Ethiopia’s economy flourishes, Sudan’s is left unchanged: Is that due to a lack of colonial heritage?

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Ethiopia’s economy flourishes, Sudan’s is left unchanged. Is that due to a lack of

colonial heritage?

Guus Boumeester S1659472

Bachelor Thesis – Political Science 2018/2019 Supervisor: Dr. De Zwart

Date of submission: 17 June 2019 Word count: 8375

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Table of content

Introduction

Methods and design

Theoretical framework

4. Ethiopia's growing unrest and change of power 1991

4.1 Development of inclusive political institutions after 1991

4.2 Engines to prosperity: infrastructure and educational developments

4.3 Growth and creative destruction

5. Never ending vicious circle in Sudan?

5.1 Patronage control and oppression after the critical juncture in Sudan

5.2 The resource curse of Sudan

5.3 Infrastructure, education and creative destruction in Sudan

6. Comparing two cases: Sudan and Ethiopia

6.1 Historic trial and error a root to Ethiopian success?

6.2 Education the key to success?

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Introduction

As if a perfect storm had been avoided, the Ethiopian people celebrated the appointment of Abiy Ahmed as prime minister in 2018. Abiy Ahmed, a former intelligence officer, was a much-needed change in power. Just two years before violent protests had spread across Ethiopia. There were people protesting against the human rights violations of the Ethiopian government and wanting more rights for ethnic minorities such as the Oromo and the

Amhara (Briggs, 2018, p. 40). With the appointment of Abiy Ahmed, a member of the Oromo minority, political changes quickly followed, with 8000 political prisoners being freed in just two months by Abiy Ahmed government (Briggs, 2018, p. 42). Alongside political changes, Ethiopia has recently shown enormous economic growth. Partly because Abiy Ahmed has started to reform the Ethiopian economy and its institutions. These economic reforms in Ethiopia have had its effect, with a average of 10,5% GDP growth from 2004 to 2016 (World Bank, GDP growth, 2017). This is significantly higher than in other countries in Africa with the same natural resources and geography, such as Sudan.

In contrary to Ethiopia, Sudan has had little economic progress and institutional development in recent years. Koert Lindijer reported in his article ‘After new military coupe, threat of

internal military struggle rises’ (13 April 2019), that Sudan’s political unrest has seen little

change in the last 30 years and new conflicts are imminent. The current political system in Sudan is a continuation of the so-called ‘patronage system’, a system that had been in place since the colonisation of Sudan. This was a system in which institutions were corrupted by the patronage of the elite, creating extractive political institutions with meager benefit for its civilians (De Waal, 2017, p. 16). The patronage system exploited the country's oil reserves, forging an economy largely based on oil exports. The focus on oil only benefited members of

4 the patronage system and created little incentive for other economic sectors to be developed (De Waal, 2017, p. 17).

In this thesis our research question is: why has Ethiopia’s economy experienced such an enormous growth and Sudan’s has not? Even though they share many similar

characteristics such as: geography, natural resources, same land fertility rate and life expectancy (index mundi, 2013). In order to look at the difference in economic growth in Sudan and Ethiopia, the theory of historic institutionalism will be used. Historic

institutionalism is a social science theory, which is interested in how certain opportunities and constraints shape institutions over a period of time (Fioretos, 2011, p. 371). This allows us to see how institutions in Ethiopia have developed to promote economic growth and Sudan’s institutions have not.

In order to answer our research question, the difference in institutional development in Ethiopia and Sudan during and after two different critical junctures will be compared. This enables us to see how and why institutions in Ethiopia and Sudan change during and after critical junctures to become more or less favorable towards economic development. Critical junctures are described by Acemoglu and Robinson (2012, p. 110) as “major events that disrupt the existing political and economic balance in one or many societies”. Critical

junctures are interesting moments in time since they provide options for institutional change, but do not necessarily mean that change will take place (Capoccia, 2016, p. 3). States react differently during these critical junctures because of their differences in institutional

development throughout history, a process called institutional drift.

This is a process in which small decisions that are made at some point in time, can influence the institutional pathway for years, but it can also have no influence at all (Acemoglu &

5 Robinson, 2012, p. 108). It is therefore imminent that all states experience some other form of institutional drift, since no decision process is the same and all states have diverging reaction to decision, influences and other factors (Acemoglu & Robinson, 2012, p. 108).

These critical junctures are also interesting because it gives us the opportunity to see how historic influential preferences and factors affect the process of institution making, in a situation that creates the possibility for institutional change (Capoccia, 2016, p. 3). The historic factor that is especially interesting, is the role of colonial heritage in the institutional development of these nations. Since Sudan was colonized and Ethiopia was not, our hypothesis is the a lack of a colonial heritage is the reason behind Ethiopia’s economic success.

The first critical juncture that we chose is the fall of the communist regime in Ethiopia between 1991-1995. This specific critical juncture has been chosen because it can be seen as a turning point in Ethiopia's history. Ethiopia had been a very troubled nation before the fall of the communist regime, with famine, conflict and underdevelopment being widespread (De Waal, 2018, p. 80). Though, after the 1991-1995 fall of the communist regime, Ethiopia has experienced enormous economic growth and institutional change, such as more human rights and media freedom.

