On Greece and the Kenyan economy (well sort of)

I’ve just finished reading a fascinating article in Open Democracy about the collapse of the Greek economy and what it will take to fix it. While Greece and Kenya are fundamentally different countries, I was struck by how well the author unpacked the underlying dysfunction of Greece as a country and an economy and how some of the issues apply to the Kenyan economy today.

Don’t have anything clever to add to the article’s analysis, just want to point out the things that stood out for me.

For starters, the author notes:

In a small-scale economy households make different choices from those in an economy of salaried employees and large organizations. The family will seek stability in polyergy: in having varied sources of income, as many as it can find and appropriate.

How many Kenyans do we know who have a side hustle? Banker by day, butchery/hair salon owner by side…. Even during the times we have experienced growth – it’s been a false growth, barely any trickle-down (hence Kibaki and his cronies shock in ’07 when his re-election wasn’t guaranteed based on economic growth).

Author goes on:

In a small-ownership economy household saving and investment is also different. It is channeled, quite rationally, into real estate and into education. In western economies savings are invested collectively through pension funds, mutual funds and bank deposits. They end up funding industry, technology, infrastructure, and in general, sizeable organizations. In the Greek micro-economy monetary savings have few reliable collective outlets.

Cue the ubiquitous Kenyan dream of owning a plot and investing in your kids education. NSSF is widely regarded as a rip-off, and other forms of investment and saving (e.g. stock market) are only taking hold fairly recently.

And does this sound all too familiar?

But clientelism and favoritism have been inherent in the modern Greek state since its inception, and the state has always been a major player in the economy. Distributing political rents was a necessary means of legitimation of politicians in the eyes of the electorate, and harvesting rents was a major egoistic reason for becoming a politician.

And wonder why we don’t hear of enough success stories from Kenyan entrepreneurs – very few can tell the story of how they got from A to point Z without some murky stories or connections in the middle – usually related to government connections or at minimum great skill at navigating the political rent space. Try pitching your open source solution to a government official, unlikely to move anywhere because no fat budget attached.

Business strategy: if businesses can make high profits from government contracts or from other privileges, they will invest more to gain the privileges than to become competitive in an open market. Over time this distorts their whole mode of operation: a good salesman is one who can build personal relationships with bureaucrats, a good engineer is one who can draw out a project to make it more expensive. It is rare for a state-dependent enterprise to be also competitive. This was true for the big so-called ‘national suppliers’, as well as for the small I.T. companies, in which many bright engineers wasted their youth working on useless R&D projects funded by EU Programmes.

And finally, I think this captures the essence of why I think it is – generally – tough to transition big/large scale companies successfully in Kenya and to translate the innovation that we see all around into tangible (profitable) businessess – we work hard, but are loathe to collaborate, because someone inevitably stabs you in the back and there is no penalty – legal or social (as in they’ll be catching pints next to you in the bar a week later as if nothing happened). So most of that innovation and entrepreneurship bubbling around either doesn’t transcend the individual or the small scale – you cannot grow in an environment that lacks trust or that is full of what the author calls low-trust opportunism (I am so adapting this phrase!).

Maybe Greeks will work as hard as westerners when given the same set of choices; but they will not collaborate as well.In game theory an opportunist is one who grasps the chance to make a good profit today, even if that may have negative repercussions tomorrow. Usually, he will break a rule or spoil a collaboration to make the ‘grasp’ (αρπαχτή – ‘arpachti’, from the verb αρπάζω, to grasp).

25 comments to On Greece and the Kenyan economy (well sort of)

  • Afrowave

    Sasa?

    Nice “sort-of” blog. You have raised very good points and comparisons. We are left with a number of questions on why the similarity. Is it the commonness in human nature and our leaders penchant for corruption or is it in the roots of democracy and post Cold_War globilisation?

    I have been thinking about this scenario over sometime now. Rangeh Omar documented on Greece’s current crisis and its history very well (http://tinyurl.com/32pzpny).

    The “war” is in the mind. We need a paradigm shift. In Kenya, as Just-a-Band put it, we see ourselves as “tenants”, eager for a green card than a voters card.

