Market Ideas vs. Interventionist Ideas
After researching the status of Ethiopia as a developing nation and why it became one and remains one today, it appears that Ethiopia uses a
combination of market-led strategies and interventionist strategies. Some of Ethiopia’s policies and actions favor minimizing the role of the government in
order to maximize the free operation of demand and supply in markets, these being the market based policies. For example, in order to promote economic growth and development through trade, Ethiopia utilizes export-led growth. This is seen through the Ethiopian Export Promotion Agency, which works to increase
“the international competitiveness of Ethiopia’s export commodities in the international market.” The EEPA also ensures development that is sustainable
through working with exporters and also provides training, improved service of delivery system, current trade information, and product and market research
(Export). Through this export-led growth strategy, exports are concentrated upon to increase revenue, which in turn should lead to an increase in GDP and
subsequently higher incomes. Growth in domestic and exporting markets would follow. This increase in revenue could then be used to provide essential
services for development. Also, there has been trade liberalization by the government in the form of reducing tariffs, which would increase demand for
Ethiopia’s exports and lead to economic growth and development (Aredo). However, Ethiopia also uses some policies that involve an active role by the government, interventionist based policies. This is because Ethiopia is serious lacking the provision of education, health care, infrastructure, etc. and these would not be provided by market forces, especially to the poor. The Ethiopian government uses foreign direct investment and aid to increase road density, and provide
more education and health care to its citizens, increasing economic development.
Instead of following only one approach, Ethiopia combines the two, which is beneficial to Ethiopia because it tailors the strategies to Ethiopia’s
individual needs. There are negatives to both strategies. A pure market-led approach makes it unlikely that infrastructure will be created, but a pure
interventionist approach may lead to higher levels of inflations as a result of an increase in the money supply by the government, government spending could put
the economy into a deficit, and that it could create inefficiency. Currently, a combination of the two would be beneficial to Ethiopia because while there are
problems in each, the other approach helps make up for the problems in the other. For example, a market-led approach does not really create agriculture,
but an interventionist government would be able to help provide that. In the future the government of Ethiopia could probably move more towards a more
market-based approach as the country becomes more developed, but for now a combination of the two, where one makes up for what the other lacks, most helps
the economy in terms of economic growth and development.
After researching the status of Ethiopia as a developing nation and why it became one and remains one today, it appears that Ethiopia uses a
combination of market-led strategies and interventionist strategies. Some of Ethiopia’s policies and actions favor minimizing the role of the government in
order to maximize the free operation of demand and supply in markets, these being the market based policies. For example, in order to promote economic growth and development through trade, Ethiopia utilizes export-led growth. This is seen through the Ethiopian Export Promotion Agency, which works to increase
“the international competitiveness of Ethiopia’s export commodities in the international market.” The EEPA also ensures development that is sustainable
through working with exporters and also provides training, improved service of delivery system, current trade information, and product and market research
(Export). Through this export-led growth strategy, exports are concentrated upon to increase revenue, which in turn should lead to an increase in GDP and
subsequently higher incomes. Growth in domestic and exporting markets would follow. This increase in revenue could then be used to provide essential
services for development. Also, there has been trade liberalization by the government in the form of reducing tariffs, which would increase demand for
Ethiopia’s exports and lead to economic growth and development (Aredo). However, Ethiopia also uses some policies that involve an active role by the government, interventionist based policies. This is because Ethiopia is serious lacking the provision of education, health care, infrastructure, etc. and these would not be provided by market forces, especially to the poor. The Ethiopian government uses foreign direct investment and aid to increase road density, and provide
more education and health care to its citizens, increasing economic development.
Instead of following only one approach, Ethiopia combines the two, which is beneficial to Ethiopia because it tailors the strategies to Ethiopia’s
individual needs. There are negatives to both strategies. A pure market-led approach makes it unlikely that infrastructure will be created, but a pure
interventionist approach may lead to higher levels of inflations as a result of an increase in the money supply by the government, government spending could put
the economy into a deficit, and that it could create inefficiency. Currently, a combination of the two would be beneficial to Ethiopia because while there are
problems in each, the other approach helps make up for the problems in the other. For example, a market-led approach does not really create agriculture,
but an interventionist government would be able to help provide that. In the future the government of Ethiopia could probably move more towards a more
market-based approach as the country becomes more developed, but for now a combination of the two, where one makes up for what the other lacks, most helps
the economy in terms of economic growth and development.