Editing Economy of Ethiopia (section)

== History ==

{{Main|Economic history of Ethiopia}}

[[File:GDP per capita development of Ethiopia.svg|thumb|Development of GDP per capita]]
Ethiopia's resources have enabled the country—unlike most [[sub-Saharan Africa]]n countries—to maintain contacts with the outside world for centuries.<ref name=":0">{{citation-attribution|1={{cite encyclopedia|title=Ethiopia: a country study|publisher=[[Federal Research Division]], [[Library of Congress]]|location=Washington, D.C.|url=https://www.loc.gov/item/92000507/|last=Wubneh|first=Mulatu|date=1993|editor-last=Ofcansky|editor-first=Thomas P.|edition=4th|pages=146–150|isbn=0-8444-0739-9|oclc=25869403|editor-last2=Berry|editor-first2=LaVerle|entry=The Economy}}}}</ref> Since ancient times, Ethiopian traders exchanged gold, [[ivory]], [[musk]], and wild animal skins for salt and luxury goods, such as silk and velvet.<ref name=":0" /> By the late nineteenth century, coffee had become one of Ethiopia's more important cash crops.<ref name=":0" /> At that time, most trade flowed along two major [[trade route]]s, both of which terminated in the far southwest in the Kefa-Jima region.<ref name=":0" /> From there, one route went north to Mitsiwa via [[Gondar|Gonder]] and Adwa, the other along the [[Awash River]] valley to [[Harar|Harer]] and then on to [[Berbera]] or [[Zeila]] on the [[Red Sea]].<ref name=":0" />

Ethiopia lost its status as a great trading state after the fall of [[Axum]].<ref name=":0" /> Most Ethiopians came to despise traders, preferring instead to emulate the country's legendary warriors and priests.<ref name=":0" /> After establishing a foothold in the country, Greek, [[Armenians|Armenian]], and Arab traders became the economic intermediaries between Ethiopia and the outside world.<ref name=":0" /> Arabs also settled in the interior and eventually dominated all commercial activity except petty trade.<ref name=":0" />

When their occupation of Ethiopia ended in 1941, the Italians left behind them a country whose economic structure was much as it had been for centuries.<ref name=":0" /> There had been some improvements in [[communication]]s, particularly in the area of road building, and attempts had been made to establish a few small industries and to introduce [[commercial farming]], particularly in Eritrea, which Italy had occupied since 1890.<ref name=":0" /> But these changes were limited.<ref name=":0" /> With only a small proportion of the population participating in the monetized economy, trade consisted mostly of barter.<ref name=":0" /> [[Wage labour|Wage labor]] was limited, economic units were largely self-sufficient, [[foreign trade]] was negligible, and the market for manufactured goods was extremely small.<ref name=":0" />

During the late 1940s and 1950s, much of the economy remained unchanged.<ref name=":0" /> The government focused its development efforts on expansion of the [[Bureaucracy|bureaucratic]] structure and ancillary services.<ref name=":0" /> Most farmers cultivated small plots of land or herded cattle.<ref name=":0" /> Traditional and primitive farming methods provided the population with a [[Subsistence economy|subsistence standard of living]].<ref name=":0" /> In addition, many [[Nomad|nomadic peoples]] raised livestock and moved seasonally in drier areas.<ref name=":0" /> The agricultural sector grew slightly, and the [[Industrial sector in Ethiopia|industrial sector]] represented a small part of the total economy.<ref name=":0" />

By the early 1950s, [[Haile Selassie|Emperor Haile Selassie I]] (reigned 1930–74) had renewed calls for a transition from a subsistence economy to an agro-industrial economy.<ref name=":0" /> To accomplish this task, Ethiopia needed infrastructure to develop resources, a material base to improve living conditions, and better health, education, communications, and other services.<ref name=":0" /> A key element of the emperor's new economic policy was the adoption of centrally administered [[Urban planning|development plans]].<ref name=":0" />

The First Five-Year Plan (1957–1961) sought to develop strong infrastructure, particularly in transportation, construction, and communications, to link isolated regions.<ref name=":0" /> The Second Five-Year Plan (1962–1967) signaled the start of a 20-year program to change Ethiopia's predominantly agricultural economy to an agro-industrial one.<ref name=":0" /> The Third Five-Year Plan (1968–1973) also sought to facilitate Ethiopia's economic well-being by raising [[manufacturing]] and agro-industrial performance.<ref name=":0" /> However, unlike its predecessors, the third plan expressed the government's willingness to expand educational opportunities and to improve peasant agriculture.<ref name=":0" />

