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Budget promises growth, but that alone won’t help

Friday May 2 2014

National Treasury Cabinet Secretary Henry Rotich at the Treasury Building in Nairobi on June 13, 2013 before the reading of the Budget. PHOTO | ANN KAMONI | FILE

National Treasury Cabinet Secretary Henry Rotich at the Treasury Building in Nairobi on June 13, 2013 before the reading of the Budget. PHOTO | ANN KAMONI | FILE NATION MEDIA GROUP

DAN BRANCH
By DAN BRANCH
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This has been a week of stark realities for many Kenyans. On Tuesday came the news that economic growth had increased only marginally in 2013. Promises of a six per cent growth in gross domestic product proved to be off the mark, with employees in tourism and agriculture being among the worst affected.

Then on Thursday, Labour Day, Cabinet Secretary Kazungu Kambi urged the very lowest paid workers to patiently wait for an increase in the minimum wage. Kambi’s boss had a similar warning about the minimum wage.

On Thursday, President Kenyatta’s government released the first details of June’s Budget announcement. Yet again, the Treasury promises a Budget that will stimulate rapid growth. And as Kambi argued, when that growth is achieved, all Kenyans will enjoy the benefits.

The minister’s words of consolation and the details of the Budget were reiterations of an economic orthodoxy shared by many people around the world for the past 25 years; policies for growth are, it’s often argued, the best way of improving everyone’s lot. But this orthodoxy is showing signs of crumbling.

Inequality has, in many respects, become the curse of our age. The Pope certainly agrees, tweeting this week that “Inequality is the root of social evil.” But it is a new 700-page book rather than a 37-character papal tweet that is getting the most attention from liberal audiences interested in inequality.

Everywhere French economist Thomas Piketty goes in the world today, he attracts large audiences to hear him speak. The English translation of his book, Capital in the 21st Century, has sold more than 80,000 copies since it was published a little over a month ago; it is a best seller in the United States and in much of Europe. His interviews with the Press and broadcasters are to be easily found on the Internet.

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Now more of a celebrity than an academic, Piketty is well deserving of his success. His book is a remarkable piece of work, combining an impressive command of a wide array of empirical data with a clear, comprehensible argument: inequality is getting worse.

In other words, more and more wealth is being concentrated in the hands of fewer and fewer people. Moreover, drawing on two centuries worth of data on wealth and taxation, Piketty finds that economic growth in the 21st century does not benefit everyone. Instead, growth is now benefiting only the wealthiest in societies across the globe.

Piketty thinks this economic problem has significant political consequences. As he told the BBC on Wednesday, “Democratic institutions cannot work properly if inequity becomes too extreme.” That is an argument many Kenyans will appreciate; many elected politicians have served their poor constituents inadequately since independence.

Inequality has been a fact of life here since the beginning of the colonial period (and is something I have written about before in this column). None of the major parties or presidential candidates has taken the issue seriously over at least the past quarter of a century.

Put another way, debates about inequality are not reflected on ballot papers, which offer a choice between candidates who subscribe to very similar, pro-growth, pro-wealth-creation policies.

POLITICAL ALLIANCES

Rather than confront the matter, Kenya’s politicians have done their best to avoid inequality. Ethnicity has proved to be exceptionally useful in this regard by keeping the poor and marginalised from forming political alliances.

Many wealthy individuals have used their money to ensure kin and neighbours are well supported. Some churches have preached the prosperity theology, which argues that wealth is a blessing from God. More controversially, the champions of the poor and marginalised have been silenced through violence, such as Pio Gama Pinto and J.M. Kariuki.

Inequality has helped spark conflict at various points in the recent past, most obviously after the 2007 elections. Such flare-ups seem likely to be more frequent in the near future.

Evidence suggests inequality will only get worse in Kenya in the years to come. What strategies and policies are in place to deal with it? If Piketty is right, simply telling poor Kenyans that they will benefit too from economic growth is not true.

The distance between the Kenya of the “haves” and the “have nots” has rarely seemed so vast. On one hand, we are told constantly of a booming modernising economy driving growth across eastern Africa. On the other, the daily challenge to make ends meet seems to only increase for millions of Kenyans.

Kambi told the Labour Day rally that “This is a new government. We stopped crawling the other day. We are now walking.” If he and Kenyatta want Kenyans to run towards a more prosperous, secure future for all, the government must begin to take inequality seriously.

Prof Branch teaches history and politics at Warwick University, UK.[email protected]

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