Kinyua: “The Government Can Never Go Broke”
I was reading this opinion piece in the Nation written by Mathimu Mati and he begins his opinion piece by quoting the PS in the ministry of finance who says the following:
“Government can never get broke, it’s people like you and me who can get broke.”
— Joseph Kinyua, permanent secretary, Ministry of Finance
I’ve said here before that I didn’t think Kinyua was a serious thinker and this quote, which shocked the writer above, just proves my point.
If you wanted to get technical about it, then yes, Kinyua could be right. As someone once told me, the president will can go without “food”. However, on second examination, it’s a simplistic and extremely arrogant quote to give in a country where 10 million people are faced with starvation
You can’t just say, “it’s only people like you and me” who go broke and then brush it aside as if it’s nothing. When or if the majority of people start going broke, there will be serious social implications that follow this, both for the people and for the “government”. You get high crime, you get social unrest, you get ethnic violence..you get all of those things.
However, as a public servant whose salary is paid for by the taxpayers, he has an obligation to explain to the people how he is managing their money. Does he lack the intellectual capacity to do this or is he just thuggish and arrogant?
As I think about this issue of governments going broke and the social implications it breeds, I wonder how a country like Zimbabwe, which has been broke for years hasn’t descended into full scale violence. The only explanation I’ve been able to come up with is that Zimbabwe, like Kenya, did create a well educated middle class and when the economy descended, these people left the country for greener pastures. The same thing happened in Kenya in the early 90′s when the economy, under Moi, all but collapsed. Middle class Kenyans started leaving and this had never happened before.
So, after these people left, they began to send money back to their relatives in the form of remittances. This, I am arguing, is what has “cushioned” Zimbabwe away from complete descent into violence and it’s done the same thing for Kenya. It’s been a combination of remittances and a sizable population of literate people that found a way to survive, short of resorting to violence. This dynamic did not exist in Rwanda. At the time of the genocide, 80% of the population of Rwanda was illiterate.
When Moi was asked what his greatest contribution to the country was, he repeatedly said that it was keeping Kenya from descending into civil war like most of it’s neighbors had. However, upon closer examination, one realizes that it was not Moi that maintained the peace. It was the decision, at independence, to provide free public school education (up to the university level) to thousands of people. Many of Kenya’s (present day) middle class professionals were people who went to the university in the 70′s and early to mid-80′s. This is where our doctors, lawyers, accountants and engineers came from. Then of course, things started crumbling around 1986 as the Moi era of corruption started to destroy the economy and fewer and fewer people were able to afford school, which meant that fewer people were getting the skills they needed.
I’m thinking about Uganda as I write this because it too had a well educated populace. Unfortunately, Idi Amin was able to get to quite a few of them before they could escape. The lucky one’s made it out to Kenya, where with their skills, they were able to get jobs (& Kenya benefited from having these skilled Ugandans in their country).
Now, we can see where this thing is headed. University education is no longer free, which means that fewer and fewer people can afford it and this means that the number of educated, literate people is going to fall and this is going to become dangerous.
We can also see why this coalition illusion government is creating a danger zone: with 80% of the government’s budget going to fund Range Rover’s and luxury offices, the expenditure to expand free public education (like they did in the 70′s and 80′s) has evaporated and this cushion, that has kept the country from descending into violence is slowly being eroded. It has been destroyed in Zimbabwe and it is being eroded in Kenya. These two countries that have had the highest literacy rates in Africa are losing their most valued “commodity”.
Are the ministers who are being driven around in their mercedes benz’s thinking about what they are creating?
The government can never go broke……
Ke,
I also read that article and that Mwalimu Mati wrote. As regards the phrase that Kinyua said- I think it depends on what “broke” means.
A.I you mean that the government does not have a single cent. Then thats not true as Kinyu put it.
B.But if in broke you mean- The government not having enough money reserves to fully run its reccurent expenditure without heavily relying on debt. Then that is true.
What Kenyans need to realize is that a big government always has these effects which consumes most precious tax revenue which could be used for other needs.
I still have faith in Joseph Kinyua. You people could’nt find a Kenyan with better qualifications to be there. And in qualifications i specify- Macro economics and public finance.
KE,
Its economics 101 – govt is the only entity that always has money coming in regardless of the state of the economy. It never goes broke. When it does not have enough money from “equity” or taxes, it can raise debt in multiple ways. One has only to look at the US which is trillions of dollars in deficit and still piling on the expenditure.
It’s very simple, in Kenya we do not honor and reward hard work, we honor and reward thuggery and thieving. How the hell in the world are we every going to move forward as a nation when our society has a deep rooted and ingrained culture where stealing is how we value our people, politicians etc. the implications of all this is that our nation and our children will become complete beggars to the world.
If we as a society and people of this nation don’t see beyond tribal lines, we are doomed for failure faster than a bullet hitting a target.
At the rate we are fostering hatred, and spending money as a nation as if there is no tomorrow, we are headed for a bankrupt kenya, and this will mean we will be on the verge of a civil war!!!
The train is rapidly approaching the destination, so people regardless of the tribe, clan or religion, as the people of this nation, we better wake up and demand a lasting change, otherwise we completely doomed!!!
This ain’t no dream, its a sure reality – watch as it happens!!!
PS: For you guys who say we cant go broke, you are wrong, Kenyan currency is not the US$ which is globally accepted. US can afford to print money as the world accepts the currency and world buys it. Who the hell is going to buy the Kenyan currency on the global market, no one trades with it outside Kenya….
Reader: KE,
Its economics 101 – govt is the only entity that always has money coming in regardless of the state of the economy. It never goes broke.When it does not have enough money from “equity” or taxes, it can raise debt in multiple ways.One has only to look at the US which is trillions of dollars in deficit and still piling on the expenditure.
Are you sure you are familiar with economics 101? What is “money”? It has no inherent value. It’s not like gold or silver. Besides, if you start printing money, you just end up debasing the currency and it will eventually become valueless. This is what happened in Zimbabwe.
What are these multiple ways that the government can use to raise money? The stock market has gone quiet.
Demigod:
Yes, you are right, but I’m afraid, that if Bernanke keeps printing like there is no tomorrow, the US will cease to remain the universally accepted currency of the world. The only thing America has left is it’s rule of law system. This is very important for economics.
KE,
I’m not talking about printing money. That’s why i called it “equity”. As long as there is economic activity that can be taxed, a govt cannot go broke.
Kenya is running on taxes from
- foreign-owned tourist havens propped up by EU grants,
- airport and port taxes from all those civil society groups and their cargo transiting through Kenya to other African destinations,
- bank profit taxes….
- Kenyan owned businesses expanding into the rest of Africa (Equity, KCB…)
- Foreign investors running in to leverage Kenyan skills (Google, Microsoft…)
Notice that even foreign investors are creeping back into NSE after figuring out Kenyans intend to ignore the political leadership and keep going.
As for loans, the Chinese premier has already complained about the potential devaluation of China’s 1 trillion dollar US assets, yet the world is salivating for the Kenyan infrastructure bond the govt had promised to issue.
Like I said, economics 101.
The one thing that could dry us up – once Ethiopia has their rail system built through to Sudan. Then their port would be very competitive compared to Mombasa. Yet we have not developed those Kenyan production competencies you often speak of.
And I agree with you – the rule of law is very important for economics.