Rising Prices
As usual, the hot topic around concerning what takes place in Ethiopia is “inflation”. It is not a surprise because there are not many places in the world where it is not a worry and in order to contain it there is some work to be done. In the case of Ethiopia, it is not difficult to put a finger on the major problems. Shortage of products that include food items could be one good reason as the price of food items has skyrocketed in the nation’s urban centers. The main reason for that is the archaic production method that is used everywhere in the county, except maybe in construction that includes road building. There it is possible that modern machineries are used. In the agriculture sector where it is going to be more than 30 years since Derg took charge, the advancement that is achieved is close to zero and it is possible to call it a zero sum undertaking. No one is ready to be accountable for it. It is possible to say it is a difficult task, but in reality it is peanuts, simply because what are going to be involved in the production of a bumper agricultural products could be counted on one finger. There is a serious need for machinery so that a large scale production could be introduced that seems to be very foreign in Ethiopia and most part of Africa, whereas in North, South and Central America it was common from years back. Unless there is a large scale production, it does not make sense to use machinery because it will not be worth it economically. That is the only thing missing in the country, as the land and the manpower, including the expertise must be there in plenty or whatever is lacking could be imported, such as fertilizers or it could be manufactured in the country unless somehow everyone feels it is impossible. The rest is doing business as usual and commonsense.
This is not directed at those who are in charge per se on one hand, whereas on the other it is, because that should have been part of their job for all these years. It was their job to intervene when there was a population explosion, it was their job to intervene when many people were succumbing for AIDS, it was and it is their job to come up with ways how to advance the agriculture in the nation, but none of it is accomplished. The unfortunate public was allowed to raise its number to such unsustainable proportion where what might have been needed was education and the distribution of affordable birth controlling mechanisms. Then once the explosion had taken place it is very difficult to fathom why the agricultural production cannot be boosted at the same level by introducing modern farming methods. The suggestion is nothing can be accomplished overnight, but in the last 30 years, at least some percentage of the farmers should have equipped themselves with some machinery. But that obviously would create complication, where it is not going to be economically meaningful because the size of the land they have at their disposal is only fit to use the old method. What they are doing is subsistence farming and it will take some time to involve them at the level we are talking about here.
Those of us who live abroad know that we can get away if we say a 50 acre plot of land is only good for a hobby farming, but the reality is it takes at least that much land to become economically viable by applying modern way of farming, it does not matter where. That might not be possible with the kind of land tenure there is in Ethiopia today, but there has to be some way to get around this problem. We hear people are opening banks or they are building big five star hotels that have international standards, and there are business interest groups in the country that are at each other’s throat because of turf war, but no one had seen that if agriculture is done at a large scale it will be profitable. And it has to be done by bigger entities such as the government or the private sector that can bring the capital, the manpower and the knowhow together. Once we have at least two to three dozens of that kind of big businesses tackling the agricultural problem that is crippling the nation now it could be easy to overcome it, because that kind of problem was nonexistent before the Derg, except when there was a catastrophe, such as drought.
When people hear how much money people have to pay to have simple food items, the question that comes to mind is where is that kind of money going to come from. If the existing government had totally flopped what it will do is it will start flooding the market with money instead of products. When that happens, as everyone who knows basic economics can tell us, too much money would chase too few goods. The price that will be reflected is of that of the fiat money that should not be there and that is another source of inflation that is difficult to get rid of, because the government will have to distribute such money on the monthly basis, until it becomes worthless. It is difficult to tell what the outcome will be, although one possibility is it will take the government down with it. All this for not trying to tackle the agricultural problem in the country where the land is there and all it takes is to come up with an effective way of allocating the available resources. When that is done, even if it could drive some farmers out of their land they could be compensated or relocated. Opening land for the old method of agriculture is also a waste of valuable resources. No new land should be opened unless it is going to be farmed using machinery and it has also to be a large scale farm. Ethiopia has so many friends who want to see that nation doing well and can come up with the resources if there is anyone in the nation that could shoulder the responsibly equitably. But it seems that the tradition in the country needs to be reformed because people are dying because they are resisting change, where problems such as corruption and lack of drive to be industrious are rampant and are a huge obstacles. Or there might even be political motivation for some of the neglects that are becoming costly.
