THE PAUCITY OF KIBAKINOMICS

"I am inheriting a country which has been badly ravaged by years of misrule and ineptitude…The era of anything goes is now gone forever...Government will no longer be run on the whims of individuals”  Those were the words of Kibaki at his swearing in ceremony.

President Kibaki rode to office on a campaign hinged on reviving and turning round the Kenyan economy after years of economic mis-management during the Moi years, a feat that was largely attained in some sectors such as the tremendous growth of ICT, infrastructural development, pro-poor FPE and strengthening of institutions but despite all these, Kenya has had the highest interest rates of all the viable economies in the world for the past two years straight (18%), more than double what it was in 2010 (6%).

Regardless of how you look at it, there are two things that it does. It discourages borrowing from banks, in turn discouraging confident consumption, thus stagnating the economy. It also suppresses the emergence of small businesses and foreign investment.

  

The glaring question is what is wrong…? Plutocracy is the major reason the economy is still so depressed and unemployment so high.  

So how did that happen…? For the past decade, tribalism and corruption has closely tracked income inequality, and there’s every reason to believe that the relationship is causal. Specifically, money buys power, and the increasing wealth of a tiny minority has effectively bought the allegiance of our politicians, in the process destroying any prospect for cooperation. Disputes in economy used to be bounded by a shared understanding of the evidence, creating a broad range of agreement about economic policy.  But now you can’t get cooperation to serve the national interest when one side of the divide sees no distinction between the national interest and its own partisan triumph. Many a time’s parliamentary committees have had money change hands among the members to offer a rationale for policies that serve the interests of the plutocrats at the peril of the wanjiku.

The "big men" enjoying the president's favor have manipulated emerging networks of patronage and political control. This has resulted in mega corruption scandals like Anglo-leasing, Triton-oil, Maize sale, FPE and Cemetery rip offs, NHIF scandals among a host of other litanies which exposes the soft underbelly and paucity of “kibakinomics”.  Kibakinomics also gave more power to some public institutions which rob public funds.

Kibaki’s economics style was prescribing to ideas of John Maynard Keynes, one of the most influential economists of the last century. Kibaki manages by crisis, and cuts the deal whenever push comes to shove. keynsian economics has its pros and cons, it’s not the panacea to all economic woes…

Kibakinomics hour of reckoning came this year when inflation and a volatile exchange rate threatened to erode all its gains. Treasury and the Central Bank had only one option in fighting the runaway inflation; hikes in interest rates. In the current financial year the government targets a tax collection set at sh 780 billion, Ksh 100 billion higher than the ending year. This effectively means less borrowing by businesses, less investment by businesses, less employment creation eventually leading to high costs of living.

The Budget has a deficit of Ksh 166.7 billion, the treasury plans to borrow Ksh 60.7 Billion from donors to fill the hole since filling it through domestic borrowing is unattractive. The only worry is that of the money borrowed by the Kibaki regime in the past decade, more than half departed in the same year with a significant portion of it winding up in private accounts at the very banks that provided the loans in the first place. Meanwhile, debt-service payments continue to drain scarce resources, cutting into funds available for public health, education and other needs.

The only remedy to Kibakinomics is strengthening our parliamentary and judicial institutions to offer checks and balances on the highhanded ways of the powerful, as well as the voice of the independent press. Otherwise it will lead us to George Orwell’s ‘shamba la wanyama’.