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Seid Hassan, the man who predicted the effects of price control in Ethiopia

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06/22/11

  01:11:55 am, by admin, 3292 words  
Categories: Ethiopia, Seid Hassan

Seid Hassan, the man who predicted the effects of price control in Ethiopia

Seid Hassan the man who predicted the effects of price control in Ethiopia

Soon after the Ethiopian government imposed price controls on certain commodities in Ethiopia, Ethiopian born economist Seid Hassan of Murray State University wrote an article on this website predicting the inevitable. Six long month after his critical article, everyone seems to agree that the price control imposed by Meles Zenawi was a total economic disaster. Today, the Associated Press has an interesting piece which reaffirms the negative effects of Zenawi's policy. Below is a re-publication of the article by Dr Seid Hassan which was originally posted on Jan 9, 2011.

Ethiopia: The Futility and Damaging Effects of Price Control

By Seid Hassan*

I. INTRODUCTION

The government of Meles Zenawi announced that it was imposing price caps on select merchandize goods, the first round of the imposition affecting 18 food items as of January 6th, 2011. After gathering several hundred local merchants at the meeting hall of the PM Office, Messrs. Zenawi, Melaku Fanta who is the general director of Ethiopian Revenue and Customs Authority and State Minister of Trade, Ahmed Tusa, accused the businessmen and businesswomen of price gauging, hoarding and engaging in unhealthy competition. The three men said that the merchants were exploiting the existing weak government regulations while at the same time using world-wide price hikes and the recent devaluation of the birr as an excuse to jack up the prices of their goods. Concurrent with the imposition of caps on prices of certain commodities, Messrs. Zenawi, Fanta and Tusa also vowed to “abolish this market disorder” and enhance competition down the road. Until the newly installed proclamation is put to effect to abolish the market disorder, they told the merchants that the authorities would use price caps and “cutting the fingers” of merchants in the short-term. For anyone who watched the entire taunting process and Mr. Meles’ rants as well as the stunned faces and complete silence of the 584 businessmen and women, he/she would realize that the gathered attendee s were really frightened. They had to be reticent because they knew that Meles has made good on his “I will cut your fingers” threats in the past. They knew that he has sent quite a few of them (most of his victims being non-TPLF/EPRDF members, and those whom he “did not like the color of their eyes”) to prison and closed down their businesses. The reproach was also accompanied with incredible and empty threats, two of the empty threats being his intent to supply the goods using the state-owned businesses and foreign suppliers.

Economists are generally opposed to price controls except in special circumstances (during emergencies). It is not that erecting price caps under emergencies would be without negative effects. It is just that, in crises situations, the positive effects of price controls could outweigh their negative effects. For example, imposing price caps could be necessary and morally acceptable in unusual circumstances such as during wars, unexpected crop failures, and natural disasters. Such special measures may be necessary so that some unscrupulous individuals could not use the sudden and unexpected situations to create big windfall gains for them while hurting so many others. Temporary price controls could also be effective in managing the country’s reserves, such as to buy time until the reserves are put into the supply networks. Nonetheless, both economic theory and the experiences of many nations who used price controls strongly indicate that using price caps as a panacea for a rising inflation is counterproductive and in most cases, the “cure” is more damaging than the disease. In the Ethiopian case, using price controls in the face a recent massively devalued birr is certainly a fool’s errand on the part of the authorities.

The purpose of this short commentary is to explain to the general public that, even though imposing price caps on certain goods may seem to be attractive to consumers, such measures, in general, will end up harming the very people they were intended to help. I will briefly illustrate the unintended (deleterious) effects of price controls in part II below. At this point, I would like to draw the reader’s attention to this important point: That the main culprits (root causes) of price hikes are SHORTAGES already existing in the system! Price hikes, especially those which appear to occur all over a sudden, are known to delude authorities (and consumers) as if they were artificially created by merchants. Authorities introduce price controls to appease angry consumers while at the same time shifting the blame towards the business sector. Once anger and confusion are in play, it is not uncommon to observe authorities exploiting the public’s anger towards their favor, one of their common tools being the Scapegoating of merchants for the price hikes. Let’s turn the now to the secondary effects of price controls, but those readers who are less interested in knowing the unintended and deleterious effects of price caps, they can skip Part II below, without much loss, and read the last two sections.

II. DELETERIOUS EFFECTS OF PRICE CONTROLS (in brief)

Price caps force producers to sell the products under unacceptable and, in general, below equilibrium prices. The reader is reminded that acceptable prices include both real (differences between cost and revenue) and imagined ones, such as the price of uncertainty existing within the system. Thanks to the price caps, the underpriced goods will now be available to the buyer without reflecting the true cost of producing them. Any good that is being sold without reflecting the true costs of production would be produced inefficiently. Since some merchants will be reluctant to sell their goods below the true market price (in addition to the fears), less trade is created and this is one form of the inefficiencies that is created by the price control measures.

Price caps kill the incentives to produce the goods that are under the price caps. The price caps also motivate producers to produce other goods that they think are more profitable and that are not under the government’s radar for price controls. This will result in resource misallocation and inefficiencies. In the end, less and less of the highly valued goods will now be available to the consumers, which hurts consumer welfare.

Price controls force producers to supply mostly low quality products into the market, which may lead the economy to be filled with lower quality products than would be otherwise. The process would create dissatisfaction on the part of the consumers. Economic history has shown that such consumer dissatisfaction, in addition to being inefficient, would force consumers to shift their attention to foreign-made goods, which could only be obtained in the black market at times. In the Ethiopian case, the price caps may help the cheap and low quality Chinese products.

As was evident from the practices of former socialist regimes that included Ethiopia, price caps exacerbate the existing shortages. When this happens, as Ethiopians who lived during the Derg’s reign mournfully remember it well, products are distributed on the first-come, first-served basis, thereby increasing the number of hours for queuing. This wasted time spent queuing (opportunity cost) lowers consumer welfare.