The popular PM who is considered to be knowledgeable is telling the public the economic growth that is attained by subsistent farmers who are using a very old method to feed themselves and the nation. What might pass as interesting is even this very old method is making at least some of the farmers rich even if it is not eradicating the persisting shortage of food, because there are some stories about a considerable sum of money was either devoured by rats or cows. What this shows is it is possible that the farmers could be hoarding the fiat money because there is not much they can do with it. They cannot go out and rent or buy more land so that it will be worth their while to go and borrow money from a bank to buy or lease a tractor, simply because the land is not there, and they can get the optimum return from their small plot of land using the old method.
Therefore, when we look at the problem it is coming to a head simply because everyone is talking about inflation and if there had been a change recently it was the local election where the government in office is winning whether the vote is rigged or not. The interest of the outside world is also waning although it might be rekindled when the main election comes around. Till then the government and those private sector players with the money cannot sit back and see these poorly equipped farmers struggle to feed 80 million people, because they can never do it. This means the mistake had been done when those in charge sat back and saw when the population exploded to such unacceptable level, but this time they cannot afford to sit back and see the public starve. If we are going to talk election the first thing on the agenda should be solving the existing problem in the country, where what the nation most needs is agricultural developments more than anything else. What is taking place in the nation currently is also important, but it has to continue at the level it is now and the focus should shift to advancing agriculture that could be a source of many things, including jobs, wealth, investment, and of course the lifeline of the overall nation, especially those who are living in the urban set up.
Another interesting current occurrence is food price is going up everywhere, the reason being crops are no longer limited for consumption only, as they have become a source of fuel since ethanol has started to be used. What this means is the world farmers would soon find it difficult to feed the world if the use of ethanol is allowed to continue as it is. Nevertheless, as we know it that could change with a stroke of a pen, but until that happens it is difficult to say how could the farmers are sleeping at night knowing that what they are producing is gaining in value around the world and what they need to do to share in that fortune is to grow more. That alone could drag the nation out of some of the problem it is in.
One other worthy happening to mention is outsiders are saying that still the food price is cheap in the country and that is a very distorted outlook. What that means is the government and other businesses are going to be pressured to raise the pay of their employees using the fiat money and the outcome is the same. Because it does not make sense to inflate the price of goods simply because the same goods would end up costing more money and if it is looked at it is another zero sum game, although, obviously, economist would frown upon such outlook. Therefore, the 10 percent growth the officials are fond of telling us should make many people uncomfortable, because they are the outcome of an archaic farming system that is gaining some advancement by opening new lands that is resulting in the destruction of natural forests. In addition, the ramification of such actions are not worth pursuing when compared to what they are availing to the country.
This is not directed at those who are in charge per se on one hand, whereas on the other it is, because that should have been part of their job for all these years. It was their job to intervene when there was a population explosion, it was their job to intervene when many people were succumbing for AIDS, it was and it is their job to come up with ways how to advance the agriculture in the nation, but none of it is accomplished. The unfortunate public was allowed to raise its number to such unsustainable proportion where what might have been needed was education and the distribution of affordable birth controlling mechanisms. Then once the explosion had taken place it is very difficult to fathom why the agricultural production cannot be boosted at the same level by introducing modern farming methods. The suggestion is nothing can be accomplished overnight, but in the last 30 years, at least some percentage of the farmers should have equipped themselves with some machinery. But that obviously would create complication, where it is not going to be economically meaningful because the size of the land they have at their disposal is only fit to use the old method. What they are doing is subsistence farming and it will take some time to involve them at the level we are talking about here.
Those of us who live abroad know that we can get away if we say a 50 acre plot of land is only good for a hobby farming, but the reality is it takes at least that much land to become economically viable by applying modern way of farming, it does not matter where. That might not be possible with the kind of land tenure there is in Ethiopia today, but there has to be some way to get around this problem. We hear people are opening banks or they are building big five star hotels that have international standards, and there are business interest groups in the country that are at each other’s throat because of turf war, but no one had seen that if agriculture is done at a large scale it will be profitable. And it has to be done by bigger entities such as the government or the private sector that can bring the capital, the manpower and the knowhow together. Once we have at least two to three dozens of that kind of big businesses tackling the agricultural problem that is crippling the nation now it could be easy to overcome it, because that kind of problem was nonexistent before the Derg, except when there was a catastrophe, such as drought.
