The Deep Rot In Our Economy And How To Resolve It; Short Term Solution

By Darius Okolla

As Dr Ndii clarified in his KTN interview last week, there are no easy choices as far as the Kenyan economy is concerned. Thing is, we’ve maxed out our borrowing, and pretty much maxed out taxation at the same time while perpetuating reckless spending. It gets more alarming considering the economy hasn’t hit rock bottom yet; common projections are that the debt distress will be full blown by the second half of next year and we might bottom out in 2021.

The reason recessions have the moniker ‘the lost decade’ is because they take about 10-15 years to clear off. To quote Paul Krugman and Ezra Klein, what happens is that four years before the fiscal and monetary distress the economy starts shedding jobs, so the employed feel the heat long before the crisis fully hits. Subsequently, once the economy bottoms out the firms recover first, since they can sell to new markets abroad. Meanwhile workers get elbowed out as firms aren’t hiring as much. To illustrate this, personal networths of most Americans hasn’t recovered to the pre-07 levels; this is 2018!

Left with no wiggle room as the private sector oscillates between plateauing and contracting, the government has three immediate options. One, since LAPSSET was shelved, opening up the Kibwezi-Isiolo-Eldoret route is a critical priority. See, the MSA-NRB-BUSIA corridor is overcrowded and the MSA-NRB route barely passes through any populous town. By opening up the Kibwezi-Isiolo route the govt would have not only decongested the main route, it’ll have raised the economic profile of the alternative route through Isiolo and possibly all the way to Eldoret in NorthRift.

Keep in mind that Isiolo is the most central region in the country, has lots of land, and already has an international airport besides being surrounded by 3 aquifers totalling over 450 billion cubic metres of water that’s besides Lake Turkana and the Marsabit aquifers-for perspective the whole country uses 3 billion cubic meters of water per year. The resultant real estate value increase along this potentially new corridor, the availability of water and the central location of Isiolo could spur northward expansion that opens up new opportunities.

Two the government should allow for the growth of grey(and where necessary the black markets) for basic commodities-yes you read that right. One thing that recession and economic contraction does, is it dents pockets, sinking many into economic distress. Once impoverished and unable to survive people chase alternatives goods and services rather than pay the high open market prices, laying the groundwork for black and grey markets. Black and grey markets create problems of their own, but in an economic downturn they solve the immediate existential problem-hunger.

Already detectives pursuing the 100B tax evasion scam points to a dynamic so unique to recessions and mafia states-black and grey markets. The FSB(formerly KGB) and the senior men in the decaying Soviet Union like Gaidar, Vladimir Potanin, Yavlinsky, and Anatoly, well aware that the impoverished masses couldn’t afford open market prices during the economic downturn, tacitly allowed black market for basic commodities to thrive, which ensured that the masses don’t starve. Grey markets are those ‘in which commodities are distributed through channels that, while legal, are unofficial, unauthorized, unmonitored, or unintended by the regulatory agencies. The business arm of our national Intelligence Unit could take a page off that script.

Three, an economic clamp down on the criminal elite; frozen bank accounts, high-profile arrests, repatriations. However the last time a high profile person went after his sis and bro, was Moses and Miriam in the book of Genesis, I’m not sure this local guy can arrest his errant siblings. In mafia states like ours, political access and privilege are tied to family relationships, loyalties or political patronage. So this one is pretty much out of the way.

Fourth, is an overhaul of our food systems. See, while food production is agricultural, building up vibrant food systems is political. We need an overhaul of our agricultural systems, encourage investments in value-add, dismantle market cartels and channel funding and knowledge systems for farmers nationwide. For example we currently produce 600M litres of milk annually while we can easily triple that.

Revolutions, by their very nature, tend to fail when a country has lots of land and food. I mean, why go get shot at and teargassed when you can comfortably feed yourself and your family. An empty stomach is a great but insufficient revolutionary tool. Now, I’m still shocked by how much of a professional failure and neurotically incompetent you have to be to run a govt the way this guy is doing. Anyway, moving on, even though there’s no immediate panacea, in the medium to long term, a series of painful cuts in spending, fiscal discipline, and debt renegotiations are necessary.