If the price caps happen to be too low, the intervention could increase more demand for the underpriced products. In process, the low prices would allow and motivate more consumers, including poor fellows like myself, to desire more of them, but with so many people being anxious to buy the products at the controlled price, the process makes the already existing shortages to become even worse. Fearing the newly enacted laws and consumer backlash, merchants and suppliers may continue to sell their products at the regulated prices, but history has revealed that they sell them mostly to their favored customers. Such favored customers are usually “good neighbors”, relatives, friends, and the politically well-connected. In short, the price controls create nepotism. Since the government can only observe prices being sold at the regulated prices, it will have no basis to accuse the merchants for violating the law. In case you are tempted to tell me that the government will go after those who discriminate between consumers, you will be wrong because such a practice will be beyond and above the newly enacted law. Even if it does, prosecuting merchants for discrimination will be both difficult and arbitrary, and by trying to regulate the difficult human behavior, the regime will be introducing another element into the equation.

Price controls most certainly create black markets, thereby encouraging people to break the laws when they try to obtain the goods which have become increasingly scarce, thanks mainly to the price control measures. This in the long-run motivates people to disrespect other laws. Economic history has revealed that black market prices are much higher than those which would prevail without the price caps. The higher prices reflect the severe shortages as well as other premiums such as compensations for being caught by government authorities (to cover the fines, etc.) Shortages, higher prices and premiums hurt the poor and the less connected more.

Etc. Etc. Etc.

III. WHAT CAUSED THE PRICE HIKES IN ETHIOPIA

In a write –up titled as the “The Causes of the Ethiopian Rampant Inflation Rates” that was made public about three years ago, I argued that the main culprit behind the rising Ethiopian food prices were shortages existing in the system, and not caused by the high demand of Ethiopians who were becoming increasing wealthy, as Prime Minister Zenawi alleged. It is my contention that shortages are still the main culprit behind the current price hikes but we have now a new element into the picture - the massive devaluation of the birr that was implemented beginning September 1, 2010. In fact, what we are observing now was predicted ahead in my highly popular article titled as “The Devaluation of the Birr: A Layman’s Guide.”

As mentioned it in the first paragraph above, the authorities told us that merchants have used market concentration, the recent devaluation of the birr and world-wide price hikes to raise the prices of their goods. Let’s briefly show the absurdity and contradictory nature of their claims. Speaking about the devalued birr first, as I explained and predicted in detail elsewhere, the 20 percent devaluation which took effect beginning September 1st, 2010, in collaboration to uncertainty and anticipated further devaluation of the birr were expected to result in price hikes of 20% or more. In this light, accusing the merchants for the problem that the regime itself has created is not only contradictory, but it is also absurd. Second, while acknowledging the existence of world-wide price hikes, Messrs. Zenawi and Fanta tell us that business leaders could neither engage in speculation, nor are they allowed to using the world-wide price hikes as their signals. Hello! Isn’t using world-wide information signals part and parcel of an entrepreneurial activity? If Ethiopian Commodity Exchange (ECX) and the farmers could use the world-wide price signals, why would it be any different for the merchants? The writer of this commentary has bad news for the authorities: current available data indicate that there are sweeping world-wide price hikes that are already underway and these price hikes will continue as long as there are shortages. And given that the regime’s current policies that are strongly geared towards exports, Ethiopia will be affected by what is happening world-wide. The interconnectedness between world-wide prices and the commodities produced in Ethiopia will intensify as the regime’s policies become effective and these policies change the crop patterns produced in the country (the policies favoring exportable products.) My prediction is that the shift in crop patterns and the introduction and intensification of bio-fuel agricultural products will raise the prices of food items in the country. You get the picture when you add the rising costs of oil prices and bio-fuels, the unchecked growth rates of the Ethiopian population, etc.

Shifting gear towards the claim made about market concentration and the “unhealthy completion” in Ethiopia, one cannot avoid but speculate (hoping that Mr. Zenawi will not cut my fingers for using the word “speculate”), the regime’s already prepared to expropriating private business under the guise of reforming the concentrated market. We saw this taking place during the so-called “Anti-Corruption Campaign” of 2001 that was effectively used to force prominent private sector operators in the trucking industry, coffee export, domestic trade services and insurance close down their businesses and flee the country. As it became evident, that carefully planned and executed exercise allowed party affiliated “endowed” companies to expand their foothold in the Ethiopian economy. As you can remember, Mr. Zenawi in 2009 also accused private coffee traders for hoarding their coffee beans and used the same orchestration to expropriate their coffee beans and to take away their licenses. Some of us cried foul, informing the world that Mr. Zenawi was using his carefully crafted orchestration in order kick out private coffee traders and make room for his regionally owned companies. Unfortunately, our crying of foul received deaf ears, and now that Guna Trading PLC, one of the conglomerates owned by the TPLF, has become a major player in coffee trading since then, the intended transfer of the coffee trading business from private companies to a party-owned conglomerate is almost complete. On January 6, 2011, Messrs. Melaku Fanta and Zenawi told the gathered local business people that the price hikes were caused by a disorganized market system and the practice of illegal wealth accumulation exercise on the part of the traders. In order to give reason for market concentration, Mr. Fanta said that there are 147 flour factories in the country in which case only 50 of them controlled 65 percent of the flour market. “An average of 53 percent of the market in each of the commodity types is controlled by only 30 top businessmen,” Mr. Fanta declared. Frankly speaking, this does not seem to constitute a market concentration to me. Do you think so? The world economy that is filled with an oligopolistic market structure can attest to the fact that a country could enjoy cut throat competition and stellar market performance even in a market that is dominated by less than a handful companies. However, this can only take place in an economic system where the legal system prohibits collusion (tacit or otherwise), and in a system where government muddling is strictly prohibited and enforced, a situation which does not exist in Ethiopia. Now that Mr. Zenawi is telling us that he would abolish the disorganized market system, could this again end up being a tool to be used to annihilate the private flour producers and to make room for the party-owned parastatals? Only time will tell but one cannot rule this out, given the common practices in Ethiopia. For sure, both economic logic and past experience strongly indicate that, in this kind of circumstances, government interference will make things worse, not better. In addition to hindering the voluntary (impartial) exchange process, the endeavor will exacerbate the already existing partiality into the exchange of goods and services. Moreover, in addition of being used to deflect the public’s attention to the root causes of the problem, the exercise is designed to create a rift (conflict) between consumers and businesses.

