By XN Iraki

In 1988, one former Member of Parliament found himself in jail after being found in possession of $12. In 1988, voting by secret ballot was replaced by queuing. By 1991, the monopoly enjoyed by Kanu was over; the political arena enjoyed a thaw leading to competition, which has intensified after every election.

By 1993, the economy started the long journey to deregulation, where most controls were removed.

Many observers ask why political and economic deregulation had to go together; the two are Siamese twins.

It is this realisation by politicians that makes politics so attractive, not serving mwananchi or being addressed by big titles.

What is not easily discerned by ordinary mwananchi, the holloi polloi is that our deregulation in politics and the economy were a part of a global paradigm shift.

The cold war was over and after 70 years, communism had lost the war, courtesy of lack of creativity and entrepreneurship.

Democracy now could ring; political observers are often surprised by how Kanu and any communism system were similar.

In academic circles, we suddenly rediscovered the invisible hand popularised by Adam Smith more than 200 years ago.

We just realised that competition could unlock the latent potential of any economy.

This thinking was aided by bold and entrepreneurial politicians willing to experiment and take political risks. Bold politicians included Ronald Reagan and Margaret Thatcher who had once sacrosanct sectors like water and aviation deregulated, exposing them to competition and the invisible hand of the market.

Has deregulation lived to its expectations? First, let us admit that deregulation is not an exact science; we still do not know the optimal level of deregulation.

Too much of it not good for an economy, it could lead to chaos. Too little of it will stifle creativity and national entrepreneurship.

Deregulation becomes a political issue, vested interested would want to continue enjoying monopolies and keep off competitors, lobbying often leads to anticompetitive rules some clothed in self serving statements like "national or public interest".

Deregulation often has other consequences, like price rises if competition is not high enough.

This can be politically unpopular. A good example is petroleum sector, which though deregulated is not competitive enough leading to threats of price controls.

Business people, those on the supply side of the economy understand deregulation better than the consumers, who often think life would be better if everything was free.

This asymmetric information often leads to a few people making money after deregulation, while the vast majority think and wish the good old days could return. In US and UK, two countries that pioneered deregulation, success has been noticeable because deregulation was brought by economic realities and was not forced down the throat as was in Kenya.

Politicians in these countries did their part to ensure competition was encouraged leading to lower prices, greater consumption and possibly more jobs and economic growth.

In Kenya, we are yet to reap the tastier fruits of deregulation. Truthfully, a few people have benefited greatly from deregulation by supplying products and services in sectors that were heavily regulated earlier.

Some observers note, with disdain that deregulation ushered in the era of middle men, who make money by speculation and not taking entrepreneurial risks.

Such brokers, middlemen or plain conmen thrive in the deregulated economy by taking advantage of asymmetric information.

The failure to reform sectors that support deregulation such as the judiciary and regulatory bodies made the ground very fertile for such characters.

Our belief that the Government should supply everything made deregulation less successful.

Some sectors have benefited from deregulation. The power rationing has eased because Independent power producers can supplement the national grid.

In education new players both at tertiary and non-tertiary levels have opened new opportunities to entrepreneurs and consumers (students).

The financial sector though heavily regulated worldwide has seen more banks enter into the market and competition in provision of services such as foreign currencies.

Some banks legally provide more services than was traditionally allowed; they want to turn into financial supermarkets.

Other observers suggest that deregulation can uplift some sectors like rail transport so that anyone can own train and put it on the tracks just as we do with the cars, buses and lorries. The same applies to airlines.

A deregulated economy is more open to innovations, creation of new firms and further economic growth.

But for this to work, the political decision makers must be converted, and belief that deregulation though threatening the interests of a few(including themselves), benefits the majority in the long run.

Some observers have noted the proliferation of regulatory bodies which could reverse the gains of deregulation. Such bodies should be created based on economic fundamentals not politics of appeasement.

In determining the optimal level deregulation, let us borrow from our mothers, they all seem to know how much salt is enough for each pot without using a weighing machine.

—The writer (xniraki@aol.com) is a lecturer at the University of Nairobi, School of Business.