The Thin Line Between Confusing and Being Confused

Sometime last year I wondered whether there are "Chinese Walls" that separate the editorial teams of the Daily Nation and the sister (or its brother) publication, the Business Daily. Whenever they are confronted with a business/economics information the two tend to see things differently, the latter often getting it right and the former completely missing the point.
Today was not any different. After the release of the Economic Survey 2014 by the Kenya National Bureau of Statistics (KNBS) that confirmed what we have known all along that the economy's performance has not been stellar (real growth a 5.3 percent for 2014 represented a decline from the previous year's 5.7 percent), the Daily Nation's headline screamed: Bad year for the economy but more jobs created. This is as confusing as it is confused.
Let me start with the confusing bit. The Daily Nation wants its readership to imagine that real growth is not important for job creation. Indeed it may be creating an impression that the causality runs the opposite way - declining growth leading to more jobs. That leads to the confusion that I see in there. May be somebody was trying to look for a positive angle where none exists.
Some of us believe that if something is black, simply call it black. But I know in journalism schools, they have what they call looking for balance. That is why if the Daily Nation was to conduct an interview about the shape of a chicken egg, and one egg-head says it is square and the rest of the respondents say it is oval, the headline will most like be: Opinion differ on the shape of a chicken egg. Nobody will say that some dunderhead thinks that it is square while it truly is oval.
The  Business Daily, using the same KNBS Economic Survey 2014 gets it right. It reports that  "Growth slowdown, generates formal sector jobs". In other words, the Business Daily cared to bring out the fact that it is not about numbers; it is about the quality of jobs.
If I were the Economics Editor for the Nation Media Group - they don't have one; perhaps they do not need one! - I could have steered the story towards analysing the extent to which the economy's growth is far from the potential (what in our tribe we call full employment). That way we are able to see the difference between cyclical things (temporary) and structural things (permanent), This will lead us to determining whether the jobs that Daily Nation seems to be celebrating are those that were lost during the downturn and are now being regained - in which case it is not job creation.
Oh, I unfairly expect too much out of the Daily Nation's economics reporting. I forget that they are busy trying to sell a newspaper!         

Cockroach Ideas: The Kenyan Version as Epitomised by Joe Keiyah

Economics Nobel Laureate Paul Krugman has an interesting characterisation of bad ideas. He says they are like cockroaches in the sense that "no matter how many times you flush them down the toilet, they keep coming back" . One such idea is the view that the Central Bank of Kenya (CBK) is better served by having a chairman who is  not the governor.
My views on this are clear: that is a recipe for confusion in policy signalling; and the role of the chairman - as envisaged - is not similar to that in other very few jurisdictions where the two offices are separate.
While I thought I have argued my case successfully, and even those who were thinking otherwise are on my side, the same crazy thinking seems to be getting back.
This time round, the peddler of this argument is Joe Kieyah of KIPPRA. In a commentary titled "Why the CBK needs board chair, governor", all that Joe does is everything but explain "why". Instead he goes ahead to tell the rest of the world how he doesn't understand the role of monetary policy.
To other non-suspecting Joes, this particular Joe argues that "unlike the CBK governor who enjoys security of tenure, the chair will be a presidential appointee, answerable to the citizens through the executive arm of government. Such accountability will ensure that monetary policy will take cognisance of social policy, which has been conspicuously missing". This is lazy thinking for two reasons:
First, when one reads my paper (third link in this post), one will see that the chairman of CBK as envisaged does not have accountability to the public; but the governor - to the extent that he/she chairs the monetary policy committee (one of the aspects where the chairman does not provide "oversight" - is answerable to a parliamentary committee (and if such committee so requires, the entire parliament); this is close to the practice in the US. This means that Joe is too busy to read carefully on the issue he is commenting about.
Second, the link between monetary policy and social policy is a clandestine way of seeking to politicise the CBK and formalise monetary policy activism. On this, Joe is consistent in peddling the wrong idea; this he did in a commentary in February 2015. The same day this commentary was published, Joe and I were panellists in a forum hosted by the CFA Society East Africa (See picture). In this forum he explicitly argued for the CBK to in some instances tolerate high inflation if that could lead to higher GDP growth. Of course that is a nonsensical argument given the knowledge we have on the link between stability and sustainable growth (see my essay reflecting on the legacy of Prof. Njuguna Ngungú as CBK Governor).

I certainly do not enjoy doing this, but it sometimes becomes compelling to ask of a Prof. to do some homework. So I will ask of Joe to:

• One, carefully study the governance of the Bank of England to be able to see that the role of the chairman of the court (yes not broad) of directors is not the same as what the chair of the CBK is meant to do.
• Two,carefully study the governance of the Federal Reserve System of the US to be able to appreciate that the chair of the Board of Governors is the head/CEO of the Fed just as the CBK governor is the CEO.

If Joe is not brave enough to do the homework, then he will have to carry the tag of being a peddler of cockroach ideas.

The Legacy Thing

I have a piece in this week's The East African that reflects on the legacy of Prof. Njuguna Ndung'u as governor of Central Bank of Kenya. When the invitation to do the piece came through I was categorical to the editor that I will steer clear of any intrigues at the Central Bank Kenya and focus on monetary policy.
I had to do this because I was mad at the pedestrian evaluation the former governor was getting from people that the media thinks are knowledgeable about economic policy generally and monetary policy specifically.
One such "expert" is Joe Donde - yes, you got me right; the "hero" who came up with a legislative proposal to regulate interest rates.
Hon. Donde, as his villagers would call him, summed Prof. Ndung'u's legacy as characterised by total failure. He argues that that when Prof. Ndung'u took over the corner office at the central bank, the Kenya shilling was exchanging at KES 67 per USD and when he left it was exchanging at KES 92 per USD.
Clearly Donde doesn't know that there is a difference between real exchange rate and  nominal exchange rate. Because if he did, he could noticed that over that period, the real effective exchangs rate appreciated by about 30 percent - meaning therefore that the economy lost competitiveness in the international markets. In such a case, the correction had to be the nominal depreciation.
And Donde applied to be Chairman of the Central Bank of Kenya's board of directors, and didn't make it to the short-list!