We need a different shade of capitalism


Capitalism is like smoking and Mark Twain said it correctly, “Giving up smoking is the easiest thing in the world. I know because I’ve done it thousands of times.”
With the rising inequality, capitalism is under constant attack but we are not about to abandon it yet.

Even the most ardent critics of the economic system only take temporary flight before coming back to it. But a continued European economic crisis, Asia’s managed capitalism and Africa’s socio-political misperception may precipitate new shades of capitalism.

French economist Thomas Piketty, in his bestselling book, “Capital in the Twenty-First Century” which emphasises the themes of his work on wealth concentration and distribution over the past 250 years, has argued that returns to capital are rising faster than economies are growing, which will cause wealth inequality to increase in the future.

In simpler terms, if your parents were not wealthy, your earned wealth will never match that of children from wealthy families whose returns are higher. In essence, the wealthy will always get wealthier while the majority poor will struggle.

Inequality will widen to the point where it becomes unsustainable – both politically and economically – unless some drastic steps are taken. To address this problem, he proposes redistribution through a global tax of as much as 80 per cent on the wealthy.


Piketty’s arguments have sent right-wing economists to the drawing board but the same should not be the case in developing countries where economies can very easily grow faster than the rate of return.

Unfortunately, we get entangled in such liberalist arguments and use them to drum up populist movements that may set us back many years. If African countries dealt with problems of infrastructure, insecurity, inefficiency and corruption, their economies would grow at rates of more than 10 per cent.

This is what we envisaged in the Vision 2030 development programme. China with its managed capitalism has managed a consistent GDP growth of more than 10 per cent over many years, in the process moving more than 500 million people out of poverty.

We cannot continue to copy the extreme ideas of the West and paste them here in Africa. To leapfrog, we must develop our own shade of capitalism.

Whilst Asian economic resurgence happened in the absence of political reforms, Africa is attempting to succeed with both economic and political reforms at the same time.

We must decide what our priorities are because we may not succeed where there is no political ideology to galvanise our diverse ethnic groups.

At independence, ideology brought together Jomo Kenyatta/Tom Mboya on one hand and Oginga Odinga/Bildad Kaggia on the other, dividing their two communities. The economy grew at more than seven per cent. It is for this reason we need a common ground that will enable economic growth.

To develop, Africa must ward off extreme conservatism and liberalism of the West and develop a new agenda along the lines of Bill Clinton/Tony Blair Third Way.

Using a similar ideology, we shall pursue greater equality in society by partnering with the private sector to increase the distribution of skills, capacity and productive abilities. We reject extreme liberal proposals of income redistribution as a means of dealing with inequality as it may precipitate laziness.

We also ensure we are committed to the Constitution with regards to providing equal opportunity, combined with an emphasis on personal responsibility.

We balance our budgets, support devolution to the lowest level possible, encourage public-private partnerships, improve labour supply, invest in human development, protect social capital, and protect the environment.

Even if we pursued Piketty’s proposal of taxing the rich, it is how we spend that money that matters. Take Thika superhighway, for example, which cost Sh27 billion. This money is sufficient to refurbish the Thika-Nairobi commuter rail line and tarmac all the dirt roads in central Kenya.

The impact on the poor would have been greater as they would transport their produce to markets, while the thousands of commuters who use the railway would be spending far less than they are today.

This, in essence, is putting money in poor people’s pockets and effectively reducing inequality. Development should start from where the majority of our people live.

This also applies in urban areas where we need to build access roads to where the majority live. Former US President Richard Nixon once said, “Extremists on the left tend to be just as critical of pragmatism as extremists on the right.”

The writer is a senior lecturer at University of Nairobi and a former Permanent Secretary, Ministry of Information and Communication.