Building the Economy in Our Image
Every society has its own passionate protectors of culture, albeit differences in their efficacy. Protecting one’s culture is worth a fight for its own sake. After all, it is culture that makes us who we are. Humans without a culture are like a computer without software. A computer needs an acrobat reader to read pdf files, for example. For humans, culture is like software that they use to interpret their experiences. But in this piece, I will argue why we (Ethiopians) need to cautiously manage our cultural changes from an economics vantage point.
Cultural values and economic values appear seemingly unrelated, but they are intertwined more than we think. Culture is the chief factor that defines our preferences and tastes. Since the beginning of the 20th century, economists have recognized that demand, in addition to supply, plays a pivotal role in determining the prices of products in an economy. Where does the demand for products come from? As human beings, we have desires for food, drinks, shelter, art and knowledge, among others. The specific product that we use to quench our desires, however, depends on our preferences, which are shaped by our culture.
In mainstream economics, individuals are supposed to maximize their utility by consuming products, including leisure, given their budget constraints. The utility is a measure of the level of satisfaction (preference) an individual derives by consuming a product. An individual is willing to pay more for a product that offers her a higher utility, which is affected by her cultural values. This implies that cultural values directly affect the relative prices of products exchanged in an economy.
For example, a society that attaches more value to military adventurism than to knowledge is willing to offer higher prices to rifles and ammunition than to books and schools. This could promote the former industry at the expense of the latter. Thus, our cultural values affect the kind of industry and economy we build. The industries and the economy we build are by and large reflections of our culture
In a globalized world, managing the pace of cultural change affects whether we create a society that could afford or produce what it consumes. If Ethiopia, for instance, were conquered by the Italians for a considerable amount of time, injera might not have remained as our staple food as we know it today. Pasta and Pizza could have taken center stage. In that case, given their long tradition of making Pasta and Pizza, Italians would have been better placed to serve them than Ethiopians could do, at least in the short run. This would have helped the Italian Pasta and Pizza industry with little trickle-down effect for Ethiopians. Thanks to those brave men and women freedom fighters, our taste for injera, among others, has remained intact. As a result, our injera industry has created millions of jobs for Ethiopian teff farmers, bakers and traders etc.
Let me give another example—beauty. Lately, our standard of a girl’s beauty has succumbed to cultures stemming outside from Africa. In a non-African culture, for a girl to be considered beautiful, at the bare minimum, she should possess long hair, putting girls with kinky and curly hair at a disadvantaged position. To conform with the changing culture, girls of African descent including a considerable number of Ethiopians, are increasingly becoming dependent on extra hair—human (preferred) or artificial hair. As a result, non-African descent girls who wish to do business with their natural endowment hold a natural monopoly in the human hair industry, which is a multi-billion dollar industry. While leaving African-descent girls with less resource to spend in more productive areas such as education, the human hair industry creates little job opportunities for African descents.
Do not get me wrong. I am not saying that our culture should remain static. Culture in every society has always been in a state of change. Of course, it should be so that society can adapt to the changing environment. But my point is we have to be cautious of the pace of cultural change, especially if a foreign culture drives the change. This would have ramifications on the kind of industries we build and their local content in terms of creating new local businesses and employment opportunities.
In a digital era, culture changes fast unless a conscious effort is made, making local institutions and businesses fail to catch up and continue to serve society’s rapidly changing tastes and preferences. Perhaps, high-paced cultural change is the main culprit behind the dimmed trickle-down economy we observe today. Women who brew local alcohol such as tella and areke, for example, increasingly struggle to tap into the growing middle-class urbanites as their taste for local alcohol is being supplanted by imported alcohol products such as whisky. The same can be said about other sectors.
Our preserved culture has a latent business potential, but more is needed to realize that potential. Our traditional food and costume industries recently appear to take off, not lest successive Ethiopians governments have kept foreign influence and industries at bay. Nevertheless, a long way remains for these industries to stand on their feet, particularly the Ethiopian costume industry. Today, the Ethiopian costume industry has a limited market as the costumes are often worn during religious festivals or special occasions. Why? Customers complain the high price and poor quality, including the style of the Ethiopian fabric, making them gravitated to imported clothes.
However, price, quality and style get better as the industry achieves scale in its production and marketing. With an increased production volume, per unit cost of production falls, which could reduce price for consumers and increase profit for the industry. The increased profit could then be invested in the industry’s physical and human capital to reduce the price further and improve costumes’ quality and style. By being a loyal customer to our costumes, we can benefit directly by getting employment opportunities along the value chain of the costume industry. A vibrant costume industry also creates markets that other industries can harness, thus benefiting even those who not directly involved in the costume industry. In west African countries, to promote their local industries, Fridays are dedicated to local costumes. Can we also nominate a day dedicated for our costumes? Small steps make big changes, as they say.
In a nutshell, our cultural values affect the relative prices of products exchanged in our economy, which in turn affect the kind of industries we build, including their local content. Let’s thus create employment opportunities for ourselves by fostering industries built in our image by managing the pace of our cultural changes.
