Higher levels of productivity key to better incomes for all Kenyans 

Economic strategy has been all the rage over the past few weeks, as politicians fumbled in an attempt to explain what they mean by their current slogans. As an economist and elected leader, I can afford to tell you what I think of those slogans.

In the 90s and 2000s, conventional wisdom was that as you increased democratic space, the state would become less extractive – there would be no more free lunch for the political elite – and the economies would naturally get better, leading to improved living standards. But this soon emerged as a mirage in many countries, leading to the rapid rise of populism.

In turn, populism has brought many right-wing leaders to power in North America and Europe. The question is why?

One explanation is that real wages have stagnated for decades, making workers to feel disenfranchised. For instance, in the US, after the financial crisis of 2008, those whose primary source of wealth was the financial markets soon recovered.

But not so for those who relied on wages. This left citizens, as American author Arlie Hochschild called it, feeling like strangers in their own land.

This is the reason, experts argue, millions of Americans opted for Trump. To be fair, Mr Trump seemed to understand and, therefore, exploit this disenchantment. And he could offer targets for blame for why people felt their lives had stagnated – immigrants, Africa-Americans, women and so on.

In our case, real wages have stagnated for over a decade. Between 2000 and 2008, real wages increased 4.8 times, rising to 33,000 per person per month. After the cataclysm of 2008, real wages dropped to 26,000, before rising sluggishly to the current level of 31,000.

Lower the cost of capital

Many middle-class folks will tell you they have not made significant investments in the last decade. Yet they can see people who seem to be operating in another economy thriving. This has led politicians to look for targets to blame – dynasties, Mt Kenya communities, and so on have been targeted.

Blame games aside, it is increased productivity that drives real wages up? So, the thing the economic theories being thrown around must solve is how to increase productivity at the firm level. That is what can make our businesses globally competitive and raise our standard of living.

We have to solve underlying issues such as high energy and capital costs and technology. To these I now turn.

Our competitors in the far East pay less than 6 US cents while we pay three times more at around 18 US cents per kilowatt hour.

We must also lower the cost of capital.

Thirdly, we have to stop penalising domestic technology. As I have pointed out in this column before, some of our policies favour imported technology. 

Take the export processing zones law, for example. Imported machinery is tax free for EPZ operators, but machinery made in Kenya does not get the same advantage.

Ndiritu Muriithi is the Governor of Laikipia County. His Twitter handle is @NdirituMuriithi