To repeat, the public needs to understand that the price hikes reflect the existence of shortages and they are not artificially created by greedy merchants. The public should avoid jumping on the bandwagon of accusing merchants using wrong and flimsy excuses suggested by Messrs. Zenawi and Fana. I also urge the public to look into the market concentration that Messrs. Zenawi and Fanta are talking about. I submit to you that nearly all the wholesale trading and transportation are in the hands of a few conglomerates that are owned by ethnic-based parties. In fact, some of the goods that the new price cap is imposed upon, such as sugar, are produced by the state-owned enterprise. Instead pointing their fingers on the state parastatals that they serve as board members, they decided to point their fingers on the merchants. The public also needs to understand that authorizes do not possess magic wands that would give them more advantage in allocating resources, including price hikes, than the free market pricing system set up to serve the interests of the people. For Ethiopians and those of us of Ethiopian origin, we happen to know that Mr. Zenawi has used these kinds of crises to target and attack businesses owned by certain ethnic groups. Unfortunately, I have witnessed such targeted attacks being geared towards a very highly successful and entrepreneurial ethnic group and I am not talking about the ethnic group that I belong here.

IV. CONCLUSION

Right after devaluing the birr by 20 percent, Mr. Zenawi threatened the merchants, telling them that he would pinch them by cutting some of their fingers (effectively, this means sending them to prison and/or closing down their businesses). This is in line with other dictators, such as the Hugo Chavez of Venezuela, who, who in 2007 and many times over, threatened businessmen that he would confiscate their businesses and give them to workers. In mid 2010, that country’s inflation rate was about 30%, the highest in Latin America, and the only nation in the continent whose economy has contracted in consecutive years. Chavez’s policy has failed so miserably that the Venezuelan currency, the bolivar, is being devalued again. In Zimbabwe, the government of Robert Mugabe physically lowered prices and even sent the” police and a pro-government youth militia swept into shops and factories, threatening arrest and worse unless prices were rolled back…” The end result was sheer chaos as “staple foods vanished from store shelves and some merchants reported huge losses.” Sounds familiar? The same fate awaits Meles’ policies and the birr, unless the regime changes its policies and begins to attack the root causes of the price hikes. Price hikes and shortages never are observed in a country experiencing double-digit growth rates, as professed my Mr. Zenawi’s regime, unless of course the double-digit growth rates have been cooked up from their sources (as several anecdotal evidence indicate.). Could these price hikes serve as signals indicating to us that the made-up propaganda growth rates are about to backfire?

It is really pretty hard for one to run a business, particularly in a resource-poor, destitute, and poorly led country like Ethiopia. Even under normal circumstances, it is very difficult to run a private business, for such a venture may lead to disastrous failures resulting in the loss of one’s lifesaving. Knowing that their survivals depend on their loyal customers, businesses don’t like to disappoint their consumers at all. Given this cardinal fact, it is totally ridiculous on the part of the Ethiopian authorities to scapegoat merchants every time they face problems. Businessmen also worry about their successes as well as the risks that confront them, be they current or future, imagined or real. They think about their shareholders to whom that they are accountable for. They constantly think about their long term survivals. Unlike government bureaucrats who receive their regular paychecks, they have to depend on their own dollars. And the livelihoods many people, including their families and their workers can only be guaranteed if they succeed. They have to think about all of these. In addition to the aforementioned challenges they face, Ethiopian businessmen and businesswomen are challenged by the highly nepotistic system which favors regional party owned conglomerates. If this is not enough, imagine being repeatedly bullied by the leader of the country, threatening you to cut your fingers, scapegoating you for the problems the regime itself has created. This is hell, an absolute nightmare and I wonder for how long people can live under such a nightmarish situations.

*The writer is a professor of economics at Murray State University


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33 comments

Comment from: Imperial Body Guard [Visitor]
Imperial Body Guard

The alien imposed federation of secession voodoo economic policy is crumbling away day by day. What Ethiopia needs is educated individuals serving their citizens in the House of Parliament under the Constitutional Monarchy. For to long the neo-colonial regime has used oppressive force to threaten and persecute educated Ethiopians, many of them have fled in search for freedom abroad, but not for long. The neo-colonial regime is getting weaker and weaker, and the economic ills that it creates will only come back to haunt them.

“To live a full life and to be thankful for the blessings of God nothing is more rewarding than after having leaned to teach your fellow-man, using your talent to teach others. May God guide you in the accomplishment of this task.” Selected speeches of His Imperial Majesty Haile Selassie I, page 519

“Neo-colonialism today takes two forms: economic and political. We recognize that economic dominance is not only often the more difficult to eliminate, but often serves as the entering wedge for political domination. We further recognize that, given the history of our continent, and the conditions under which we came to freedom, it is not unusual that, despite our best efforts, the economic independence which we seek is long and difficult in coming. Long-established patterns of trade are not easily or quickly reoriented. Let us not delude ourselves in thinking that these facts, for such they are, are of no significance for the future of Africa. But let us, at the same time, toil with all our strength to alter them.
When we consider political neo-colonialism, our desires, although perhaps no less difficult of attainment, are at least easier of articulation. We seek to avoid a rigid and inflexible posture which prejudices our position on major issues before the world. We seek to avoid alignment, to achieve true non-alignment. Our late good friend, H.E. Prime Minister Nehru of India, put it thus: ‘The only camp we should like to be in is the camp of peace and goodwill.’” Selected Speeches of His Imperial Majesty Haile Selassie I, page 269-70

“The aim of those leaders that is based on ambition for power and personal gain is one with no firm foundation and will, consequently, crumble easily.” Selected Speeches of HIM Haile Selassie I, page 471

Long Live the Constitutional Monarchy!
Long Live the Kebra Negast!
Fire burn down the satanic star of secession
Rise with the Lion of Judah!
Long Live Independent Ethiopia!