The second critical juncture is the recent independence of South Sudan in 2011. This critical juncture was chosen because the independence of South Sudan has had the opposite effect in Sudan as opposed to the critical juncture in Ethiopia. The independence of South Sudan has not positively affected the Sudanese economy, resulting in no real significant economic growth (World Bank, 2018, GDP growth). Sudan has had little economic growth in the last years and this did not change after the independence with South Sudan (Bereketeab, 2015,

6 p. 5). Corrupt institutions, alongside a debt that bigger than its GDP, are signals that

economic development is not to be expected in the coming years (Elbeely, 2015, p. 4). Alongside the lack of economic growth, Sudan has seen a decline in human and media rights (World Press Index, 2019).

In the next chapters the differences in institutional development at the time of and after these critical junctures will be clarified, in order to see how institutions in Ethiopia were able to change and promote economic growth in Ethiopia, whereas the opposite happened in Sudan. In the last chapter, the cases of Sudan and Ethiopia will be compared, to see how the lack of colonialism has enabled economic growth in Ethiopia and prohibited growth in Sudan.

Methods and design

To address the research question in this thesis, a proper research design must be chosen. Mouton and Marais (1990, p. 32) describe a research design as “to align the pursuit of a research goal with the practical considerations and limitations of the project’. Furthermore, a research design will be used to form a coherent methodological frame since we have to be careful with making assumptions in our research (Shugan, 2007, p. 458). The aim of our research question, as mentioned in the introduction, is to find the reason behind the recent economic growth in Ethiopia and lack thereof in Sudan. The hypothesis is that this is due to an absence of colonial roots.

To form a correct logical frame for our case study, a most similar systems design will be used, one must observe the similarities between the two countries; geography, natural resources, same land fertility rate, life expectancy, school life expectancy, and child death ratios (Index Mundi, 2013). Though the countries are very similar, there are two

7 differentiating variables. The first being the recent economic (1995-) growth in Ethiopia, which has not taken place in Sudan, which will be our dependent variable. The second being their colonial institutional heritage, which is absent in Ethiopia and will be our one

independent variable on which the cases differ.

In this thesis a small N case study was used because our hypothesis is very complex, therefore a method of research is needed that allows us to explore and understand this complex problem. According to Zainal (2007, p. 1), the ideal method to describe such complex problems is a case study. In our case study we will compare the differences in institutional developments during and after two critical junctures in Ethiopia and Sudan, to uncover if Ethiopia’s recent economic growth is due to a lack of colonial heritage.

In order to do our research literature research will be used. Literature research makes it possible to go into great depth in specific cases and thus get extensive amounts of information. Literature research is a very good way to look at variables that can not necessarily be quantified (Mouton & Marais, 2012, p. 207). In our comparative case study institutional concepts such as human rights and media freedom must be taken into account. These concepts are hard to quantify and therefore qualitative research seems to be the ideal approach, since a good understanding of these concepts is needed to see if these

institutional concepts change during or after critical junctures (Merry, 2016, p. 164).

Theoretical framework

In this thesis we will inquire how institutions in Ethiopia have recently developed to promote economic growth and institutions in Sudan have not, after and during the before mentioned critical junctures. The concept institution is defined as:

8 The rules of the game in society or, more formally, are the humanly devised

constraints that shape human interaction. In consequence they structure incentives in human exchange, whether political, social, or economical. (Hodgson, 2006, p. 9)

In order to see institutional differences in our thesis, we will look at changes in political regimes, human rights, entry to education, economic inclusiveness, developments in technology, education and infrastructure and privatization of the economy during the period of these critical junctures. In order to do this, we must look at the developments and

realizations of human rights laws, media freedom laws and educational laws that were implemented by both countries in time and after the critical junctures. We will also look at regime differences, by looking at who profits from the regimes being upheld in both countries. Then we look at the changes in investments in infrastructure, education and technology. After that we will look at changes in economic inclusive laws and policies, such as laws promoting a competitive market, creative destruction and laws that promote

privatization.

Finally we will show that the current difference in economic development in Sudan and Ethiopia during and after these critical junctures, can be seen as a result of colonial heritage. Having a colonial heritage affects how institutional development takes place within a country (Acemoglu & Robinson, 2012, p. 110). This has caused for an important difference in

institutional drift in Ethiopia and Sudan, since the institutional process in Ethiopia has not been affected by a coloniser. Suggestion of a relationship between development and colonisation has been widespread within the field of historic institutionalism.

9 For example, theorists like Acemoglu and Robinson (2012), Tadei (2014), Rodney (1973), and Kpessa (2012) show the relationship between colonial heritage and the

underdevelopment of nations. Acemoglu and Robinson (2012) show that the boom of the slave trade was the first reason that extractive institutions were created in colonized countries. Extractive institutions are political or economic institutions that not everyone can participate in. Extractive institutions are not favourable for economic development, since they extract wealth and power from the population, to benefit elitist regimes (Acemoglu &

Robinson, 2012, p. 79). The institutions that do promote development are called inclusive institutions, these are institutions that allow and promote participation by the mass of the people in economic institutions and are pluralistic in political sense (Acemoglu & Robinson, 2012, pp. 79-81). Examples of inclusive institutions are having private property rights and having institutions that promote a broad distribution of power.

