alexa Capitalism is not to blame for Kenya's runaway corruption - Daily Nation

Capitalism is not to blame for Kenya's runaway corruption

Thursday March 5 2015

By KWAME OWINO
More by this Author

Months ago, there was a dispute about the ownership of a playground claimed by a public school and a firm of property developers.

While the issue seems to have found momentary resolution, the sad occurrence presented an opportunity for commentary about the ideas that drive public affairs in Kenya.

One of these was that Kenya has become conflict-prone due to capitalism being the predominant ethos in the country.

Stated differently, the claim is that incidents of illegal acquisition of public land throughout the republic reflect the reality that Kenya has tilted too far towards capitalism and that greed is a natural consequence of that policy choice.

Each person who makes the argument that the greed and corruption endemic in Kenya are the result of capitalism either does not live in Kenya or has a warped understanding of capitalism.

There is no pure form of capitalism, but this reference attaches to nations that organise economic activity through private, open markets. Bearing this definition in mind, it's clear that Kenya does not qualify as a capitalist or open market economy at all.

That’s not to say that there are no open, competitive markets in Kenya, but that the economy in Kenya does not rank as a fully open one, with limited government intervention.

Remember that the government of Kenya maintains a large number of state corporations and trading companies in a variety of goods and services, from meat trading (read Kenya Meat Commission) to loss-making sugar manufacturing firms.

These firms are deliberately cited to illustrate the point that they have not been economic successes, even if there are claims that they serve many other valid social purposes.

Bearing in mind that many private corporations in Kenya already run commercially successful abattoirs and sugar firms, it's clear that continued government maintenance of such inefficient firms and abattoirs serves to destroy, not create, value for society.

A country with a firm focus on extending capitalism would not run perennially corrupt, loss-making firms such as those in the stable of Kenyan state corporations.

Coming to the manner in which scarce national resources are allocated, the argument that this country is too capitalist fails again.

Sensible economic thinking has demonstrated empirically that scarce resources such as telecommunications spectrum, mineral resources or roads should be allocated by a mechanism that allows for price discovery.

'BEAUTY CONTEST'

What this means is that a mechanism for allocating such resources should reveal their value to the people or corporations that use them.

So what happens in our Kenyan home? Regulators argue correctly that spectrum is a scarce resource, and then proceed to use a “beauty contest” to allocate it to competing firms.

In other words, they cite economics at the beginning and then abandon good economic thinking for a less transparent, political decision.

It is no surprise, then, that some Kenyans cannot help but think there’s more to this decision than is being stated. That’s not a demonstration of open markets or capitalism.

Still other instances of economic policy demonstrate that the belief Kenya is driven by capitalist or open market policies is a myth.

Agriculture is the predominant economic activity of most households in Kenya, but the overall agriculture policy is one that contradicts what straight-thinking capitalist, open market policy would require.

Agriculture policy provides subsidised fertilizer to selected farmers in Kenya in order to produce grain and other crops. This often involves use of state corporations as the procuring entity for distribution to farmers, through various stores in the country.

PUBLIC REASONING SUFFERS

A country steeped in capitalist thinking would eschew the provision of subsidies to any part of society. The best way to assist would be to provide cash transfers, giving the recipients freedom to procure fertilisers through competing private firms that are fit to supply them in the right quantities and on time.

The quality of public reasoning in Kenya suffers when we blame capitalism and open markets for the tendency of people with public sector power to engage in corruption. Countries with open market systems do not condone corruption, because the protection of individual and group property rights form the major reason for existence of government.

So let's call it what we will, but accept that Kenya’s economic policy is not yet based on expanding the economic freedoms of individuals and certainly is not a capitalist society.

Facts should matter. Kenyans should understand what an open economy is, and start working towards it.