06/22/11 @ 03:04
Comment from: henok [Visitor]
henok

This is just obvious. one does not need to be an economist to predict this.
So are you saying that this old man (Seid Hassan)should win a nobel prize for this? Ayy yediaspora intellectuals neger. Full of depreciated oldies, obsolete people.

06/22/11 @ 04:24
Comment from: addiszemen [Member]  

Hey Nazrets, are you trying to cheer up the diaspora loosers or trying to attract readers?
All our diaspora economists turned polticians are nothing but a fiasco.
They’re dishonest, and For the sake of their political agenda, they are always willing to cut corners even if it means jeopardizing their integrity.
They only depend by the book, never considering the practical implimentation could be much diffrent. Where they always are ready to jump on a fault finding,"I told you so” band wagon.
THERE IS NO GAIN WITH OUT PAIN.
What we Ethiopians don’t understand so far is, we are always expecting miracullar results and discourage ourselves or others who are working on our behalf, if something seems to go wrong, we are the first to point fingers, sit back and blame others. Never trying to be part of the solution, or alternatives
We are not diffrent from the rest of the world. And the whole world is suffering. Just yesterday WFP reported that 900 million people around the world are starving.
The current govt has done a tremendous effort to achieve all what we see these days back home; a postive huge progress never seen before, with nobody giving them a chnce or the benefits of doubt, our leaders achievment is NOTHING SHORT OF A MIRACLE!!

06/22/11 @ 04:29
Comment from: dubilla [Visitor]
dubilla

For me the general economic science argument of yours makes sense!!!except that the unclarity of issues of targeted ethnic based discrimination on businessmen and women with the aim of chasing them out of business.
The guy was telling them to cut their fingers(i.e.abnormality) if they fail to abide by!
And you are telling us adding a sixth finger(ethnic discrimination in business) to a normal of five.
fight with yourself to remove those ethnic based eyes and try to extend your horizon beyond and beyond!. How did you differ if you sing the same music with which we are bored of.

06/22/11 @ 06:43
Comment from: Molla [Visitor]
Molla

Didn’t he also predict the collapse of the “ECEX - Ethiopian Commodity Exchange” which is growing and developing day after day.

06/22/11 @ 07:37
Comment from: prince of konso [Visitor]
prince of konso

nazret
This is a basic economic theorey which can come from any ordinary economist mouth. i really dont see the genius of this work. most of the truth are suppressed for political score.Yes in theory it could be true, but the problem with economics is the theory and the result can be totally different. book worms like Saed supported by their nazret mouthpiece can bring so many theories. but the theorey is adultrated for political gain.

06/22/11 @ 11:34
Comment from: JJ [Visitor]
JJ

how dare meles under estimate those greedy merchants who are used to rip tens of thousands of birr over a shop that is smaller than a bird nest…well live and learn.

06/22/11 @ 12:15
Comment from: monday [Visitor]
monday

Meles is failing the country selling lands and building highrises is not econmical solution

06/22/11 @ 13:33
Comment from: mesfin_b [Member]  
mesfin_b

the truth of the matter is Meles the midget shifta doesn’t want to listen to the intellectuals. He lives in his own caveman world. I think he still has the northwest Ethiopian highland gorges and canyons picture flashing infront of his eyes.
The economy is spiraling downhill and there is no good headed fellow to warn him.
Time to kick his behind out of Arat Kilo.
Down with Meles and EPRDF.

06/22/11 @ 15:54
Comment from: prince of konso [Visitor]
prince of konso

Addis zemen
that was ,beautiful, to the point, and above all nothing but the truth.Your short say tells the reality than that long very obvious analysis. I didnt know nazret can be so excited by this very obvious but impractical economic analysis.I dont know if it is ignorance or political solidarity

06/22/11 @ 18:42
Comment from: sunny [Visitor]
sunny

it is a great article ,pro !

as we can see dictators are not understand until they are overthrew away by the people.

look woyane meles gov’t ,many educated person they told him that ethiopia is not be on the right track with economy policy and many other issues but instead of correcting , they are trying to insult by saying ex-derg, ex-kingit,and bla, bla bla……

first of all woyane is not coming to solve ethiopian problem but it is to destroy . This is very clear if u see what woyane did with in tweny years . So the only solution for ethiopian people is that , woyane has to go !!!!!!

06/22/11 @ 18:47
Comment from: I_hate_ehadig! [Visitor]
I_hate_ehadig!

addis zemen,
You are just blind moron. Nazareth is here with evidence to convince you how your master failed. But you are just a stone head, unbreakable even with any kind of truth.

You know the reason? you should be one of them who suck the blood of Ethiopians.

“If I hate Ehadig, I have a reason”

06/22/11 @ 18:59
Comment from: Gonder [Visitor]
Gonder

Mr. seid,
it is one thing to talk about Economics theory and it’s another diffrent thing to rule and administer Ethiopian ‘Negades’.

unless u are in addis and start working with those Negades, u dont understand how crule they are..

U sit in ur office and lecture all ur useless theorey to the west, which is very irrelevant to our ‘negades’..

Go to ET and learn how crule our negades are

06/22/11 @ 19:32
Comment from: lion [Member]  
lion

” Unfortunately, I have witnessed such targeted attacks being geared towards a very highly successful and entrepreneurial ethnic group and I am not talking about the ethnic group that I belong here.” The writer has some point in the beginning, then everything turns to one side story “ethnic group” I don’t know anyone that does not feel comfortable about their own culture and family but when it comes to national interest everyone should start thinking about the pieces that make up the whole. The writer tries to make us feel one ethnic group is benefiting more than the other. He failed to show that. After all this is about the price control mechanism to see either works or doesn’t, it is not about ethnic group who has what not. He puts certain ethnic group in Ethiopia being “a very highly successful and entrepreneurial” that itself is dough ting line. It is highly discriminatory and bias. There is no single group that can be categorically labeled as such. The writer himself is creating this difference. Successful person comes from all walk of life, not because belongs to different ethnic group. He is absolutely wrong and should not respect his view. I think the government best understand what the people of Ethiopia needs more than anybody who lives in Western World and writes an article. It is shameful this old guard poison Diasporas who cannot help but search for negative news and use that to their own advantage to score political agenda. It is insult to everyone’s intelligent to write article like this. Ethiopians no longer hid in the dark, we can make our conclusion that is better or worse for the people of Ethiopia. His writing is not attractive and failed to understand the government vision and most of all the people.