Before the colonization period, little hierarchy or authority had existed within most African nations, thus little centralized institutions were in place, except for in Ethiopia which had been centralized during the reign of Menelik II around 1880 (Tibebu & Kane, 1995, p. 46). This changed rapidly when the slave trade commenced, African countries were centralized by the European states to make the slave trade as efficient as possible. This process of centralization paradoxically caused the opposite effect: nations were broken down leaving no authority whatsoever (Acemoglu & Robinson, 2012, pp. 253-255). Sudan is a prime example of how colonisation broke down native institutions and replaced them with extractive

institutions. Sudan’s native institutions were based on centuries old tribal structures, which differed regionally. These were replaced by extractive centralized trade-networks by the Egyptians and British, which only focused on economic gain for the colonizer, thereby destroying Sudan’s native institutions (Large, 2012, p. 274).

10 Colonisation not only destroyed native institutions. Acemoglu and Robinson (2012) cite technology, alongside education and infrastructure, as the most important drivers for prosperity. Yet, technology cannot always develop within countries (Acemoglu & Robinson, 2012, p. 271). Colonialism for one denied African states to technologically develop,

extractive political institutions were created through which the local population were exploited to benefit the West. These states often have backward extractive agricultural institutions, institutions based on communal property rights and inefficient use of labour (Acemoglu & Robinson, 2012, p. 258). Colonial powers were also not interested in promoting education since it would not benefit themselves. The historic lack of education in countries such as Sudan can still be seen today as only 57% of children go to primary school as of 2015, compared to 85% in Ethiopia (World Bank, 2015, primary school enrollment). Just as education, infrastructure was only built by colonial powers for economic purposes, which resulted in limited investments in infrastructure in colonies. Opposingly, Ethiopia’s

infrastructure developed during this time, the creation of Ethiopian airlines in 1945 being its biggest success (Adejumobi, 2007, p. 154).

So why did these colonial institutions not change after these states became independent? To explain this, the works of Pierson (2000) and Kohli (2004) will be used. First of all, Kohli (2004, p. 411) notes that state institutions, such as state legislatures, are very rigid and powerful organizations, which were often controlled by people who did not have enough power to change them. The governments, left by the colonial powers often did not have a majority backing from its population, often causing huge social, political and economic divides.

Kohli (2004, p. 414) sums up the three main contributors to institutional change in

11 military and national movements caused short term institutional change, they are rarely able to change the institutions for good (Kohli, 2004, p. 415). Which means that according to Kohli (2004), colonization is the biggest factor in institutional change. This might not be surprising since the colonial powers used preponderant force to gain control over their colonies, imposing their preferred form of ruling, which created new long term organisations and new class alliances (Kohli, 2004, p. 415). After gaining independence from colonizers, military forces and nationalists often tried to change these institutions, though with little success, since they would eventually keep these extractive regimes in place (Mehta, 2011, p. 145). To understand the way in which these colonial rigid extractive institutions were kept in place, we must look at a concept called path dependency. Path dependency makes it difficult to reverse the decision process, and to move on to another ‘path’ since returns increase when staying on the same path (Pierson, 2000, p. 252). This means that the ‘switch’ to another path might be more costly than staying on the same path.

The reference to the theory of path dependence, with its emphasis on the mechanisms through which institutional arrangements become entrenched, not only gives us a more robust reason to examine critical junctures, it also shows that distant decisions and

processes can have long lasting effect on institutional development, making critical junctures a point in time were historical and contemporary factors both form institutions (Capoccia, 2016, p. 5).

This can be used in the continuity of extractive institutions in states with colonial heritage like Sudan, to see that even though some decisions are meant to cause path departure, most of the time they resuscitate old extractive institutions (Kpessa, 2012, p. 2). In the next chapters: we start by looking at both the critical junctures and see how institutions changed during and after these critical junctures, to see why Ethiopia has experienced economic growth and

12 Sudan has not. Then we will compare their differences and look at colonialism as the root cause for such differences.

4. Ethiopia's growing unrest and change of power 1991

In May 1991, the Ethiopian People’s Revolutionary Democratic Front (EPRDF) established a transnational government and ended the Marxist-Leninist regime of Mengistu Haile Mariam (Allen, 1993, p. 445). The Ethiopian People’s Revolutionary Democratic Front (EPRDF) was able to overthrow the communist regime because it was backed by many different groups and the communist state had lost its backing from the communist Soviet Union. In 1991 the institutions in Ethiopia were wretched, with as main problem the tremendous famine that had spread through Ethiopia in the 70’ and 80’. The famine partly arose from poor environmental conditions, such as drought, but was mostly due to a new communist institutional change that was called ‘villaging’. It was an unbelievably inefficient system in which farmers were placed together in villages in order to save resources, which caused some farmers to be separated from their own crops (Allen, 1993, p. 446). This then prompted farmers to walk 3-4 hours a day to look after their crops, a highly inefficient extractive institutional development. This was an extractive institutional change because it saw the nationalisation of all rural property in Ethiopia (Weldegebriel, 2012, p. 4). These new agricultural institutions were not the only thwart for economic development. Ethiopia had always been an ethnic diverse country but between 1980-1990, the civil war in the Eritrea province caused many economic and political problems (Allen, 1993, p. 446). The Eritrea conflict was not the only conflict within Ethiopia at this time, the Ethiopian people continually protested for more inclusive institutions such as; media freedom, a civil society and freedom of speech, but the elitist socialist Ethiopian government answered with violence (Brüne, 1990, p. 190).

