[Comment] How to Tackle Poverty After Chaos

from All Africa

Business Daily (Nairobi)

By M. J Gitau

Until very recently, it was hard for economists to admit or recognise the role of politics in the economic process. That was partly because of the specialisation the profession has undergone in the last few years, and how difficult it was, and probably is, for economists to pay respect to anything immeasurable.

But look at the damage politics has had on the economy in just a span of months. From rosy growth projections of seven per cent for this year, the forecast today is too weak.

Today, Treasury and the Central Bank have downgraded that to about four per cent, and last week, AIG, an investment firm, gave a three per cent forecast, while it is reported that the IMF figure is about 2.5 per cent. These grim figures were seen about five years ago.

But underlying the slow down that the economy will suffer this year is the fact that it will hit varied groups differently. Without doubt, big and middle-business have suffered, and will take sometime to recover.

The country's poor are perhaps the hardest hit. If the economy continued with its growth path, and the process benefited lower income groups much faster than others, then perhaps Kenya would have reached the development level giving the majority the capacity to absorb shocks occasioned by the post-election violence. Painfully, this is not the case.

Inflation witnessed today is astonishing. At 21.8 per cent, inflation in March compares badly with the 5.9 per cent in March last year. Almost all basic commodities that determine the life of the poor man have gone up in prices, which, for the most part, is a result of post-election chaos.

Looking at the overall inflation can conceal the entire picture. While 21.8 per cent was the overall inflation for all income groups, that of lower income groups, in say Nairobi, was as high 23.2 per cent, the price index for food and non-alcoholic drinks for lower income groups in Nairobi jumped 28.5 per cent.

All this shows the larger segment of the population which is unemployed, possesses few assets to cushion against inflation, and have fixed wages, are hurting badly.

However, there are sectors in the economy that are still burgeoning. The real estate market has over-pricing, the oil market continues to hike prices while all factors point toward lower prices.

This is the kind of crisis the economy suffers today, and presents the long-term, structural challenge. In short, how will prosperity that we had started to witness, and which we shall continue to record once we are past the crisis, be designed to allow a more cohesive society?

This is the structural and long-term challenge to the economy. It would be prudent to say the enormous task ahead will not be left to the 'economic technicians' alone but will need collaboration from the political class.

Reform, whether economic or political, always starts with a small group that provides leadership.

Appreciating this point shall be the starting point of providing a meaningful chance for the poor and the rich to co-exist.

It should also be the opportune time to debate the plight of the majority who lack sources of decent income, assets and skills for meaningful employment.