Just Another Vocation for Ndemo

Bitange Ndemo's piece on inclusive growth indicates that GDP "has not been a good measure of inclusivity". I didn't know that GDP had such a role in the first place; even a first year economcs student can tell you it doesn't. But trust Bitange who, in his other vocation of pseudo economic punditry, is keen to sound profound. I take no risk in the bet that Bitange has not read Thomas Piketty's Capital in the Twenty-First Century (I'd be happy to lend a copy). Otherwise he could have been persuaded to take a different approach - underpinned by the sources and consequences of inequality. So here we are celebrating the dubious Forbes Magazine's ranking of Africa's richest and then we turn the corner and cry about lack of inclusivity in ther GDP numbers!

Financial Illiteracy: History Repeating Itself

They say that history often repeats itself. I didn't imagine it will be that soon at the Daily Nation business desk. It consistently gets one story wrong while her sister, the Business Daily, initially gets it right but subsequently gets recruited into the bad habit of being sensational. Recall a little while back when I pointed out that whenever a bank borrows - either locally (bond issuance) or internationally (line of credit from an international lender), it is an indication that it has adequate capital to leverage and expand its balance sheet.
On the other hand though, whenever a bank seeks to increase its capital - either through a rights issue or by listing at the stock mart, it is seeking to growth its balance sheet through increasing a liability called capital that will translate into an equivalent asset called credit (loan book); it could also be a move towards meeting some regulatory requirement.
These two actions on the liability side (one, borrowing, and the other, injecting capital) have the the same effect when it comes to the effect on the balance sheet - for they lead to growth. However, they mean different things when one is looking at what they mean with regards to the regulatory requirements. When one is able to borrow, it is an indication that one has met the requisite regulatory  requirement with regard to capital, and not the opposite as the Daily Nation and Business Daily will want you to believe - that one is borrowing to meet capital requirements! Nothing, at least to me, reflects financial  illiteracy than such lazy thought process.
So when the Daily Nation fronts such argument, as it does in today's edition, and the Business Daily gives the same story but taking a more 'reporting' line before they inject some "analysis" about how such move entails "injecting more resources" is linked to capital adequacy, you'd better go by the story of neither.
But I know where the Daily Nation and Business Daily are coming from: no story is juicier that pretending to analyse that a bank is in trouble and so is rushing for a rescue. As I have indicated before, it is akin to seeing a thief behind every bush!   

Correlation or Causation?

This is interesting. Agriculture is doing badly - low international prices for produce, low productivity, bad weather, etc; but listed stocks in this market segment are doing just fine. Why? Somebody is looking at the land potential - not for agriculture or agri-business; a speculator; a real estate speculator. This story in today's the Business Daily motivates the question: is this a case of correlation or causation? Well, seems to me that it is the the latter!

"What they Don't Teach You at harvard Business School"

There is a popular book titled 'What They Don't Teach you at Harvard Business School' by Mark H. McCormack. For those of us who didn't go to that prestigious school, this should be a compelling read. Nonetheless I haven't gotten around to read the book because that is not my kind of stuff - I would rather Thomas Piketty's 'Capital in the Twenty-First Century' or William Easterly's 'Tyranny of Experts: Economists, Dictators and the Forgotten Rights of the Poor '.
Now, Adan Mohammed, the Cabinet Secretary for Industrialization and Enterprise Development, went to Harvard Business School. I have no doubt that a prestigious school such as Harvard Business School teaches that strategic policy initiatives have a time lag before their positive effects can be seen; and that lag can stretch to a few years. In the modest schools that we went to (Oh. I have been to Economics Schools and not Business Schools), that is one of the issues we were repeatedly told.
Either Mr. Mohammed has forgotten (it has been a while since he was in that School) or he is being a good politician; for he imagines that all the good things in the Kenyan policy space happened over the last two years or as long as he has been in Government.
Just watch him say that! Here he is full or praises for the World Economic Forum and the World Bank's Ease of Doing Business ranking - which he links to the one and half year's that he has been in Cabinet. He nonetheless hints that some of these reforms could take some two to three years for their benefits to be seen, and this he does reluctantly on account of the prompting of the interviewer.
It is hard to believe that it is the same guy now sulking when the World Bank's latest Ease of Doing Business Raking simply tells us that we have been running around in circles. I do not want to call this intellectual dishonesty - there is nothing intellectual here. Oh, unless the concept of lagged effects of policy is part of  "What they Don't Teach You at Harvard Business School". 

The Righ To be Confused!

What is your objective reaction to this piece by Jaindi Kisero in the Daily Nation? Well, I can understand. Any way to bend an argument to fit a prejudiced view seems to be the order of the day here; and unfortunately it is often celebrated as great commentary. Look at this:
1. You make an irrelevant comparison that one intervention - under totally different circumstances - was less deserving than the one where your views are leaning towards without any logical basis.  I know why, project financing economics is not easy if you earn your living through mere pontificating in a subject where your expertise is only feigned.
2. You give examples that indicate government failure in running enterprises in a particular segment, even illustrating how the private sector is a master in running similar enterprises; yet you conclude that we need more government in the same enterprises.
My conclusion in one word is: confusion. In our constitutional dispensation, one has a right to be confused; right?

The Pretence Persists

Recently, I argued that there is a  lot of pretence when it comes to providing a good guide to housing prices. Seems like the pretenders are digging in: just have a look at the readers comments to the Business Daily piece and see how they have smoked out the persisting pretence!

Economics Nobel Prize 2014 Makes Lots of Sense!

I have a short version of the thinking of the Royal Swedish Academy in their 2014 economics Nobel Prize award. If you have no time for the technical citations that run up to 40-plus pages, my essay in today's Business Daily can give you a good idea why the prize was deserved.