Economic system of 100 million people in Ethiopia



By Tsegaye Tegenu

Why is it so important to discuss this economic system

Since the declaration of a state of emergency in October 2016, there has been too much political discussion about good governance and political power sharing in Ethiopia. The political debate is reaching an all time high, creating a distinct impression of the existence of one world, the political world, which is seen as both the problem and the solution to the challenges facing the country. Groups of opposing political forces are now polarized and have entered an era of political stalemate. The country’s challenges and prospects are seen only through the prism of politics.

In this essay, a modest attempt is made to emphasize the existence of another world, an “economic system of population”, which has its own driving forces, objectives, principles of organization and distribution. This economic system is autonomous existing independently of politicians. Politicians control only 30 percent of the national economy, the rest being an aggregate of the micro-decisions of millions of households in the country. Acknowledging the existence of the population economy as an independent world and scientific knowledge of its special characteristics can certainly change the nature and subject of political debate in the country.

The current political discourse, whatever the ideology, is based on the assumption that politicians know what the people need and that only a party and a leader who are visionary enough to solve the country’s problems are missing. Policy is essential to any policy, but there are different fundamental viewpoints when identifying options and solutions. What is there at the end of a political battlefield? Is it about sharing power, distributing resources and / or improving the performance of the economy? If it is to turn the economy around, then it is necessary to know not only how to use existing resources (political values), but also how the economic system creates new resources (scientific method and evidence).

Ethiopia is the second most populous country in sub-Saharan Africa with a population of 99.4 million, according to World Bank data. According to the most optimistic low fertility scenario, the population size is expected to increase to 137 million by 2037. This is an increase of 38 million people with an average growth rate of 2.2% per year. year. Currently, Ethiopia’s population is growing by around two million people per year.

What does a rapidly growing population mean for the country’s economic performance and people’s quality of life? How well do the county’s economic resources meet the needs and demands of a rapidly growing population in recent decades? If the level of satisfaction of the desired needs is not satisfactory, what are the problems of supply and capacity for growth? Does the economy have the capacity to increase the scale of production and employment at the pace necessary to recover from arrears and readjust to further shortages each year? What are the roles of the private sector and the state in the fight against scarcity and poverty caused by the pressure of rapid population growth? What kind of policies can be designed to improve the performance of economic growth and other components of well-being?

These fundamental questions of the economic system of the population should be discussed by politicians. To start the discussion, in what follows I will try to define the economic system of the population, its size, functioning and performance over the past three decades.

The purpose and size of the economic system of the population

The population economy can be defined in terms of the management of an economy by a part of the rapidly growing population in the country. The objective of the population economy is the reproduction, survival and multiplication of households under conditions of demographic transition, institutional and technological constraints. The economy of the people is not for profit, capital accumulation and investment. This is a characteristic of countries where the population doubles every thirty or twenty-five years. It includes all “unobserved economies” that are not covered by the national accounts.

Since market and state economies are embedded in the economy of the population, it is difficult to know what proportion of GDP is controlled by the economy of the population. Considering the commodity-based account and transaction recorded by the government, private consumption is 65% while government and business / capital investment constitutes 20 and 15% respectively in 2013.

Private consumption, which in this study is considered the economy of the population, constitutes the rural economy on which more than 80 percent of the population depend (see CSA agricultural survey) and the urban informal economy which absorbs about 60%. of the workforce in urban areas. regions (ILO). There are 15.5 million households in rural areas and 5.3 million households in urban areas which are part of the population economy.

Although it is difficult to record rural and urban economic activities in the national accounts, the proof of their importance lies in their ability to support a rapidly growing population in the country. Ethiopia’s population of 100 million is not by miracle or accident. It needs strategies, activities and cooperation among millions of household members.

How does the population economy work?

It is beyond the scope of this article to discuss the level and trends of the production performance of the sectors that make up the population’s economic system: food, employment, basic social services (education and health) and sectors. infrastructure services. On performance analysis research methods and empirical conclusions, see the list of references below. National and international studies show that the economic system of the population is characterized by fragmentation of land, multiple deprivations, a low productivity trap and urbanization induced by migration.

The concept of a population economic system assumes that the effects of population growth exist in the form and pressure of scarcity of inputs, goods and services. This assumption is particularly important for analyzing the functioning and performance of the economy. On condition of doubling the population, in countries where structural transformation is limited, scarcity is not an artificial perception. I don’t see a world of plenty. There is some form of want and need. Scarcity is an essential characteristic of rapid population growth, especially in conditions where there is no technological excess. In the table below, you can see the incidence of deprivation for each sector based on the distribution of urban and rural population.

My hypothesis is that population growth has positive effects on economic growth if there is division of labor and specialization in production and if there is a certain level of technological development. In the absence of these factors, population growth creates a shortage of resources and production. Not only does this lower the standard of living, but rapid population growth will also lead to a higher level of emigration, population losses and economic crashes (see media coverage).

The future: Creative destruction of the economic system of the population

The future should be based on the idea of ​​a creative destruction of the economic system of the population and not on continuous cooperation for further reproduction. Creative destruction, sometimes known as Schumpeter’s gale, is a concept that refers to the destruction or annihilation of the previous economic order and the creation of new wealth by capitalism. In this article, I have used the concept of creative destruction in the sense of annihilating the fragmented economy and replacing it with a growth mechanism that faces the pressure of multiple scarcity. The challenge of the economic system of the population is not to reduce the number through population policy measures. It is a question of destroying the economic system of reproduction by a structural transformation induced by industrialization. The economy of the people should be eliminated as a system. It has no growth mechanism to support a rapidly growing population. By 2050 Ethiopia’s population is expected to reach 174 million to become the 9th largest country in the world (UNFPA, 2011). Already with 100 million people, we have economic crashes, population losses and political unrest. Reducing the number does not replace the growth mechanism. Capitalism, led either by the state or by the private sector, should replace the driving force of the population in the destruction and creation of wealth in society. The economic system must pass from the hands of reproductive households to the hands of the creators of wealth (capitalists and workers). How can this transformation take place in the given context?

The political discussion must focus on the creative destruction of the economic system of the population. Ethnicity, political ideology, distribution of existing resources and issues of power sharing must take a back seat, after discussing the pillars of structural transformation induced by industrialization. Ethiopia is at a crossroads when a better understanding of the challenges and opportunities facing the country requires a mix of politics and science. Political judgment must be informed by economics, the main reason I am writing this article.

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Tsegaye Tegenu, PhD


Department of Social and Economic Geography

Uppsala University

[email protected]



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