Mesle A. 08-23-16
Despite at its visible incipient stage of growth, capitalism in its Ethiopia’s contexts has already begun to send its shockwaves across the long established traditions of the people. In Ethiopia, the fast expansion in all sectors is evident with an adequate sign of a revolutionary proliferation of the ‘service industry’ ahead of others. Construction also blossoms itself as a flourishing industry with an expanding absorption capacity of more than the 35% of the total work force now active throughout the country.
These developments however were not without nationwide value meandering. One may remember the experience and outlook shocks, which the blanket lifting of command economy in the early 1990s caused mostly in urban Ethiopia. Both the public establishment and the staggering private sector of the time felt the vibrancy of the shocks equally but differently. Many public servants and their officials strongly grappled with the new and strange capitalist oriented- regulatory practices. There were many who strongly doubted the healthy functioning of the economy in the virtual absence of government control.
After a couple of decades, it is true now that capitalism also unfolds with its gloomy side through the incidences of growth bumps, specifically, inflation, corruption, rent-seeking behaviors and so on. Until recently, when the Ethiopian government has engaged in policy interventions in inflationary controls, the widespread belief was that the private sector aggravated the problem due to the need for unlimited appetite for profit and wealth.
This came at the very time when other directly or indirectly related economic upheavals in the developed world have precipitated many stakeholders to raise fundamental questions. Some of the most important questions are these: what are the cardinal rules of capitalist growth that pervasively affect human dispositions to wealth? Is capitalist growth inherently an outcome of human selfishness? If so, how do newly developing societies manage and adjust to this growing value against their egalitarian roots?
It is, at this juncture, that economists and development scholars reassert what they call ‘self-interest’ as either the primary, or one of the locomotives of capitalist growth as well as its bad sides. This argument, in its turn, has provoked divergent views on its relevance particularly to the initial growth and subsequent challenges of capitalism in developing states.
As a starter society of capitalistic growth, these debates squarely apply to Ethiopia and Ethiopians today than ever before. Thus, what were and are the positions of the late PM, Meles Zenawi, the chief architect of Ethiopia’s capitalistic growth, as both an economist and a political leader on this question? How did he respond to the above concerns?
Smith in his famous book of 1765, ‘Wealth of Nations’, underlines what he calls ‘enlightened self-interest’ interchangeably with what he terms the ‘invisible hand.’ Smith arguably qualifies self-self-interest as ‘enlightened’ to refer succinctly to the entrepreneurial spirit and skill to discern the signals of free market operations. For Smith, the inner human impulse to satisfy its ‘self-interest’ out of the free market ignites expansionary growth than the regular government intervention.
‘Self-interest’ as a worldview of policy makers and scholars continues as a mainstream western value particularly in the United States under differing brands. The concept ‘rugged individualism’ with broadened or changed meanings of ‘self-dependent, reliant, and diligent personality’ came into use in the Regan era.
‘Self-interest’ comes into mounting intellectual pressure, however, more by the fastest rise and growth of China and India very recently. Experiences of these countries kindle renewed questions and interests particularly on redefining the epistemological and methodological inconsistency of the ‘self-interest school’ to explain capitalistic growth and its propelling forces in the context of developing countries. PM Meles Zenawi intervenes, at the point of the debate, to have come up with his own arguments against the above liberal ethos of self-interest as follows.
Meles dwells on the question of ‘self-interest’ in the conclusive remarks of his first unfinished Chapter, the Neo-Liberal Political Economy and Social Capital of his PhD Dissertation. Meles sets out by dismissing the arguments of the neo-liberal paradigm that tries to exploit the concept of ‘self-interest’ as a justification for its thesis of the ‘limited government.’ Meles specifically mentions the ‘rational choice theory’, which is one of the most known neo-liberal pillars of ‘limited government’. This theory argues that human beings are, in Meles’s words, ‘solely self-interest-maximizing individuals.’
‘Rational choice’ theory goes on arguing that human beings are also rational by their very nature with the exceptional capacity of calculating their costs and benefits in making any decisions of day-to-day life. This makes the presence of an interventionist government unwarranted. Meles also mentions the neoliberal argument for ‘competitive market’ as both pervasive and Pareto efficient where government intervention against this pillars means nothing but ‘socially rent-seeking activities.’
Meles does not accept the logic and rationales of this paradigm. Firstly, he underscores that the neo-liberal argument that human beings are by nature self-maximizing individuals is faulty. Secondly, he dismisses the argument that understands government created rent as necessarily socially wasteful as equal to the self-interested nature of the human individual. Thirdly, Meles attacks the thesis that the capitalist market is inherently Pareto optimal in that it rationally distributes and allocates resources among market actors fairly by itself. Generally, this argument for Meles Zeanwi, is excessively misguided and understandably reductionist. He particularly rejects rational choice approach in its attempts to equate ‘individual self-interest’ with the growth of capitalism by moving the government out of game. Starting from the neo-liberal argument on the positive relations between ‘self-interest and government inefficiency’, Meles’s stresses his own version as follows: Government created rent does not necessarily have to be socially wasteful. It becomes wasteful only if solely self-interest maximizing individuals use it to create wealth at the expense of society and only if the state is incapable of improving on the market- i.e. there are no market failures. The theory of solely self-interest maximizing individuals does not hold water.
