The Economics of a Pound a Morsel

A story is told of a young girl, of about five who loved her pearls. They were fake childish pearls but she held onto them, aggressively so when her dad requested of those pearls. Finally, to the insistence of her father more than anything else, she finally handed him her pearls in tears. In exchange, he gave her real smoldering new pearls. “Sometimes,” he told her, “we give up what we have to get something better than we have ever conceived.” Herein, in this tale, lies an economic lesson greater than we would ever perceive.

It is without a doubt that the Kenyan economy has recently been staggered by the inconsistent foul cries that have embattled the sugar industry. I would like to begin by saying that a mere child’s play research has led me to uncover the fact that the Sugar Industries’ problems did not begin yesterday as we may be led to believe. The battles that we witness today are not novel and the cries that graze our ears are not unheard of.

Screenshot_2015-08-21-17-17-20~01

(A screen shot from a report on the Hansard in the 1990s)



Screenshot_2015-08-21-17-11-04~01(A screen shot from the Hansard from the 1980s)

The debate that rages is unfortunately not a political debate. It ought to be seen for what it really is. It is an economic debate and unfortunately, both sides are waging uninformed attacks on either side. I always wonder, in such moments, such rare much needed economists-stamping-their-authority kind of moments, why economists choose to duck their tails between their legs and watch the cauldron of insanity instantaneously tip. This is a Kenyan phenomenon I will never understand.

The Sugar industry sustains about 250,000 smallholder families, not 60,000 as the media has been reporting. It also sustains about 25% of the population, which depends either directly or indirectly on the sugar industry and contributes about 15% to the country’s GDP with Mumias accounting for almost half of the country’s produce according to a report released by Monitoring African Food and Agricultural Project, implemented by Food and Agriculture Organisation.

In 2014, the Kenya Sugar Directorate said that Kenya had produced about 591,658 tons of sugar, occasioning a 1.4 percent drop from a record harvest of 600,179 tons in 2013. 600,000 tons is about as good as it gets and this is good, comparing it to produce from other countries. However, the truth is that, despite the quantity, Kenya has a demand for about 800,000 tons of sugar of whose deficit the government meets by importing sugar from other countries. The reason for this is because, in Kenya, the cost of production for a ton is about $570 while in other countries, the cost of production is at about $240 to $290. These high costs of production mean that the government has to inject more money into Sugar producing industries to lessen the burden on the common consumer in the form of indirect subsidies. Moreover, it is the industry’s highest stakeholder.

Anyone familiar with street economics knows of the Production Possibilities Frontier Curve on which capitalistic modern economies derive their lifeblood from. The theory is simple. If a primordial economy produces one product in the beginning and it wishes to introduce another, it will have to spend and take resources from the primary product to be able to produce the second. As it does this, the cost of producing the second is outweighed by the benefit, as the resources taken from the first product are merely the excesses. However, as time rages on in the production of the second, the resources taken from the first are better and hence, a point will reach when the cost is greater than the benefit. The production possibilities frontier happens when a balance is strikes and each economy is operating at maximum efficiency. Where the Cost= the Benefit.

This may seem simple but Kenya is not a primordial economy. Our PPF curves may not be operating at maximum efficiency but the Sugar Industry at this point and for a long time has been supping on resources that could be used to develop other industries and improve more lives. Billions spent on the deathbed of the Sugar millers take away millions to be spent on other things such as free or affordable education. Hence, there are only two questions. Is the benefit derived from local sugar production greater than the cost of sustaining the industry?

The cost of production to satisfy Kenya’s demand amounts to about to about 480,000,000 million dollars. The cost of importation of 800,000 tons is about 240,000,000 dollars. The cost of production at this point without satisfying the demand at hand is about 300,000,000 dollars. The additional cost of importing the rest is about 60,000,000 dollars. This is still greater than the cost of importing raw sugar in total with about 120,000,000 dollars. The decision to spend money resuscitating the industries takes away about 120,000,000 dollars, which could be worth about 120,000 student lives.

