prosperity Party (Photo: Prosperity Party/Facebook)

By Alula Nerea

Addis Abeba – Looking back at the spring season of 2018, when the “reformist” group led by PM Abiy Ahmed mobilized the public with flowery promises of democracy, freedom of expression, and economic prosperity, we now find ourselves counting the sixth year of rotten promises. The political landscape has been overwhelmingly dominated by a single party (Prosperity Party), reminiscent of the final days of the former EPRDF regime. Freedom of expression has become a right constrained within the safety of homes and intimate circles rather than exercised in public.

According to the Freedom House report, Ethiopia not only ranks among the lowest with a score of 20 out of 100 but also decreased by a point from the previous year. This shows the extent to which one of the building blocks of stable and accountable democratic governance is under threat. The other manifestation is sanction of  academic freedom in universities, continuous suppression and threat of journalists, which forced many into nomadic exile, while others resort to self-censorship. According to CPJ, as of December 2023, Ethiopia ranks as the third worst country for journalists, trailing only behind Eritrea. 

The country’s perpetual internal conflicts with militant groups in Oromia, Tigray, Amhara, and other regions is also another manifestation of serious deficiency of political will and commitment to utilize democratic mechanisms to answer nationwide political questions. Similarly, undemocratic practices extend to socio-economic matters. For instance, the recent events tied with the “corridor development project” in Addis Ababa which involved the demolition of houses and businesses without adequate consensus building and resident involvement indicate that undemocratic tendencies are ingrained structurally from top-level political leadership to street-level bureaucrats.

These undemocratic behaviors of the leadership are also reflected in its foreign policy engagements. The recent diplomatic clash with Somalia due to an agreement with the de facto state of Somaliland over port access for a military base. The move undermines international customary laws such as the principle of non-interference outlined in the 1970 UNGA Friendly Relations Declaration and Article 6 of the Montevideo International Convention of 1933. This incident serves as a prime example of the inherent and repetitive undemocratic behavior of the state in interstate relations. Such decisions, especially at a time when the country faces numerous internal security and socio-economic challenges, lack sound logic for many observers.

Brandon’s article, “Decision Making in Autocratic Regimes: A Poliheuristic Perspective,” offers valuable insights on how undemocratic regimes approach decision-making in foreign policy matters. He discusses the ‘non-compensatory’ decision rule, where decision makers prioritize eliminating alternatives that could lead to negative outcomes on “a single dimension of concern” such as political survival, even if those alternatives may have significant positive impacts across other dimensions. 

In the case of single-party autocracies, it eliminates alternative decisions  that don’t sufficiently align with the interests of the ruling party. Similarly, personalist autocracies eliminate decision alternatives that do not satisfy the leader’s need to maintain political status. Consequently, regardless of the type of autocracy, decision-making in foreign affairs  often revolves solely around the political survival of the party or leader while neglecting broader socio-economic considerations. 

This trend is evident in the case of the Prosperity Party or the leadership of PM Abiy Ahmed, where decisions are fundamentally influenced by their relevance to the political survival of the party or leader, even if it has devastating consequences in international relations. This approach is further demonstrated by lack of principle and inconsistency in handling similar issues. For instance, the reluctance on dealing with the issue of occupied borders by Sudan and Eritrea while prioritizing sentimental nationalist agendas, such as securing access to ports on the Red Sea. such inconsistency reflects an attempt to resurrect public support for the party leadership despite the decision having a wide range of negative ramifications internationally.

In the economic front ‘non-compensatory’ decision making which single handedly focused on keeping political survival the regime seems even more persistent. One of the prominent manifestations is how the government runs the so-called “homegrown” reform program (HGER). For instance, the time chosen to sell the telecom operating license network in 2022 despite the low price caused by 6 out of eight bidders withdrawing concerning political instability. The decision seems  primarily driven by the need to finance the war effort in its Tigray region, which sparks a doubt on the true motives and recommitment of the government to its own reform agenda.

Thus, considering the systemic nature of overly power centered decision making behavior of the regime on internal and external affairs, it’s reasonable to examine the “homegrown reform” agenda from an economic sovereignty point of view. More importantly focusing the overall notion of liberalization and  ongoing discussions with the IMF regarding debt restructuring and new loans. 

During the past regimes the government had a huge involvement in the economy through different ways. Among them state owned enterprises (SOE) have been instrumentalized as a source of finance for government expenditure. Moreover, they also have been an essential policy instrument for the government to discharge its stabilization, allocation and  redistribution roles. Nevertheless, The current reform took a different route aiming to shift the economy from state to private led economy. Though the dissension has advantages in terms of improving  economic efficiency and competitiveness, it also results in the state relinquishing important capabilities to direct the economic transformation. 

More importantly, the basic notion of reform which is aligned with  Brentwood institutions (IMF & WBG) have been under scrutiny after the failure of Structural Adjustment Programs (SAP) in many African countries. Mainly, Policies like liberalization of markets, deregulation and fiscal tightening (Austerity) could potentially undermine the economic sovereignty of nations if not implemented wisely. For instance, unregulated liberalization can incapacitate infant local business due to uneven competition with foreign companies. In addition, deregulation of the market would create more advantages for foreign companies who have strong capitals and know how. Fiscal tightening policy also has a similar effect on local companies since it limits government ability to financially incentivize or subsidize local companies.

In this context, the recent decision announced by the Ethiopian Investment Commission and the Ministry of Trade and Regional Integration to open key commercial sectors previously restricted to local investors to foreigners has implications on economic sovereignty. The move undermines the capital accumulation effort of Ethiopian nationals in sectors that are less capital intensive and quick to generate profits. In addition, it risks survival of local small and micro enterprises which are sources of livelihood for many low income urban residents. Also, the competitive landscape makes market entry difficult for local startups and entrepreneurs with limited capital.  

The other controversial issue of the reform is untimely perpetual devaluation of foreign currency done in compliance with IMFs request as part of debt restructuring.  Recently, the regime has been struggling to find a way out from a potential default which was exacerbated by war spending rampant corruption, and lack of disciplined fiscal policy. To address the challenge, talks have resumed with the IMF to secure a $3.5 billion loan, contingent upon IMF’s conditionalities like currency devaluation directed to a shift of the foreign exchange regime from managed to free floating. The plan can have short term advantages like encouraging exports and increasing foreign currency stock. However, it leads to surrendering some of the monetary autonomy of the state that allows the state to use exchange rates as a monetary policy arm to stabilize the economy and improve trade competitiveness. In addition, considering the economic pressure driven by annual inflation rate of 28-30%, the devaluation plan could even exacerbate the existing political instability,

In conclusion, the partner of single handedly power centered decision making behavior of the regime seriously undermined its promises of peace, democracy  and prosperity of the country. Moreover, instrumentalizing or complacency on extrajudicial killings of politicians, civilians and journalists could further weaken the regime’s grip on power. Appling democratic principles through genuine and inclusive dialogue and negotiation with both armed and non-armed political groups is crucial not only for ensuring peace but also for creating a conducive environment to make sound economic decisions that doesn’t compromise economic sovereignty.

Editor’s Note: Alula Nerea is a doctoral candidate in Economics and International Business at Bucharest University of Economic Studies. Previously, he has been working in areas of inequality, foreign aid and International Relations as a visiting researcher at University of Bordeaux and Uni-Kassel. He has a background in development economics, public management and policy studies. He can be reached at [email protected]

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