BORROWING FOR INVESTMENT

Why national debt doesn’t endanger Kenya’s future

Politicians in Europe gave higher priority to cutting deficits than to restore their economies.

In Summary

• Newspapers and Twitter feeds have been full of self-proclaimed experts insisting that President Uhuru Kenyatta’s policies of economic growth will backfire.

• The only way a government can be useful in the creation of jobs is by creating the optimal environment for entrepreneurs to set up their businesses.

Treasury Building
Treasury Building

Fearmongers are back in the spotlight. While they are not instigating tribal hate, they have found a new threat to Kenya’s existence that is the national debt.

Newspapers and Twitter feeds have been full of self-proclaimed experts insisting that President Uhuru Kenyatta’s policies of economic growth will backfire.

Such unsubstantiated and all-encompassing criticism is usually a sign that ulterior motives, and not the issue at hand. With that in mind, let’s dive a bit deeper into the role of debt in a nation’s economy.

While the government can be accused of many things, even its most ardent critics concede that it possesses brilliant geopolitical analysis skills.

As such, the President closely followed the results of austerity measures that were implemented in a multitude of countries after the financial crisis of 2008.

The shockwaves sent throughout the political system of the most affected nations led to the election of austerity hawks, who convinced their publics that the most important step for the survival of their nation was to cut spending dramatically in order to limit the national debt.

 

Measures were especially drastic in the European Union. Former economic powerhouses like Spain and Italy felt the backlash of the brutal cuts, born out of the belief that high government debt always results in total disaster.

Not only did they have to sell some of their most valuable national assets, but they also stopped investing in their country. And all this in order to appease the economy with an offering of the budget at the break-even point.

They gave rational explanations for their foolish acts. First of all, they explained, the country might default – despite the fact that history shows us that such events are extremely unlikely.

They continued that even if all-out default is avoided, the cost of servicing the debt will be a burden too heavy to bear for the generation to come.

So heavy, they warned, that it is outright immoral to take on more debt, even if this means cutting back on crucial infrastructure investment. Otherwise, they said, the young generation will have to shoulder an unacceptable burden.

However, these people seldomly ask people of the younger generation themselves what they prefer. They might be of the opinion that investment, which helps to speed up economic growth, would be a worthwhile endeavour, especially when facing unemployment due to economic stagnation.

According to the United Nations Development Programme, statistical update of September 2018, the Kenyan youth unemployment rate stands at 26.2 per cent - a number which demands our attention!

The only way a government can be useful in the creation of jobs is by creating the optimal environment for entrepreneurs to set up their businesses.

This environment comes down to, amongst other factors, a good education, roads without potholes, a nation-wide network of ports and railways, and efficient government and health care services. Without these, even the best youth can’t fulfill their potential.

For proof, consider the aforementioned countries. Politicians in Europe gave higher priority to cutting deficits than to restore their economies. The result was a decade-long slump.

The young generation, with unemployment in the double-digits, are leaving their homes – countries such as Italy and Spain! Some commentators speak of a “lost generation”, sacrificed on the “altar of the balanced books”. Unfortunately, this also leads to public unrest, and populism and racism are on the rise. The danger of debt-default has been replaced by dangerous politics.

We should take note of these occurrences. Today’s debt is tomorrow’s investment, which in turn translates into the day after tomorrow’s prosperity. Instead of listening to the fearmongers’ warnings, we should support Uhuru in his fight against graft.

Too much of our government’s investments are corrupted. Even though Uhuru’s efforts have led to an uptick in graft-related arrests, the culture that permitted this criminal behaviour to become prevalent is still deeply rooted in our society.

We must demand that the judicial systems hold these criminals accountable and that the Executive relentlessly continues to pursue corrupt officials - wherever they may be in Kenya.

 

Thus, I urge you to separate the wheat from the chaff and focus on the policies that will impact our future instead. This is the true fight we have to wage for our children’s generation. It is our moral duty to leave them a highly developed, corruption-free Kenya – and not necessarily a debt-free one. 

Maore is Igembe North MP


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