Why Kenyan politics is like a Ponzi scheme in which 99% always lose

61727-054. This is a number that will sadly remain etched for a long time in many victims’ minds.

It is the unique identifier for an infamous inmate serving 150 years in prison in Butner, North Carolina, in the US. His name is Bernie Madoff.

For more than two decades, he pulled off $65 billion, making it the biggest Ponzi scheme on record. Living a lie became his full-time occupation and was even described as ‘arguably the greatest con of all time.’ However, all this came to an end in 2009, when at the age of 71 years Madoff pleaded guilty to 11 federal felony counts. His story is aptly depicted in the movie, italicise The Wizard of Lies.

A Ponzi or pyramid scheme is an investment fraud where clients are promised abnormally high returns on their money at little to no risk. The idea is built on recruiting a constant exponential chain of people, whose investments continue providing returns to earlier investors who form the top tiers of the scheme. New recruits are enticed through clever messaging that exploits their problems, to create a fantasy of hope that their success is around the corner. However, when the flood of new investors dries up, the scheme begins to unravel due to the shortage of new money to go around to pay everyone. In every case, it is an unsustainable venture.

Many of us pride ourselves on being too clever to fall for the trappings of a pyramid scheme. We believe we can smell the con game from miles away. And perhaps this is why the Bernie Madoff hope scam does not resonate with us. So allow me to break it down for you.

In recent weeks, our political landscape has been aligning and realigning. Senior politicians have been revealing their political dream teams, whose composition, in a bid to demonstrate inclusivity, is drawn from various parts of Kenya. This semblance of inclusivity appears to have been further cemented by one of the radical proposals before the Building Bridges Initiative. It reportedly proposes to expand the Executive through the creation of the posts of a Prime Minister, a ceremonial President to serve a seven-year non-renewable term and two deputy prime ministers. The message in defence of this expansion is that the place holders of those slots will be drawn from different ethnicities to balance the power representations and relations. It is hoped that this, in turn, will reduce ethnic antagonism and divisive elections, while building national ethos and shared prosperity.

Like the Ponzi scheme, this is very clever messaging that is promoted as the panacea for all our problems. The structure of these political dream teams is very uncannily similar to that of the Ponzi scheme. The occupants of these positions are selected based on their perceived ability to recruit voters from their ethnic blocs, to support their preferred presidential candidate, in order to conquer their competitor. This is why we have seen bold pronouncements that certain regions are solidly behind certain candidates. If you know, you know.

When we, the electorate, buy into these Ponzi political scams, we guarantee the election of these political dream teams into positions of governors, senators, MPs and soon to be, the expanded Executive. Like in the Ponzi scheme, because of being positioned in the top hierarchies, they become the largest beneficiaries.

Research into more than 350 multi-level marketing schemes was done by Jon M. Taylor of the Consumer Awareness Institute over 15 years. The findings were that 99.6 per cent of participants at the base of these Ponzi schemes always lose their money, and the loss rate is always between 99.12 -99.97 per cent. Is it then any wonder why ‘Wanjiku’ never reaps the rewards promised during enrollment into the Ponzi political schemes?

This begs the question, when Wanjiku decides to buy a pair of shoes, or a mobile phone, or decides to marry or have a child, why does she not need a dream team to make that decision for her? I’ll tell you why. It is because she is praxeological [relating to the study of human action, based on the notion that humans engage in purposeful behavior], and thus perfectly capable to make decisions all by herself based on her needs, means and ends. She is perfectly alive to what she is lacking, the resources she has to meet that need, and the outcome she’ll have once her need is met. So, why shouldn’t the same obtain in matters political? Why do political power brokers infantilise her on political decisions?

In economic-speak, this is known as central command economy. In this type of economy, an elite group of people in government makes all the decisions regarding what goods and services should be produced, the quantities to be produced and the prices at which they should be offered for sale. When this power is consolidated in the hands of a few government planners, two major problems arise: one, the incentive problem; and two, the knowledge problem.

In the incentive problem, the central planners make a decision in their own interests and thus impose social costs and deadweight losses on the rest of the society. As a result, policymaking is dominated by political interest groups that do not own the factors of production and hence have no incentive to drive efficiency or control costs. Rather, their power struggles remain in pleasing their bosses, having the right connections, thus making corruption quite pervasive.

The knowledge problem is brought about by the central planners’ inability to undertake an economic calculation of how much each good or service is required to be produced, by who and to whom, where and when to do so, and which technologies or methods are best suited to put the productive factors to use.

Similarly, our political dream teams act like these central command economic planners. They decide and impose on us who we should vote for in their own interest. They diagnose our problems and prescribe solutions in colourful manifestos. And in our greed or naivety, we buy into their Ponzi political schemes. We vote for them. They secure political positions. Then the journey of aggrandising themselves at our expense begins. Five years later, we continue lamenting at the faux fantasy hope. And soon thereafter, another political Ponzi scheme is designed. And the cycle continues. Lather, Rinse, Repeat.

Finally, my unsolicited advice to Wanjiku is that conmen and politicians do not sell you facts; they sell you emotions and believing them is like believing in dry water or wooden iron.

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it." - Upton Sinclair.