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ELECTION 2022

What is economic growth with no consequent visible development?

NATIONAL
By Patrick Muinde | Jan 15th 2022 | 5 min read

A general view of the Nairobi Expressway along Waiyaki Way through the skyscrapers in Westlands, Nairobi.January 13th, 2022. [Elvis Ogina, Standard]

In performance management lingua, the public service is sometimes accused of producing invisible things to people they do not know for reasons they do not understand. Within 21 days to this article, two separate sets of data were released that convey conflicting sentiments.

On the eve of the New Year, the president announced that the economy had grown by 9.9 per cent for the third quarter of 2021. This was another impressive performance from the highest in recent history of 10.1 per cent reported for the second quarter.

Days later, the Kenya National Bureau of Statistics released the Sustainable Development Goals (SDG) Gender facts sheet for 2021. This covers the period 2014 to 2019 for about 42 indicators that Kenya tracks out of the 80 Gender Indicators on SDGs. 

Based on this data, an estimated 53 per cent of the population is defined as poor. This is about a 15 per cent increase from about 38.9 in 2014. Meaning more Kenyans sunk into poverty between 2014 and 2018. On Social Protection floors cover indicator, the national average proportion declined from 78.3 per cent in 2018 to 63 per cent in 2019. Simply put, a significant group of persons who deserve social protection fell out of or were excluded from the programmes in 2019 compared to 2018.

The country registered marginal improvements on some education indicators of arithmetic and reading abilities and access to banking or mobile money services. However, only a small proportion of the population had access to clean water and sanitation and clean fuels and technologies. The national averages were 19.4 and 24.5 per cent respectively. In the quality of work and economic growth parameter, an estimated 83.4 per cent of the working population is under informal employment outside those under agricultural activities as at 2019.

A further 13.1 per cent of 5 to 17-year-olds were engaged in child labour. Beyond this, national data indicates majority of Kenyans within the age bracket of 16 to 65 years are engaged in small scale agricultural and pastoralist activities. In essence, over 85 per cent of the population is engaged in low quality work.   

This evidence raises pertinent questions in economic thought. One, why are there such huge disparities and contradictions between the implied robust economic growth and the consequential developmental indicators? Two, is it possible for an economy to experience an economic growth that does not translate into economic development? Three, if so, under what conditions can a country experience an economic growth with no consequent human development?

George Kucera on Quora.com proposes a nice analogy to describe why economic growth does not necessarily translate into development. On the contrary, there cannot be development without economic growth. The primary concept in economics is on how to allocate scarce resources to achieve desired human ends. In the broader scheme of things, the government determines a lot about which human ends will be achieved due to its ability to control macroeconomic policy and as the single largest consumer in any economy.

Summing it up all into the continuums of production and consumption, ‘the entire purpose of creating things is to consume things, now or in the future’. Thus, how government policy and governance structures smoothen or interfere with these economic quanta could determine if growth happens without the expected consequent development. 

Economic growth means an increase in real national income/output. Gross Domestic Product (GDP) is the most popular measure for economic growth. Economic development, on the other hand, means improvements in the quality of life and living standards. Popular measures of development include Genuine Progress Indicator (GPI) or Human Development Index (HDI). These indicators take into account variables like the environment, healthcare, pollution and education quality, among others.

Tejgram Pettinger on www.economichelp.com highlights the factors that affect economic growth in developing countries as level of infrastructure, corruption, education standards, levels of inward investments, labour mobility, flow of foreign aid and investments, and levels of savings and investments. On the other side of the equation, he proffers six variables that may explain the anomaly of economic growth without development.

One, growth may only benefit a small percentage of the population commonly manifested in huge income inequalities. Two, is corruption that siphons benefits of growth into the bank accounts of politicians and/or elites. Three, are environmental problems where a country’s production processes are harmful to the environment, human health and other elements of the ecosystem. Four, is problem of congestion caused by unfair distribution of economic activities that result in heavy traffic jams and unhealthy human habitations.

Five, is production without consumption where State-owned industries increase output without a corresponding consumption. Six, is huge military spending at the expense of investments in education, health and other essential public goods and services. The classical illustration of economic growth without a commensurate development is the USSR.

In the early 1980s, some economists predicted that development in the USSR was not far from that of the USA based on iron ores, steel, coal and concrete outputs. However, the union tumbled by the turn of the decade on December 26, 1991. Chairman Mao’s China heavily dominated by huge State-owned enterprises suffered the same fate under the weight of massive resource misallocations.

We can then logically analyse our seeming stellar economic growth that doesn’t seem to have commensurate impact at the household level. Reviewing the six variables that explain how economic growth happens without a consequent developmental impact personifies a movie cast in Kenya. While the Jubilee administration is proud because of massive infrastructure projects, only a minority within the sanctums of power know their rationale, cost structure and financing details.

It beats logic of a democracy how such huge national strategic installations can be shrouded in mystery. Worse still, through a well-choreographed public relations campaign, the citizenry have been forced to abdicate their inalienable rights to participate in their own development. This is on the basis that they can ‘see’ and probably use the projects.

They must never question priority, value for money and any poison pills attached to the project designs, contractual obligations and financing arrangements. In this melee, slum life has been normalised and sanitised within government programmes; wasting millions of human productive hours daily in traffic gridlocks is the norm; dumping, second-hand goods and import dependency is the mark of entrepreneurship and external trade flows; innovation, creativity and merit have taken a banter at the alter of cronyism, nepotism and tribalism; and public extravagance, official waste and unexplained conspicuous consumptions is the allure of national success.

One may wonder what could heal the malignant tumour in our national development experiment. While a sound economic philosophy is a great foundation, extractive political institutions and defective governance system will ultimately override the economic institutions. The consequent inequalities are fodder for socio-political turmoil, and crucifixion of citizens’ freedoms, democracy and right to human dignity. 

The panacea is to get only good men or women into the job. This is the philosophy behind Americans ‘Military Seals.’ Their rule is simple: We do not need many people, all we need is a few good men and women.

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