13 In most extractive countries, a long vicious circle of underdevelopment can be seen. A concept that Acemoglu and Robinson (2012, p. 430) use to reason why extractive

institutions in undeveloped countries, tend to keep in line with this trend. This vicious circle is kept in place because new elitist leaders who attain power are often inclined to follow the same institutional paths as the previous regime has, since these are the existing institutions and are profitable towards the elite (Acemoglu & Robinson, 2012, p. 364). So, how has Ethiopia been able to transform these institutions, when it seemed more likely that the Sub-Saharan state would stay one of the most impoverished countries in the world?

4.1 Development of inclusive political institutions after 1991

With the change of power in 1991, a critical juncture appeared in Ethiopia which would set course for a more inclusive future, albeit slowly. The fall of communist Ethiopia gave way to the creation of an ethnic federal state in 1995, with Meles Zenawi as prime minister.

Although far from perfect, one can argue that it was the best possible model for Ethiopia in 1991, after it had been destroyed by a communist elitist regime for years and was bitterly divided by ethnicity (Abbink, 2011, p. 597). Ethnic federalism gave an opportunity for various ethnic groups to have their say in a country that had been notoriously ruled by one ethnic group: The Amahars. The change to a more inclusive ethnic federal state was a huge step in developing institutions and the economy, since it gave opportunities to include the whole population, instead of just one ethnic group (Abbink, 2011, pp. 603-604).

In 1995 a new constitution was drafted, which for the first time included article 13, an article which gave Ethiopians basic human rights as stated in the United Nations declaration for human rights (Article 13, 1995, Constitution of Ethiopia). A very welcoming change after the immense violation of human rights under the communist regime of Mengistu Haile Mariam. Not only have human rights improved as of late, but the Ethiopian press have substantially

14 had more influence and freedom than ever before, as data from Reporters without borders suggests (2019). Having press freedom is a key aspect to economic development since it can provide critical feedback to certain policies, which can then be altered to create more economic gain and be more inclusive to more people (Alam & Shah, 2011, p. 4). Press freedom also lowers the degree of corruption within a country, which is often a big issue within developing countries, so press freedom is necessary to battle this (Alam & Shah, 2011, p. 5).

4.2 Engines to prosperity: infrastructure and educational developments

The end of the civil war and the drafting of a new constitution in 1995 were also a catalyst for economic reforms in the following years. The change to more inclusive political institutions, is key in the development of economic institutions (Acemoglu & Robinson 2012, p. 102). The change of regime in 1991 had been backed by the majority of ethnic groups in Ethiopia, all wanting economic reforms in one way or another. This lead to the decentralisation of fiscal and administrative authority in Ethiopia. The decentralisation of these authorities were believed to result in a more equal distribution of materials and thereby resulting in less ethnic tension (Cohen, 1995, p. 158). Following the decentralisation, economic reforms were drafted with international help from the International Monetary Fund (IMF) and the World Bank. Under leadership of the EPRDF the interest rate was liberalized, giving more

competitive opportunities to banks and companies. It further introduced an interbank market for foreign exchange, thereby lowering the exchange rate for other currencies and promoting international competition and investments (Cohen, 1995, p. 158).

The critical juncture in 1991-1995 gave opportunity for such changes because the unsuccessful economic development during the communist regime had caused for a widespread famine in 1984. The famine in 1984 was the straw that broke the camel’s back,

15 causingthe Ethiopian People's Revolutionary Democratic Front (EPRDF) to form allies with three other ethnic parties in order to end the degrading communist regime and form an ethnic federal state in which more people could participate (Young, 1996, p. 535).

Albeit the first step to economic growth is having inclusive political institutions, three other facets further helped the process of developing inclusive economic institutions (Kohli, pp. 51-58). Firstly, the investment in education has been enormous since 1995, with 16,8% of the government spending being spent on education in 2004 (Saint, 2004, p. 88). This is important since education is seen as one of the motors of institutional change and has a positive effect on the economy (Acemoglu & Robinson, p. 78). Historically, education had been very important within Ethiopia, with emperor Menelik II promoting universal education as early as 1929 (Bishaw & Lasser, 2012, p. 55 ). This vision was shared by the socialist regime, but was eventually neglected because of costs. With the fall of the socialist regime and the creation of a more inclusive ethnic federalist state, education was once again developed (Bishaw & Lasser, 2012, p. 64). Reforms included schools getting more autonomy, gender-equality laws being implemented in education and entering primary school was made free of charge (Chicoine, 2018, p. 17). This resulted in a massive 9.3 million primary school students in 2003 as opposed to 2.8 million in 1991 (Bishaw & Lasser, 2012, p. 53).

Infrastructure is another important facet which induces institutional change. Together with technology and education, it can provide a stepping stone for institutional development. Infrastructural development in Ethiopia since 1995, has accounted for 0.6% GDP growth a year in Ethiopia (Foster & Morela, 2011, p. 1). The growth is created by the Ethiopian

government, who are investing huge sums of money in infrastructure, accumulating to about 10% of the GDP annually. The Ethiopian government has been investing in infrastructure in

16 order to promote an open market and enable trade with other neighbouring African nations. An example of such an infrastructural project is the ten-year road sector development program (RSDP), which was implemented in 1997. The programme oversaw the

construction of nearly 9000 km of roads in Ethiopia, which had a huge positive impact on trade (Gebreeyesus, 2013, p. 25).

