Crony Capitalism Through the “Developmental State” Model of Ethiopia: An Identification of its Main Manifestations

Alemayehu Geda ()
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Alemayehu Geda: Addis Abeba University

No 1634, Working Papers from Economic Research Forum

Abstract: Ethiopia adopted the ‘developmental state model’ in early 2000. This strategy was in force until 2018, successfully registering high GDP growth and infrastructural development. This success was accompanied by several adverse developments that included high indebtedness, monetization of fiscal deficit, inflation, shortage of foreign exchange, and significant depreciation that opened opportunities for cronyism. It didn’t bring structural transformation and significant poverty reduction either. This study aims to understand the general pattern of cronyism through its various manifestations by categorizing all firms in the country into six categories and mapping the crony relation they established with the government. The analysis reveals the pervasive nature of cronyism and the vital role of the developmental state model in cronyism. These features, combined with the ethnic form the regime took, made the development strategy unsustainability as the political system inherently leads to more conflict among the political elites that are contesting for power and resource control. The latter led to political instability that culminated in the devastating war in the Tigray region between 2020-222, as the regime was undemocratic, a beneficiary of the system and a minority group to build a peaceful power-sharing system for all political elites of the country, as that will undermine its power

Pages: 41
Date: 2023-04-20, Revised 2023-04-20
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