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Wednesday, December 2, 2009

Liberty and Economics-What ails Kenya

Sun Tzu says, “All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.”
We in Kenya keep seeing and marvel at the riches of countries like the US, Japan, Asia and Europe. We go further and profess at the love of the lifestyle of the citizenry of these countries. We always ask ourselves, “how can we be like them?”
The founding fathers of America were clearly great thinkers. They came up with the quotes below:
• If we can prevent the government from wasting the labors of the people, under the pretense of taking care of them, they must become happy.-Letter to Thomas Cooper (29 November 1802)
• Our legislators are not sufficiently apprized of the rightful limits of their power; that their true office is to declare and enforce only our natural rights... and to take none of them from us. No man has a natural right to commit aggression on the equal rights of another; and this is all from which the laws ought to restrain him... and the idea is quite unfounded, that on entering into society we give up any natural right.- Letter to Francis W. Gilmer (27 June 1816); The Writings of Thomas Jefferson edited by Ford, vol. 10, p. 32
• Government big enough to supply everything you need is big enough to take everything you have ... The course of history shows that as a government grows, liberty decreases.- Commonly quoted on many websites, this quotation is actually from an address by President Gerald Ford [ to the US Congress (12 August 1974)
• "Society in every state is a blessing, but government even in its best state is but a necessary evil; in its worst state an intolerable one."- Thomas Paine
• That government is best which governs least.
• Where the people fear the government you have tyranny. Where the government fears the people you have liberty.
This betrays their underlying thought… Capitalism is based on liberty of man, free from the tyranny of government and largely dependent upon the sweat of his brow, not the handouts from other men.
The founding fathers of the US and subsequent leadership were very skeptical of government because their reason was government is a conglomeration of individuals who act in their own interest first and others later… and they were right. Throughout history, we have seen politicians who seek popularity expand government ostensibly to solve people’s problems. They end up taxing the populace more and as a result, the government ends up transferring resources from the most productive members of our society to the lesser productive members of society thereby wasting resources.
When taken to extremes, we have a situation like we have in Kenya where people keep talking in terms of “naomba serikali inisaidie…” The more this culture of dependency is ingrained into the national psyche, the more likely the nation is going to be ultra competitive during elections. The rationale of the populace will of course be, since those in government eat (read waste), then we would rather our people waste.
The problem in Kenya’s set up is too much government. If we look at the worst performing sectors of the economy, they all have one thing in common. They suffer from micromanagement by government. These include the fields of energy and agriculture. These two are regulated, nay, controlled by thought that is based on a mixture of feudalism and mercantilism- where the state favors a few existing at the expense of many.
Adam Smith and Ricardo showed us arguments such as ‘The government is protecting home grown industries’ does not make sense because cost of maintaining these industries to society is much more than the general ‘welfare’ that these so called home grown industries offer society in general… classic broken window fallacy. Secondly these industries never become as efficient as they ought to be during the time of protection so it is rarely a logical argument that this mercantile approach to doing business actually helps anyone.
When all is said and done, the ultimate cost the mercantile/feudal policies of Kenyan government are a disincentive to investment and therefore there are fewer entrepreneurs wiling to venture in these murky waters. These policies ultimately make society poorer and the resultant economy is one of high dependency, low tax base, high black market activity and a volatile society. Kenya anyone?

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