If you ever wondered where power, prosperity and poverty come from, then you need to read ‘‘Why Nations Fail: The Origins of Power, Prosperity and Poverty’’ by Daron Acemoglu and James Robinson.
Their premise is that while economic institutions are critical for determining whether a country is poor or prosperous, it is politics and political institutions that determine what economic institutions a country has.
Their story begins at a city called Nogales in the Americas. It is a city divided by a fence. On the north side is United States, and on the south side, Mexico. And the inhabitants on the northern side face lower crime rates, live longer and earn three times as much as their southern neighbours.
Acemoglu and Robinson attempt to answer the question of how two places which share an ethnic background, a geographical location and climate could be so different.
Most of their findings centre on how economic and political policies are applied and whether such policies are inclusive or extractive.
Arguing that although policies around economic intuitions are important, political institutions play a key role in shaping them. In most instances, they found that success was dependent on how inclusive the institutional policies are.
They further argue that an inclusive political system will certainly enable an inclusive economic system. Inclusive systems provide “incentives for people to acquire skills, work hard, save, invest, and, most importantly, innovate”.
On the contrary, their findings show that when a political system is extractive, it often exists for the benefit of a narrow elite, and creates an extractive economic system. Although we elect the political class, rarely do we influence the systems they create thereafter.
And as such citizens may be discouraged from creating wealth if there are no incentives to work hard or to invest for that matter. Extractive economic systems do achieve short term growth, but they are not sustainable in the long run. What lessons does the Nogales present to others?
Nogales is a perfect case study for emerging countries. Our nascent devolved political system is an attempt to address some of the income disparities that we have had since independence but it can also be the Nogales fence dividing counties that will succeed and those that will fail.
Allocations from the exchequer alone will not address apparent disparities that will eventually look like Nogales. The direction of our many problems must be anticipated and planned for to meet future demands. Solutions to deal with these problems are there but what is needed is leadership with courage to create inclusive systems coupled with openness to drive change.
Without change, change itself can overwhelm us. It is evident that when we did not anticipate and plan for change from rural to urban migration, our cities began to witness the growth of shanties.
Prior to this Kenya indeed planned and built low income housing until a new political dispensation ignored this planning aspect. Some of these problems are urgent and addressing them forms the basis of dealing with other more complex problems. If for example we do not address agricultural productivity that is being undermined by excessive land sub division, we risk food insecurity leading to increased poverty levels.
Some of the steps that we must take include: Encouraging futuristic settlement by building rural urban centers or rural service centers through a rapid urbanization programme where citizens will have access to modern utilities and other social services such as health and educational facilities.
The current haphazard rural settlement is not sustainable, encourages peasant mentality and undermines economic progress.
Invest in rural cottage industries especially around value addition to agricultural production; leverage on the information and communication technologies to aggressively digitalise much of our oral past as a basis of not only knowledge but a platform for enhancing revenue generation from our indigenous capital.
Further we need to get rid of backward cultural practices such as burying the dead in highly productive land and move to consolidate land to enable large scale mechanized farming.
Our future is in our hands. To realise it, we need strong leadership that builds inclusive institutions enabling incentives for people to acquire skills, work hard, save, invest, and, become innovative.
The writer is a former permanent secretary, Ministry of Information and Communication and a senior lecturer at University of Nairobi.