When people hear how much money people have to pay to have simple food items, the question that comes to mind is where is that kind of money going to come from. If the existing government had totally flopped what it will do is it will start flooding the market with money instead of products. When that happens, as everyone who knows basic economics can tell us, too much money would chase too few goods. The price that will be reflected is of that of the fiat money that should not be there and that is another source of inflation that is difficult to get rid of, because the government will have to distribute such money on the monthly basis, until it becomes worthless. It is difficult to tell what the outcome will be, although one possibility is it will take the government down with it. All this for not trying to tackle the agricultural problem in the country where the land is there and all it takes is to come up with an effective way of allocating the available resources. When that is done, even if it could drive some farmers out of their land they could be compensated or relocated. Opening land for the old method of agriculture is also a waste of valuable resources. No new land should be opened unless it is going to be farmed using machinery and it has also to be a large scale farm. Ethiopia has so many friends who want to see that nation doing well and can come up with the resources if there is anyone in the nation that could shoulder the responsibly equitably. But it seems that the tradition in the country needs to be reformed because people are dying because they are resisting change, where problems such as corruption and lack of drive to be industrious are rampant and are a huge obstacles. Or there might even be political motivation for some of the neglects that are becoming costly.
The popular PM who is considered to be knowledgeable is telling the public the economic growth that is attained by subsistent farmers who are using a very old method to feed themselves and the nation. What might pass as interesting is even this very old method is making at least some of the farmers rich even if it is not eradicating the persisting shortage of food, because there are some stories about a considerable sum of money was either devoured by rats or cows. What this shows is it is possible that the farmers could be hoarding the fiat money because there is not much they can do with it. They cannot go out and rent or buy more land so that it will be worth their while to go and borrow money from a bank to buy or lease a tractor, simply because the land is not there, and they can get the optimum return from their small plot of land using the old method.
Therefore, when we look at the problem it is coming to a head simply because everyone is talking about inflation and if there had been a change recently it was the local election where the government in office is winning whether the vote is rigged or not. The interest of the outside world is also waning although it might be rekindled when the main election comes around. Till then the government and those private sector players with the money cannot sit back and see these poorly equipped farmers struggle to feed 80 million people, because they can never do it. This means the mistake had been done when those in charge sat back and saw when the population exploded to such unacceptable level, but this time they cannot afford to sit back and see the public starve. If we are going to talk election the first thing on the agenda should be solving the existing problem in the country, where what the nation most needs is agricultural developments more than anything else. What is taking place in the nation currently is also important, but it has to continue at the level it is now and the focus should shift to advancing agriculture that could be a source of many things, including jobs, wealth, investment, and of course the lifeline of the overall nation, especially those who are living in the urban set up.
Another interesting current occurrence is food price is going up everywhere, the reason being crops are no longer limited for consumption only, as they have become a source of fuel since ethanol has started to be used. What this means is the world farmers would soon find it difficult to feed the world if the use of ethanol is allowed to continue as it is. Nevertheless, as we know it that could change with a stroke of a pen, but until that happens it is difficult to say how could the farmers are sleeping at night knowing that what they are producing is gaining in value around the world and what they need to do to share in that fortune is to grow more. That alone could drag the nation out of some of the problem it is in.
One other worthy happening to mention is outsiders are saying that still the food price is cheap in the country and that is a very distorted outlook. What that means is the government and other businesses are going to be pressured to raise the pay of their employees using the fiat money and the outcome is the same. Because it does not make sense to inflate the price of goods simply because the same goods would end up costing more money and if it is looked at it is another zero sum game, although, obviously, economist would frown upon such outlook. Therefore, the 10 percent growth the officials are fond of telling us should make many people uncomfortable, because they are the outcome of an archaic farming system that is gaining some advancement by opening new lands that is resulting in the destruction of natural forests. In addition, the ramification of such actions are not worth pursuing when compared to what they are availing to the country.
posted by Ethio-Probe @ 2:56 PM
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