We need an economic paradigm shift not price control

By Billow KerrowThe Price Control Bill is a bad joke, not least because of its populist image and its negative impact on investment but because it is premised on a wrong concept, devoid of sound entrepreneurial logic in a competitive, liberalised environment. There are ways to protect consumers, and even producers, against market imperfections but price setting is certainly not an option any more. The MPs needed to do a bit of homework to understand why prices of essential goods are going anywhere but down; or whether it is the purchasing power of the ordinary Kenyans that is low due to the very low per capita income.Kenyans are impoverished, with 55 per cent living below the poverty line, or on less than a dollar a day. A fifth of our population suffers extreme hunger and survives on Government handouts. More than a third of our under-fives suffer stunted growth due to malnutrition. Simple diarrhoea kills an average of 100 children daily, whilst malaria still accounts for close to 20,000 child deaths annually. Half the rural folk do not have access to safe drinking water. Life expectancy is falling fast. In the 2010 Failed States Index just released, we were ranked 13th among 20 states categorised in ‘critical condition’ — in danger of collapsing. On a measure of having a long and healthy life, being educated, and having a decent standard of living in the 2009 Human Development Report by UN, we were ranked 147th out of 182 countries, well below Congo, Bangladesh and Yemen.Consequently, it would be foolhardy for our MPs to ignore the bigger picture. The major factor contributing to the high cost of living is bad governance. We have a regime that presides over impoverished millions but displays insatiable appetite for opulence and conspicuous consumption. Mega-corruption, gross mismanagement and plunder of public resources continue to flourish, funded by ordinary Kenyans. Bureaucrats develop economic policies that fleece the poor rather than reduce poverty. For instance, a litre of kerosene in the villages attracts taxes of Sh9, effectively raising its price by that amount. For the motorists, a litre of petrol carries about Sh40 in Government revenues. Expansionary monetary policies lead to high inflation, which leads to increased prices of essential commodities. With our huge expenditures we resort to deficit spending to roll our programmes such as the on-going economic stimulus. The attendant domestic borrowing sparks off higher interest rates, and hence higher costs of production. Yet, it is our MPs who determine such fiscal policies affecting the ordinary Kenyans.As witnessed in the recent maize scam, complicity by MPs in corrupt practices led to ‘politically’ high prices of maize flour. Higher cost of inputs and inefficiencies in the parastatals coupled with their clamour for higher producer prices for farmers led to rising costs of cereals in recent years. Our leaders do not balance the needs of consumers vis-‡-vis producers.Businesses have long agitated for lower costs of production so as to reduce prices and remain competitive regionally. The costs of dilapidated infrastructure, inefficient service delivery, archaic regulatory framework in agricultural sector, high cost of energy and punitive tax regime to businesses mitigate against it.Our MPs have no qualms about contractors reaping off billions of taxpayers’ money, which impacts on prices. Neither do they appreciate how the bloated size of the Executive translates to more taxes on the poor Kenyans. We need a paradigm shift in our economic policies and political governance system to help us set relevant priorities that will put money into the pockets of more Kenyans and reverse glaring inequalities in our society. We need to focus on poverty reduction. Introducing price controls is shedding crocodile tears!—The writer is a political economistKey words; Price Control Bill; president KibakiWe need an economic paradigm shift not price control By Billow KerrowThe Price Control Bill is a bad joke, not least because of its populist image and its negative impact on investment but because it is premised on a wrong concept, devoid of sound entrepreneurial logic in a competitive, liberalised environment. There are ways to protect consumers, and even producers, against market imperfections but price setting is certainly not an option any more. The MPs needed to do a bit of homework to understand why prices of essential goods are going anywhere but down; or whether it is the purchasing power of the ordinary Kenyans that is low due to the very low per capita income.Kenyans are impoverished, with 55 per cent living below the poverty line, or on less than a dollar a day. A fifth of our population suffers extreme hunger and survives on Government handouts. More than a third of our under-fives suffer stunted growth due to malnutrition. Simple diarrhoea kills an average of 100 children daily, whilst malaria still accounts for close to 20,000 child deaths annually. Half the rural folk do not have access to safe drinking water. Life expectancy is falling fast. In the 2010 Failed States Index just released, we were ranked 13th among 20 states categorised in ‘critical condition’ — in danger of collapsing. On a measure of having a long and healthy life, being educated, and having a decent standard of living in the 2009 Human Development Report by UN, we were ranked 147th out of 182 countries, well below Congo, Bangladesh and Yemen.Consequently, it would be foolhardy for our MPs to ignore the bigger picture. The major factor contributing to the high cost of living is bad governance. We have a regime that presides over impoverished millions but displays insatiable appetite for opulence and conspicuous consumption. Mega-corruption, gross mismanagement and plunder of public resources continue to flourish, funded by ordinary Kenyans. Bureaucrats develop economic policies that fleece the poor rather than reduce poverty. For instance, a litre of kerosene in the villages attracts taxes of Sh9, effectively raising its price by that amount. For the motorists, a litre of petrol carries about Sh40 in Government revenues. Expansionary monetary policies lead to high inflation, which leads to increased prices of essential commodities. With our huge expenditures we resort to deficit spending to roll our programmes such as the on-going economic stimulus. The attendant domestic borrowing sparks off higher interest rates, and hence higher costs of production. Yet, it is our MPs who determine such fiscal policies affecting the ordinary Kenyans.As witnessed in the recent maize scam, complicity by MPs in corrupt practices led to ‘politically’ high prices of maize flour. Higher cost of inputs and inefficiencies in the parastatals coupled with their clamour for higher producer prices for farmers led to rising costs of cereals in recent years. Our leaders do not balance the needs of consumers vis-‡-vis producers.Businesses have long agitated for lower costs of production so as to reduce prices and remain competitive regionally. The costs of dilapidated infrastructure, inefficient service delivery, archaic regulatory framework in agricultural sector, high cost of energy and punitive tax regime to businesses mitigate against it.Our MPs have no qualms about contractors reaping off billions of taxpayers’ money, which impacts on prices. Neither do they appreciate how the bloated size of the Executive translates to more taxes on the poor Kenyans. We need a paradigm shift in our economic policies and political governance system to help us set relevant priorities that will put money into the pockets of more Kenyans and reverse glaring inequalities in our society. We need to focus on poverty reduction. Introducing price controls is shedding crocodile tears!—The writer is a political economist

We need an economic paradigm shift not price control

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