. Economic growth is calculated by Y=F(K,L) where Y is total output K is capital and L is labour. The bottom up proposal is focus on government to provide capital, basically more government spending. Supply side economics (pejoratively referred as trickle down by liberals)would be to make sure private sector is enabled to provide capital. Business policy of focusing on the bottom(equity bank, grameen etc) isn't an economic policy. Its a business decision to focus on where mass market is.Its clear. #BottomUpEconomics is a political ideology, not a policy program. We’ve shifted discourse from identity politics—reggae, tribal kingpins “our turn in State House” and all that to politics of the economy. Are you Top/trickle down OR #BottomUpEconomicsKE
— David Ndii (@DavidNdii) July 28, 2021
Rest is detail https://t.co/ZIuvvNFEYc
Unleashing capital from private sector by first dealing with debt, lowering interest rates by reducing budget deficit, further liberalization and privatization, and finally cutting taxes on investment.
Private sector growth in a country like Kenya - which is 3rd after Namibia in income inequality - will not spread the benefits. This problem with trickle down economics. You want to have South Africa - rich country for 5 percent - or a country for everyone.Private sector especially informal sector is the engine of kenya economy. These are the employers and the owners of capital in kenya not necessarily the much hyped private sector KAM or KEPSA. In aggregate the informal is much bigger than formal sector, so unleashing capital held by informal sector would stimulate the economy. Lowering taxes and interest rates would mean more capital for everyone to invest. To do that budget deficit the albatross around the neck of the economy has to be dealt with. Private sector is mainly informal sector i.e SMEs, in a nutshell unleashing private capital is unleashing the bottom. Government led economic growth is what exacerbates inequality cause its crony capitalism. Only people with access to government gets to benefit. EABL is benefiting from keg cause it was given special tax exemption (crony capitalism). Every local distiller or brewer would have been given same tax rate for using local raw materials. The government is clearing dictating who's the winner in the marketplace.
So indeed bottom up economic policy is socialisms. It's not capitalism. But like it has been shown by Keg beer - CSR project that breweries started as its contribution to fighting illegal beers - social project can lead to transformation. KEG beer now account for most volumes by KBL and is most likely the most profitable brand. CSR turn profitable.
MPESA began as DFID/NGO social project in thika - it has grown to become the juggernaut it is - last year we did 130B dollars- and Safaricom is heading to 20b dollars in valuation...and 1B dollars in net profit.
In short - gov business is not to make money - it's to tax private sector - get 30 percent - and then use the money on infrastructure, regulate the private sector and what remain should be invested in social impactful projects.
In long run social investment in education, healthcare, housing and poor - plus in basic infrastructure like railways or roads - will catapult the private sector to grow.
But if we continue with short termism of trying to make profit for a few - we will end up in South Africa - we are just 10 percent below them in income inequality - and results will be more crime/violence - as the excluded majority fight back.Unleashing capital from private sector by first dealing with debt, lowering interest rates by reducing budget deficit, further liberalization and privatization, and finally cutting taxes on investment.
Private sector especially informal sector is the engine of kenya economy. These are the employers and the owners of capital in kenya not necessarily the much hyped private sector KAM or KEPSA. In aggregate the informal is much bigger than formal sector, so unleashing capital held by informal sector would stimulate the economy. Lowering taxes and interest rates would mean more capital for everyone to invest. To do that budget deficit the albatross around the neck of the economy has to be dealt with. Private sector is mainly informal sector i.e SMEs, in a nutshell unleashing private capital is unleashing the bottom. Government led economic growth is what exacerbates inequality cause its crony capitalism. Only people with access to government gets to benefit. EABL is benefiting from keg cause it was given special tax exemption (crony capitalism). Every local distiller or brewer would have been given same tax rate for using local raw materials. The government is clearing dictating who's the winner in the marketplace.
You're about to get it. Now informal sector is focus on bottom up. Now those guys are informal - they are not getting taxed. If you go informal sector - and ask them what there problem is - taxes is the last thing on their mind. They have not seen KRA except throughClearly you don't know informal sector, informal sector pays taxes. From your economic adviser David ndii https://mobile.twitter.com/davidndii/status/1372073922368319488
indirect taxes.