4.3 Growth and creative destruction

The huge investments in education and infrastructure by the new ethnic federalist state of Ethiopia have had substantial successes on institutional development and economic growth. Though there is one more development that is associated with inclusive institutions that has been stimulated in Ethiopia since the critical juncture: creative destruction. Creative

destruction is a process in which the old replaces the new. Laws that promote creative destruction are considered to be a prime example of good functioning inclusive institutions, since they promote new technologies and the competitive market to be developed (Caballero & Hammour, 2000, p. 3). Most states with extractive institutions will be very careful with creative destruction, since it is a process that causes competition and makes it harder for incumbents to monopolize their extractive power (Caballero & Hammour, 2000, p. 19).

The reformed economic laws of 1991 had a strong impact on the process of creative destruction in Ethiopia. In cooperation with the World Bank and the IMF, Ethiopia started to (semi-)liberalize its industries. Prior to 1991 most Ethiopian industries had been protected from international competition by high import tariffs (Kragelund, 2019, p. 109). To illustrate what changed, we will look at the shoelace and shoe industry in Ethiopia prior to and after the fall of the communist regime. The shoelace and shoe industry in Ethiopia was quite big but had not developed at all in 1991. The industry was based on old production processes and relied purely on sheepskins, making it bitterly outdated. When the import tariffs were lowered due to liberal economic reforms in 1993, the Ethiopian shoelace and shoe industry

17 took a big hit. The Chinese shoe industry was technologically light years ahead and much cheaper, so when the tariffs were lowered, shoes were imported from China (Kragelund, 2019, p. 109).

The Ethiopian government reacted with more economic reform laws in 2002 called: The Ethiopian Industry Development Strategy (EIDS). A strategy that was aimed at letting Ethiopia take control over the whole production process of the shoe industry and other lacking industries (Oqubay, 2018, p. 11). This was an insightful reform, since production cost and wages were really low in Ethiopia. So, Ethiopia started to attract foreign capital in order to set up a wholesome shoe industry. Western countries passed on the opportunity, but China took the risk. What followed was a process of technological spillover and huge increases in shoe exports from Ethiopia to other countries. The production and export of shoes and laces has seen substantial growth after the 2002 reforms, with in 2016 the export of 2 million pairs of shoes to the United States alone (Dutter, 2017, p. 1).

The fall of the communist regime has created an inclusive influence on the institutions of Ethiopia, this might be due to the lack of colonial heritage. The old rigid and backward institutions have gradually been changing the last few years. Although change is slow, there is a positive drift within this African nation who has historically been one of the poorest in the world. We will now look at the second critical juncture of this thesis, to see how Sudan has kept extractive institutions in place even though they have a lot similarities with Ethiopia, then we will compare the two cases to see how colonialism is at the root of this difference.

5. Never ending vicious circle in Sudan?

As BBC reported in 2011, UN Secretary General Ban Ki-moon urged the international community "to assist all Sudanese towards greater stability and development”. So, 2011

18 looked to be a promising year for the 54th independent nation of Africa: South Sudan. After years of civil war and unrest, January 2011 marked the split between the mostly Christian South and the Arabic North. The independence of South Sudan was seen as the first step to a peaceful Sudan, after years of civil unrest and conflict.

The independence agreement stated that Sudan would continue under the leadership of autocratic leader Omar Al-Bashir and Salva Kiir Mayardit would become the leader of South Sudan. Sudan itself has seen constant conflict since it became an independent state in 1956, so after the 2011 independence of South Sudan, Sudan needed to develop its

economy and institutions to start a new pathway to economic growth. Unlike in Ethiopia, this did not happen. With the new state of South Sudan being formed, the critical juncture seemed to further deteriorate Sudan and its institutions. Struggling with enormous economic problems since 2011, Sudan has been on the verge of economic collapse. The economic troubles being worsened by the regional conflicts in the western province of Darfur (Sharfi, 2014, p. 316).

Under the dictatorship of Omar Al-Bashir Sudan and his National congress party (NCP), Sudan is on its way to becoming the most oppressed country in the world, just scoring 8/100 freedom points in the latest freedom house report (2019) and just 16/100 points on the corruption index. This has not changed since the independence of South Sudan. Fighting between the two countries and within each country has continued till this day. The military coup in Sudan a few weeks ago shows the instability of the country (Lindijer, 2019, 11 April). How is it possible that these institutions have followed the vicious circle of

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5.1 Patronage control and oppression after the critical juncture in Sudan

The critical juncture in 2011 gave opportunity for Sudan to reform its institutions and step away from years of violence and extractive political institutions. Whereas the critical juncture in Ethiopia caused political change, Sudan’s rigid path dependency with extractive

institutions stayed the same. Omar Al-Bashir had continued a historic absolutist regime which was ruled by a elitist patronage network, a network of high profile political figures who benefited from his extractive regime. The preservation of this vicious circle of power can be traced back to the colonial roots of Sudan (Lusignan, 2004, p. 6). The British rulers had focused all their efforts on the North of Sudan and neglected the South of Sudan, since the British felt that the South was not ready for the modern world, thereby excluding them from any economic and political developments (Lusignan, 2004, p. 6). This ‘divide and rule’ strategy resulted in a highly centralized government, mostly controlled by Arabic elites collaborating with British rulers, a system that Omar-al Bashir still keeps in place (Mann, 2014, p. 562).

