Why we must ensure that devolution works

If America is a Great Experiment in the history of self-government, perhaps Kenya is engaged in no less great an experiment. It is an attempt to free itself from a two-faceted quagmire.

On one side, the economic system is distorted and dominated by “rent-seekers” (or “cartels” as Kenyans often say). On the other, the political system is deeply flawed by the influence of money.

Politicians and cartels are often intimate allies in this scheme. Kenya is trying to change this without giving up multiparty democracy. It is something no other developing countries have accomplished.  

Most lower-income countries suffer from a serious corruption problem. In Kenya, such a pedestrian description does not do justice to the sophistication and scope of unscrupulous acts. The whole economy is cleverly distorted to generate maximum rent (“rent” in economics is an excess or illicit profit above what is fair in the market). 

From police officers on the street to mighty business bosses and powerful politicians, rent-seekers are everywhere. This is systematised and controlled by “cartels.” They protect their turf and resist any reform. Yet, by the World Bank’s “Ease of Doing Business” index, Kenya looks very respectable. Kenyans are truly enterprising; they have refined cartelisation into an art form. 

This situation saps economic dynamism from Kenya. Economies advance when individuals and companies come up with new ideas, which in turn are spurred by fair competition. But, when those with money can use their political connections and influence to make easy profits (rent), why would they do the hard work of value-addition, quality improvement, or productivity gains? This is the fundamental reason why Kenya’s economic take-off has been sluggish.

Some countries have revamped such a low-productivity economic system. Taiwan, South Korea, and Singapore all managed to shut down the old ways of doing business. They forced businesses to improve their competitiveness, especially in the international markets, as their growth strategy. It is not that corruption disappeared in these countries, but it stopped being the mainstay of profit making. These countries have had spectacular economic successes.

However, their transformations were engineered under authoritarian political regimes, which could take draconian measures. Besides, a severe national crisis made painful economic reforms tolerable in each case. Crisis and authoritarianism seem like necessary conditions for such a transformation. Kenya is not in a similar situation.

In older high-income countries, the transitions happened as part of the gradual maturation of democracy itself. In Kenya, voters are still often influenced by empty promises, money, or tribal rhetoric. Here, again, the conditions in Kenya are not conducive for a transformational shift. 

In Kenya’s neighbourhood, Rwanda and Ethiopia have been implementing impressive reforms to stimulate economic growth, both under much more authoritarian political regimes (recent changes in Ethiopia notwithstanding).

Rwanda, in particular, seems to be intent on building just the kind of economy I described above. Some Kenyans even wonder whether their country, too, needs a period of authoritarian rule to rid itself of the cancer of corruption and reset political and business norms. I know they say this in jest. Yet, it seems to reflect an element of desperation for a quick change. 

Indeed, Kenya needs to change its fundamental political economy system urgently. The simple reason is that each year, one million youth reach the working age, and yet the economy is creating far less than half as many decent jobs for them.

Unemployment and underemployment are increasing at an alarming rate. Kenya cannot afford to wait another 50 years until its democracy matures to find a way to build a high-performance economy. This is much like climate change. You know where this is heading. The time to act is now.

Kenya must find a way to change the country within the multiparty system. I, for one, believe it is possible. In fact, I think important changes are already happening in some counties. Devolution has been a game changer. It has shaken the old system profoundly by creating much different power dynamics.

At the local levels, governors and county assembly members can be held accountable by the people more directly, and they in turn can tap into the people’s desire for change to buttress their reform efforts. Kenya can build on the emerging successes, and eventually change the political economy system at the national level.

Kenya needs to succeed in this experiment, because its future depends on it. And, if Kenya does succeed, it will become a new beacon of hope for many other countries that are trapped in similar problems.

Mr Ohashi is a senior economic advisor to the Presidency of Kenya. Tomorrow: Kenya’s inverse import substitution strategy