Editor’s note : views expressed in the article reflects the views of the writer and may not necessarily reflect the views of borkena.com
Yonas Biru, PhD
Last updated January 21, 2023 at 6:52 P.M. Toronto Time
First, let me clear one point. Addis Media has a 13-minute video clip supporting the appointment of Mamo Mihretu as the Governor of the Ethiopian Central Bank (ECB). In it, it reported “Dr. Yonas Biru, who has been criticizing the Ethiopian government’s economic performance, has expressed support for the appointment of Mamo Mihretu with enthusiasm and optimism. He called the appointment the right decision.” This is simply not true. Neither in public nor in private have I supported the appointment.
There is a chorus of voice – each distinct unto itself but shares a general sentiment – expressing concern, bewilderment and even anguish, regarding Mamo’s appointment. Some raised his lack of experience and subject matter expertise to head the Central Bank at a time of economic turmoil. Others saw his prior professional association with the World Bank as a liability.
Those who supported his appointment summon his master’s degree from the Kennedy School of Government at Harvard and his work experience at the World Bank as qualifying pedigrees. One of the argument Addis Media presented is Jerome Powell, Chair of the US Fed. Powell holds bachelor’s degree in political science (Princeton University) and Law degree (Georgetown University). The argument is that one does not really need training in economics or sound experience to be Chair of the Fed or Governor of a National Central Bank.
What Addis Media and others who hold similar views miss is that Powell had extensive economic and finance background. He had served as an assistant secretary and as undersecretary of the U.S. Department of the Treasury. As a lawyer his experience was investment banking. he was also the head of a top private equity and asset management firm. His lifelong experience qualifies him for the job.
The immediate past chair of the Federal Reserve was Janet Yellen. She holds PhD in economics from Yale University. She was professor of economics at Harvard and London School of Economics. She was also the Eugene E. and Catherine M. Trefethen Professor of Business and Professor of Economics at the Haas School of Business and the University of California, Berkeley.
The Chair before her was Ben Bernanke. He was tenured professor at Princeton University and chaired the department of economics. He is also the winner of the 2022 Nobel Memorial Prize in Economic Sciences. The Fed, as Central Banks, is a critical position. It requires not only deep economic and financial knowledge but also cerebral professionalism to maintain the integrity and independence of the institution from political seduction to the extent possible.
No question that Mamo has an impressive background. He graduated from law school top of his class. He has worked in the World’s premier international economic agency and holds a graduate degree from Harvard in public policy. For me there are three reasons why his appointment concerns and worries me and why the Parliament should not approve his nomination.
First, Mamo is in the close circle of the PM’s management team. He is part of the government and a member of the Parliament, representing the PM’s Prosperity Party. The governor of the central bank should be independent. This is what is critical for the economy. This is a common practice in the world. The ECB, like the Ethiopian Human Rights Commission, needs to be completely independent of the governing party. Mamo’s appointment violates this cardinal rule. For this reason alone, the Parliament must not approve it.
Second, I do not believe he has sufficient experience in macro economics and finance to lead the ECB during a time of turmoil.
A third and less important point is that not even a year ago, the Prime Minister appointed Mamo to serve as the head of the nation’s sovereign wealth fund. This was a new institution with enormous responsibility of national significance. One would think it takes at least a year to warm up to the position and figure out the contours and kernels of all the moving parts of the new institution.
Not long ago, the Prime Minister was lecturing his subordinates about the five steps of team building, noting:
Stage 1: Forming – Develop the team to meet the objectives of the institution
Stage 2: Storming – Deal with emerging problems and adjust expectations and goals
Stage 3: Norming – Teams jell up together to work in harmony and increase productivity
Stage 4: Performing – Team becomes greater than the sum of its parts
Stage 5: Termination – Time for reform and reset as needed as the nation’s environment changes
If one is a good student of the PM’s lecture, it becomes clear that Mamo was hovering between stage 2 and 3 at best. The PM is moving him to a new position before his current institution reaches stage 4 – performing. At worst he is hovering between stages 1 and 2 and is leaving the institution before the norming stage, which is the most important part for a new institution.
No matter how one slices and dices it, it was not a prudent decision, to say the least.