The Sudanese regime has continually degraded human life and ignored human rights, with Omar Al-Bashir being held responsible for genocide in 2003 with respect to the conflict in Darfur, and being summoned to stand trial before the international criminal court (ICC) in The Hague for genocide and crimes against humanity (Al Bashir case, ICC, 4 March 2009). The critical juncture did not change anything in that respect. In 2017 the United States wrote a report on the once again deteriorating human rights in Sudan. The report accused the Sudanese government of: extrajudicial killings, torture, beatings, and other inhuman

treatment of its people, with Omar Al-Bashir being held accountable for these crimes (Sudan Human Rights report, 2017, US department of state). Maybe the most striking backward development is the complete wipeout of freedom of speech in Sudan, with the freedom of Sudanese press declining since 2011 (World Press freedom, 2019). Not only has media

20 freedom declined in the past years, journalists have been under perpetual threat under Omar-Al Bashir’s leadership. After the 2018 media freedom protest a 100 Sudanese journalists were imprisoned (World Press freedom, 2019).

Corruption has been widespread in Sudan since the British created the patronage system (Martini, 2012, p.1). The corruption in Sudan strengthens the position of the patronage elite, since it mostly benefits the elites (Martini, 2012, p. 1). With the new anti-media reforms in place corruption cannot be battled efficiently, thus change seems unlikely. So politically, Sudan has not ventured the same path as Ethiopia has, as more political inclusiveness in the future seems improbable with such a colonial extractive regime.

5.2 The resource curse of Sudan

With the independence of South Sudan in 2011, Sudan was facing a very important

economic turning point. The independence of the South meant that Sudan would lose more than half of its oil fields and 75% of its foreign exchange earnings to South Sudan (Sharfi, 2014, p. 316). This left the Sudanese government with a huge problem, but should have permitted the country the opportunity to move away from the resource curse (Copnall, 2014, p. 78). The resource curse is the paradox that countries with an abundance of natural resources, such as oil in the case of Sudan, tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources (Shaxson, 2007, p. 1124). This is due to the fact that the economic gains from the resource curse are often not invested back into other economic sectors, making the natural resource sector the only sector that is developed (Shaxson, 2007, p. 1123). This causes

underdevelopment in other sectors and makes participation by the mass of the population impossible, making it a very extractive economic system. The resource curse also makes

21 corruption and an elite patronage system more likely, since elites want to profit as much as they can from this industry (Shaxson, 2007, p. 1127).

The resource curse is therefore very applicable to Sudan, as the British had already created such a patronage network during the colonial period of Sudan, which made the exploitation of natural resources much more likely (Mayo, 1994, p. 177). Furthermore, the British had also given a trade monopoly to a group of elite merchants called the Jellaba. Thereby creating even more extractive economic institutions in which the rest of the population could not participate (Mayo, 1994, p. 177).

So in 2011, Omar Al-Bashir decided that Sudan would anew exploit natural resources, to try and stimulate the Sudanese economy (Copnall, 2014, p. 86). This time the focus would be on the abundant gold resources the country has. While the Sudanese economy focused on the mining and selling of gold, other economic sectors decayed (Sharfi, 2014, p. 317). The precarious economic situation did not change during or after the independence of South Sudan, simply because no other group could challenge the system of elite patronage. The historic colonial elite patronage system was too ingrained into society, to change during the critical juncture of 2011 (Mann, 2014, p. 575). This is a classic example of the vicious circle of underdevelopment, since the elitist regime of Sudan keeps itself in power by exclusively profiting from natural resources and not investing in other economic sectors (Acemoglu & Robinson, 2012, p. 342).

5.3 Infrastructure, education and creative destruction in Sudan

Alongside the resource curse, important motors of development have not been invested in by the Sudan government. The county’s infrastructure remains abysmal: the road density in Sudan being one of the lowest in the world (Garmendia & Ranganathan, 2011, p. 5). An

22 example that Garmendia and Ranganathan show, is the average travel time that is reported on the Khartoum- Jumba journey. An 950 km journey between two cities with more than half a million inhabitants, that takes an average of 5 days, which is astonishingly slow because of the poor infrastructure and makes trade even harder (Garmendia & Ranganathan, 2011, p. 5).

Education, as noted earlier in this thesis, is an important motor to success in developing countries. According to Kpessa (2012, p. 4) a lack of investments in this area causes lack of belief in the government as well as more chance of ethnic conflicts. That being said, British colonists in Sudan had created an education system which even further induced ethnic conflict. The British almost exclusively established schools in the Northern part of Sudan (Seri-Hersch, 2017, p. 4). Although there was education in the Northern part of Sudan, only primary education was accessible to the gross of the population (Seri-Hersch, 2017, p. 7). This lack of educational investment still continues today, merely 1% of the government expenditure was allocated to education in 2017 as independent news broadcaster Dabanga (31 july, 2017) reports. Not only educational investment is lacking in Sudan, the World Bank reports that still a staggering 40% of children does not have access to primary school education, with no improvement over the last few years (World bank, 2017, primary school enrollment). This backward development of education is a typical sign of the continual extractive institutions that are kept in place by the Sudanese patronage regime (Acemoglu & Robinson, 2012, p. 78).