Meles admits that society consists of both interested and non-interested individuals. He poses history, common everyday observation and theoretical analysis for justifying the presence of non-self-interested individuals as many as those who are self-interested. Thus, even the limited government of neo-liberal scholars, which Meles calls the ‘night watchman state’, could be a creation of both of these divergently interested individuals. Otherwise, if the entire government is a creation of solely self-interested individuals, that state for Meles is a dangerously corrupt institution existing and functioning only for the advantages of the leaders and decision makers.
At the same time, Meles suggests that the blend of these individuals could create a government that intervenes in the market for the benefit of the larger society.
Meles reasons out as follows:
….. An economy based on complex economic interaction such as a market economy requires a blend of self-interested and non-self-interested behavior: a blend of social and individual norms that maximize survival potential within an appropriate social context. In the absence of such norms, the state, if it can exist as a coherent corporate entity for any period of time, becomes predatory. A properly behaved night watchman state populated by solely interest maximizing individuals is thus a practical and theoretical impossibility.
For Meles, as for Hobbes, whether a human individual within a broader community setting and governance is self-interested or non-self-interested is an outcome of social training and societal influence through social values and norms. This is the function of language and communication bordering human nature from the animal world. Secondly, Meles holds that these values and norms are never always static and rigid inheritances.
They can be created, recreated, shaped and reshaped by human beings themselves in their struggle to live up to dynamic factors. Thus, thinking human nature out of the rules of social values and their dynamic nature is erroneous. Thirdly, Meles succinctly underlines that once communities create and set up these blends of social norms, values and rules they pass them to the wider community membership and future generations. Fourthly, Meles nails down that growth and development are therefore primarily social values and norms before they change into any form of material wealth and benefits.
What is the process of creating, disseminating and maintaining these growth-friendly social values and norms? Meles has an answer:
Creating the proper blend of norms, values and rules to reduce uncertainty and transaction costs is a critical factor in accelerated growth and development. The creation of such social values and norms is called social development or social capital accumulation. Social development is thus not only an essential element of development but also a critical instrument of accelerated economic growth. The accumulation of social capital, which plays such a critical role in accelerating economic growth, is a public good, which has increasing returns to scale.
Meles labels these development-motivating social values, rules and norms as ‘public good’ apparently for three definitional underpinnings. First, social values are generalized beliefs, principles and guidelines of an accelerated growth among the majority of the population. They include such positive values like strong love and habit of work, firm disposition toward self-confidence, self-reliance, continuous self-improvements, innovativeness, willingness to learn from others and to share ones experiences with other needy ones, saving, and so on. Second, social rules, on the other hand set standards and governing procedures in the struggle for accelerated growth like punctuality, planned engagements, commitments to the rules of do’s and undo’s agreed by the community, compliance with public laws and requirements, anti-corruption duties and restraints from ethically harmful activities and others. Third, by social norms, Meles must have meant the rules of restrictions and sanctions on members of the community and goverment who tend to break these rules and agreed standards of accelerated growth.
Meles Zenawi emphasizes again on the development of these positive social values for five practical reasons: firstly, the rules of these values are social infrastructures serving as a basic input for accelerated development as much decisive as roads, electricity telecommunications and so on. Secondly, once they grow, as the outlook of the majority, political systems and the relations between citizens and the government shall become adequately predictable, purposeful and trust building. Thirdly, positive social values and norms of development naturally have the lowest transaction cost as compared to other growth investments like technology and capital accumulation, which are structurally scarce for a starter economy. Fourthly, these values guarantee the sustainability of growth, as they are pervasive and permissive across the larger community. Fifthly, they serve both as necessary and sufficient conditions in a country to start growth from ground zero.
What one should ask here is how these social values develop in a society, which formerly severely lacked them? How could a community that was fighting bloody civil wars, suffering from ignorance, viewing poverty as a given condition and having little capital and resource adapt itself to these social values? Meles supplies the answers as follows:
It is, hence, undersupplied by the market and is subject to vicious and virtuous cycles. It is created by social activity by civic engagement in the context of horizontal and dense networks and inculcated and sustained through modeling, socialization and sanctions. The state plays a critical role in social capital accumulation through undermining patronage networks and promotion of fairness and equity, through the promotion of participation and democracy, and through appropriate sanctions and efforts at socialization.
According to Meles, the neo-liberal paradigm, which suggests a non-activist and non-interventionist state, a night watchman state, is structurally limited to undertake these grand projects in developing societies. The neoliberal paradigm fails to achieve these goals because its own outlook bends its attentions out of direction from the human side to the material side of growth. It practically leaves these communities to adapt themselves to serving self-interests in a non-existent free market.
Meles uses differing phrases to represent the kind of government and society ruled solely by self-interested individuals. He, for example, uses ‘rent-collecting state, predatory government, system of patronage, patrimonial state’ and so on. All these, one way or another, refer to ‘kleptocractic rule’ or government by thieves. Meles’s explanations agree with modern thoughts of ethical philosophy in many different ways. Government theft’, for example, does manifest itself not only in abusing public authority for the fulfillment of ‘individual self-interest’ but also in undermining the spirits of non-self-interested individuals, coalitions and officials in the name of law, free media, democracy and so on--cynicism. It is also consistent with Meles’s generalized idea that while non self-interestedness the rule of self by the individual from within—intrinsic control, self-interestedness is a rule by extrinsic appetites like material temptations. .
The remaining task, therefore, for the post-Meles generation of government officials across the entire public sector, the ranks of the ruling party, and even opposition parties is to answer the question boldly for oneself: ‘where am I standing?’
Habtamu Alebachew, Ethiopia: Meles Zenawi’s Version of ‘Self-interest’ and Capitalist Development