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Watching the recent parliamentary
opening session and the question and answer period
with the Prime Minister was interesting though not
as entertaining as in the previous parliament,
wherein notable opposition figures ask challenging
and pointed questions. This time around, watching
parliament reminds an excerpt from George Orwell’s
book, Animal Farm, that features a guy in the corner
yelling the king has no clothes. Analogously, the
Prime Minister’s lone voice was swallowed by the
deafening silence of the majority in the house, who
were passive through the whole session without any
discernible contribution.
The response from the Prime Minister
about the inflation challenge and the International
Monetary Fund’s (IMF) criticism about loose monetary
policy was a vintage point of defensiveness. He went
on to say that “We are not going to cut our foot to
fit into our shoe.”
Ethiopian policy makers might not
have to cut their feet to fit into anything.
However, they neither could know if the diagnosis of
the size of their feet is right. They cannot walk
nor would they be able to run with a loose shoe,
although they could try doing it bare foot.
Inflation is not just an Ethiopian
phenomenon. It is challenging most of the developing
world. Yet, Ethiopian inflation has gone up by
almost 50pc, year on year, and the average wage has
not even caught up to a quarter of that increment.
It is confounding to figure out how
people are coping with these price increases. People
who are affected by the dramatic rise in the last
couple of years are being treated like statistics.
There seems to be no policy change to control the
inflationary pressure and give the public a
breathing room.
Loose monetary policy has
consequences that especially affects people with
fixed income. It is important to have an economic
growth that is anchored with a monetary policy
ensuring stable prices as the poor and the middle
class do not have to pay the heavy burden of losing
their purchasing power with every tick of
inflationary pressure. The Birr has seemingly become
like a pop corn; easily expansive with a little heat
but no discernible weight at all.
It was clear from the outset that
the recent devaluation of Birr by close to 20pc
would have a negative impact on inflation. Rightly,
the spiraling inflation shows the cost of the
devaluation. Easy money turned too heavy for the
average consumer, especially those who live on a
fixed income.
In a supply constrained market, easy
money is chasing after few available goods with an
increasing potential of facilitating hoarding by
both businesses and consumers. Assumptions of
constant price increase have become self-fulfilling
prophecies. Governmental promises of keeping
inflation in single digits have remained pipe dreams
except for one remarkable quarter. As it happened,
it all went flat.
Of course, a certain percentage the
aggregate price rise is imported since the country
does not have sufficient productive capacity to
produce all major consumption goods including food
items that consumers could not go without. But most
of the inflation is caused by monetary policy that
is too loose for its own good.
Targeting inflation rate to a single
digit will be next to impossible unless policy
makers come up with a monetary policy to tame the
rise in price and send a message that they are
serious about controlling it. The excessive material
display of the few should not be misconstrued as
prosperity; the visible deprivation of the many is
an unavoidable fact.
Absence of effective political
opposition is part of the problem. The dominant
party has become unaccountable to anyone including
the general public. It is apparently clear by now
that a system based on neo-patrimonialism will never
let political pluralism flourish to challenge the
status quo either in politics or economics.
In the developed world, politics is
the art of the possible and even when it is
difficult, issues are resolved amicably. Leaders who
broke their promises or unlucky in hard economic
times are thrown out of office through transparent
voting.
However, politics is the art of the
impossible in most African countries. Those who win
are the autocrats with unchecked power. Elections
are mere procedures, wherein great leaders always
win 99pc of the votes.
It is only once in a while, as rare
as Glacial Age, that people get the real power.
Often, autocrats assume the general public is not
the sharpest knife in the drawer, except when
vehemence takes over and cuts through their
authority.
In his book titled, “The Tipping
Point,” Malcolm Gladwell points out that social
changes do not occur gradually. They rather spread
like viral epidemics and change everything when they
happen suddenly. One cannot stop change but at least
can be prepared to soften the blow of its abruptness
that could sweep the good, the bad and the ugly
indiscriminately.
Yet, that can only happen when there
is a political space for the battle of ideas; not
just in appearance but also in reality. |