This seems like a cold-hearted approach, where numbers are used to negate the benefit shared by 250,000 families that depend on sugar directly or indirectly. However, the decision is not to weaken the sugar industry by exports, but to improve it in a way that will allow it to thrive in future. To allow importation of sugar for a while will save us more than 120,000,000 dollars that we can invest in training of farmers to adopt new, more effective technologies that will allow the production of more tons of sugar, (24,000) a day for the sustenance of the population and the improvement of the mills. Alternatively, it could allow the farmers to invest in other kinds of crops. The areas used to grow sugar are highly fertile and could be more productive for other kinds of crops. Farmers would be better off if weaned off sugar.  Whatever the resolve, the money saved should be reused for the sake of the community deprived of their income, for purposes of training them to better adopt to the shifting gears of development.

A model of lowering tarrifs for the purpose of lessening the burden on individual consumers could be adopted to allow importation. With strengthening of the industry, the government could increase tarrifs progressively to allow for local produce easier penetration into the market.

There is a sort of closed-minded business like approach to this. Economies are open-ended and to bring in a mind fed in closed loops is not beneficial to growth and expansion of production possibilities. We ought to stop bickering and look at this as an opportunity to develop a stronger much grounded economy. Maybe, it is time we handed down these fake crystals for the sake of greater pearls.

Remembering the River

It has been so long since I last posted. School happens and one drowns in it. I find myself swimming in the tides of Mark Twain as he trained to be a professional cab pilot. It is difficult, he wrote, (painstakingly paraphrasing here) for one to see the swell of the river with each rising tide and breathe the same romanticism that led him to it, when one is a professional. The tenuous study and great amount of lingua to be learnt somehow averts one from the passion that drove him thereto in the first place. It is the most strenuous of attitudes, to constantly remind one of the beauty they once saw, such that beautiful colourings and ebbs and rises of the waters are marvelled at instead of being blanketed by worry, of a foreshadowed storm at sea.

It is the same with the study of law. The choice to go to professional school is often informed by the great service one has to perform for humanity or rather, that one wants to perform for humanity. The difficulty, is not the incredible amount of lingua you have to learn that some men, thinking themselves elitists droned about…but rather, the great of amount of effort you have to inject, into not losing your humanity amidst the vague and almost arrogant process of the law. It is very easy to lose oneself in critique and scepticism. The task, is to foretell the raging tides of society without losing one’s ability to appreciate the beauty in the colourings of the threads of law as they mesh together a justice, sometimes elusive, but always worth the search.

I wrote this on Friday, 11th of November of 2011. “This work… (some work my friends and I were doing on community service), is not about the name or the fame, it is not about the fun. It is about the pain that poverty instills. The lost dreams that you have to restore. The tears that we cry, the heart that we break in ourselves and retie it, not with our own broken pieces, but with pieces that are broken like ours, shattered, hoping that one day life will flow again, because at the end of the day, economic discrimination is physical, painful, segregative and undermining.”

I was a fresh faced kid out of high school then and despite the fact that these words may seem primordial, I found them echoed in a more sophisticated manner in the words of Amartya Sen, in the musings of Acemoglu on the importance of institutions in developing economies, in the work of (believe it or not) Marx and his sub-cronies Nyerere and Mamdani, Kwameh Nkrumah and many others. It is a struggle of life, though elusive, but always worth it.

This was my river…restoring dignity and ending a cyclic form of poverty. Being useful in society. I went on to teach the Internet, I went on to design curriculums, I went on to learn the law, I realise now, that I am in search of the great master equaliser, with which to serve my people and everyday I look, I see a primordial form of it in the Internet, hence, I am led to explore it.

Like Twain, it is not easy to remind myself of this. I am lost in details sometimes. The law is an arse and sooner than later, one’s ideologies are stuffed up and left to wither in the shores of doubt. It is the greatest work indeed, to lift my head from “Democracy as Freedom” by Amartya Sen once in a while and behold, the seas of humanity, that led me here and from hence, work out how to comprehend the beauty before me, with a sense of duty.