06/22/11 @ 19:38
Comment from: eselem [Visitor]
eselem


This mercenary and his cornies are not for the people. They are just for their belly. Their motto is to rob the country and to put the citezens in missery. They do not want to get help from an expert because they are arrogant.

06/22/11 @ 20:00
Comment from: biadeg [Member]  
biadeg

Dear Nazret: You are trying to create a hero out of nothing. With all due respect to prof. Seid, what he said is nothing spectacualr or new discovery. It is econ 101, if you ever know economics. The problem the Ethiopian elite (esp. in the Diaspora) has is that 1. they try to create a hero to follow 2. They politicize everythig to score credit 3. They always look for problems in the country and use that to lament and complain in the hope of discrediting the govt. They pray on the countries problems.

FYI the laisezfare (traditonal capitalist theory of the market forces) no longer holds full water even in the West. What meles did is no worse than bailing out of big banks in Wall Street and all over Europe by the govts. If the old economics was to work, they should not have interfered in the market at all. But, it doesn’t. Govts interfere to harness or control the market forces when it is emergency. This has been going on for ages (esp. after World war II). Price controls are not new even in capitalist countries let alone in Ethiopia. Do you know the fed govt still subdizes the farmers in America. Do you many govts in Europe protect their exports with various tarrif and price control even in the age of Euroean Union and GAT. Nazret, please do a little research before you run to judgement and show your ignorance in economics. This is not the 1st time you did it.

Believe me Meles knows what he was doing when he put a cap on prices. It is political. It is the politics stupid! Govts do that a lot, when they think things are going out of control and have a potential to destabilize society. By the way, though IMF is crying fowl on the price control, their unabated inflation due to devaluation had also brought disasters in many places in Latin America and Asian countries, which no one follows now.

So, there is a big difference between theory and practice. The books say that. But, the challenge is not reading the books and spitting theory, it is the governing! Meles is doing the governing not prof. Seid. Meles knows the sideffects of both control and free market as much as prof. Seid, if not even better. I am not a fan of Meles, but that is the reality. The only problem I see from the Ethiopian govt is that the lack of free intellectual discourse (freedom of press) in the country to discuss these issues and give a chance to people like Prof Seid (on both sides of the issue) to debate the issues freely at home. That could have helped both the leaders (policy makers including Meles), and most importantly the country and our people. In the long run, that is the only guarantee also for economic growth and political stability. Imagine the free press in the USA (including PBS) has so much to contribute to policy making with open debate on major social, political and economic issues. I hope I will see that in my country Ethiopia, in my life time!!! I hope meles leaves that kind of legacy before he leaves office. If not we are in trouble. You never know where our country is heading. Econ Growth is not always a solution, as we saw clearly in the Middle East!!

Be Well!

06/22/11 @ 21:04
Comment from: Shewarega [Visitor]
Shewarega

Seid Hassan was vindicated. Please cyber cadres, learn from your neftam neftegna buddy Yirgamenamen and throw in the towel. You lost big, very big on this one. As one foreign observer recently noted, its the “Achellis Hill” of this regime. No matter how many price caps, or printing money, the inevitable truth AGETTO MEWUTTATU AYEKKEREM.

06/22/11 @ 21:37
Comment from: negasi [Visitor]
negasi

If Addis Zemen and the rest of the woyane pack had listened to the advice of the smart professor, we wouldn’t have been in such a miserable mess. The problem is, those stupid qimalam hodam cadres don’t suffer one little bit because of their rthnic connection.

06/23/11 @ 00:17
Comment from: yoyoma [Visitor]
yoyoma

Until recently, we couldn’t have a dollar account exceeding $5000, Why? what if I have a million? wouldn’t my country benefit? and now they increased it to 50000, how much control over every penny should the gov have? some of us with foreign passport with Ethiopian origin have problems understanding why? we cannot invest in the banking? insurance? EPRDF doesn’t want us to keep our money where it’s safe? where the return is good? you want me to go farming and deal with the locals with so many unknown issues? I like Woyane, but I won’t trust you with my money. It is hard to govern Ethiopia, but we need to watch carefully not to burn down in the sheety deals and papers that hold no guaranty in courts.

06/23/11 @ 01:15
Comment from: mesfin_b [Member]  
mesfin_b

To Yasazinal.
In other words are you telling us after 8.4 Billion looting in the bast 2 decades Meles the shifta is the holy savior of our Ethiopia?
Please sir give me a break.
Lalawekut yh yneger!!!
the fact of the matter is 1 kilo of sugar is cheaper in the deveolped countries than in Addis. This is a basic food staple and if my people are lined up to get cooking oil, then my friend someone is telling lies through his teeth. That lier is none other than Meles the midget shifta.
Wether it is 101 or advanced economics Prof. Seid is right and he is to be commended.
BTW Nazret is just a blogsite, nothing more.

