Evidence from the Shoe and Flower Cluster in Ethiopia
1. General Introduction
Ethiopia has remained a predominately agrarian subsistence economy despite its long history of civilization. Industry in the modern sense only emerged in the country during the 1920s.1 Yet, a cognizant effort to stimulate industrial growth began with the formation of the federal government’s first five-year development plan in 1957. During the 1960s and early 1970s the country enjoyed relatively better industrial performance, although most manufacturers were foreign owned (Eshetu, 1985; Shiferaw, 1995).
In 1974 a military government came to power that instituted command oriented policies and nationalized virtually all medium- and large-scale industrial companies owned by both foreigners and Ethiopians. Private ownership was only permitted for cottage industries and small-scale enterprises during this period. The strict leftist economic and political ideology pursued by the military government suppressed private economic activity considerably and subdued entrepreneurial spirit (Eshetu, 1985; World Bank, 1985).
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