An East Asian Reply to Africa’s Economic Voldemort

The talk of economic empowerment, economic liberation or the rise and emancipation of a dilapidated Africa is one that is more often than not, met with drooping shoulders and heavy sighs. The prospect itself is gratifying but growing up with an inexplicable vision of 23 million people dying a day from starvation and 47% of the continent’s population living under poverty, we simply exclaim at how wondrous that all would be. Cases of corruption that is so severe that it stashes away almost 0.77% of the continent’s GDP annually leave us disheveled and disillusioned. Economists, with their glorious terms and upward sloping graphical predictions seem to speak of intangible hope that can not be realised… Or can it?

One song that is mouthed continuously though is the comparison of Africa to East Asia. Even lay men know that once upon a time, East Asia and Africa were almost at the same economic footing. At some point in time, both were dilapidated, reeking of poverty, disease and death. However, the countries of East Asia speak of a transformation now. With approximately staggering rates of almost 6% GDP growth annually for the past thirty years in the region, their peoples are enjoying the fruits of their labour. African streets still reek of poverty disease and death and their peoples, walk them, with hunched backs, bearing the weight of accumulated and enslaving foreign debt. In many ways, Asia and Africa gained independence, but Africa, long mentally colonised, still suffers the plight and indignation of economic slavery.

This would hence explain how we have gradually accumulated solutions to these innumerable problems that we face. Before our faces, the ideas of capitalistic ideas, democracy, a free market among others have been flaunted. Most of these though remain theoretical unvisualised ideals in the African mind. Despite our lack of knowledge of them, we hold onto them dearly. They translate to the only refuge we know to liberate ourselves. The price is ransom for our continent.

Hence, we swallow whole some of these concepts tossed around by educated men and women in three piece suits, sited in four walled air conditioned rooms, in a metropolis somewhere. If indeed, democracy and capitalism are the foundational basis to economic growth, what would explain the almost mysterious way in which East Asia rose? Despite the popular cry that the cities are filled with “determined-to-the-point-of-suicide” fellows, examining the policy that shaped one of the world’s regional powers would not only debunk some propagated myths, but also, contextualise a rise to greatness that is most often than not, shrouded in an elusive mystery.

Most of these countries began their monumental rise at the time after the second world war, after the start of the cold war. “The Iron curtain has descended Winston Churchill time…” The world was divided on the lines of capitalistic countries and communist or socialist countries and the major players fought hard to gain as much traffic on their side as possible. At that time, it meant pouring as much money in devastated countries as possible. This explains the Marshall plan of the US, the rebuilding of Europe and the resurrection of an ailing East Asia. Copious amounts were poured into East Asia. Impressive figures of almost 1.48 billion dollars (an impressive sum then and now,) were poured into Taiwan in successive instalments between the periods of 1951 to 1968 as noted from Taiwan’s Ministry of Finance. South Korea and Taiwan received loans on very generous terms with very little of their capital coming from FDI ( foreign direct investment) with FDI being 1% in total percentage to the capital flow of S. Korea and 8% of Taiwan’s, between the periods of 1951 and 1967. All this happened under the watchful eyes of authoritarian regimes and an economy infested by monopolies such as chaebols in S.Korea and the guanxiqiyes in Taiwan.

Contrary to the view held by the World Bank regarding the rise of these countries, free trade was a concept that remained intolerable. There is proof of heavy subsidisation of industries while protecting them with heavy tariffs and other barriers. They also carefully controlled investment. Funny enough, western countries opened up their markets to these countries’ goods while at the same time, not making it mandatory to have these countries open up their markets to their goods. There also seems to have been deliberate undervaluation of East Asian countries’ currency an example being under the Bretton-Woods regime where, 360 yen went for a dollar at that time. The reason was that this in turn creates an export driven need and lessens the import drive, creating a vacuum, that leads to increased industrialisation, manufacturing the import needed. Indeed, this shaped Japan’s industry. The lack of a proper functioning system of democracy was also deliberate, to ensure that an authoritarian hand would structure the functioning of the workers in such a way that a disciplined force would create the machinations for an economic leap. Recently, these countries liberalised trade and investment but this was a case of development first, then, liberalisation rather than the propagated model of development through liberalisation promoted by neoliberal economists.

