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November 15, 2018

Regulatory capture: Is it game over?

A bulldozer demolishes houses that were build on a land belonging to Kenya Railways at Dandora on 15th.August.2018./EZEKIEL AMING'A
A bulldozer demolishes houses that were build on a land belonging to Kenya Railways at Dandora on 15th.August.2018./EZEKIEL AMING'A

 

Mene Mene Tekel Upharsin. Long time ago, there lived a King of Babylon called Belshazzar. One day he threw a party and invited thousands of his friends, wives and concubines. And because Kings will be Kings, wine flowed freely from gold and silver goblets. As the wine loosened their tongues, they praised the gods of gold, silver, bronze and iron. Then without warning or invitation, a party pooper in the form of a disembodied hand emerged.  And what proved to be the buzz kill, this incorporeal hand began to write on the palace wall, and the astrologers were unable to decipher the writing. Then Daniel, a man said to have the spirit and wisdom of God, was summoned to decode the inscription. GAME OVER!!! was Daniel’s summary to the King. That same night King Belshazzar was slain.

Could we have witnessed our rendition of God’s graffiti this week? GAME OVER!! is what President Uhuru Kenyatta declared while addressing a church congregation. And as the official party pooper, he admitted he had lost friends by reading the riot act to crony capitalists. He declared that no matter how much money they had, or how well connected they were, nothing would save them. And just like that, his disembodied finger pressed the ‘SANY’ button. Consequently, 4,000 buildings have a date with the green bulldozer.

Like King Belshazzar, many crony capitalists have been drunk with power, influence and money. They have been invisible, untouchable and unaccountable to anyone but their gold and title deeds gods. Without any regard for the rule of law or the environment, they in collusion with the State, arrogate to themselves public amenities, watersheds and resources reserved for public infrastructure.

In economic-speak, this is called regulatory capture. It occurs when State regulatory agencies become subjugated by the industries or interests they are charged with regulating. The result is that the regulatory agency does not design or apply a regulation with the objective and the effect of increasing efficiency or equity, but to increase the welfare of an industry or pressure group, adopting a perspective of vested interests and not of general public interests.

The logic behind this theory is that as the public, we are highly ignorant of the regulator’s activities unlike those in the regulated industries that make it their business to be well-informed and hence they can apply pressure on the regulators to get favourable outcomes. The result is that the regulatory agencies act as agents for those they regulate, not to the taxpayer. 

On the whole, public knowledge about politics and how government runs is disturbingly low. A study by the Society for International Development on the Status of Governance in Kenya showed that only 11.2 per cent of Kenyans consult the print Constitution and less than one per cent of the public engage in development of policies on devolution and representation. This makes it challenging for us to hold our political leaders and regulators accountable for their actions despite rising levels of education and increasing availability of information thanks to modern technology. However, this ignorance is not the result of stupidity on the part of the public. It is the contrast between how we as voters behave in the political system versus how as consumers we behave in the marketplace.

As consumers, we engage in sufficient research about a product such as a car, a computer or a mobile phone. We ask our friends about it, read reviews and enquire about return policies before making our decisions to purchase. And the free market obliges us. The benefits from this research means the difference between purchasing a good or a bad product, between loss or getting value for money, and between retaining or losing a consumer for the buyer and seller, respectively.

Conversely, as voters, we invest very little in researching the candidates who solicit our votes, the regulators appointed to protect our interests or the policies that require our public participation. Yet they have a significant effects on our lives. We are essentially rationally ignorant. And sadly, the politicians and regulators know this all too well. And they like it that way.

As voters, we behave like football fans who fanatically support their favorite teams even if they cannot influence the outcome of the games. Likewise, we are political fans who cheer on our political candidates and executive appointees through the lens of pre-existing views, while ignoring any new information that taints them negatively. And rather than solicit different views from other people or sources, we ignorantly choose to discuss our preferences only with others whose views align to ours. We solicit information through like-minded media and anyone who does not agree with us is mercilessly mauled down. Economists call this behaviour rational irrationality, where the purpose is anything other than truth-seeking. 

Despite his GAME OVER declaration, the cruel reality is that the President cannot reverse regulatory capture as a lone ranger.

I thus submit that one, we the public, should be genuine truth seekers. And to do so, we should seek out those who hold contrary views to our own because they are likely to present us with arguments and evidence that we were hitherto unaware or unwilling to embrace.

Secondly, we should stop being lazy thinkers. We should not use opinion and political pundits as useful shortcuts. Instead of learning about politics and policies directly, we prefer the shorter route of following the directions pointed out by our political preferences largely based by how entertaining they are, and whether they reinforce the views we already hold.

Lastly, for a long time we have deluded ourselves that if we cede more power to democratic institutions, they will solve problems that they have proved incapable of fixing.  Hence we should revisit the Jeffersonian principle that the best government is that which governs least. We need to shrink the size of government.

Finally, my unsolicited advice to Kenyans is those who are too smart to engage in politics are punished by being governed by those who are dumber.

 

Politicians and diapers should be changed frequently and all for the same reason – Jose Maria Queiroz

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