As many economic sectors are not being invested in, the creative destruction process in Sudan also has yet to take off. The Sudanese economic system is and has not been suitable for creative destruction, since the elite patronage do not stimulate this process. They have impeded the process of creative destruction by using oil and gold profit to further patronage

23 (Mann, 2014, p. 575). The lack of creative destruction shows the fallacy of Sudan, as the process of creative destruction is being hindered by all factors mentioned before in this chapter: slow technological development, political instability, an extractive regime and an economic system that is built on the resource curse (Caballero & Hammour, 2000, p. 28).

6. Comparing two cases: Sudan and Ethiopia

In the previous chapters, we have looked at two critical junctures and the institutional reactions of both countries. It has become clear that institutional development in these countries during and after these critical junctures were very different. The nations seem to share some comparable characteristics such as geography, natural resources, same land fertility rate and life expectancy. Yet, Sudan and Ethiopia have taken different routes in their institutional development during and after critical junctures. In this chapter we will show that colonialism is the reason behind the recent difference in economic growth in both countries.

6.1 Historic trial and error a root to Ethiopian success?

The political regime of Omar Al Bashir (1989-2019) and Mengistu Haile Mariam (1974-1991) had very similar destructive results on the institutions in both countries. Both states struggled with many ethnic groups, causing unrest and conflict. Making famine, underdevelopment and poverty key problems in both states during these times. Though, the institutional

development after and during critical junctures in each country was different. One difference we should note about both countries, is the historical difference in regime development.

In 1889 Sudan was colonized and became an condominium ruled by England and Egypt until its independence in 1956. On paper Sudan was also ruled by Egypt, but in reality England ruled the whole country (Lusignan, 2004, p. 6). There was not much institutional development in colonial Sudan, until a few years before it became an independent nation

24 (Lusignan, 2004, p. 6). Though as mentioned before, the institutional development by the British created a particular inequality which is still there today. The strong divide and rule policy of the British coloniser caused a big North/South divide in areas such as education and political rule (Mann, 2014, p. 562). This resulted in an elite arabic patronage system, which controls almost all aspects of the Sudanese state. Until the independence of the South in 2011, Sudan had mostly seen military rulers, though there have been some attempts of semi civil rule (1964-1969). Albeit, every time the military absolutist rule was restored and the vicious circle of patronage elitist rulers continued.

While Sudan has really only seen one kind of regime, Ethiopia has seen many regime types. Before and after the short Italian occupation (1936-1944), Emperor Haile Selassie ruled Ethiopia. An emperor who was keen on centralizing and strengthening his own power, but who also saw the importance of modernisation. Haile Selassie can be seen as a two faced leader; one aimed at modernising and forming international relations and one aimed at suppressing and securing self-rule (Asserate, 2015, p. 314). This two faced approached turned out to be fatal. When modernization and developments came to a halt and the economy became troubled in the 70’, Haile Selassie’s rule came under threat (Asserate, p. 202, 2015). What followed were mass protests in 1974 against the regime of Haile,

ultimately ending the Haile Selassie regime. What followed was the establishment of the derg, a socialist military government, who were firm devotees of the Marxist ideology (Bahru, 2001, p. 234). Ethiopia became a Marxist-Leninist state aimed at nationalising all companies within the state. Under the Marxist-Leninist regime, human life was constantly degraded. The red terror of (1977-1978), was a spree of violence aimed at anti-communist believers, which led to thousands of deaths.

25 While a variation of regimes were experienced by Ethiopians, Sudan’s patronage military rule stayed the sole regime. The possibility for Ethiopia to experience different regimes has had different effects on its population, making some regimes more favourable than others (Van Veen, 2016, p. 11). As we have seen in this thesis both Haile Selassie and the communist regime were overthrown by the Ethiopian population when the population

stopped believing in these regimes. In both instances they were replaced with a new kind of regime, which we could see as trial and error.

The latest regime being Ethnic federalism. This regime change in 1995 seems to be the right fit for Ethiopia, resulting in enormous economic growth as well as inclusive institutions such as human rights. The trial and error in regime that Ethiopia has experienced would be very hard to picture if it had been colonized to the extent that Sudan had. So, the lack of colonial heritage has definitely played a role in the development of a regime that is more inclusive and promotes such economic growth.

In Sudan, the elite patronage have resided because the Sudanese population have not been able to experience such trial and error. The bitter colonial divide between the North and South, have been so ingrained in society that the independence of South Sudan has not brought any change (Mann, 2014, p. 575). This shows us the impact that colonialism has had on the institutional drift of Sudan, since it still cannot break with the vicious circle of underdevelopment due to colonialism.

6.2 Education the key to success?

The current economic situation is very different in Ethiopia and Sudan. The Ethiopian economy is leaning towards privatisation, while Sudan has started to exploit a second natural resource. The motors to prosperity: infrastructure, education and technological

26 development have not been invested in by the Sudanese regime. One source of failure in infrastructure, education and technological projects has been the widespread corruption that has spread through the country (Martini, 2012, p. 5). The corruption in Sudan, although hard to study, has resulted in negative effects on competition within the Sudanese economy (Martini, 2012, pp. 5-6). While the Sudanese corruption remains among the highest in the world, the Ethiopian government has proceeded to attack corruption, thereby arresting high officials and educating its population about the causes and consequences of corruption (Megiso, 2007, p. 6).

