On The Need For A New Economic Nomenclature

Abstract

Fully 14 years after it came to power, many observers are unsure about the exact nature of the ideological bases for the economic policies pursued by the government of Ethiopia. It calls its political ideology revolutionary democracy and pronounces its economic policies as market based. Given the tight control it exercises over much of the economy and given the absence of private ownership of land in particular, many observers are quick to point that those self ascribed labels do not accurately characterize the economic policy environment of present day Ethiopia. Some would suggest that the Ethiopian economy is in actuality a centrally directed economy with aspirations of liberalization at some future date. This essay explores how the economic policy environment in Ethiopia compares against the traditional standards of a market system. It reports on the current policy framework and how that framework impacts on the efficiency of the operation of markets in such important regards as attracting adequate quantities of private investment from domestic and foreign sources and efficiently allocating the countrys labor and other critical resources. The essay also explores the extent to which the policy environment protects private property rights and promotes risk taking. The study concludes that the policy framework falls far short of what is normally expected in a free market economy.