As a result, one seeing the deliberate moves by the West, especially the US in ensuring a stronghold for capitalism in the East would question the praises of the World Bank, of free trade and investment to African ears attending the G8 in Camp David. It would be wise to learn from the Asians, though not to copy them blindly. African policy makers need to restructure how they view the rise of an economy, and rethink the concepts of free trade and a strong currency taught brazenly in schools. Furthermore, policies that are entrenched in culture would succeed more than they would fail. Exploring policy that encourages domestic saving and the rise of pension schemes as they have in Nigeria would be beneficial. Infrastructure in Nigeria is set to be financed by proceeds coming from pension schemes in the next decade or so. Aggressive policies that remove the thorn of corruption ailing so many of us would also serve a mighty purpose if entrenched as they were in countries like Seychelles. A powerful regional force would sufficiently serve as a market for its own goods, while toughening tariffs and investment opportunities would not only encourage consumption of our own produce but also innovation and industrialisation. The world is not as it seems and Africa needs to open its eyes and its mind in the making of sound policy as regards to its economy if it is to manuever its rise to the top, where it belongs.

Lord Atkin’s Patronus to Decolonising the Judiciary’s psyche

The question of judicial independence is one that has been debated time and time again in African judicial circles. It has been said, that the judiciary can not be as independent as independence is. Justice could be said to be under siege best example being Kenya’s war with an Executive controlled Judiciary over a long period of time. Such control is the most efficient measure to curb democracy and curtail human rights in the wake of dictatorial governance.

Here though, I find a concise explanation on what Judicial independence is. An independent judiciary is a middle ground, an umpire, between a people and their civic rights and an executive, with it’s powers. It referees the ground in a manner that a people’s freedoms are not limited in a manner that violates their fundamental rights.

This particular reasoning breathes life into the concept that a people who give up their liberties for temporary securities, deserve neither liberty, nor temporary security… 🙂

TomGraddon

I shall today be exploring the case of Liversidge v Anderson ([1942] AC 206). It isn’t a case I was immediately familiar with, but is significant nonetheless for its impact on constitutional law and theory, especially concerning the authority of the courts in challenging Parliament.

This case is particularly significant not because its outcome affected the nature of the courts’ relationship with Parliament, in fact it is a dissenting judgement with which we are concerned. Naturally, a dissenting judgement doesn’t have the persuasive calibre of a prevailing judgement, which would grant it the authority of law, but this case deftly illustrates the role taken on by judges as a social conscience, prepared to challenge statutes enacted by Parliament where they believe they infringe too far on our civil liberties or basic freedoms. Moreover, when discussing points of law and finding precedent to support a judgement, whether a judgement…

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An Impetus to African Nationalism

‘Each generation must discover its mission, fulfil it or betray it, in relative opacity.’ -Frantz Fanon

We are born in a generation that has failed to recognise its objective in an ever changing and dynamic society. However, these words, uttered by a sick and tired Frantz Fannon as Africa clambered for independence remind us every day that we are fighting the same battles. The battle is to identify the battle ground. The battle ground then was in the field of active colonisation. The price, was the land. However, in this soliloquy, we read into the fact that the battle ground is an ever changing phenomenon. We are not actively fighting to get our land back anymore but we are embattled in bitter tensions to win our minds back. In the book The Wretched of the Earth, though seeming like an overview on the effects of colonisation on the African people, Frantz Fanon analyses the psychiatric and psychologic dehumanising effects of colonisation upon the individual man and woman, and the nation.

I am not about to start analysing the effects of colonisation, but I do feel like the youth in this generation have the task of liberating themselves from the claws of dependency that have held generations upon generations of Africans captive. This would be our battle field, the price, is African development. This is a journey that I undertake; to involve scores of us to debate real issues. Issues on law, issues on diplomacy and Pan-Africanism, issues of food and food security, issues on economic empowerment, issues on education, issues of technology, issues on government and politics.. issues that need to be discussed, to find solutions that are to be implemented. To uplift Africa, we need not undermine or discredit the rest. However, we need to learn to stand on our own two feet and find solutions to the problems that encircle us. This is such an avenue. Bound to communicate, I reiterate the words…

“Everything can be explained to the people, on the single condition that you really want them to understand.”