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The author is right. A governor even though a lawyer must be indepdende from the government decision making process. The former governor of Tanzania who resigned last year after serving 5 years which is the limit in Tanzania was a professor of law with experciences in banking, and did as a principal investigtor for the central bank of Tanzania reform. The late president was impressed by his report and then appointed him to the lead the bank who did a great job. The professor was in mid 60th with vast experiences in law, finance and investement. The newly appointed the Ethi governor of central bank has neither experiences nor extensively worked with macro economics. At the same time he has the most neoliberal attitude to management attitude which is aligned to IMF and WB, and can’t be a neutral person regarding management of the countrys economy with is running with high inflation. IMF medicine prescription for Ethiopia is a disaster for the poor and marginalized people. SAP has misarably faield in most African, Asian and Latin American countries. Ethiopia should fight corruption and it is our turn to eat mentality which was intensfiy during the TPLF rule that made the country poor economic performance with the worst corrupt and cronies capitialism in the country’s hisotry. Why is the PP repeating the same blunder made by these corrupt Tigray elites and rulers? Ethiopia must move to transformative green and ciruclar based economy aligned to agriculaure and agro-industrial development. Forget about infrasturcture and fight corruption by PP cadres, and strenght weak capacity and capability of insitutions, and promote indepedent thinkers and intellectuals to manange the governance of economy, legal, education, politic, social, art and other systems.
The author is right. A governor even though a lawyer must be independent from the government decision making process. The former governor of Tanzania who resigned last year after serving 5 years which is the limit in Tanzania was a professor of law with experiences in banking, and did as a principal investigator for the central bank of Tanzania reform. The late president was impressed by his report and then appointed him to the lead the bank who did a great job. The professor was in mid-60th with vast experiences in law, finance and investment. The Kenyan bank governor who is a catholic priest is a neutral person and a brilliant economist. The newly appointed the Ethiopia governor of central bank has neither experiences nor extensively worked with macroeconomics. At the same time, he has the most neoliberal attitude to macro management attitude which is aligned to IMF and WB, and can’t be a neutral person regarding management of the country’s economy with is running with high inflation. IMF medicine prescription for Ethiopia is a disaster for the poor and will be marginalized people. SAP has miserably failed in most African, Asian and Latin American countries. Ethiopia should fight corruption and it is our turn to eat mentality which was intensify during the TPLF rule that made the country poor economic performance with the worst corrupt and cronies capitalism development in the country’s history. Why is the PP repeating the same blunder made by these corrupt Tigray elites and rulers? Ethiopia must move to transformative green and circular based economy aligned to agriculture and agro-industrial development. Learning from Latino America is crucial of Ethiopia’s peoples centered development. Forget about infrastructure and fight corruption by PP cadres, and strength weak capacity and capability of institutions, and promote independent thinkers and intellectuals to manage the governance of economy, legal, education, politic, social, art and other systems.
The second comment is the edited and correct one!!!
Regards,
Let’s not be too quick to dismiss this appointment. If the PM is willing to build a new team of well trained technocrats that focus on generating technical solutions in their respective fields of expertise, if Abiy abandons these political cadre appointments of the past five years and returns to the original theme of his very first appearance on the political arena for GENUINE REFORM, KUDOS to Abiy, and many once again will wish him success and best of luck.
The nation has had myriads of problems unnecessarily politicized, ethnicized and pulverized by demagoguery for far too long. The building of a technocratic administrative workforce that generates data driven policies can provide the necessary change in course Ethiopia desperately needs.
Back to the appointment, if the new appointee builds a core team of technocrats with subject matter expertise, and the Abiy regime, gives the latitude and independence for policy drafting, free from political interference and back stage arm twisting, it might be acceptable. So as the adage goes, one need not “let the perfect be the enemy of the good”, if the direction for the nation can be shown with some certainty pointing to true North.
This was mentioned in this article regarding the professional background of the H.E. Mamo bin Mihretu appointed to manage the national bank. It goes ‘He had served as an assistant secretary and as undersecretary of the U.S. Department of the Treasury. As a lawyer his experience was investment banking. He was also the head of a top private equity and asset management firm. His lifelong experience qualifies him for the job.’ That sounds enough qualification to me. Let’s wish this well read young man the best in his pressure cooker job. God speed sir!!!
It is high time for Ethiopia to establish the equivalent of the CBO, Congressional Budget Office. Such an independent body can be constructed with the following fundamental principles and goals:
1) it will be a strictly nonpartisan and non political entity.
2) its will constitute a team of well trained economists, budget analysts, statisticians etc.
3) it will analyze and score or rate the major policies drafted by a given Ethiopian regime/ parliament in a given fiscal year
4) its scores will be available to the public, uninterrupted by any interference from any branches of the government
5) its team members will be strictly chosen on professional competence, experience , education and training
6) it will not be involved in any policy making decisions as its sole purpose is to evaluate the impact of a given policy drafted on the Ethiopian economy (cost to the public, deficit, etc).
As usual, the clarity of thought in Dr. Yonas helps to crystalize the valid objections against this appointment, and I believe he has made a very powerful case against the appointment within such short article!
