By Berhane Woldu,
ERITREA’s economic development strategy is no different than what the USA and Europe did in their early development strategy and ongoing regulated market economy. They were protectionist with government directed economy and huge subsides. Ann Markusen, in Dismantling the Cold War Economy, talks about the excesses of the Pentagon system and the new global economy.
The US policy on industry like all industrial western countries is based on the assumption that private enterprise can survive only if there is extensive government intervention.
Government needs to regulate disorderly market systems, protect private capital from destructive effects of the market system and to organize a public subsidy for targeting advanced sectors of industry.
In Europe major companies and finical institutions are owned by the governments and no “free market exists.” Adam Smith describes “The Invisible Hand” as the market regulator.
In the USA, to some extent, free market do exist and government doesn’t own businesses. Nonetheless, Pentagon system is one that the US government directs the US private economy with, provide subside to major corporations, provide a state-guaranteed market for excess product, and assist advanced industries for development. Major sector of the economic players has relied on this kind of government assistance and involvement. The current recovery is sluggish due to the US’s administration hasn’t been able to resort to increased military industry spending which has a multiplier effect pumping mechanism of economic stimulation. Bill Clinton’s $750 billion public money to develop fighter’s jet to Lockheed Martin and Boeing who weren’t the traditional manufacturers of fighter jet aerospace is one of the best example of government subside to a thriving company that makes millions of dollars for its shareholders; transfer of wealth from the public to the few rich.
Fast economic growth after World War II was due to US intervention in the approximating of “The Marshal Plan”. The auto, steel, and semiconductor industry wouldn’t be where they are today had it not been the result of government subsidy. Industrial-military complex with a major military production, research and development is a major public funded private industry. This is where the rich, powerful and lobbyist decide where public tax money is spent. The Regan administration poured money into advanced technology and had the highest tariffs. The western democracy spends an enormous amount of money to stimulate the economy.
In 1950, the National Defense Highway System in the USA was a major social engineering projects which shifted from public transport to automobiles and trucks. American elected officials have poured in billions of tax payers’ dollars into the new cutting age technology, biology-based industry and commerce. Biotechnology, genetics engineering, seed and drug design are huge growth industry with enormous profits to their share holders. Barrack Obama’s administration spent trillions of tax payers’ dollars to save the financial billionaires. Consequently, the US government is the biggest investor in the world’s largest economy and had made sure that the American economy dictates the world economic order.
The bright and educated elite of the American education system have served their country well. They have built the country from an English colony to the world’s greatest power in less than 300 years. I see no wrong if the Eritrean bright and educated who were in fact educated in Europe and America does copy the American economic development system. After all it’s what they learned.
Like the USA, in Eritrea today the biggest investor is the Government. Eritrea’s economy started from zero with none functional industry, poor infrastructure, poor educational system, and with minimal health services. There was no economic activity. In May 1991, the government started to revive the economy by investing billions of dollars and was the main sources of capital. Major industries are owned by the government such as agro-industry, cement factory, electricity and Airlines. There are also semi-governmental corporations like telecommunication, transportation, and Insurance companies. There are also private manufacturing companies like Dolce Vita, Eritrean cotton, Soap and industrial material companies, Dairy and poultry farm and export- import companies. Private mining companies have heavily invested in Eritrea in conjunction with Eritrean Mining Cooperation. Individual entrepreneurs in service sectors are major players of Eritrea’s economy. Like Europe the major finical corporations are owned by the government those that were tried as private entity didn’t last long; case in point was the “Awgaro bank.”
In managing of the national wealth the government plays an active role in securing the right of the people to share the national wealth and securing the best value for its mineral wealth by administrative national laws that have been put in place.
The Eritrean government has also formed several construction companies with a cost of billions of dollars in-order to expedite the national development program. These construction companies have played a major role in national development by building dams, schools, hospitals, and water supply systems; have minimized the cost and help transfer of skill.
Like the US Marshall Plan during the great depression and the end of World War II, the Eritrean government has devised a national strategic plan for food security, social justice programs and industrialization.
Hence, it has put its human and capital resources into action have attained food security, major social justice programs have improved enormously and are now marching towards industrialization.
The Eritrean government, like the US, is subsidizing the major cooperation, awarding them major government contracts and incorporating industries.
Eritrea’s leaders do what the Western countries did rather than what the IMF or World Bank tells them to do.
In summation one can conclude that what Eritrea has done is nothing out of the ordinary rather copied the right economic development strategies and policies from the great economic achiever the USA. To call it anything more than a choice of economic development is unfair, unpatriotic and divergence from the truth. This is no socialism but market driven economy with government subsides just like that of the USA.