We should be very concerned about the sluggish growth of our economy
What you need to know:
- With the fall in oil prices and the massive infrastructure spending, which the administration of President Uhuru Kenyatta has been engaged in, pundits were forecasting better numbers.
- One of the reasons Singapore is where it is today is because of a high rate of national savings anchored by a thriving financial services industry that includes strong pension schemes and the State-owned investment conglomerate, Tamasek.
- President Uhuru Kenyatta tried to construct our own version of Tamasek in the name of the proposed Government Investment Corporation. Resistance from bureaucrats would not allow the bright idea to see the light of day.
When you read the Economic Survey, what trends do you see? Where is this economy headed? The message from the statistics is loud and clear: our economy continues to experience successive years of anaemic growth.
We are nowhere near the Jubilee regime’s promise of a growth rate of between 7 and 10 per cent in the two years the coalition has been in power. By the way, both Uganda and Tanzania registered better growth rates last year, with the economy of Uganda growing by 6.3 per cent and Tanzania by 7 per cent. Ours grew at 5.3 per cent. Of course, the economies of these two neighbouring countries are much smaller. A schoolboy will always grow faster than his teacher.
However, how do you explain this persistent sluggish growth? How did we lose the growth momentum of the Mwai Kibaki years, when we registered 7 per cent growth in 2007 — even before we rebased our numbers? Is this economy slowly losing its wealth creating power?
With the fall in oil prices and the massive infrastructure spending, which the administration of President Uhuru Kenyatta has been engaged in, pundits were forecasting better numbers. The unfortunate thing is that our leaders will not accept that three successive years of anaemic growth is a situation that should set alarm bells ringing.
Indeed, the slow growth we are witnessing is a reality that demands digging deep to find its root causes. The governing elite is afraid to confront the reality and to accept that things are not looking too good. It is a tactic they employ when they want to avoid having to make radical policy departures. That is why we are always content with tweaking the traditional economic management tools: fiscal stimulus, monetary easing, low inflation, and high infrastructure spending.
We must get out of this complacent economic mindset and come up with new and fresh ideas. Singapore would not be where it is if Lee Kuan Yew had stuck to the conventional wisdoms of his time.
These days, I yawn when I hear phrases like “special economic zones”, “industrial incubators”, “industrial clusters”, and “smart regulation”
The truth of the matter is that we have a civil service bureaucracy whose DNA is wired to oppose any new ideas. It has taken more than five years to produce a Special Economic Zones Bill. One of the reasons Singapore is where it is today is because of a high rate of national savings anchored by a thriving financial services industry that includes strong pension schemes and the State-owned investment conglomerate, Tamasek.
President Uhuru Kenyatta tried to construct our own version of Tamasek in the name of the proposed Government Investment Corporation. Resistance from bureaucrats would not allow the bright idea to see the light of day.
I digress. I must go back to discussing the Economic Survey. I wish the statisticians would do a better job of analysing the underlying dynamics of the pictures they portray in the document by going beyond mere bean counting.
When the statisticians tell you that the informal sector created 640,000 new jobs last year, what do they mean? How do you count informal sector jobs — what do you include and what do you exclude?
We forget that a fast-growing informal sector is a symptom of an economy that has lost the capacity to create decent jobs for its citizens. In reality, the informal sector is just a reflection of the number of citizens who have been forced to put up with low-paying, low-quality jobs. Where are the statistics on widening inequality in Kenya?
And I do not just mean disparities in incomes such as salaries and bonuses and earnings from trade and agriculture. Inequality in this society gets more pronounced when you compare sections of society with enough capital to invest — shares, government paper, and urban property, with sections of society without the wherewithal to invest in these inflated assets. Return on capital on these inflated assets have outpaced the rate of economic growth by huge margins.
The future of this country might resemble 19th century Europe, where those at the top of society got there through inheritance rather than hard work. It is not a sign of a healthy economy.
Are we concerned about the social order that might result from increasing inequality? That idea of a Capital Gains Tax was not bad, after all. And perhaps we should start a national conversation about an inheritance tax.
