For once, Ethiopia’s political discourse is showing a departure from its usual hardcore political issues over buzzwords such as unity, diversity, federalism, secession, territorial integrity, access to the sea . . .

Today’s discourse - whether in Parliament, at the Council of Ministers or in the power corridors of line ministries - is very much focused on how much household purchasing power has diminished lately. The term inflation has become as familiar as a household name. For any keen observer of history, it is understandable if policymakers are on their guard against a rising cost of living for they had the ability to bring to power people like Adolph Hitler in the 1930s Germany.

Exploring a course of action to balance growth and at the same time fight upward pressure in prices is what bothers politicians as well ordinary citizens. It is refreshing.

But if Ethiopians feel they are the only nation in the world to have experienced escalating prices, they could find solace from a statement made by a woman in Ouagadougou, Burkina Faso: “You wonder if it’s the government or the businesses that are behind the price hikes.”

She is from a country where there was a riot against increased prices. Others have gone through bloody violence, such as in Egypt where two got killed last week during a protest provoked by a 35pc increase on the price of bread and 26pc increase in that of cooking oil. Even in Italy, consumers went marching against the inflated prices of spaghetti.

From Ecuador to France to China, international prices on basic commodities are going mad. A recent study by the UN Agriculture and Food Organization (FAO), revealed that the cost of food jumped by 23pc in 2007, when compared to the previous year, while the price of grain went up by 42pc, cooking oil by 52pc and dairy by 80pc. Dwindled national reserves, bad weather and poor harvests are blamed for increases in prices.

Consumer price indexes are at an all time high from the United States (four per cent since 1990) to China’s 7.1pc recorded in January this year, the highest in more than a decade. Chinese Prime Minister, Wen Jiabo, declared that fighting the scourge of inflation is “a top priority” for his government.

His country is simply one of the 37 across the world that suffered from food crises beginning December 27; 20 of them have enforced various degrees of price controls.

The response from the Revolutionary Democrats in power in Ethiopia in fighting inflation is mixed, in the same way that they have a mixed-bag of policies on various issues stretching from building “white capitalism” to forming a “developmental state”.

Prime Minister Meles Zenawi is fond of achieving growth modelled along Taiwan (double digit growth and single digit inflation) as opposed to the South Korean scenario he is confronted with – double digit growth eaten up by double digit inflation, according to his own assertion at Parliament.

There are causes for inflation he can do much about and those he is helpless against. He has little influence over imported inflation through commodities the country buys such as fuel, cooking oil, fertilizer and chemicals on which its thriving industry so much depends. The only way his administration could respond is by enhancing the country’s revenues from export.

Locally, there is a list of measures it could take and it does, as much as those it does not.

For instance, it appears a sensible move on this administration’s part to take fiscal measures in lifting various forms of taxes on imports of commodities such as cooking oil, sugar and soaps. Although this could cost the federal government up to half a billion Birr in revenue a year, that is an amount with an indirect impact in enhancing the purchasing power of the consumer community.  

Encouraging the emergence of self initiated consumer groups that lobby for their rights and pressurising businesses not only to bring prices down but also provide a deserving quality product and services is also a wise decision, although very late.

It is hard to say as much about its desire to employ an inefficient state distribution company in order to channel these commodities to the cooperatives and through other group of buyers. Such is a policy subscribed by a heavy handed state, at the expense of distorting the market, sometimes creating artificial shortages as a result of the incompetence of those trusted by the state, if not because of their favouritism and corrupt practices.

Sorting out the imbalances in the market, with its populist allegation of businesses taking advantage of the inefficient market infrastructure, seems where the government has it all wrong. There appears to exist irresistible temptation to confuse hoarding items to a degree that distorts prices or the functions of cartel, and the legitimate conduct of businesses in order to speculate.

As a result, there emerges a climate of business bashing in the air, partly blaming “greedy” businesses for escalating prices. The Prime Minister’s strong emphasis in Parliament did little to make a distinction between “the lawful majority” and “the few illegitimate operators” in stopping a populist mood of pointing fingers at businesses. 

The federal government has now created yet another taskforce whose members are required to go around towns and witch-hunt for those who sell items for “more than a reasonable amount”. Minister of Trade and Industry Girma Birru said the government has a trade practice law, legislated in 2003, which allows Council of Ministers to go to the extent of imposing prices on basic commodities, should it find it appropriate.

Having a piece of legislation is hardly enough to fix what goes wrong in the market. Neither does the state need an additional bureaucracy to discipline the market because for too long its existing agencies have failed - perhaps miserably - in protecting the consumer public on quality, measurement and public health issues. It would have been less costly and more effective if the government were to put its weight behind the effort to make the standard and quality, authority as well as various regional health bureaus, do the monitoring and inspection works they are created for.

Should people think the newly formed taskforce is a short-lived desperate attempt by the state, they should hardly be blamed for this because in the past such efforts did not last long. They only created a temporary fuss, before they went astray.

To be honest, business bashing is meaningless in practical terms; naturally, they are there to profit whatever the market affords to give and is willing to pay. So long as they do operate within the bounds of the law, prices should be left to the wonders of the market that determines prices on the basis of demand and supply. This is not to say that practices that distort the market, robbing it of its competitive nature through monopoly and cartel, should not be addressed by the state. In fact, that should be the preoccupation of the state, writing laws to avoid such practices and effectively enforcing them - consistently and uniformly.

The state should use other instruments under its disposal in its bid to fight inflation. It could effectively utilize the right fiscal policies in order to bring development that boosts income and enhance social welfare, an area where this administration has reasonable success.

The shortcomings is always evident in the monetary policy front which the administration of Prime Minister Meles is often reluctant to take, and very slow when it does. It has a central bank that is hardly autonomous from the whims of the powerful executive, snail-paced in its policy responses, and shy of market forces which seek signals to make their respective decisions. It seems it is devoid of its natural job: fighting inflation.

Take, for instance, the interest rate on deposits that was adjusted by a percentage point last June, after remaining at three per cent for several years. It is a rate stranger to the concept of movement according to how much inflation is going up and down. In an economy where inflation is in double digit and real interest rate on lending is negative - as the Prime Minister once admitted - reluctance to compensate the huge number of depositors discourages national savings.

More importantly, though, it makes people feel that here is a country where the effect of Robin Hood is in reverse. It is as if the system takes money away from the majority that saves from its meagre income only to pay a few borrowers who repay at a discounted rate. Perhaps the government would do well to itself and the economy if it were to focus on such macro policy issues.