    In reality, we suffer from the lust of the “Western Dream”. Since we grew up in a country where from colonial times, aligning yourself with power put “butter” on the table, and that “butter” became a highly sort after status, and since to get the “butter” one had to “give up” even their relatives, we have grown up with little critical thought and no imagination of how we can create our own systems that divorce us from these Western paradigms.

    Income and opportunity disparity has increased and the ethos of hard work and patience has been trodden over by “deals” and “kuangukia”. With our consumption of “Ghetto” culture, few want to be an engineers and doctors. Now they want to be “famous”.

    So now we have to “systems” that are accepted in the West, “slavery” and “class”. This is what democracy and capitalism live by.

    Let’s take for example “Free Education”. The moment we, Kenyans embarked on this, we were told its too costly and won’t work. We went ahead anyway and suddenly DFiD was at he door offering cash “for books”. Obviously, the “easy money” found its way into Kenyan pockets, and suddenly, there were noises of “corruption” and “we will withdraw our aid”.

    Guess what?, DFiD’s contribution was 500Mil Kshs. Kenya’s education budget is 140Bil Kshs (www.hakijamii.net/banalysis.pdf). Actually, we could have done very well without their money and of course, DFiD has continued to give money to Kenya.

    So though we are really responsible for our own chaos, The Western governments can’t let us solve them. They will have no business opportunities left. Remember “Dead Aid”.

    With the IMF and World Bank going after their “pound of flesh” in Greece like SAPs did in Africa in the name of “privitisation”, Greeks are now demanding the return of the Drachma and leaving the Euro behind. Global business won’t let them.

    We need to think inwardly, “Africanly” more and take our gaze off Washington DC and Brussels as a source of leadership. We need to look at what we have got and stop seeking affirmation from people who do not see our development “without them” as progress.

  • Bemused

    Small business, no trust of big govt., so the Tea Party nirvana is purgatory? We developing countries might start looking away from Western models of “development”. This is not just idle talk, maybe the Asian countries who have developed, have developed with corruption, with their countries current cultures. I am not for corruption, but is corruption more a symptom than a cause of a disease? The Suharto family is wealthier than the Mobutu regime, and Indonesia with fewer natural resources.

    Ha Joong Chang, a Korean economist at Cambridge has done a lot of work in development economics, studying what works in development.

    Here is a short talk he gives, funny, but very informative and eye-opening.
    http://www.youtube.com/watch?v=T5-ojv5-b3U&feature=related

    http://www.zambian-economist.com/2009/03/bad-samaritans-by-ha-joon-chang-review.html

  • Sums the Kenyan economy a bit too well!

  • Ken

    Even HaJoong Chang distinguishes corruption that involves “reinvestment” of the proceeds locally and corruption that involves deposits in foreign banks–Kenya has experienced far too much of the latter for corruption not to be a big obstacle to a better standard of living for most Kenyans, in my humble opinion.

    I don’t see that Kenya needs a specific model from either the West or from Asia. Keep in mind that the point being made in the quoted piece in the post is why Greece has had a different experience than other countries in Europe under the EU system. To me, reform of law enforcement and the judicial system under the new constitution could give Kenyans hope of bettter ability to trust and collaborate, knowing that rules can be fairly enforced.

  • Bemused

    Yes Ken the key is trust. Back to my point the corruption we experience is a symptom of a larger disease.

    While law enforcement and judicial reform are necessary… can a marriage really be built on the pillars of a pre-nup, post-nup, divorce decrees and their enforcement? Is there more?

  • Thanks Ory, you just cleared up some things I’ve been thinking about for some time. It is impossible for Kenya to move forward if the changes are only cosmetic and barely skin deep. There are some strong and deep rooted mores that have yet to be unlearned – and maybe this change is a factor of time? Who knows. Maybe Greece needs more time, and maybe we’ll never know.

    “Low-trust opportunism” as you call it and lack of trust, translate more or less to a situation where everything is a zero-sum game. My win is your loss and vice-versa… an exercise adopted my our primitive ancestors, which as we know can’t have a good ending.

    On the positive side, we have made some good progress and its time to stop and take stock. Each gain must be celebrated.

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  • 3 years later- and liking the analogy between Greece and Kenya, also wish to add my motherland- Ghana, to the list, only we had it about 30 years ago and that is how Ghana met and got married to the IMF and World Bank.

  • brown

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