Yes, NBE is not yet a legally independent institution (it isn’t empowered by law to make Monetary Policy[MP] independently) and the role & functions of MP is largely accommodative to the fiscal & financial policies of the MoF. But it is still a very crucial & technocratic economic policy institution and it needs to be headed by a person with sufficient Macro-financial expertise. Besides, ETH, just as Rwanda did recently, will soon need to modernize MP making by moving away from monetary targeting(reserve setting) and adopting price-base(interest setting) monetary policy framework which will requires sophisticated system of analysis, forecasting & policy setting – all the more reason why NBE will need a capable macroeconomist as a leader now more than ever before!
But, besides getting the technical requirement wrong, what troubles me most about this appointment is what it says about the inner circle & inner working of the government. The excessive reliance on a few inner circle of advisors and unwillingness to listen to outside supporters & constructive criticism is not just a problem in economic policy making. The country paid a heavy price in its foreign & diplomatic relations as a result of this closed thinking- talk about epistemic closure!
The empirical evidence about the ‘Ethiopia’s 3,000 years of shame’ is getting more confirmation from this article. No one seems to go deeper and try to at least question the validity and/or ownership of “Addis Media”, a purported source mentioned in the first paragraph of this article which purportedly quoted the author. I will come back to this latter.
First: about the curriculum vitae of candidates for the post of Governor of the National Bank. To my mind, the chosen candidate has the training and experience to lead the central bank. He is young, and has both personal and professional stakes in how the economy would perform, which is by itself vital incentive to succeed in the post. I share his commitment to private sector to be the driver of economic growth and development, and disengagement of the public sector from direct ownership of the means of production and commerce. Bureaucrats are totally incapable of managing any economy (China is an exception), but rather are good in driving the economy to the ground.
Second: the American experience is totally irrelevant in the selection of Ethiopia’s managers in any field. Trying to tie the two shows weaknesses and/or lack of own judgement skills. Aping anything foreign is monkey business, not a sign of ‘professional sophistication and/or excellence’.
When I searched Addis Media Network” in the Internet, I found its location to be in Silver Spring, MD; the same location where the author resides. Coincidence? Imagine also the possibility of same author participating in the comments section on articles authored by him, under assumed names. Readers should stop and think twice before jumping on the bandwagon of news/opinions posted on social media to avoid from being swindled big time.
Totally unwarranted & unrelated criticism of the article. First, the author didn’t raise objections about the general CV/competency of the appointee and never had a problem with his commitment to private-sector-led development. Second, the author raised the American experience to respond to supporters of this appointment who argued (rather foolishly, I believe) that the U.S Fed chairman is a lawyer(no, he was more like an Investment banker). Lastly, I really don’t see your point about AMN. I thought AMN is owned by Addis City? In any case, this is rather a weird point to make!
Tiglunmy,
I share your remarks about the possibility of Dr. Yonas’ s dishonesty. Over the past couple years he has tried every trick in the book to present himself indispensable to Abiy Admin. He got rejected and the first thing he did was to make public what was discussed in confidence. When all failed he brought out his true color. He started psychoanalyzing Abiy and prophesying his doom. He is a right-wing conservative. Anyone who contradicted him was qorqoro denqoro qoreqonda, etc. This is a mid-to-late 60-year old acting this way. Yes, he is smart and well-trained, unlike the many half-educated phds. Problem is he is too self-conscious. Of all puzzling things is his unrelenting accusations of Prof Al Mariam.
Be carefully what you wish for! Championing for the greedy neoliberalism economics and capitulation to the financial predatory institution entities of the West like the IMF and the WB is grave mistake. They are there to make tons of money plus spawning vise of curruption in public and public sectors, but not the vise verse. Dealing with them needs extreme caution and expertise. They never helped a poor nation out of poverty in the last 5 decades and won’t do now. Zero chance . It always ends up with same story: disastrous national bankruptcy, exploitation scheme and socio-economic collapse of many countries. Their technical economic jargons like ” economic austerity measures”, ” the holy grail of privatization scheme ” is to control the public assets , ” structural adjustment “, fiscal responsibility, ” and so on are just marketing genius and PR”s offense. They have been discredited time and again as their track record in everywhere shows. So an alumnus of theirs or someone who closely associated or immersed in their institutional group-thing without filter is not necessarily reliable
Reply
But we don’t know whether the appointee espouses a neoliberal economic doctrine- In fact, we know next to nothing about his stance on major macro policy issues! Just because the person worked at WB as a mid-level professional we can’t logically conclude he shares whatever econ doctrine his employer suppose to promote!
