SR article

Institutional Analysis

This analysis gives an overview of the political and economic institutions in Kenya. At the end there is a focus on which institutions are important for the project in Okana.

Political institutions

With the choice of a new president in 2008, President MwaiKibaki, a political crisis started in Kenya. There was a strong thought that the election was manipulated and international observers confirmed the electoral manipulation. While there seemed to be a democracy, where every person has one vote, the power of corruption and favours dominated the election. The free election held by the government suggests these political institutions are inclusive, according to Acemoglu& Robinson. But this suggestion is not fair, because there is too many space for favours and corruption, as shown in the manipulated election of the new president in 2008. The inclusive political institutions that seemed to be there, were not working during this elections.

This example gives a good view of the political institutions of Kenya. The institutions are the different rules under which the country lives, the political institutions determine who has the power in society and to what ends that power can be used (Acemoglu& Robinson, 2012). Kenya’s political system concentrates power in the hands of the president and his political cronies. This exacerbates the economic inequalities (CFR, 2008). The president has a lot of power in hands, which makes the political institutions absolutist, which means that the distribution of power is narrow and unconstrained (Acemoglu& Robinson, 2012). But on the other hand the power of the president makes that the state is centralized. The state in Kenya is ‘the monopoly of legitimate violence’, as defined by Max Weber (2009), what means that there is centralization of the state. Centralization can make that the political institutions are inclusive from origin, but the absolutist way of the institutions makes that the political institutions of Kenya can be defined as extractive. In Kenya the economic inequalities will be even exacerbating because of the big control by elite and the dominance of heredity if nothing changes.

In provincial areas the president also has its power with pointing district commissioners, who oversee municipal services such as education, health, and transportation. In our project in a little village near Kisumu called Okana, the population is also really dependent to the central power of the president. Where you may expect that there is also a lot of private property in this little village,  the power of the president is dominant. We expect there will be some district commissioners who follow the volition of the president. There is always a control by elite.

In the last decade, the political institution structure is in a transition. The approval of the new constitution in 2010 and relatively peaceful elections in March 2013 are milestones constituting steps forward in Kenya’s transition from political crisis (IDS, 2013). Kenya is willing to make the political institutions more inclusive than extractive, but it is difficult to break through the society who gets power of the extractive political institutions. The absolutist institutions needs to change into pluralistic institutions where the power in society is distributed broadly, more broadly than it is now. At the end, according to Robinson et al, inclusive political institutions that are sufficiently centralized and pluralistic will lead to a strong state, and that will be one step further in the development of Kenya.

Economic institutions

Besides the political institutions, there are also economic institutions. ‘Inclusive economic institutions are those that allow and encourage participation by the great mass of people in economic activities that make best use of their talents and skills and that enable individuals to make the choices they wish.’ (Acemoglu& Robinson, 2012) According to the UN Human Development Index (2015), Kenya ranks 145 of 177 countries on income equality. This rate shows that the income in Kenya is non-equal divided and that means there definitely is a non-equal playing field at the market. The economic institutions therefore be extractive, because the incomes are extracted from one subset of society to benefit a different subset. However, the free market in Kenya is more and more developing. This will lead to more inclusive economic institutions, but to accomplish a fair market in Kenya, the corruption has to be tackled first. The private property rights in Kenya are not secure enough, and people without this rights will not be willing to invest and increase productivity. The elite of Kenya probably has this rights and use them, but the private property rights has to be for a more broad cross-section of society to make the economic institutions inclusive. Only then the institutions will foster economic activity, productivity growth and economic prosperity (Acemoglu& Robinson, 2012).

The state in Kenya is intertwined with economic institutions, as the enforcer of law and order, private property and as a key provider of public services as roads and transport network. Providing public services seems that the state is inclusive, because everyone gets the benefits, the population as well. But as mentioned in the political institutions, the state is dominated by a minority of the society, which gives the state an extractive character. In Kenya there are a lot of corrupt officers next to the road, which stops every car and bus to charge  them for a lot of money without any reason. This officers show that the state is still not as inclusive as they suggest to be. We experienced it ourselves when we were in a car on the road in Kenya, where an officer wanted a lot of money from us without any reason. We satisfy the officer with a small amount of money and luckily he let us go after that. Nevertheless, inclusive economic institutions need and use the state to survive. Kenya is developing the economic institutions more and more into inclusive, but the state also has a part in this transition. This makes that the economic institutions still are extractive in Kenya.

