Ethiopia’s Economic Challenges: Understanding Why It Hasn’t Achieved Sustainable Development Despite Its Long History

There is a notion by some people that Ethiopia has maintained its freedom for a long time now that is why it’s considered to be among the few countries in Africa which were not fully controlled by foreigners. After the second duality- Ethiopian war, Italy occupied Ethiopia between 1936 and 1941, however, for the most part, it remained uncolonized during the scramble for Africa in Europe. Moreover, Ethiopia’s contact with Mediterranean can be traced back centuries ago when it was involved in ancient trade between Africa and the rest of world especially during Aksumite Empire era (100-940 AD). In spite of being free for long; Ethiopia economy today s though not developed sustainably. The nation is ranked among the poorest worldwide and experiences huge problems in its efforts to fight poverty, improve infrastructure as well as industrialization.

This article intends to explain reasons underlying Ethiopia’s continuous underdevelopment in economics as: geographical constraints, past political centralized systems leading to conflicts, and wrong economic strategies.

1. Geographical Constraints and Environmental Conditions

The primary factor behind Ethiopia’s slow economic growth is its challenging geography and environmental conditions. Despite being endowed with abundant natural resources, such as arable land, Ethiopia’s options for agricultural and economic diversification have been hindered by several factors.

a. Landlocked Status

In 1993, Ethiopia became a landlocked country when Eritrea, previously part of Ethiopia, gained independence, therefore cutting off access to the Red Sea for Ethiopia. For this reason, Ethiopia has been depending on its neighbours, most especially Djibouti, for sea ports. The status of being land locked raises trade costs because goods have to pass through foreign countries before accessing the global markets. This has limited the country’s involvement in international market competition because high transport costs have hampered her effective exporting and industrializing capabilities.

b. Arid and Mountainous Terrain

Ethiopia’s highlands are characterized by mountains, while its lowlands are semi-arid, making it difficult to establish sustainable agricultural or mining systems. Agriculture, which remains the backbone of Ethiopia’s economy, provides livelihoods for more than half of the population. However, it remains largely subsistence-oriented and vulnerable to climate change. Throughout history, droughts and unpredictable rainfall have led to periodic famines in Ethiopia.

Additionally, the highland areas, being far from water sources and difficult to cultivate due to steep land gradients, face agricultural challenges. In the lowland regions, such as the Somali Regional State, desertification has further impacted large-scale farming efforts. As a result, Ethiopia has struggled to build a sustainable agricultural base to boost its economy through increased exports.

c. Limited Natural Resource Exploitation

Even with its abundant minerals and vast hydropower potential, Ethiopia has not been able to take full advantage of these resources. The construction of the Grand Ethiopian Renaissance Dam (GERD) on the Blue Nile River is a giant stride towards exploiting the potential in hydro- power. Unfortunately, the dam is yet to yield any substantial economic benefits owing to political disagreements involving allocation of water among lower riparian countries like Sudan and Egypt. Moreover, mining is less developed here since there has been little interest from investors hence requires more funding for this to happen, even though there are no financial constraints as such at present moment so far other than that we are left behind by time itself thus far.

It is lower mineral exploitation that has kept Ethiopia from diversifying its economy beyond agriculture.

2. Historical Struggles with Political Centralization, Conflict, and Insecurity

Ethiopia’s political history has also played a significant role in its underdevelopment. The country has faced internal conflicts, weak political institutions, and struggles with centralization, all of which have hindered economic growth.

a. Feudalism and Decentralization

One of the most significant attributes of Ethiopia, throughout its existence, was a greatly decentralized feudal system. Considered as the title of the local rulers, Rases were said to have held considerable authority within their regions thereby controlling land and resources. The central authorities at Addis Ababa always had trouble trying to bring these local rulers under their control. This limited progress towards implementing national economic strategies, coordinating infrastructure development or gaining support for modernisation programmes due to weak coordination.

Although Emperor Haile Selassie struggled to centralize power, create social change and modernize the country during his reign between 1930 and 1974, chiefs within different regions always resisted this move. This gave way to the continued existence of feudalism which saw to it that there was no room for any major economic ventures except through subsistence farming.

b. Conflict and Political Instability

Conflicts have also hampered Ethiopia’s economic development. Both internal and external conflicts have occurred in the country’s history stray away resources that should have been used for development. Just in the 20th century, Ethiopia has been involved in numerous conflicts such as Italo-Ethiopian Wars and a civil war that led to the removal of Emperor Haile Selassie in 1974. Consequently, these fights interfered with economic growth by redirecting resources and disrupting commerce activities.

Between 1974 and 1991, following the overthrow of Selassie, Ethiopia was governed by the Derg, a military junta that was Marxist-Leninist in orientation. This brought about economic disasters such as a famine that took place between 1984-1985 as a result of policies imposed by Derge like nationalization of land, forcing people into collective farms among others. Having gone bankrupt when Derg fell from power, Ethiopia continues to suffer up to date.

c. Civil Strife and Recent Conflicts

More recently, the civil war in the Tigray region, which began in late 2020, has had devastating effects on Ethiopia. The conflict has caused widespread displacement and destruction of agricultural land, resulting in a breakdown in food production and worsening food insecurity. Political unrest has also deterred foreign investment, making it difficult for Ethiopia to focus on long-term economic planning.

3. Economic Policy Missteps and Inconsistent Development Strategies

Ethiopia has also struggled with inconsistent and counterproductive economic policies, which have further impeded its development.

a. Marxist Economic Policies under the Derg

During the Derg regime, Ethiopia implemented a command economy based on Marxist-Leninist principles. The government nationalized land, seized private enterprises, and introduced agricultural collectivization. These policies were disastrous, leading to widespread famine and economic collapse. The regime’s tight control over the economy stifled innovation and entrepreneurship, leaving Ethiopia poorly positioned to benefit from global economic trends.

b. State-Led Development under the EPRDF

Following the fall of the Derg in 1991, the Ethiopian People’s Revolutionary Democratic Front (EPRDF) embraced a state-led development model. A lot of money was injected into infrastructure with a focus on road building and power generation. Besides, the idea of setting up industrial parks was born as foreign investments flock in the country. However much these strategies seemed useful at the beginning, they were fought down due to too much control by the state, inefficiency in bureaucracy and corruption. This move made it almost impossible for private individuals to operate freely because government intervention crowded them out resulting into weak private sectors gain traction. On top of that, there have been no adequate human resources or education system which would push forward industrialization efforts.

c. Debt and Foreign Dependency

Ethiopia has accumulated significant debt from borrowing to finance its infrastructure projects. While foreign capital has been essential for growth, there are concerns about whether Ethiopia can sustain this debt. The COVID-19 pandemic has further strained the economy, raising questions about Ethiopia’s ability to manage its liabilities while pursuing growth.

Conclusion

Ethiopia faces economic challenges emanating from geographical constraints, political instability and erratic government policies. Conveniently, Ethiopia has been independent since time immemorial but has not utilized its comparative advantages to ensure constant economic development. This can only be realized through ensuring that there is political tranquility in the country. In addition, the government needs to deal with internal problems in the various sectors so that they can embrace market oriented economic policies. Creating an all-inclusive worth-while economy; Ethiopia’s growth opportunities would be increased and thus people’s lives improved in addition to achieving long-term economic development within the country. However, substantial reforms are required in order to put an end to recurrent conflicts and underdevelopment which affect the nation.