What I liked about this article is that, unlike most media discussions about this appointment, it didn’t engage in unhinged talk about a neoliberal conspiracy theory to make its case against the appointment. It only presented a valid objection to the appointment based on facts & logic and the gov would be foolish not to take these objections seriously!
The Fallacy of Foreign Aid as
Print
By Teketel Haile-Mariam
Addis Tribune
October 4, 2002
The World Bank and International Monetary Fund held their annual meetings in Washington, D.C. this past weekend, and repeated their promises at previous such meetings to make the poor nations of the world more prosperous. And Ethiopia had sent its own delegates to the meetings to plead for more loans. Protesters from across the globe, who believed these institutions had done (and continue to do) more damage than good through their ever increasing loans and misleading policy prescriptions, had also gathered to demonstrate their opposition to the activities of the institutions, which they also believed contributed to environmental degradation (and the changing weather pattern around the globe) and economic rape of the world’s poor.
What roles did the international financial institutions play (and continue to play) in Ethiopia? Did their policy prescriptions and loans have significant and sustainable impact on improving macroeconomic performance and standards of living of ordinary citizens?
Ethiopia had (and continues to have) a history of dependency on foreign assistance, whether that be in the form of food donations, military hardware, or loans for public investment. Although this history applies to all three recent successive regimes, non-military loans contracted by the current government over the last eleven years exceeded similar loans obtained over a span of about sixty years by the two prior regimes combined. And there had been negative correlation between the ever increasing loans and the levels of poverty. As loans increased, the per capita income (brute measure of the level of economic development) had stayed virtually unchanged, poverty had spread and deepened, and even by African standards, Ethiopia had lagged miserably and had become an example of most things wrong in that unfortunate continent, rather than being a symbol of freedom, unity, and prosperity.
Then why borrow more? And why do international lending institutions want to repeatedly extend additional loans (often for the same intended purposes) when previous loans did not have much positive impact?
The most common explanation given by the Ethiopian government to justify more borrowing is a fight against poverty. It usually quotes common statistics on widespread poverty, hunger, diseases, low level of agricultural technology, the AIDS epidemic, high level of unemployment, and such other indicators of a seriously ailing economy, and how foreign loans help in the fight against those ailments. Rarely does the government mention whether or not past loans had generated more benefits than their costs. It also does not mention the recent catastrophic consequences of high external indebtedness in countries with much more powerful economies like Argentina and Brazil, and other states in Latin America and Africa.
There is another less obvious explanation as to why countries like Ethiopia need to borrow more despite the poor records of past loans, which is rooted in inferiority complex. Insecure governments usually consider their relationships with international lending institutions as forms of legitimization of their regimes, and they believe those perceptions would help them prolong their hold on to power. They get opportunities to attend international meetings organized by such institutions to be seen as legitimate members of the international community, and use such forums to lash out at their domestic opponents. They also use the staff of the international institutions to write reports favorable to their policies (similar to recent scandals in the United States securities industry where research analysts have been caught writing favorable but misleading reports on companies in the hope that would give their brokerage firms competitive edges in accessing investment banking businesses with the companies), and use those reports as affirmations of their repressive political and economic policies. We have heard and read this many times before, where the Ethiopian regime proudly stated the approval it had received from international financial institutions (such as the World Bank and International Monetary Fund) about the soundness of its policies of state ownership of land as well as ethnic regionalization under cover of decentralized administration.
The international financial institutions know all too well that they have the upper hand in their dealing with insecure governments (and their employees), and are prepared to capitalize on the insecurity to advance their own agenda; the more insecure a government (and its employees), the better for the lenders. They are interested primarily to lend more for their own survival and to promote exports from the industrialized countries, rather than to help promote the economic development in the borrowing poor countries. They use academic, professional, and intellectual discourse and reports as covers to advance their real and hidden agenda of lending more, often by replicating previous programs under different name designations (such as policy adjustment, structural adjustment, sector adjustment, numerous variations of sub-sector rehabilitations, emergency recovery, emergency demobilization, and multiple variations of same project investment programs across all sectors and sub-sectors under different nomenclatures).
As amply demonstrated in Ethiopia, the long record of borrowing by successive regimes had been ineffective in promoting sustainable development and in alleviating poverty. In fact, the reverse might have been true where more lending had driven the country into deeper poverty. As export earnings from traditional sources (such as coffee) decline, ever increasing shares of those earnings would be used to pay the rising debt services, thus leaving ever diminishing proportions of foreign exchange earnings for economic development (and poverty reduction). To add insult to injury, the loans can be used as instruments of foreign policy, as demonstrated during the Ethio-Eritrean conflict when donors (led by the above mentioned international financial institutions) attempted to withhold their funding as a leverage to get political concessions from Ethiopia. The more the dependency, the more the exposure to international political arm twisting and blackmailing.