To conclude, both economic and political institutions show some characteristics to be inclusive, which suggests that Kenya is transitioning from extractive to inclusive institutions. However, the institutions are extractive from nature. The state in centralized, which opens opportunities for the political institutions to change into inclusive institutions. But that the state is dominated by minority, the power is still in hands of a few person of the society, makes that this patron is hard to break through. Kenya is trying to develop, and when the institutions really transform inclusive, this will lead to economic prosperity, productivity growth and in the end a stronger state.

Institutions in our internship

Sometimes neither culture or geography nor ignorance can explain the divergent paths of different countries in political and economic ways, but looking at the institutions of the country can give more answers. That is why it is important that for our project to look at the institutions that can influence the outcome of our project and on what institutions we have to pay attention to let our project succeed.

The extractive economic institutions of Kenya do not stimulate entrepreneurship in the country, because there is not much possibility for entrepreneurs to borrow money from banks and financial markets, for foreign companies to enter into partnership, for individuals to take up mortgages to buy houses (Acemoglu& Robinson, 2012). For the non-profit organization where our project is for, SRI, this is not a positive circumstance to make the organization a self-sustaining organization as the goal of our project is. Because of the transition of the economic institutions to be more inclusive, the state tries to stimulate the non-profit organizations like SRI with providing some financial support, but this is for SRI not enough to become self-sustaining. For our project, this means that we have to find other ways to generate income for the organization. We have to be aware that the organization probably also wants money from us, but our project is not to just give money, but to really make a change in the organization with the support of some funds we arranged.

Second, the extractive character of the economic institutions in Kenya creates that people do not have the freedom to pursue the vocations in life that best suit their talents, and also do not provide a level playing field that gives them the opportunity to do so. Therefore it will be hard to find people in the area of Okana, the village where our project takes place, who are really willing to invest and increase productivity to stimulate economic activity. We have to make sure that we will be surrounded by the right people who really want to help us as good as possible, so that our project will succeed.

Thirdly, extractive economic institutions are not stimulating productivity growth, and this productivity will influence our project. We have to be aware that in Kenya things are arranged much more slowly than in the Netherlands. We only have three months to finish our project, and we have to make sure we will not lose too much of our time because of the lack of productivity because of the Kenyan institutions. We are aware of this productivity, so we can respond to that if we have to. Practical, it may be good to let the local people know that we want to do this project with the local people together, and that we are not just there to leave our project behind without any influence of the local community. When the community is feeling connected to us and our project, the change of succeeding is much higher.

The extractive political institutions of Kenya are also important to take into account while working on our project. The political centralization in Kenya gives opportunities to shift from extractive to inclusive political institutions, and the elections that come up also suggests that there is really going to be some political change in the country. A lot of people we spoke in Kenya to are truly interested in the upcoming elections, which shows that the society also has its vote in choosing a new president and that suggests inclusive political institutions. Nevertheless, the transition from extractive to inclusive political institutions is terrifying the society as well. The phenomenon of creative destruction, as stated by Joseph Schumpeter (1942), shows that economic growth and technological change caused by inclusive political institutions will destroy the old with the new. The community of Kenya fears new innovations, because they cannot understand why the old ways are not good enough. For us as a group is of great importance to be aware of this fear. If we want to create innovations in the organization of SRI, we have to tactically deal with this fear to creative destruction. Practically, we should assure the local community of Okana that our possibly new approach of entrepreneurship can also work in this country. We can show them some cases in with similarities of our project worked, and by that we can convince them that innovations can be good for the community.

The transition from extractive to inclusive political institutions however will be take a long time. With the extractive political institutions as there are now, it will still be possible to trigger economic growth in Kenya. As mentioned in the development and poverty analysis of this report, there is found a new source of oil and minerals in Kenya, which make countries like China interesting to invest. This can lead to rapid growth of prosperity, because the elite of Kenya can directly allocate resources to high-productivity activities that they themselves control. Despite, this can create rapid growth, but this process will be intrinsically limited. In the end, for the country and definitely for our project, it will be better to invest in creating inclusive political institutions rather that stimulating this rapid but limited growth. Then our project may stimulate the development of prosperity in the local area of Okana.

 

Bibliography 

Daron Acemoglu& James Robinson, Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Crown Business, 2012. Chapter 3.

CFR (2008) http://www.cfr.org/kenya/understanding-kenyas-politics/p15322#p3

Weber, M. (2009). From Max Weber: essays in sociology. Routledge.

Institute of development studies (IDS). Social, economic and political context in Kenya. (2013). Accessed on 13-09-2016http://interactions.eldis.org/unpaid-care-work/country-profiles/kenya/social-economic-and-political-context-kenya

Schumpeter, J. (1942). Creative destruction. Capitalism, socialism and democracy, 825.