06/23/11 @ 10:33
Comment from: ethiopia [Visitor]
ethiopia

ADISS ZEMEN

What are you thinking? when you say to ethiopian opposition you do not come with solution.is your godfather ever gave a single chance to others? think about what you are talking about.to let you know that your godfather meles is the man who hate amhara people .the man who thik that evry thing he sayd is need to be accept. and he want us to hear his truth, what about the real truth he is dictator and criminal he is the risponsible for the genocide comited on amhara people in the eastern part of ethiopia he is the risponsibel for genocide comited on angwak people and so many ……. finaly no wher to go

06/23/11 @ 11:22
Comment from: anon [Visitor]
anon

[Gonder],

I will not be a far streach if I state you are simplly KICHAMAME TIGRE. You sa the Ethiopian merchants are crule!really.Do youreally know what you are talking about.If there is any one who is to be rtermed crule it is the Members of TPLF cult.To begin with they don’t believe in Ethiopia.If they do is is only to deceive the public and only because it helps to advance their strategy of loot.Since the arrived in Addis,through the help of many gulible Ethiopians-other wise it was undremt to set weyane her feet in center of Ethiopia let alone extend its rule to the whole of the country-they used Ethiopia’s traditional enemy states and offshore business partners to loot the nations resources.EFORT in partnership with Medroc has done jus t that.In a liittle over 19 years the two companies have an istimated commbined asset of 20.billion.Bear in mind have been living under foreign hand out for these many years.Now,the tplf members the main adversary of Ethiopians argue that the Ethiopian merchants are crule.
The tplf is here to kill, destroy,humilate any Ethiopin who resists their vicious sbjugation and occupation of our country.In the past they told us the method they are agrasively using against us.
They claim Melese is given by God.
They insist Mellese is the best thing that happen to Ethiopia.
Tplfites need to only confrontation,that is what they are waiting,and I believe this is also the best result to the nation.Ethiopians need not regrit for the out come of this confrontaion-for they have been patient for too long.I don’t think the Ethiopian people really know the enemy they are against with.This is even true of those who believe are waging war against the adversary.Not only the adversary came to rob,loot,and humilate but has a sadistic relish to bring about the fighting spirit of our citizens to the knee.The weyane elite, time and again has demonstrated they have a fittish desire to inflict pain and humilation upon the innocent.Just to mention some of the means and artifacts employed by ruling elite to bring about the national humilation.The rewriting of our history by their psudo-historians that come out from mega publications,the illegal inappropration of firtile land from Wello and Gondar to Tigray,the ceeding of 1500 kilo meter long by 50 killo meter land mass to the Sudan,the mindless land sell of the South western Ethiopia to weyane strategical allies of the Gulf pan Arab states.To make matter worse the natives of Ethiopians are repeatedly told to shut up and follow or else they have no part in the affair of their nation-here is your servitude in a nut shell,long worked out by the two stools of the house of Hamassen and Adwa.This is the type of picture that the enemy we are contending with looks.

Perhaps thefollowing is the most extensive and complete profile of the psychopath/sociaopath.

3-A number of mind-controlling cult leaders may exhibit many of the behavioral characteristics of a sociopath–an outstanding ability to charm and seduce followers. Since they appear apparently normal, they are not easily recognizable as deviant or disturbed. Although only a trained professional can make a diagnosis of whether or not someone is a sociopath, it is important to be able to recognize the personality type in order to avoid further abuse. These traits also apply to a one-on-one cultic relationship.

Glibness/Superficial Charm
Language can be used without effort by them to confuse and convince their audience. Captivating storytellers that exude self-confidence, they can spin a web that intrigues others. Since they are persuasive, they have the capacity to destroy their critics verbally or emotionally.

Manipulative and Conning
They never recognize the rights of others and see their self-serving behaviors permissible. They appear to be charming, yet are covertly hostile and domineering, seeing their victim as merely an instrument to be used. They dominate and humiliate their victims.

Grandiose Sense of Self
Feels entitled to certain things as “their right.” Craves adulation and attendance. Must be the center of attention with their own fantasies as the “spokesman for God,” “enlightened,” “leader of humankind,” etc. Creates an us-versus-them mentality

Pathological Lying
Has no problem lying coolly and easily and it is almost impossible for them to be truthful on a consistent basis. Can create, and get caught up in, a complex belief about their own powers and abilities. Extremely convincing and able to pass lie detector tests.

Lack of Remorse, Shame or Guilt
A deep seated rage, which is split off and repressed, is at their core. Does not see others around them as people, but only as targets and opportunities. Instead of friends, they have victims and accomplices who end up as victims. The end always justifies the means and they let nothing stand in their way.

Shallow Emotions
When they show what seems to be warmth, joy, love and compassion, it is more feigned than experienced and serves an ulterior motive. Outraged by insignificant matters, yet remaining unmoved and cold by what would upset a normal person. Since they are not genuine, neither are their promises.

Incapacity for Love
While they talk about “God’s love” they are unable to give or receive it. Since they do not believe in the genuineness of their followers’ love, they are very harsh in testing it from their devotees and expect them to feel guilt for their failings. Expects unconditional surrender.

Need for Stimulation
Living on the edge, yet testing the beliefs of their followers with bizarre rules, punishments and behaviors. Verbal outbursts and physical punishments are normal.

Callousness/Lack of Empathy
Unable to empathize with the pain of their victims, having only contempt for others’ feelings of distress and readily taking advantage of them. Their skills are used to exploit, abuse and exert power. Since the follower cannot believe their leader would callously hurt them, they rationalize the behavior as necessary for their (or the group’s) own “good” and deny the abuse. When devotees become aware of the exploitation it feels like a “spiritual rape” to them.

Poor Behavioral Controls/Impulsive Nature
Rage and abuse, alternating with small expressions of love and approval produce an addictive cycle for abuser and abused, as well as creating hopelessness in the victim. Believe they are all-powerful, all-knowing, entitled to every wish, no sense of personal boundaries, no concern for their impact on others. The followers only see them as near perfect.

Early Behavior Problems/Juvenile Delinquency
Usually has a history of behavioral and academic difficulties, yet “gets by” by conning others. Problems in making and keeping friends; aberrant behaviors such as cruelty to people or animals, stealing, etc.

Irresponsibility/Unreliability
Not concerned about wrecking others’ lives and dreams. Oblivious or indifferent to the devastation they cause. Does not accept blame themselves, but blame their followers or others outside their group. Blame reinforces passivity and obedience and produces guilt, shame, terror and conformity in the followers.

Promiscuous Sexual Behavior/Infidelity
Totalist leaders frequently practice promiscuity, child sexual abuse, rape and sexual acting out of all sorts. This is usually kept hidden from all but the inner circle. Stringent sexual control of their followers, such as forced breakups and divorces, removal of children from parents, rules for dating, etc.