The typical and predictable response of the Ethiopian government to the above would be: you are only criticizing us for what we are trying to do, but what alternatives do you have to offer? Here are my suggestions.
The first suggestion concerns principle. The key principle must be that government control of resources and micromanagement of economic activities by the public sector have not worked anywhere in the world, and there are no convincing reasons to believe such a policy framework would work in Ethiopia. Instead, private sector based economic policy framework is a superior prescription for economic success. That key principle must be modified slightly while dealing in international trade, which these days is commonly referred under the general term of globalization.
While recognizing that exports are the key to future economic prosperity (and hence policies should focus on improving the country’s international competitiveness), allowing indiscriminately imports of goods that unfairly kill domestic manufacturers would not be prudent. The most prudent approach should be to first promote competition among domestic producers while protecting them initially from outside competition. As the domestic producers mature, protection can be lifted gradually. All developed economies have used this approach (and are still using it) under cover of “infant industry protection” or some other similar justification. Just see how the domestic textile and leather manufacturers are being decimated by cheap imports from Asia and second hand products from North America and Europe. Of course, the lending institutions would not support protection to be extended to the domestic manufacturers, often at the urging of exporting nations from behind, because that would undermine the market in Ethiopia for such imports.
And the second suggestion concerns fundamental policy measures the government should take to promote rapid economic development and poverty reduction. Without being exhaustive, such policy measures should include:
(a) letting the private sector be the engine of growth,
(b) privatizing all land ownership, including agricultural land, which is the foundation of the economy and a source of employment for about 80 percent of the labor force,
(c) purging all other policies that have been designed to stifle entrepreneurship, such as political parties’ ownerships of businesses and their involvement in commerce,
(d) building strong financial system to promote saving, borrowing and investment. The nucleus for this exists since there are already many private banks which can be used as a base for strengthening the system,
(e) maintaining small groups of highly paid professionals to manage the normal functions of government under a free market environment, and reducing the number of people working as government employees. These managers should contract with the private sector to handle as much as possible of the government’s work,
(f) restructuring the federal system of government to organize regional administrations along geographic rather than ethnic groupings, with strong federal laws to protect the interests of minorities anywhere. This will promote free movements of capital and labor, and exchanges of ideas, as these are essential features of private sector based economy,
(g) strengthening the rule of law to protect civil liberties and private property rights, and to strengthen commercial transactions,
(h) aggressively containing the population explosion, and
(i) making it easier for citizens to manage their own affairs by, for example, eliminating bureaucratic bottlenecks that encourage corruption and taking other small but tangible pro-citizenry actions.
In summary, Ethiopia should proceed with vigorous programs of economic growth (which in due course would also reduce poverty) by harnessing her own resources first, supplementing those with foreign grants to the extent possible rather than with foreign loans. The government should refrain from investment in directly productive activities and engaging in commerce, and leave such undertakings to the private sector. Public investment should focus on improvement of infrastructure that would promote private sector investment and economic growth (such as in telecommunications, power, and transportation) and education. Under no circumstances should foreign loans be used to finance items that have dubious investment merit such as vehicles, studies by foreign “experts”, and any items that can and should be financed using domestic human, material, and financial resources. Local capacity building should be given top priority by giving preferences to domestic rather than foreign consults and contractors, and by strengthening local training institutions rather than sending trainees abroad. If necessary, foreign experts should be contracted to conduct their training in such local institutions rather than sending the trainees abroad since that would be more cost effective, sustainable, and best for building the human resource base.
The above suggestions, if implemented, would surely reduce the need for heavy external borrowing, while at the same time promoting domestic resource mobilization, local capacity building, and the emergence of critical mass of middle class entrepreneurs. The suggestions would also provide a more solid basis for well-anchored, gradual, and sustainable development that would reduce poverty.
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How do you even contemplate that the parliament of Prosperity (i.e., EPRDF – TPLF) Party will have the will and courage to reject an appointment made by the PM? This shows the naivety, if not the infantility, of your thought process. Educated, maybe! Mature, no!
Of course, the author knows parliament is a rubber stamp to the executive branch and I am sure he doesn’t hold any unrealistic expectations. The author is merely engaging parliament as civic engagement and public discourse. Failing to understand this subtle point is rather a sign of civic immaturity!
Assuming Yonas comprehended the fact you stated before he wrote his lengthy essay, I would then call his efforts ‘beating a dead horse’. Looks like the guy doesn’t have anything to do at this time.