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Leaders’ promise to fund welfare state is a pipe dream

By Patrick Muinde | October 23rd 2021

DP William Ruto shakes hands with ODM leader Raila Odinga during Madaraka Day celebrations at Bukhungu Stadium, Kakamega. [Benjamin Sakwa,Standard]

As the election day draws closer, the economic thinking of the leading presidential candidates is becoming clearer. Now we seem to have some meat to hang on. Today, I focus on some snippets from three candidates. The rest that I do not mention here is because there is nothing to talk about or their ideas are null and void ab initio–at least on matters of the economy.

I limit my analysis strictly to their economics philosophy and not their prospects on the political front. At least, based on the little information out in the public domain, all the candidates seem to be leaning on a welfare State. The term Welfare State refers to a governing system where the government takes a bigger responsibility on protecting and promoting the economic and social welfare of its citizens, especially the vulnerable.

However, in other instances, the term welfare State is viewed in a derogatory way where the government creates incentives that are beyond what is reasonable. Under this view, Investopedia.com defines it as a ‘nanny state’ in which adults are coddled and treated like children. While the concept of welfare State dates back to an era beyond the Roman Empire, the modern forms of welfare State have their origins in the United Kingdom and the United States from around the 1940s.

For the good students of history, they will notice that this was the period shortly after the end of the Great Depression and the era of the Second World War that ended around 1945. This is of great significance in this article because our proposed welfare State leans on this latter view of the terminology.

The fair questions to ask are: one, can a welfare State work within our current state of the economy? Two, do we have the institutions to initiate and sustain a welfare State in the form it is been proposed? Three, who shall pay for it and is it sustainable? Four, what is the scope of this welfare State and does it make economic sense? Five, can we trust the proponents to bring it to reality?

Before we analyse the propositions of the three candidates of interest in this article, let us remind ourselves of the workings of modern economies.

First things first. Modern economies are structured under the top-down model as either Keynesian or Milton Friedman’s theories. In Keynesian economics, macroeconomic policy prioritises government spending within the economy to drive output, create employment and control inflation to within acceptable limits. Under Friedman’s theory, macroeconomic policy focuses on money supply to drive economic activity and manage inflation. However, this depends on the efficiency of the financial institutions to transmute the money injections to the individual economic units.   

In recent history, some of the greatest economic recoveries have leaned on Keynesian economics. Franklin Delano Roosevelt utilised it to steer the US economy from the Great Depression. Bill Clinton used it to oversee the US through the greatest expansion and growth in modern history. Barack Obama deployed it to navigate the US and the world through the 2007/08 financial crisis.

Deputy President William Ruto and ODM leader Raila Odinga. [DPPS]

Economic literature has scanty information on the bottom-up model. Where it exists, it only exists as a hybrid of top-down and bottom-up like the Chinese case (though still no much information) or as a form of empowerment of local communities to utilise available resources to improve on their socio-economic welfare. The Grameen bank model in Bangladesh is often referenced as a successful case of a bottom-up growth model. But it lacks an enabling infrastructure for scalability into a national economic policy.

The proposals being brought to the table are nothing new in the country. In the technical sense, a welfare state often provides State-sponsored unemployment benefits, social security and welfare benefits for people unable to work. In other cases, it is expanded to include health insurance cover and free college education. The objectives are to provide equal opportunities, ensure equitable distribution of wealth and appropriate public responsibility for those unable to fend for themselves.

Presently, the country has had different initiatives meant to serve these purposes. Good cases include the cash transfers to the elderly and Persons Living with Disability (PLWDs). Others that could fit here are the Women Enterprise Fund, Youth Fund and Uwezo Fund. During this Covid-19 season, we have also had special cash tranfer schemes to cushion the most vulnerable households. On the ongoing drought, policy has shifted from distributing foodstuff to providing cash coupons to the affected households to afford them the dignity of choosing what to buy.

So, before we talk of enhanced or new welfare schemes, we need to ask what impact has these previous and/or ongoing schemes have made. Also, do we have any documented evidence of their effectiveness and efficacy? Unfortunately, welfare schemes are expensive public programmes even for developed nations. So, if we were to scale or expand them, there must be persuasive and conclusive evidence on the same.

From our experience, these programmes have largely been conduits to appropriate public funds for personal benefits. Even in circumstances where humanitarian aid is sacred like the ongoing famine in 10 counties, it has been riddled with corruption.

For example, civil society recently released a report on the opaqueness and serious accountability questions on the Covid-19 intervention to help most vulnerable households.

The first is Deputy President William Ruto’s bottom-up model. Based on how he has been explaining it, his model is nothing else than proposing a hustlers’ fund similar to its cousins - Uwezo, Youth and Women funds. The technical description of bottom-up economics has nothing to do with distributing political goodies to appease a disillusioned populace due to extractive political institutions. It alludes to empowerment to create value out of locally available resources.

Even in the US where the Biden administration was proposing a redirecting of the economy away from top-down policies, they have eventually gone for Keynesian economics to steer the economy through the Covid-19 disruptions. The next logical question to ask is, if the Uwezo, Youth and Women funds haven’t saved these hustlers over the 20 or so years they have been in existence, what will make the hustlers’ fund work?

Deputy President William Ruto and ODM leader Raila Odinga follow proceedings during the National Prayers at State House, Nairobi. [DPPS]

The DP has been at a vantage point in government over the entire of this period, what fresh ideas has he packaged within the hustlernomics? But to give credit where it is due, he has done a smart job of fooling around without any specific details.

He has also perfected the art of describing his developmental achievements based on billions allocated through budgets as opposed to and tangible outcomes/impacts. My honest advice is: Only believe in his narrative at your own peril.

Second is the Handshake brother Raila Odinga’s Sh6,000 cash transfer to youths and/or vulnerable households. After fumbling with the District Focus for Rural Development, he seems to have found something that can excite the masses. This is the most ill-advised of them all. Unlike Ruto’s, it quantifies the benefit into a monthly expenditure for millions of people.

The most troubling question is, how can a leader of his stature be propagating handouts to the young, most educated, innovative and energetic demographic in the economy? All his years, he has projected the image a defender of the people. Just what went wrong?

The final candidate I’ll mention is former Deputy Prime Minister Musalia Mudavadi. He hasn’t told us anything much on his pesa mfukoni economics. But when he comments about the state of the economy, he seems fully briefed or appraised of the true state of the economy.

My final thought is this: we live in a country where almost all of us are lovers of free things instead of work. That is why even university graduates will sell their vote for as little as 50 bob.

Can any government possibly imagine it can satisfy the individual greed of such a populace?

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