Various studies have proven the connection between education and corruption. A study by Uslaner (2012, p. 16) shows the connection between education, colonial heritage and corruption. Uslaner (2012, p. 16) shows that colonialism has had a negative effect on the education of colonized countries, since most colonial powers were only interested in

economic domination and not in educating native populations. This was certainly the case in Sudan, colonialism in Sudan had deeply divided the education system within the country (Seri-Hersch, 2017, p. 9). Even more important, Uslaner shows that the more educated a society was in 1870, the less corruption it has today. This is due to the fact that the higher the literacy rate got within a country, the bigger the chance that its population could stop corrupt rulers (Uslaner, 2012, p. 6).

Sudan had some educational institutions before the colonisation, but these were not developed by the British after it colonised Sudan (Seri-Hersch, 2017, p. 3). The British had only started to build up educational institutions in 1930, though these institutions were mostly built in the North of Sudan (Seri-Hersch, 2017, p. 4). This led to an enormous discrepancy between the North and the South of Sudan, with 27000 primary schools in the North and just over 5000 in the South of Sudan in 1948, with the schools in the North primarily accessible

27 to the elites (Seri-Hersch, 2017, p. 9). This has resulted in Sudan still having one of the lowest primary school attendance in the world, making the degree of corruption higher and thus development unlikely.

The lack of colonial influence can be seen in the Ethiopian education system, which had historically developed very well, but had been marginalized at the end of the socialist regime in 1991 (Mekuria, 2009, p. 28). Though this changed once the state became an inclusive ethnic federal state after the critical juncture in 1991-1995 (Mekuria, 2009, p. 23). Ethiopia once again started to invest in inclusive educational laws - such as a free primary school - with great success as seen before in this thesis. This once again shows that the lack of colonial heritage gave Ethiopia the opportunity to change its institutions to become more inclusive and battle corruption, and thereby promoting economic growth.

Another important factor that can battle corruption is having media freedom within a country, this is important because it makes people aware of the systematic problem that corruption forms (Uslaner, 2012, p. 6). Ethiopia is therefore heading in the right direction and has been promoting media freedom since the critical juncture of 1991-1995. Though for Sudan, the future does not look good, with a backward development of freedom of speech and media laws, corruption seems to be given no obstacles (World Press freedom, 2019). Due to the unequal development of education by the British and a decline in media freedom, the corrupt patronage network in Sudan are reinforced.

7. Conclusion

In this thesis we have sought to answer the question: Why has Ethiopia’s economy experienced such an enormous growth and Sudan’s has not? Our hypothesis was that a lack of colonial heritage in Ethiopia was the reason behind its recent economic success. We

28 conclude that Ethiopia has been able to economically thrive because it has been able to follow its own regime ‘trial and error’ path, which was only possible because it was not colonized. Alongside this historic path, Ethiopia had historically developed important drivers for prosperity, such as education and infrastructure, which would not have happened if it was colonized.

The fall of the communist regime in 1991-1995, paved the way for the creation of more inclusive institutions and enormous economic growth. Especially with the creation of the ethnic federation - a far more inclusive regime- because it was backed by different ethnicities, which meant that more people could participate in its institutions. This caused tremendous economic growth. Economic reforms such as lower interest rates and promoting creative destruction have stimulated the Ethiopian economy. Alongside the positive

economic reforms, human rights and media freedom have been rising.

The same can not be said for Sudan. The Sudanese economy has not been developed by the patronage elite network of Al-Bashir, after the independence of South Sudan. No real investments have been made in infrastructure, technology and education.

The lack of development and economic growth can be traced back to the colonial times of Sudan. The British bitterly divided Sudan into two parts, creating an inequality that would exist for decades. The British failed to invest in almost all areas of development, whilst also forcing their system of rule upon Sudan. The system that was created proved to be

favourable to the Northern elites, creating an extractive patronage system. A system that has continually extracted wealth from its population and formed a resource driven economy in which creative destruction is impossible. The patronage system became so ingrained into the Sudanese society, that it has maintained it’s vicious circle of underdevelopment in Sudan.

29 The lack of colonial heritage in education has especially been one of the key successes to economic development within Ethiopia. Whereas Sudan’s educational institutions were barely developed by the British, the historic educational development in Ethiopia had been quite good. This historic interest was sparked once again after the critical juncture in 1991, which not only stimulated education, but battled corruption and promoted economic growth. In Sudan this was not the case in 2011, as there was no force strong enough to challenge the patronage elite, since this system had been so ingrained within the country.

The flourishing of educational institutions and more press freedom, are two important keys in battling corruption. Ethiopia has been able to develop these two areas, due to its own

historic path which was not disrupted by colonialism. In contrary, Sudan is an ideal example of how colonialism still influences institutional developments today; both education and free press not being available. Although change in Sudan seems unlikely, recently a new critical juncture has appeared in Sudan. As of April 2019, the Omar-al Bashir regime has been ousted by yet another military coupe. Some glimmers of hope can be detected by the Sudanese people after the end of this oppressive regime. Though in the case of Sudan, history might most likely repeat itself.

30

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