DEVOLUTION NEEDS BETTER IDEAS

‘Regional bank’ an absurdity

In Summary

• What needs would it meet which cannot be met by the existing financial institutions?

• Absence of well-thought-out, empirically tested ideas for bringing about economic progress is every bit as much of a problem as corruption.

It was reported earlier this week that with Vihiga county having passed the Lake Region Economic Bloc Bill – and being the seventh county to pass this Bill – the statutory requirements for the setting up of this bloc had been met, and operations could now begin.

Proposed members of this bloc include the counties of Kakamega, Bungoma, Busia, Trans Nzoia, Kisumu, Siaya, Homa Bay, Migori, Kisii, Nyamira, Bomet, Kericho and Nandi, which collectively account for about 14 million Kenyans.

So far so good. But as the Russian revolutionary Leon Trotsky is supposed to have remarked, “It matters not what is intended. What matters is what emerges”.

 

And when you consider what is supposed to emerge from the creation of this bloc, then you realise that not enough thought went into this economic bloc project.

And indeed, this is one of the key challenges that Kenya faces. Official corruption is no doubt a monster that continues to make a mockery of all attempts to move the country forward.

Bearing in mind the epic levels of corruption that pervade a great majority of county governments, who would be fool enough to put their money (whether as an investor or as a customer) into any bank set up by a group of governors?

But an absence of well-thought-out, empirically tested ideas for bringing about such economic progress is every bit as much of a problem as corruption.

White elephant projects can have as damaging an effect on an economy as grand corruption, as these both bring us to the same point: Public money will have been spent, without any corresponding public benefit being received.

However, before embarking on any criticism of the county governments and their delusionary schemes, it is only fair to concede that effective public policy is no easy task.

Consider for example one of the existential challenges facing most advanced nations: the ageing of their populations brought about by vastly improved public healthcare (making most people live much longer) combined with a sharp drop in birth rate (ie just one or two kids per family, with many couples opting not to have children at all).

Virtually every attempt to get families to have more children have failed, even where there has been a serious effort to restructure the workplace to ensure that mothers do not find their career’s stagnating due to the time they necessarily have to be away from their workplaces in order to raise their children.

 
 

And this is despite the existence of very many think tanks, some affiliated with the leading global universities, to come up with new ways to entice families to have more children.

So maybe we should not be too harsh on our governors when they propose that the Lake Region Economic Bloc should prioritise “environmental conservation, establishment of a regional bank, and water transport across Lake Victoria”.

Environmental conservation is a priority that requires no defence in an agrarian economy like Kenya’s. With most of our people dependent on agriculture for their livelihoods, the wise custodianship of our natural resources is absolutely essential if there is to be any possibility of sustained prosperity.

But surely that “regional bank” is a self-evident absurdity. What needs would it meet which cannot be met by the existing financial institutions? In a country where even medium-sized banks are being pushed by the Central Bank to merge and create fewer and bigger banks, why would the governors want to create what would necessarily be yet another small bank?

And then there is the matter of capital requirements and bank deposits.

Beyond whatever sum that the county governments would invest initially in this new bank – and bearing in mind the epic levels of corruption that pervade a great majority of county governments – who would be fool enough to put their money (whether as an investor or as a customer) into any bank set up by a group of governors?

Most critical of all, how does all this translate into the creation of economic opportunity on a sizable scale within this region? For what those who voted these governors into office desire above all else, is economic opportunity for themselves and their children. If these ordinary Kenyans succumb to the culture of seeking handouts, that is because they feel they have no other choice.

Given the opportunity to improve their lot through their own hard work, that is what they would choose.