Lack of Realistic Life Plan/Parasitic Lifestyle
Tends to move around a lot or makes all encompassing promises for the future. Many groups claim as their goal world-domination or other utopian promises. Great contrast between the leader’s opulent lifestyle and the followers’ impoverishment. Support by gifts and donations from the followers who are pressured to give through fear and guilt. Highly sensitive to their own pain and health.

Criminal or Entrepreneurial Versatility
Changes their image and that of the group as needed to avoid prosecution and to increase income and to recruit a range of members. Is able to adapt or relocate as needed to preserve the group. Can resurface later with a new name, a new front group and a new twist on the scam.

We have in Ethiopia a narcissistic, egomaniac, and megalomaniac Luna loose. Perhaps we have talked about him this many years for too long, but have done too little to cure the cancer. It is time the power brokers in Ethiopia the Oromos and Amharas sit together and hammer out their differences and plan out a common course for their country. Not just a lip service but they must reach a consensus how to run the future Ethiopia, in a way where the two people harmoniously lead their nation to the challenge ahead. Once such agreement is reached the weyane elite will be a target for Demera Chibo where ever they are. We need a reconstruction of Ethiopia on the basis of common solidarity between Oromos and Amharas.There will be some Tigrians who will come to the side of Ethiopia to support the above reconstruction plan, but not very many. We need to annihilate the Hamassen and Weyane guile confederacy that are working day and night for Ethiopia’s destruction. Why are people afraid to speak the objective truth? This is the truth. If I may borrow Billy Joe’s lyrics, “WE didn’t start the Fire”. They are the one who start deconstructing Ethiopia on the basis of their Hamassen and Adwa family tree. Ethiopians need to rise and send the guglie to their habitat. Unfortunately, some are in the blame game of the west –this is none other than a psychological cop out. If Ethiopians stand organized there is no power to save weyane elite from its destruction. The key here is first knowing your enemy, these maen are here to humiliate and destroy you as anindividual and as a nation. Get mad, organize, and take a stand. This is the proper response to the solution. Talk divorced from practical action is,indeed, very cheap, if that is the only thing we can master up we might as well zip.


06/23/11 @ 12:17
Comment from: obsi abdisa [Visitor]
obsi abdisa

Thank you Mr.Hassan for exposing the deepest problem we are facing in
Ethiopia. As you said, the one ethinc group police is damaging the whole market system.
Here comes again the wayanes are barking. The boss is nerves so they are.
The truth hart and soon all of you cadres will find another job.
Talking trush can not keep yor looser
boss on power.
We all know how the Tplf businesses are manipulating the merchent.
They control supply to hike the price.
Can any one tell me how the hail one can be a millioner in matter of two years while the rest of the merchants could not be able to pay their bills.
We know a lot of the so calld millioners = Wayenes.
Time will tale fool.

Obsi grako en haftu dubinko
in beriya, dukenye in hafu bohyiko

God bless Ethiopia and Oromo people!

06/23/11 @ 13:15
Comment from: Seatle [Visitor]
Seatle

“I submit to you that nearly all the wholesale trading and transportation are in the hands of a few
“conglomerates that are owned by ethnic-based parties. In fact, some of the goods that the new price cap is imposed upon, such as sugar, are produced by the state-owned enterprise. Instead pointing their fingers on the state parastatals that they serve as board members, they decided to point their fingers on the merchants.”

For those few lazy to read the full article the above paragraph said all!!!!

Down with TPLF
Down with EFFORT and the rest of blood sucking Hyenas!!!!

06/23/11 @ 16:36
Comment from: Gonder [Visitor]
Gonder

Mr. ANON,,

First of all,I’m not Tigire as u think but, if I’m one (Kichamame Tigire), i’ll be happy to be real Ethiopian anyways. Because most of Ethiopian Population are Kichamam as u indicated, it does not matter whether i’m teigre or not…

Mr. ANON I was in Ethiopia few weeks ago and saw how Ethiopian Merchants are crule… I have witnessed how they want only 100% profit…

Eg,, If they buy one Ox (Bere) 10,000 Birr they want 20,000 birr return, which is 100% profit..

I sold one LapTop for 13000 birr to this electronic store and I saw my Exact laptop display on their Shelve with the price tag of 22,000 birr.

I sold several Iphone ranging from 5000-6000 birr and they were priced 8000-10000 birr

When the government Sale cooking oil with ration those Stupid Negades buy from those poor people or put thier sales person with false documentation to buy as much as they can so they can sale it with high profit.

All the goverment workers and Negades are the one who are holding the poor people hostage with false price hicking…

Meles and his Cronies (including all rich Negades are responsible for these price Hiking going on in the whole country..

Just b/c u hate this government that does not make those crule (aremene Negades)a collection of angels..

Just turn ur head and see how Evil our negades are…

06/23/11 @ 19:47
Comment from: HAYELOM [Visitor]
HAYELOM

Mr hassan you shouldn’t be too proud or your supporters too loud because as they say you predicted inflation in ethiopia. one doesn’t need to be a doctor or study economics to understand inflation. When you are ready go addis or the countryside every ordinary ethiopian who doesn’t have the tag “doctor” before his name will give you a better explanation of the concept better than you do. For those Idiots like you here is one truth you have to understand, inflation is not an ethiopian only phenomenon. If you are living in the west and you have followed the situation even countries like US are facing inflation. So if you have forgotten your principles of economics(it looks like you did) go back and read it again.For those who are cheering try to educate yourself.

06/23/11 @ 21:45
Comment from: addiszemen [Member]  

Prince of konso,..
Thanks,. You’re right. But I think Nazrets are just teasing him. “The man who pridicted?…..” LOL!!

Mesfin B iatch, and I_hate_ehdig,..shabian dogs,
We know you guys hate woyanes. They’ve kicked your ass for good!! And We are thankful to them for doing that.
Keep on barking. That’s all you can do!!!

06/24/11 @ 12:50
Comment from: Astaraki [Visitor]
Astaraki

Nothing is wrong with PM. Meles or Economist Mr.Hussien.

