There was once an African country that was the wealthiest in its region, it had the best-educated population and its factories produced the goods that filled the shelves in its neighbours' shops. 

Then came a president who had new ideas, very passionately held, about how to make his country even wealthier. He said the country needed to develop its own style of government, one that was uniquely tuned to addressing its needs. He spent vast sums, upto 60% of the budget on mega-projects. As he had reversed progress made in revenue collection by previous governments, his new government had to inaugurate an entirely new regime at the revenue authority. At the same time, the authority's budget was cut into by the fact that there was much less in tax collections, the president having exonerated large sections of the working population from the tax burden. He nationalised companies that had previously been privatised and antagonised the financial markets with endless investigations and insinuations. Rent controls served to kill the fledgling property and mortgage markets.

The independence of the central bank had been conceded to the Treasury, where the president and his minister of finance could not help but interfere in the money markets.

the Osagyefo

The government was unfriendly towards the business classes, particularly the entrepreneurial group who were still smarting from the president's electoral victory and his attitude of recompensing the marginalised communities for what his government called-years of economic robbery by the centre.  Enterprise responded to the disincentives by pulling its money out, capital flight took hold and soon talent was taking to the hills of the surrounding countries.

That country's economy was largely agricultural, with a large rural population that was living off the land. As he had come into office lamenting the fact that the cost of living was high in the cities, the new government sought to keep food prices low, payments to farmers stagnated - the belief being that farmers, yokels them, would not understand or respond to price movements. The massive transfer funds programme to the regions (most of them unporductive) and slightly more modest increases in social spending sent inflation skyward.

But it was not all his fault. Even as he went about doing good in the provinces, the price of crude oil rose and rose, and with it the cost of electricity from the country's diesel hungry thermal generators.  A drought came upon the country and with farmers producing less than before (they were not price-resistant after all those washamba) there was not much to go around, so even more precious forex (that ever sliding dollar) had to be expended in buying relief food and on all that crude that the energy hungry masses were thirsting after.  The government's attempt to cap matatu fares led to strikes by matatus and a crippling of the nation's transport systems.

A drop in global tea and coffee prices made for even gloomier farmers in the provinces as a global recession kicked in. There was a lot of sugar about, and it did not cost much, the reforms and the large amounts of money thrown into the sugar-belt had made sure of that. Still tea-drinking and sugar-licking on an empty stomach was hard to bear for two years, then three years, then four.

Oil prices rise unabated

Large parts of this narrative are a prognosis of the likely effect on the Kenyan economy of the promises and attitude of the ODM party. But more significantly perhaps, they are also a chronicling of the decline of Ghana, black Africa's first independent country. Ghana is fifty years old this year, and if her experience was ever to serve as a good teacher, this would be the time.

At independence 50 years ago, the old Gold Coast was the richest country in West Africa, with an educated population and top spot in the export charts for cocoa. It produced fully ten percent of all the gold on the planet, and its coffers were lined with the proceeds from diamonds, bauxite and manganese. Its leader at independence was the famed Kwame Nkrumah, the Osagyefo, a very popular spokesman for PanAfricanism and big government. Like our mysterious leader, he had a way with the crowds and he demanded a new form of government, crafted for the peculiarity of his country's needs. He spent vast chunks of national income on massive projects all around the country, nationalised companies and followed this up by interfering with the financial system. Under his regime, capital and skills took flight for less repressive climes. Surrounded by money-grabbers and rent-seekers corruption took on unprecedented levels and all the potential and promise of previous years vanished into nothing. The farming sector was particularly hard hit by the Ghanaian government's price control measures. By the early 1980s investment had dropped from 20% of GDP to 2%, and exports had slumped from more than 30% of GDP to a mere 4%.

It is not hard to see why many Kenyans are fearful of a similar darkening of Kenya's economic prospects should the ODM party win the December election. The party seems resolute in taking a path that will assuredly undo the economic gains of the past 10 years. The party, imbued with the spirit of righteousness and assured in its zealousness is unlikely to take any counsel. Still, some basic truths stand as indubitable facts. The indispensable fundamentals of development policy tried and tested over the years are macroeconomic stability, an emphasis on exports, and exactingly limited intervention in the economy. Following this guiding light, even the most luckless government will encourage entrepreneurialism and with it the creation of jobs and the inexorable rise of incomes.

distribute or create more?

All the noises coming from within the ODM edifice do not bode well for Kenya even as they closely mirror Ghana's example of not so long ago. It is not too late however for the party to change its course and adopt a less strident, less adventurous policy. Assurances must be given to the nation that there will be no radical overhaul in government spending. Boosting allocations to the regions to 60% of government revenue is a suicidal move, especially as the party's negative attitude towards ETRs and its pledge to slash taxes for low earners mean that the government will be spending a lot more and collecting much less than it did before. This will almost certainly lead to an increase in borrowing even as our debt levels breach the trillion shilling threshold.

Worse still, recent experience has shown that with a lack of capacity for project implementation at the local level, the bulk of devolved funds are wasted, serving merely to boost inflation and redirect energies away from wealth creation as more and more people are engaged in unproductive rent-seeking activities. In all the creation of the new jimbos, each with its local tin-pot chieftain and his court of advisers is unlikely to bode well for the country's economy. Even when there are successful and useful projects initiated at the local level, the ODM government must be wary of the shock this spending will bring into the system especially as any returns on such investments will be long and uncertain in coming. Governments have never been efficient spenders, not yesterday, not ever.

under siege

The other crucial step ODM must take prior to the election is to calm the financial industry. Jitters about the party's economic policy are already affecting the stock market, especially its pledge to nationalise previously privatised parastatals.  Epithets thrown at the stock market will make for an unfriendly atmosphere surrounding the most exigent yet urgent task of reforming dealings at the bourse.  It is important that the ODM government concede the inevitability of an inegalitarian reality, and the importance of an active bourse in financing the growth and development of Kenyan businesses. The party must also eschew the urge to play to the gallery on inflation and the property market. Price caps, whether on rents or on any other commodities, indeed any hint at interference will send the economy into serious trouble. 

While it is true that the cost of living is very high and increasing, the government is best advised to persist on the path beaten out by the Mwai Kibaki government, easing access to capital whether through banks or providential mechanisms such as the Youth Fund. Investment, whether good or bad is the best way to create jobs and fuel growth. The Kibaki government has already earned accolades for its efforts at easing the initiation of a new business; barriers to entry must be brought down across the board and in every sector, less regulation must be the buzzword. The plethora of pyramid schemes and the enormous liquidity about is begging to be mopped and redirected into productive activity. The government must create incentives for the use of this private energy to fulfil our social needs, including channelling it towards investment in better housing and education.

The Jua Kali industry has long served as an engine for Kenya's drive into the future. It is not only the greatest source of Kenyan innovation but also a massive employer and service provider. Every step must be made to encourage this growth, to incentivise it into the formal sector where credit and business advice may craft Kenya's answer to other spawn of the third world as Tata or Daewoo.

It is all possible, but will the ODM leopard change its spots, or will the lure of the gallery and short-term popularity prove more attractive? Will this orange revolution like many others before it eat its own children?