13 July 2018

Ethiopia: Neoliberalism - Is It Really 'Bad for Ethiopia'?

Many people are quick to criticize the Ethiopian government for its anti-neoliberal policies.

Some see this political persuasion as 'radical left-wing' or 'Marxist', and believe that policies such as price controls are 'dictatorial measures', or, at any rate, bad for the society.

But perhaps they are right?

Has this government got it wrong? Could neoliberalism actually be the answer to many of the country's problems, and adopting it would benefit the society?

Well, before we go any further, it might be worth taking a step back.

First, let us be clear what this 'neoliberalism' actually is.

The government claims that it is 'bad for Ethiopia'. So, what is it exactly?

This economic model was developed in the twentieth century in the US and Europe.

In the 1950s, some economists started promoting it. But it was not until the early 1980s that neoliberal policies started being adopted by governments around the world. It has long become mainstream economic policy, and is taught at universities everywhere.

So, what are the basic principles of neoliberalism?

The most important idea in the neoliberal way of thinking is that the market will, by its 'invisible hand', work to the benefit of the society.

It will generate just prices and wages, it will allow businesses to thrive, it will create job opportunities for those who need them.

Thus, the market must be 'left alone', 'free', so that it can create benefits for all.

In contrast, government intervention is necessarily a bad thing.

The market will work to the benefit of the society, and must not be 'disturbed' by any government policies.

Price controls or regulations are, thus, generally seen as 'bad for the market'.

According to neoliberal thinking, the ideal situation would be a 'free for all': no or very little regulations, lax controls of prices and wages or quality standards.

After all, the 'free market' will 'do its invisible work', to the benefit of the society.

To give an extreme example: If a product is known to be toxic, it should not be banned, because the consumers should make a 'free' choice. If they don't want to buy it, this product will eventually disappear from the shops.

Or: Prices must not be controlled in any way. Traders should decide their prices 'freely'. If people will not buy, then prices will go down 'automatically'.

And so 'the invisible hand' of the market does its work.

That is the theory. But what about the reality?

In the European Union, for example, all governments have adopted neoliberal policies.

This has meant that they have cut social benefits, relaxed regulations (for example, on genetically modified foods), and permit little control (for example, in the housing market or on wages).

In the lives of the people in these societies, these policies have had a dramatic impact.

The poorest in the society have been hit hardest, as austerity measures are implemented, benefits are cut, and prices rise. They are finding it more and more difficult to get by.

Many people have to accept badly-paid, insecure jobs, just to make a living.

Although there is a very vocal part of the society that makes it clear that many people in the EU do not want genetically modified foods or crops laced with pesticides in the shops or on the fields, these products are still available everywhere in the EU.

Rents are also becoming unaffordable for the average citizens, especially in the European capitals.

The governments do not exercise much control, and prices keep rising.

London is a good example for this: landlords can charge exorbitant rents for virtually uninhabitable apartments.

It is not uncommon for people to pay hundreds of pounds (thousands of birr) for a dilapidated, tiny apartment.

Another poignant example is gun regulations in the US.

They are very lax, and it is easy for civilians to buy a firearm.

As a result, there are many incidents of shootings, at schools, clubs, or in the streets, every year. Hundreds of people have died in these shootings.

All this is the result of the neoliberal way of thinking, the 'neoliberal map', as it were.

For a neoliberal economist, these policies will make perfect sense, and the connection of any of these policies to negative societal impacts (whether that is the over-use of pesticides, or school shootings) will not be acknowledged.

But who could blame that economist? They are just following their 'map'. And, as we all know, it is very difficult to think outside the box.

So, if neoliberalism does not benefit the society, then why propose it? Who does benefit from such policies?

The answer should be clear by now: the corporations, big businesses, the industries--that is, the wealthy.

Just take the example of gun control: These lax regulations may be bad for the society, but they are very good for the gun industry.

And, by now, it should have become clear that this applies to virtually all neoliberal policies: bad for the society, good for big business. It is the economic model for the wealthy.

So, next time you want to criticize the government-for controlling prices, or 'too many opaque regulations'-perhaps think again.

Could you just walk into a shop and buy a gun here? Can you buy genetically modified crops from the farmers here, or does the government not allow the planting of such crops? Do the farmers use and over-use pesticides 'freely', or are they admonished not to do so?

If you think the Western governments got it right, and this government must surely have got it wrong, then perhaps this can be a starting point to think again. Because, as far as the anti-neoliberal approach of this government is concerned, it most definitely got that right. It is protecting its citizens, from the influence of big business and its lobbyists.

Neoliberalism is not only 'bad for Ethiopia', but bad for the world.


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