What if the implementation worked for better result? Does that make the Economist theory wrong?

According to PM.Meles Neoliberalism seeks to transfer control of the economy from public to the private sector, but its paradigm of growth have failed to bring prosperity.

since the price went like a rocket it was so serious and state representations couldn’t sleep and the government had had to do something about it and then they were forced to implement protectionist trade policies which not long-standing.

you see guy’s every policies are a trial and error there is no 100% secure theoretical polices which is error free.

But if we had a good Economist working not from outside remotely but inside the country closer to the governmental offices then the output would been rather muchbetter than PM. Meles and Economist Hussien prediction.

you see many of us doesn’t want to go back home even those diasporas(Highly edicuated) who is a right hand of the EPRDF.

If you where a person with a passion who burn inside out for your people and country you wouldn’t even wait for the next flight.

Most of us want to move for better profit and not for the thing we belive it is true and right, we are hodamoch and on the top that we like to swear and through and insult every Ethiopian intellect just to show your hatred to your opponent.

Weak up and be a critical thinker than a majority follower.

06/25/11 @ 12:09
Comment from: Adam [Visitor]
Adam

I just want to say to all of guys that have posted negative comments about Professor Seid Hassan… Shame one you! This guy has the wisdom and of course the knowledge to for see what was going to happen before anyone else. If anyone ( especially the Ethiopian Government had took this advice for consideration the price of 1 kilo meat would not have reached $ 240 eth birr). How many of you taxi drivers are economist?

06/26/11 @ 02:03
Comment from: Adam [Visitor]  
Adam

I just want to say to all of guys that have posted negative comments about Professor Seid Hassan… Shame one you! This guy has the wisdom and of course the knowledge to for see what was going to happen before anyone else. If anyone ( especially the Ethiopian Government had took this advice for consideration the price of 1 kilo meat would not have reached $ 240 eth birr). How many of you taxi drivers are economist?


06/26/11 @ 02:06
Comment from: Anon [Visitor]
Anon

GONDAR,

Among other things you have said “
All the goverment workers and Negades are the one who are holding the poor people hostage with false price hicking…

Meles and his Cronies (including all rich Negades are responsible for these price Hiking going on “.Really Why blame the public in the first place.After all this is a government not only bent to implement an economic policy to promote its own inner circle ,EFORT by giving unchallenged monopoly to the resources of the nation,bank loan,and virtuall control of import and export.But by arguming the negades are crule because you they sale items at high prices, you appear to defend the regime.This is scapegot of the Negades.It takes honest government to run a nation.Weyane is the most despecable entity that aver come in the face of Ethiiopian politics.I am sure you know this,but you class nature won’t admit it,that is to say you are ethe bigest beneficiary in tthe system.I am not making this up,your own words admit this.You wrote,

“I sold one LapTop for 13000 birr to this electronic store and I saw my Exact laptop display on their Shelve with the price tag of 22,000 birr.

I sold several Iphone ranging from 5000-6000 birr and they were priced 8000-10000 birr".The fact weyane security allow you to smuggle these items for profit or permit you to market it speakes you are in the inner circle.And that makes you YEWEYANE ENBA TEBAKI.That is why when you sign as GONDAR I react to you in my fiirst respond as a weyane .As far as I know weyane knows it has no support any where in GOndar.I far as my contacts are conserned there some individuals who are serving in the weyane administration,and they and their families are are well knowen.Theya are from remote area of Southern Gondar near the border of wello.Finnaly the economic disparity is the making of gready weyanes who are bent on promoting their own selfish interest and not Ethiopian Negades.

06/26/11 @ 14:29
Comment from: love [Visitor]
love

Dr. Saied well said as usual very documented based on evidence. Please keep on enlightening us about Ethiopa’s economy of course the enemy always speak against.

By the way, let us not be fooled that Weyane/TPLF is only working against Ethiopia, TPLF is in kahoots with Eritreans, the commentors on Nazret are not just Weyanes they are Eritreans promised to them by Weyane that if they help destroy Ethiopia’s society then Eritreans will live forever without fear of Ethiopia.
So some who comment on this blog are not just Weyane they are also Eritreans that support TPLF.

Hayelom,

You seem to have inferiority complex against the genius Dr. Hussein of his education. You are trying to undermine his knowledge of economics and it doesn’t work. It is written in your emotional comment you have complex that he knows too much and the truth.

Anon,

Well said,
The unification of Oromo and Amara is important as it is evident that Ethiopia was not colonized because of the sacrifice leadership of Oromos and Amaras. The nightmare of TPLF and Shaebia is this unification that is why Shaebia is working hard with OLF (Fake Ormo party design to destroy Oromos)seemingly against Weyane. Wake up to lead Ethiopians Oromos and Amaras!

06/27/11 @ 05:59
Comment from: Astaraki [Visitor]
Astaraki

Nothing is wrong with PM. Meles or Economist Mr.Hussien.

What if the implementation worked for better result? Does that make the Economist theory wrong?

According to PM.Meles Neoliberalism seeks to transfer control of the economy from public to the private sector, but its paradigm of growth have failed to bring prosperity.

since the price went like a rocket it was so serious and state representations couldn’t sleep and the government had had to do something about it and then they were forced to implement protectionist trade policies which not long-standing.

you see guy’s every policies are a trial and error there is no 100% secure theoretical polices which is error free.

But if we had a good Economist working not from outside remotely but inside the country closer to the governmental offices then the output would been rather muchbetter than PM. Meles and Economist Hussien prediction.

you see many of us doesn’t want to go back home even those diasporas(Highly edicuated) who is a right hand of the EPRDF.

If you where a person with a passion who burn inside out for your people and country you wouldn’t even wait for the next flight.

Most of us want to move for better profit and not for the thing we belive it is true and right, we are hodamoch and on the top that we like to swear and through and insult every Ethiopian intellect just to show your hatred to your opponent.

We need to weak up and be a critical thinker than a majority follower.


06/28/11 @ 09:39

rebtel

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