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Columnists

Use New Deal to tackle unemployment

The percentage of Kenyans in gainful employment in relation to those actively seeking employment is estimated to be 40 per cent.

The World Bank says that of the 800,000 youth (ages 15 – 35) that join the labour market every year, only 50,000 find a job. Some 70 per cent of the youth have no employment.

Our rate of unemployment today is worse than that of other countries during the Great Depression of the 1930s. Some have described the situation as a ticking time-bomb. I say no because we can learn from the past, and change it into an opportunity.

Problems are primarily the sources of innovation and creativity and going by the past, the unemployment problem is not insurmountable. During the Great Depression, British economist John Maynard Keynes published a book, ‘‘The General Theory of Employment, Interest and Money’’ in 1936.

In it he argued that private sector decisions sometimes lead to inefficient performance, structure, behaviour, and decision-making of an economy (macroeconomic outcomes) which require active policy responses by the public sector, in particular, actions by the central bank (monetary policy) and the government (fiscal policy), in order to stabilize output over the business cycle.

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His economics advocated for a mixed economy – predominantly private sector, but with a role for government intervention during recessions as a basis for employment creation.

Keynesian economics had influence across the world including the United States which was then going through difficult times with poverty spiraling. When Franklin D Roosevelt became the 32nd President of the United States of America in 1933, America was a country in the midst of the worst economic crisis in its history.

The Social Welfare History tells us that this was the time of the Great Depression—sparked by the crash of the stock market in 1929—over $75 billion in equity capital had been lost on Wall Street, gross national product shrunk from a high of $104 billion to $74 billion, and US exports had fallen by 62 per cent.

Over 13 million people, nearly 25 per cent of the workforce, were now unemployed. In some cities, the jobless rate was even higher.

Americans walked the streets in search of work, or food, donated from one of the hundreds of soup kitchens set up by private charities to keep the wage-less from starvation.

The Social Welfare History, further notes that “in rural America, meanwhile, thousands of tons of unmarketable crops sat rotting in gain storage bins, while farm income plummeted and thousands of families were forced to abandon their homesteads.

The nation, in short, appeared to be falling into an economic abyss that might well result in the total breakdown of order. Some observers even feared that without immediate and dramatic action, the country might well slip into revolution”.

Roosevelt in response, came up the “New Deal” — a series of economic measures designed to ease the worst effects of the depression, revive the economy, and restore the confidence of the American people. Within the first 100 days, Roosevelt and his team had enacted 15 major laws to address the crisis.

Among the major legislations in the New Deal, was the establishment of the Works Progress Administration (WPA), but the most famous measure of the New Deal was the 1935 Social Security Act, which led to the establishment of the Social Security Administration and the creation of a national system of old-age pensions and unemployment compensation. Social Security also granted federal financial support to dependent children, the handicapped, and the blind.

Even with these drastic measures that to a large extent helped restore the confidence of the American people, Roosevelt still faced criticisms with the Liberals arguing that “the measures were not sweeping enough to restore the nation to full employment.”

Preferring a far more comprehensive programme of direct federal aid to the poor and unemployed. The Conservatives argued that the New Deal “went too far, and brought too much government intervention in the economy”.

Rightly so because advocates of fascism and communism thrived, the New Deal offered hope and restored the faith of the American people and in their representative institutions.

In this desperate times where unemployment and crime are soaring and with more than 52 per cent below the poverty line, Kenya needs a New Deal to turn the many unemployed youth into an opportunity.

We can for example stimulate employment in the private sector by removing corporate tax. Corporate tax revenues are not significant. But we can recoup most of it simply through PAYE from increased workforce.

As Obert Skye once said “Desperate times call for desperate measures.”

The writer is a senior lecturer, University of Nairobi and a former permanent secretary, Ministry of Information and Communication.

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