Among others, the ultimate power of a government lies on its economic power. Like individual agents governments are budget constrained. It needs source of revenue to cover expenditures. A government needs financial and material resources to implement its plans and preserve its power. Control over the economy sets the limit of its power over the public. The degree and type of ownership over material resources forms a vital dimension of the boundary of power. In congruence with this fundamental truth governments usually go for the control of lucrative industries and resources (material and human resources) in an economy.  In Eritrea, for instance, the mining, fishery, most commercial agriculture, import-export services, transport, communication, banking, and other revenue generating industries are monopolized by the Government of Eritrea. It is probably not a bad supposition to hypothesize that there has been an explicit intent of interest, accompanied by concrete measures, in controlling the material resources in the economy since independence. This may be considered as an important ingredient of consolidating power.

The Government of Eritrea has been working in boosting the ownership of material resources after independence. Both direct and indirect means has been deployed to pursue this target. The former is not attractive from the point view of domestic political consumption. For this reason it has been less explicit in the post-independent Eritrea, at least till 2000. However it has been open in the aftermath of the border conflict in the name of reconstruction and national security. We will discuss this in the subsequent paragraphs by talking some examples. The latter is preferred to the former for political reasons. It is not less problematic in its implementation, though.

The indirect measures which have been prevalent in Eritrea mainly include formation of pseudo-private companies in the name of the ruling party - PFDJ. These agglomerates of the PFDJ include: Red Sea Corporation, Segen construction, Gedem Construction, Beilul financial services. These corporations have been the key players in the economy with some concession in taxation and legal requirements. They have been offered free entry to any industry with prospective profit.  It is beyond dispute to identify these companies as the main source of material resource for the Government. It is worth noting also that these companies are run by the key adherents of PFDJ and receive work directives from the same central organ, which also oversees the budget of Government. The main justification presented is the market stabilization argument. The Government argues that they are minimizing consumer exploitation by selling at reasonable prices with small mark up. Without going into the philosophy of private versus public ownership this trend can be satisfactorily analyzed from a political angle.

I will present some examples to justify the concerted efforts that the Government has been following to strengthen its material resources in Eritrea. The exposition is very concise and descriptive.

Among the class of material resources the most important sector in the economy is infrastructure. In Eritrea almost the infrastructure activities, most of which are funded by foreign NGOs, are owned and undertaken by the Government. This sector is very important for the extent of power over the people. In the name of national service and patriotic act the government builds and controls the infrastructure construction. Apparently the PFDJ has a kind of indirect control over the construction of these infrastructures. For public relations purposes most of the infrastructure projects are open to bid with predetermined winners of the game. It is a priori known that the winners are PFDJ conglomerates. The control over infrastructure projects has a double advantage. Firstly, the government appropriates huge monopoly profit. It is worth to remember here that labor cost which constitutes large share of cost structure of companies is close to zero (as most of the workers are from the national service). This amplifies the expected and realized profit. This generated profit may be used for financing the deficits of the Government or PFDJ mainly in their political investment. Secondly, the government uses it as a propaganda machine for public support. That is, by bringing the construction of dams, clinics, roads and others in the upfront daily radio and newspaper. It is conceivable that the popular support that can be gained from this activity is not negligible.

Another good example is ownership of land. In Eritrea land is owned by the state[1]. The majority of Eritrean population is engaged in the agrarian economy. It is not a reductive hypothesis to claim that via the ownership of land the Government controls the lives of the majority of the people. This can be in the form of land use policy and the like to reward the party supporters and encourage rent seeking activities. It has been a common practice to allocate land on the basis of pre-independence history and political affiliation in the post independent Eritrea. Though it may seem heroic, the current crisis in the housing market can partly be attributed to the highly centralized decision-making. By centralizing land allocation decision, the Government is commanding far above the equilibrium price of land. Taking advantage of the short-term supply constrained hike in the price of land and house rent the Government is most probably making above normal revenue. This can easily be grasped by making “back of an envelop” calculations about the per capita land in Eritrea.  In short by controlling land in a public fashion leaves the government with large room for discretion and centralization of power.

A case in point is also the import and export services. Lately, the Government has taken some policy measures to monopolize the distribution of consumer goods. This can also be justified from the financial demand of the Government. Besides, the control over the distribution of consumer and capital good extend the limits of power on the public. The fact that the market has failed to provide these basic necessities forces the public to live under the mercy of the Government. Good examples of these commodities are; sugar, bread and other basic necessities. A considerable power of the Government over the control of these basic necessities is very rewarding in expanding the limits of the power over the public. Obedience will usually be the sole option in such rationing practice because the market mechanism cannot work. Another aspect of this is also the government can increase its revenue out of these venture by increasing prices to exploit the inelastic[2] nature of these commodities.   Moreover, it is a means to curb opposition, as the majority will be busy with struggle for survival. This is expected to generate obedience, and at worst indifference.

In summary, the ownership of material resources plays a vital role in setting the limits of power over the public. By expanding their material resources governments can generate resources to finance their budgets and thereby reduce dependency on the public. Also, as it was argued above, ownership of material resources also helps to suppress opposition and accumulate political capital. A good example of this is for instance the culmination of control over the private press, which was undertaken in the name of censorship and national security issues in 2001.