Horn Instability
Something happened in Brussels last week that had nothing to do with Spanish bond yields, Greek pleadings, or even pomme frites. The Prime Minister of Ethiopia for twenty-one years, Meles Zenawi, died, reportedly in a Belgium hospital, following a yet unspecified illness.
I admit it is arcane to note this death, given all else occurring in world markets. There are two reasons for this. One is personal, as this writer spent a (difficult) summer many years ago in Ethiopia as an economics research student. Tuft University's Fletcher School of International Affairs had established an outpost on the main campus of what was then called Haile Selassie I University in Addis Ababa. I was sent by my university, Strathclyde, in Glasgow to obtain empirical evidence of over-invoicing by multinational corporations trading with Ethiopia, a project I subsequently turned into a Masters' thesis.
Apart from this personal connection, Ethiopia is interesting to this writer as something of a tale of economic transformation, albeit at a still early stage, and of international political strategy and intrigue. Readers likely associate Ethiopia with recurring periods of wide-spread famine, stemming from drought, poverty, and government corruption and incompetence. Indeed, the country's GDP per capita, estimated at US$ 1,100, remains one of the lowest in the world (as a point of comparison, Canada's per capita figure is a little over $41,000).
But the much less-known story is the remarkable growth of the Ethiopian economy in recent years. One could almost characterize the country as a mini-China from twenty-five years ago, with its very repressive political regime, yet real economic expansion since 2004 that has averaged about 10 per cent per annum (adjusted for inflation). This is a rate that has easily exceeded that of most other non-oil producing African countries. The agricultural sector, key to feeding the populace, and which still accounts for nearly eighty per cent of employment, has wisely been a principal focus of government policy, particularly through the promotion of new seed technology to enhance crop yields, the expansion of rural infrastructure and cultivation area, and legal changes to improve land tenure security.
Much of this development and reform could be compromised, or even stopped, if the political vacuum left from Zenawi's death is not effectively filled. America must be concerned, as, under Zenawi, it has relied on Ethiopia as a friend, especially as a buffer to the failed, dangerous state of Somalia. A power struggle among the tiny elite that surrounded Zenawi, including notably his widow, seems inevitable.
Instability in the horn of Africa is about to worsen, not exactly what we all need right now.