What EPRDF’s GDP Propaganda Entails

Ignoring Joseph Goebbels saying, “if you want to insert some information within people, you must announce it repeatedly, because even if the peoples do not accept the information, they would remain doubtful”, is impossible in our case. We often are told that millions of jobs have been created; the livelihood of households has improved; agricultural surplus has been obtained and food security is ensured. Yet, we see people unable to feed themselves, markets awash with unfulfilled demand, prices increasing unabated, and macroeconomic imbalance becoming a norm. In simple words, we seem to be living in an economic disequilibrium.

If the country’s economy grew consecutively by double digits, why is household food security not ensured? Why does the price of agricultural produce increase continuously?

Why would many young graduates stay at home due to lack of jobs on the market? Why would life be miserable rather than comfortable for the majority?

These questions often overwhelm the mind of an informed person when one hears the ruling party’s double digit economic growth propaganda every day. For me, it directly links with data cooking and the ruling party’s Gross Domestic Product (GDP) approach to measuring development.

Oftentimes, the ruling party refers tp the agriculture sector as a source to the nation’s economic growth. In simple words, agricultural growth entails a rise in productivity. A rise in agricultural productivity comes from various aspects, including the increment of land to labour ratio and the increment of farm land used for agricultural activities.

For a rise in productivity from use of existing farm land to happen, the size or quality of inputs used for agricultural activities must be increased. Governmental numbers indicate the increment of fertilizer import, but fertilizer use has not increased substantially. This is just one puzzle within the many in the sector.

In principle, if yield increases stem from systematic productivity increases, then extrapolation from climate data would show it. But in our country’s case, the situation is like that. Household cross-sectional survey data based on self-reported output and yield are similarly not necessarily showing lower measurement error and are definitely not likely to pick up upward or downward trends.

Given that a crop-cutting method has been used, Central Statistics Authority (CSA) data should, in principle be superior. But in practice, they leave many questions unanswered. Even if we dismiss the alternative sources and international evidence, the official yield data are not easily squared with data on input use. A systematic review of how the CSA data are collected and collated as well as those from other studies, aims to explain that increases in yield are urgently needed.

CSA data cannot account for the agro-climate situation, making work on the oblique source of growth even more imperative. For example, during 2009, satellite data using crop-moisture model, FAST, suggested that yield of maize and wheat were similar, compared to the average for the years 2003/04 to 2007/08. In contrast, a vast increase was observed in CSA data, while 2009 year was about eight per cent worse than the five years between 2003/04 to 20007/08, according to their estimates for both crops.

In simple terms, if a country is a “commodity” and a price is attached to it, then that total worth of the country is its GDP. The total market value of the products and services produced by the country’s economy, comes from private consumption, gross investments, government spending and from total net exports.

Basic needs like water, food, shelter, company, respect and freedom cannot be traded off against luxury services and material goods. The latter often serve as a sublimation of the basic needs themselves. In other words, substitution between broad categories of consumption is limited.

This is the core of the notion of lexicographic preferences, which is closely connected with the older idea of Maslow’s hierarchy of  needs pyramid in Psychology. Within this framework, GDP per capita growth and the associated rise in material consumption is an imperfect compensation for a lack of satisfaction of basic needs, like serenity, clean air and direct access to nature. The problem is that the latter are not captured by GDP.

The aggregation of individual absolute incomes in GDP, provides a robust indicator of social welfare at the national level. Well-being may temporarily change but then returns to its baseline level. Since people do not realise the phenomenon of adaptation, they keep striving for ‘more’. GDP, however, does not capture this adaptation phenomenon.

GDP per capita indicator emphasises average income and neglects (changes in) the income distribution, even though an uneven distribution implies unequal opportunities for personal development and well-being. Furthermore, individuals or families with low incomes benefit relatively more from an income rise, because of the diminishing marginal utility of income. GDP per capita does not capture these features.

Actual GDP growth often results from a transfer of existing informal activities to a formal market. This means that the benefits were already enjoyed but the market costs were not yet part of GDP. This phenomenon applies to both developed and developing countries, and relates to such different activities as subsistence agriculture, voluntary work, household work and child care. Since GDP does not recognise the value of informal activities and services, it will overestimate the welfare impact of fundamental changes involving transitions from an informal to a formal economy.

The United States is a consumer-based economy, meaning that “private consumption” formula takes up a significant portion (some estimates are 70pc) in the GDP formula. Great examples of export-driven economies are Japan, China and Germany. These countries rely on exporting products and services in order to expand their economies (in the GDP formula, “total net exports” make up a significant portion of these countries’ GDP).

Therefore, the big question for me is, what part of the GDP formula is driving Ethiopia’s GDP increase?

It may help to remember that the main objective of the neo-colonialists is to export the grains harvested in Ethiopia. How will this affect GDP?

To stimulate the land grabbing, the ruling party offered a hectare of prime farmland for 10 dollars (sometimes, less than that or even rent-free). In other words, the government is not making money (unless there is a side deal) when the land is sold, but the sale is closed.

Grains are exported from the neo-colonised farms in Ethiopia, but GDP goes up and the ruling party claims victory for the increase.

What will happen to the peoples in the country?

They will become slaves sweating for a dime a day in their own country while their “own” government claims to have increased the economy by their enslavement, and by giving away their land. In addition, millions of people in different corners of the country will suffer with food insecurity, while foreign investors ship out grains harvested in Ethiopia.

It all looks like what has happened with a bridge in Alaska. A proposed Alaska bridge that become a symbol of wasteful federal spending on politicians pet projects, has difficultly been scrapped a decade after the idea was first floated. An Alaskan Senator managed to acquire federal government money for his home state, for construction of a bridge to connect an airstrip on an island to a small town at a cost of 223 million dollars. The money was spent to build the “bridge to nowhere” for an island with a population of 50, then, the GDP would have increased by that much.

Why?

Because the “government spending” portion of the GDP formula goes up. If there was a mishap during the construction of the bridge and the government footed the bill, then GDP goes up!

Our country’s hydro-electric dams are more than counterparts to a “bridge to nowhere”. Both entail wasteful spending, but they jack up the GDP figure. The whole principle is, export the energy and increase GDP but the local people see no penny of that export earning.

It is a formula that is used to increase the country’s GDP, while the life of the majority is deprived of basics.

Ethiopia has a huge trade deficit for an economy that claim to have an economy increasing in double digits. Trade deficit is an excess of imports over exports. That means, Ethiopia imports way too many goods and services because it is unable to produce them itself. Ethiopia experienced a sharp decline in imports in 2012 which was a positive direction for GDP, which increased because of the decline.

I believe the ruling party’s double digit GDP growth propaganda benefited only a few stationary bandits and their connections.


Posted

in

by

Tags:

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.