Changing economic and environmental policy requirement not an option

By Ndung'u Wainaina | Wednesday, Aug 29th 2018 at 00:01
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First, I am not a great enthusiast of hyped ‘Big Four Agenda’. It is not new. It has just been retrieved and rebooted from among many historical political campaign mantras of Kenya politics since independence.

Makueni Governor Kivutha Kibwana seems to grasp how countries like Sweden reengineered their economy and well-being of their people. Such countries abandoned well walked, but failed, path and found alternative in investing in their people at their local level while state becoming an honest and fair regulatory and enabler.

Unprecedented technological inventions promise rising standards of living, but also displace labour and causes massive youth unemployment. Expansion of global trade and investment have propelled growth and improved several low-income countries status.

Simultaneously, many vulnerable groups have been left behind. Rising inequalities threaten social cohesion and economic progress. Environmental degradation and climate change endanger the planet. Rapid urbanization offers the prospect of productivity gains but aggravate the problems of urban slums, poverty and social unrest.

A successful response to these challenges lies in designing policies to harness human capital and learning from the successes and mistakes of the past. Serious policymakers today cannot rely on simple policy guides like  holding the fiscal balance in check, using monetary policy to control inflation, providing macroeconomic stability, and then leaving it to the market to do the rest.

Economically inclusive

Yes, policies to promote gross domestic product growth are needed. However, such policies must not be an end itself but a means to creating the resources needed to achieve social outcomes like improved health, education, employment, security and consumption.

Individual wellbeing is multidimensional and policy should aim for improvements in all dimensions. Gross domestic product growth in itself won’t lead to the eradication of oppressive and discriminatory practices against vulnerable groups. This requires deliberate interventions.

People-centered policy ensures that progress is socially and economically inclusive. There should be particular focus on extreme deprivation, especially on groups who suffer simultaneous deprivation on many dimensions.

It should also tackle the gap between rich and poor. The sharp rises in inequality of income and wealth and the observed level of inequality of opportunities in access to basic services are ethically indefensible, undermine social cohesion, and fuel a spiral of policy capture by elites, further exacerbating inequality. The empowerment of women and of historically discriminated groups is a priority in its own right. It also provides a sound basis for economic efficiency.

Development policy making must take on environmental sustainability as a central objective because income growth in isolation creates a false indicator of well-being and progress. This cannot be left to the free market to solve. Regulatory interventions by the state and multi-country policy coordination are indispensable.

Further, there is need to build on a judicious balance among market, state and community. It is important to recognize that markets are themselves social institutions which need a framework of efficient regulation to deliver their promises. Unfettered markets explain outcomes the world is now living with, including financial crises, untenable levels of inequality and unsustainability.

Rising inequality

The state is indispensable in setting the rules of the game and in establishing a regulatory framework in which markets and communities can flourish and engender progress. The state itself needs to operate efficiently while also accepting that there are situations where the well-being of the most deprived is best served by actions of local groups at the community level.

The state also has vital role where markets do not work well, where there are clear inclusivity imperatives, shaping industrial policy, effective agricultural and service-sector policies and preventing the cycles of rising inequality, leading to state capture, which in turn enforces social, political and economic inequality.

New technology is linking up the global labor market, making it possible for workers in different countries to work for global markets and consumers, without having to relocate themselves. This has created new opportunities for workers but also exacerbated inequality.

This calls for three policy obligations. First, invest in human capital and increase skills in ways that complement technology to boost labor income. Second, create new instruments of income transfers, systems of taxes and profit-sharing, and rules of the game that enhances workers’ bargaining power and gives them a greater voice. Finally, special need and responsibility on multilateral institutions to encourage and promote policies supportive of deprived voices in international decision-making.

Values and culture are not just important in themselves. They affect how an economy performs. If governments want to deliver education and health services effectively and collect taxes fairly, enhanced understanding of social norms has to be consciously integrated into policymaking in pursuit of the common good and in curbing corruption.

Mr Wainaina is Executive Director, International Center for Policy and Conflict @NdunguWainaina

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