August 6, 2009
In a recent article titled “The dangerous hype about ECX” which appeared on addisvoice.com, Dr. Seid Hassan takes both the Ethiopian Commodity Exchange (ECX) and Dr. Elleni Gebre Medhin—its founder and CEO--to task for an extraordinary failure to provide evidence on how the ECX is supposed to improve the fortunes of the Ethiopian peasantry and the economy overall. Dr. Hassan has outlined, what I think are the attributes of a free market economy, that if present, would form the necessary conditions for a successful exchange.
Among the factors that he lists as necessary conditions include: Transparency, Market Information, Availability of Credit, Transportation, Storage facilities, and Regulation.
To be sure, each of these factors are crucial to the success of the ECX both operationally as well as in garnering the support and confidence of the stakeholders. I commend Dr. Hassan for raising them as crucial issues that need to be addressed appropriately not just by the ECX but also by the regulatory bodies within the country.
Dr. Hassan’s criticism, and I must add, concerns regarding the ECX arise from his viewing of a documentary on PBS that aired in the United States about a week or two ago. In the interest of full disclosure, I have not had a chance to see the documentary; and though I have met Dr. Elleni Gebre Medhin once at a conference around 2000, I have only had an exchange of e-mails with Dr. Hassan.
Though Dr. Hassan has made a very significant contribution in his essay, I was sadly disappointed with his unwarranted and emphatic conclusions. And in making his conclusions so vehemently, absolutely and so generally, Dr. Hassan undermined the true essence of an otherwise very good essay.
For example, Dr. Hassan states that “let it be known that no commodity exchange will work (let alone function and assist the 82 million Ethiopians) without transparency and accountability”.
Surely, the issue of transparency and accountability is of the utmost essential for the smooth operation of an exchange and the confidence it must garner with stakeholders. Nevertheless, we have also witnessed failures in the most developed of countries where transparency and accountability were not completely assured in all instances. In addition, Dr. Hassan has not provided any evidence that such is the case with the ECX.
Further, Dr. Hassan concludes that: “We believe there are better ways to feed starving Ethiopians, currently over ten million of them being dependent international food aid.” The CEO of the ECX surely did not guarantee that all Ethiopians would be fed with the establishment of the ECX---that is certainly not the goal. If the ECX can help farmers alleviate the problems they face with storage, transportation, and market information, most of them will view that as success given the extant conditions in the country. In addition, Dr. Hassan does not spell out what other “better ways” there are to feed those who are in need.
Here again, Dr. Hassan makes the point that “Let it be known that a commodity exchange, no matter how glittery it may seem, will not work in a malaise economy and with people under increasingly grinding poverty.” The trouble with this conclusion is that it is possible to have a glittery exchange market along with grinding poverty—they are not mutually exclusive. Come to the South side of Chicago, go to Appalachia, or some other parts of the world like Nairobi, Kenya, and you might be able to witness glittery operations along with grinding poverty. Poverty is a relative concept, and understood in this manner, mankind will never be able to get rid off it completely!!
Further, Dr. Hassan states that “Let it be known that there is no true commodity exchange in a country where group of people who claim to represent a minority ethnic group, who have illegally transferred the means of production to themselves and the parastatals they fully control”. I cannot disagree too much with the conclusion here given the qualifiers “ethnic group” and “illegally”. Yet one wonders what views Dr. Hassan holds of the Chicago Board of Trade, the New York Stock Exchange and the several Exchanges around the world including those in South Africa and Kenya.
Having made other sweeping conclusions, Dr. Hassan ends his essay with the following remark “Let it be known that those who are a part of this process, including those at the helm of the ECX will be accountable for what they have done to Ethiopia and its people.”
What I thought began as a very useful contribution to the discussion on how to improve the ECX and make it more effective as well as efficient ended up in a state of posturing and political diatribe—unnecessary at best, and perhaps mean spirited at worst. We should not be required to like or approve what the government has done or what individuals of goodwill and foresight have attempted to do to improve the performance of the Ethiopian economy. Dr. Elleni Gebre Medhin is making a contribution that none of the rest of us were willing to tackle. She has, and will continue to face, enormous obstacles now and in the future. Her efforts to help bring about market efficiency in a country with the conditions such as those in Ethiopia should garner her respect and encouragement instead of scorn and veiled threats. While the rest of us occupy wonderful positions out here in the West and talk about the future, Dr. Elleni has concluded that the future is now, and she is determined to make her contributions in the best way that she believes she can.
The author resides in the United States and may be reached at email@example.com