Monday 31 March 2014
Fuzzy Math - The Kenyan Version
In 2001 economics Nobel laureate Paul Krugman published an interesting book titled 'Fuzzy Math: The Essential Guide to the Bush Tax Plan'. This small book came to mind when I read David Ndii's compelling commentary on how the numbers used to back the excuse for a possible wage purge do not add up. My own view on the wage bill debate is that the "sudden realisation" that the wage bill burden is weighing heavily on the economy's growth potential is the epitome of policy hypocrisy.
Tuesday 25 March 2014
The Sudden Realisation - The Wile E. Coyote Moment!
I call it the "suddenly" moment. This happens so often in the Road Runner Show when Wile Coyote finds himself running a few steps on thin air after the cliff upon Road Runner pulling a dummy on him by turning the corner; upon looking down Coyote finds no ground to run on, and then starts the process of steeply falling. Is Coyote a hypocrite? Probably not; naive is more like the character.
But not all Coyote moments are a manifestation of naivete more than they are a signal of hypocrisy. A case in point is the urgency to tackle the "wage bill problem" that the Kenyan leadership has suddenly discovered. One of my friends and high school classmate calls the move by President Kenyatta and Deputy President Ruto to "voluntarily" take a 20 percent pay cut and then demand of others in the civil service ranks to take a similar cut an act “love for country” and all its starving children!
I know people express their love differently, so the President and his Deputy are within their rights to express theirs by way of symbolism – for their proposal is simply that and nothing more. Is that a strong basis for policy? I say no, because a good starting point would have been to crack the whip on the ghost workers who cost tax payers KShs 1.8 billion annually. When the president revealed that we have ghost workers in January this year, rational people imagined that there would have been a follow-through. Now that I have seen none on the ground, I could assume that the President wants the Ghost workers to take a pay-cut too. That will “save” us some money, you know!
How about rationalising the civil service such that we have what the government needs; no more, no less? Well, there was a team that was set up to rationalise state owned corporations (parastatals). It came up with a good report – not perfect, but one that provides a god starting point. It entailed merging a number of such entities whose roles are duplicating. What happened next? There was a sudden realisation that jobs of CEOs, board chairmen/women and board members – which are doled out as political favours – were to shrink.
I am sure many have forgotten the wave of appointments (some of which illegal - recall the appointment and disappointment of a guy by the name of Dida?) that happened in total disregard of the sound recommendation of the team’s report. Oh, I get it. The logic is simple: appoint as many CEOs to these entities, some of whose survival depends on the continuous patronage of tax payers, and then force then to take a “voluntary” salary cut.
The question I will ask you now is: are we going to see the salary cuts go all the way down or the line will be drawn somewhere. I guess you know something called “inflation tax” where your real income is reduced by the factor of inflation as it erodes your spending ability. I also guess you know that if you reduce the so-called nominal income for the same person, then you are squeezing him from both ends; and his spending ability will be affected and this will affect the broader economy because expenditure is growth boosting – unless you imagine that John Maynard Keynes was an idiot.
How about Parliament – both houses – which threatened to sack the chairperson of the salaries and remunerations commission which declared then state officers (for that is what they are; forget about this hon. nonsense) and proposed their pay-cut in a legal manner? Of this was no big deal to my high school friend and many others because those whose love for country they represent were quiet, lest they stir the hornets’ nest. Now they are busy trying to legislate against their being classified as “state officers”.
Ultimately, it all boils down to Edmund Burke’s apt observation that “to tax and to please, no more than to love and be wise, is not given to men”. As I said earlier, people have a right to choose how to express their love for country. But the love expressed in the manner of the recent proposal for salary cut comes with a small problem: it interfere with any logic that will indicate that the latest move is simply tokenism and does not amount to serious policy thought-through process nor does it indicate consistency in pronouncement.
Does this make my argument idiotic? Well, not if you share the view of those who consider the latest move as totally lacking even in basic math, as David Ndii does. For if indeed there was seriousness about addressing the economy's fiscal challenges, then this is not the time to act populist and promise favours to every busy-body politicians such as Members of the Country Representatives with goodies as the president has done even after lecturing the country about the dire need for belt tightening.
Ultimately, we are now experiencing - or so are we made to believe - a Wile E. Coyote moment, but one underpinned by hypocrisy and not naivete!
But not all Coyote moments are a manifestation of naivete more than they are a signal of hypocrisy. A case in point is the urgency to tackle the "wage bill problem" that the Kenyan leadership has suddenly discovered. One of my friends and high school classmate calls the move by President Kenyatta and Deputy President Ruto to "voluntarily" take a 20 percent pay cut and then demand of others in the civil service ranks to take a similar cut an act “love for country” and all its starving children!
I know people express their love differently, so the President and his Deputy are within their rights to express theirs by way of symbolism – for their proposal is simply that and nothing more. Is that a strong basis for policy? I say no, because a good starting point would have been to crack the whip on the ghost workers who cost tax payers KShs 1.8 billion annually. When the president revealed that we have ghost workers in January this year, rational people imagined that there would have been a follow-through. Now that I have seen none on the ground, I could assume that the President wants the Ghost workers to take a pay-cut too. That will “save” us some money, you know!
How about rationalising the civil service such that we have what the government needs; no more, no less? Well, there was a team that was set up to rationalise state owned corporations (parastatals). It came up with a good report – not perfect, but one that provides a god starting point. It entailed merging a number of such entities whose roles are duplicating. What happened next? There was a sudden realisation that jobs of CEOs, board chairmen/women and board members – which are doled out as political favours – were to shrink.
I am sure many have forgotten the wave of appointments (some of which illegal - recall the appointment and disappointment of a guy by the name of Dida?) that happened in total disregard of the sound recommendation of the team’s report. Oh, I get it. The logic is simple: appoint as many CEOs to these entities, some of whose survival depends on the continuous patronage of tax payers, and then force then to take a “voluntary” salary cut.
The question I will ask you now is: are we going to see the salary cuts go all the way down or the line will be drawn somewhere. I guess you know something called “inflation tax” where your real income is reduced by the factor of inflation as it erodes your spending ability. I also guess you know that if you reduce the so-called nominal income for the same person, then you are squeezing him from both ends; and his spending ability will be affected and this will affect the broader economy because expenditure is growth boosting – unless you imagine that John Maynard Keynes was an idiot.
How about Parliament – both houses – which threatened to sack the chairperson of the salaries and remunerations commission which declared then state officers (for that is what they are; forget about this hon. nonsense) and proposed their pay-cut in a legal manner? Of this was no big deal to my high school friend and many others because those whose love for country they represent were quiet, lest they stir the hornets’ nest. Now they are busy trying to legislate against their being classified as “state officers”.
Ultimately, it all boils down to Edmund Burke’s apt observation that “to tax and to please, no more than to love and be wise, is not given to men”. As I said earlier, people have a right to choose how to express their love for country. But the love expressed in the manner of the recent proposal for salary cut comes with a small problem: it interfere with any logic that will indicate that the latest move is simply tokenism and does not amount to serious policy thought-through process nor does it indicate consistency in pronouncement.
Does this make my argument idiotic? Well, not if you share the view of those who consider the latest move as totally lacking even in basic math, as David Ndii does. For if indeed there was seriousness about addressing the economy's fiscal challenges, then this is not the time to act populist and promise favours to every busy-body politicians such as Members of the Country Representatives with goodies as the president has done even after lecturing the country about the dire need for belt tightening.
Ultimately, we are now experiencing - or so are we made to believe - a Wile E. Coyote moment, but one underpinned by hypocrisy and not naivete!
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