During the First Five-Year Plan, the [[gross national product]] (GNP) increased at a 3.2 percent annual rate as opposed to the projected figure of 3.7 percent, and growth in economic sectors such as agriculture, manufacturing, and mining failed to meet the national plan's targets.<ref name=":0" /> The Planning Commission never assessed the performance of the Second Five-Year Plan and Third Five-Year Plan, largely because of a shortage of qualified personnel.<ref name=":0" /> However, according to data from the Ethiopian government's Central Statistical Authority, during the 1960/61 to 1973/74 period the economy achieved sustained [[economic growth]].<ref name=":0" /> Between 1960 and 1970, Ethiopia enjoyed an annual 4.4 percent average growth rate in per capita gross domestic product (GDP).<ref name=":0" /> Relative to its neighbors, Ethiopia's economic performance was mixed.<ref name=":0" />

By the early 1970s, Ethiopia's economy not only had started to grow but also had begun to diversify into areas such as manufacturing and services.<ref name=":0" /> However, these changes failed to improve the lives of most Ethiopians.<ref name=":0" /> About four-fifths of the population were subsistence farmers who lived in poverty because they used most of their meager production to pay taxes, rents, debt payments, and bribes.<ref name=":0" />

The [[Ethiopian Civil War|1974 revolution]] resulted in the [[nationalization]] and restructuring of the Ethiopian economy.<ref name=":0" /> After the revolution, the country's economy can be viewed as having gone through four phases.<ref name=":0" /> Internal political upheaval, armed conflict, and radical [[institutional reform]] marked the 1974-78 period of the revolution.<ref name=":0" /> There was little economic growth; instead, the government's nationalization measures and the highly unstable [[political climate]] caused economic dislocation in sectors such as agriculture and manufacturing.<ref name=":0" /> As a result of these problems, GDP increased at an average annual rate of only 0.4 percent.<ref name=":0" />

In the second phase (1978–1980), the economy began to recover as the government consolidated power and implemented institutional reforms.<ref name=":0" /> More important, security conditions improved as internal and external threats subsided.<ref name=":0" /> GDP grew at an average annual rate of 5.7 percent.<ref name=":0" />

In the third phase (1980–1985), the economy experienced a setback.<ref name=":0" /> Except for Ethiopian [[fiscal year]] (EFY) 1982/83, the growth of GDP declined.<ref name=":0" /> Manufacturing took a downturn as well, and agriculture reached a crisis stage, particularly due to drought that lead to widespread [[famine]].<ref name=":0" />

In the fourth period (1985–1990), the economy continued to stagnate.<ref name=":0" /> GDP and the manufacturing sector also grew during this period, GDP increasing at an average annual rate of 5 percent.<ref name=":0" /> However, the lingering effects of the 1984-85 drought undercut these achievements and contributed to the economy's overall stag.<ref name=":0" />

Since 1991, the Ethiopian government has embarked on a program of economic reform, including privatization of state enterprises and rationalization of [[government regulation]].<ref>{{Cite book|last1=Seid|first1=Yared|last2=Taffesse|first2=Alemayehu S.|last3=Ali|first3=Seid Nuru|date=8 November 2016|title=Ethiopia—an agrarian economy in transition|url=https://books.google.com/books?id=sNyACwAAQBAJhttps|language=en|publisher=Brookings Institution Press|isbn=9780815729501|oclc=961309230|work=Africa's Lions: Growth Traps and Opportunities for Six African Economies}}{{Dead link|date=March 2024 |bot=InternetArchiveBot |fix-attempted=yes }}</ref> While the process is still ongoing, the reforms have attracted [[foreign direct investment]].

In 2015, Ethiopia has 2,700 millionaires, a number that has more than doubled since 2007. Their fortunes are mainly built-in niches of [[economic rent]]s (banks, mines, etc.) without investing in structural and strategic sectors (industrial production, infrastructure, etc.) and should in no way promote economic development or represent a source of [[competition]] for Western multinationals.<ref>{{Cite web|url=https://www.monde-diplomatique.fr/2017/11/PIOT/58045|title=Rencontre Avec Les pionniers de l'" anticapitalism "|first=Olivier|last=Piot|date=1 November 2017|website=Le Monde diplomatique}}</ref>

The Ethiopian government is stepping up its efforts to attract foreign investors, particularly in the textile sector. They can now import their machines without customs duties, benefit from a [[tax exemption]] for ten years, pay rents much lower than market prices, and use very inexpensive water and electricity. Major brands have established themselves in the country, such as Decathlon, H&M, and Huajian. These companies also benefit from a cheap labor force, with a monthly salary of around 35 euros. Finally, trade agreements between Ethiopia and the European Union allow them to export duty-free.<ref>{{Cite web|url=https://mondediplo.com/2019/04/06ethopia-box|title=Going for textiles|first=Christelle|last=Gérand|date=1 April 2019|website=Le Monde diplomatique}}</ref>