What is Missing in Eritrea is Market Freedom, Not Political Freedom

Eritrea need to encourage investment by introducing market freedom and reforms
A democratic climate seems to favour a free market economy. A free market economy appears to be reliant on democracy for its functioning. With only one and non-corrupted political party, Eritrea can continue to survive, yet needs to introduce market reforms to create more private sector jobs.

BY GEORGE F. TESFA

Democracy is a controversial topic, especially for advocates of free market capitalism and the West in general, and rightfully so. What is democratic capitalism? It is a political, economic and social ideology that combines a democratic political system with a free market economy, a system with many opposition political parties and a free press. It is a very appealing system. In fact, it is undeniable that, in the last half century, democratic capitalist systems have been the sole economic growth engine for both developed and emerging countries.



However, understandings of this political and economic system often fail to consider the political, social, educational and cultural history or background of the nation adopting it. Can it fit into any society, regardless of its history and culture? Can it be successfully implemented in all nations without any conflict? Of course not. Did it work for most European and North American nations for the last half a century? Yes, of course. The question is now: how do you apply Western democratic capitalism in developing and ex-communist countries without creating a terrible backlash?

Let us take China, for example. After the Cold War, it realized that market reforms were desperately needed. However, the government struggled at first in integrating a free market economy with the existing communist political system. During the process of opening the market, the government was faced with challenging civil unrest and demonstrations, like the Tiananmen Square. The government opened the market slowly, without any compromise to the power of the Communist Party of China.

The CPC. holds complete power at the national level, even though 7 to 8 minor parties also participate in the political system. This political stability, mixed with a free market economy, has served China well. China is now considered another superpower, alongside the United States.

Similarly, Singapore runs a free market economy, while a significant portion of the economy is owned by the state and there is one dominant political party, the People’s Action Party, as well as minor opposition parties.

There is not much of a free press there either. In fact, I do not think Singapore even has a freedom of information law at all. This political and economic system has served Singapore well too. Singapore now has one of the highest levels of GDP per capita.

Turning to Malaysia, the United National Organization (UMNO) party has ruled country since its independence in 1957. Many groups, including Freedom House, label the country as a flawed democracy or, as some call it, “partly democracy”, or even a dictatorship.

However, no one can deny the fact that Malaysia has made significant economic achievements, especially in trade. Open trade contributes over 100% of the country’s GDP. Now Malaysia ranks among the top countries in terms of business and trade freedom, despite the criticism by outside organizations of its political system.

For many western economists, it is ironic that, in the last 20 years or so, many economic studies show that countries that are ruled by one dominant political party, which the West calls “dictatorship”, have recorded faster economic growth than so-called free countries.

The ones that have opened their markets, but stayed with one-party leadership, made better economic progress than developed and emerging nations that are claimed to be politically freer. Is this an endorsement of one-party rule or dictatorship? Of course not. However, economic reform is imperative for any nation to grow, unlike a fully democratic and multi-party political system. Some countries tend to function better under a one-party system, given their culture and history.



Eritrea

As with many of the emerging countries mentioned above, Eritrea has its own culture, history, and politics. Eritrea cannot be Ethiopia, or the Netherlands, for that matter. To force the country into a full-blown Western-style democracy, with a multi-party system and an unlimited free press, would be preposterous and dangerous at this time.

To begin with, Eritrea is technically a 7-year-old nation, post-independence and pre-Ethiopian aggression, with a terrible political history. There is a reason why it was not a nation until only 26 years ago.

Nonetheless, to create a multi-party democratic political system in Eritrea would require a well-educated and extremely civilized society that can tolerate any ethnic tensions that may arise. We obviously are not there yet. Will this system work in Eritrea at this time, even if the country may try to apply it anyway? Definitely not.

Its history shows us otherwise and Eritrea is way too young of a nation to even attempt to consider it. This was the case 50 or so years ago and it will definitely be the reason why Eritrea would no longer exist as a sovereign nation if its leaders divided into political parties. It would dismantle Eritrea in no time. An ethnic and cultural friction created a conducive atmosphere for Eritrea to be sold to or annexed by Ethiopia in 1962. That can happen again, as history repeats both in good and ugly ways. Some may argue that those times were different. No, they are not. We are still a young and dangerously divided nation as we were then.

Eritrea can only survive at this time with one political party, the PFDJ. This political party has proven itself by fighting for Eritrean freedom and keeping it together for the last 26 dangerous years. Do Eritrean people wish to see the reconciliation and reunification of some of the country’s founding members through forgiveness and compromise? Yes, indeed.

As in the 1960s, however, Ethiopia and the United States, unfortunately, managed to create some friction among them for the sole purpose of eradicating Eritrea again as a sovereign nation. Regardless, the only viable party that should rule Eritrea for the foreseeable future is the PFDJ, at least as a dominant party, with minor parties under one umbrella.

Market Freedom

What desperately missing in Eritrea, however, is market reform. Yes, the country is technically at war and too young of a nation for market reform, as in the case of political reform. No one is advocating for a full capitalist system that is corrupt and benefits the few, as happened with the almost failed state, Ethiopia.



As with any nation, Eritrea also has the right to restrict investments in some sectors as a matter of national security, especially during this time. Considering all these facts, however, I believe the country has failed so far to even moderately liberalize private sector trades and allow low-level economic sectors (businesses) not only to flourish, compete, and drive the prices of goods lower, but also create private sector jobs.

I believe Eritrea is missing a huge economic opportunity, as there is much harmless investment, both from Eritreans and from foreign nationals, that could flow into the country and contribute a lot to the economy in many ways, including taxable income.

As a non-corrupt and one-party state, Eritrea will do well by controlling and owning large sectors like mining, energy, ports, and even large banks, but leaving low-level private businesses alone, which at this time is not the case.

All the defamation and criticism of Eritrea will and should disappear once the market is reformed, private sector jobs are created and the social mobility of ordinary Eritreans moved upward.