JURIST - Dateline: ETHIOPIA: Economic Growth from a Lawyer's Perspective

JURIST Staffer Eric Linge, Pitt Law '10, from Addis Ababa...

The Economics of Ethiopian Growth – from a legal professional’s perspective

Do you have an addiction? Do you even know you have an addiction? As American lawyers, we’re addicted to easy and fast Internet, and our relied-upon webpages are our enablers: Westlaw, Wall Street Journal, New York Times, and every PDF document you want to read. These pages pop up quickly when clicked in the U.S., but in Ethiopia – even at a government ministry with some of the fastest Internet in the country – a lawyer might as well be back to the days of 28.8 Kbps. With all their graphics and frames, these relied-upon webpages are not designed for such slow connections.

With an IMF projected growth rate of 8.4% for 2008, Ethiopia is supposedly the fastest-growing non-oil economy in Africa. But when I’m sitting at my desk, waiting for pages to load and documents to download, I am unable to produce as much in a day as I could in the U.S. And it’s not just me, it’s law students, lawyers, judges, and the entire legal profession, who cannot fully utilize the wealth of legal information held online. And because the government censors webpages that could portray it in a negative light, many local news sites and blogs are unavailable.
Also hampering a day’s work are blackouts. The capital, Addis Ababa, is on a schedule of rolling blackouts where each building has power only four days a week – though government buildings always have power.

The government adamantly maintains a monopoly on the telecommunications sector, which includes all Internet services. Ethiopia’s accession to the WTO could potentially stall as the government refuses to liberalize telecoms. Of course the WTO would argue that liberalizing the sector would improve its service; webpages would load faster. Liberalizing telecoms, however, could see the government forfeiting its ability to censor the Web.

With these impediments to workers’ productivity, can Ethiopia maintain its fast rate of growth? Robert Solow won the 1987 Nobel Prize in economics for his work toward developing the Solow Growth Model, which broadly (and arguably, too simplistically) explains countries’ economic growth by three independent variables: size of labor force, amount of capital invested (into the means of production), and productivity (technology or other factors that aid each worker to produce more output with his or her time).

Eventually a country mobilizes its entire labor force – all able-bodied men and women are working. And eventually so much capital has been invested that to invest more would no longer increase output. In other words, a state of diminishing returns has been reached. So the only variable left to drive economic growth in the long run is productivity.

Witness in the 1990s the United States, a mature economy with a fully mobilized labor force and thoroughly developed means of production. The economy grew at remarkably high rates for a remarkably sustained period of time. Amazing and repeated breakthroughs in information technology allowed each U.S. worker to produce more in his day than he could before he had the technology.

Ethiopia is not a mature economy. It is a least-developed country. It has a large number of able-bodied men and women who are available and anxious to work. It has few factories, and there is capacity and desire for more capital investment. Yet its ineffective Internet connections and rolling blackouts hamper its productivity growth. Ethiopia will continue to grow economically, but as productivity is hampered, so will be its rate of growth.

Productivity could also be improved through the strengthening of contract law. Enforcement and completion of contracts is uneven for Ethiopians and foreign investors alike. But perhaps this is the topic for another Dateline entry.