What ails the informal sector -
1) Overregulation leading to harassments from kanchos, and 30 gov bodies looking for 30 stupid licenses. Gov can fix this by simply having one certificate of registration - and waive regulation for business making say less than 5 million per annum.
2) Lack of capital - cheap capital - not shylocks like - Ngao credit or plantinum or banks - or guys loaning out cars - then repossing them - and charging punitive penalities. Will lowering of bank interest trickle down in commercial banks? Very unlikely. It appears to me we need special state banks - but then we have corruption problem? Maybe gov can subsidize commercial loans given to informal sector? Like kenya mortgage refinancing is attempting to.
3) Lack of economies of scale - this is where cooperative comes in - to organize these people so they can get group discounts, can imports as groups, and even sell as groups. This will also deal with licensing and regulation. Sacco will handle all the regulation - and members do not need to be bothered.
For local brewers - their major problem is regulation - otherwise you're allowed to do that and get tax rebate. But regulation in beer industry with KRA wanting to inspect everything making very hard for local brewers to operate.
Bottom line - at least we have finally having the right conversation.
NOT KAM or KEPSA - who are cronies of political class - but millions of kenyans. Any benefits given to KAM or KEPSA - will never trickle down - it will probably trickle out to Swiss Banks.Private sector especially informal sector is the engine of kenya economy. These are the employers and the owners of capital in kenya not necessarily the much hyped private sector KAM or KEPSA. In aggregate the informal is much bigger than formal sector, so unleashing capital held by informal sector would stimulate the economy. Lowering taxes and interest rates would mean more capital for everyone to invest. To do that budget deficit the albatross around the neck of the economy has to be dealt with. Private sector is mainly informal sector i.e SMEs, in a nutshell unleashing private capital is unleashing the bottom. Government led economic growth is what exacerbates inequality cause its crony capitalism. Only people with access to government gets to benefit. EABL is benefiting from keg cause it was given special tax exemption (crony capitalism). Every local distiller or brewer would have been given same tax rate for using local raw materials. The government is clearing dictating who's the winner in the marketplace.
Clearly you don't know informal sector, informal sector pays taxes. From your economic adviser David ndii https://mobile.twitter.com/davidndii/status/1372073922368319488
When taxes are lowered the government collects more. Lowering broadens and simplifies taxes, leading to more compliance, case in point 10% rental income tax.
Deregulation and liberalization is supply side economics (think chile under pinochet). Regulation for the most part can be dealt with at the county level while liberalization at national level.
Capital: Lowering interest rates will mean banks will start lending to private sector . To do that government has to stop crowding out the private sector. This means budget deficit has to be lowered. Banks have to lend money money to make money either to government or to private sector. The solution is to cut government borrowing so that private sector can get credit. This is what happened during narc administration.
Economic of scale is wonderful if its earned not forced clusters. Otherwise monopolies are created that end up hurting the intended beneficiaries. Case in point cooperative societies in coffee.
For distillers to get tax rebate it would mean they'd have to become brewers. The taxation of base alcohol i.e ethanol is higher even when producing a low percentage alcoholic drinks. I can produce a 5-7% alcohol per vol. coffee based cocktail but I'd not get a rebate even if I used sorghum.
More government spending and involvement in the economy as proposed by both bottom up and dynasty is what I am against. The solution for our economy isn't more government its more private free markets.
Established SMES - is private sector. It's not informal sector. Our challenge is formalize them - through forced cooperatives - low regulation - free market - then they can pay taxes and we can low the tax rate.Formalization is a result of registration and licenses , what we call decriminalization of economic activities. Even further formalization is issuance and respect of property rights, e.g titles of slums and even vipandas. Private sector is everything that's not public, this includes individuals and households.
For now reducing budget and reducing taxes is an oxymoron. How will we finance deficit without borrowing? Unless we sell gov assets? Or we totally cut to back on development budget - meaning no roads or such projects. Fighting corruption is easier said than done.
Kibaki was able to have low budget deficit by selling parastals, by getting donors back from Moi era cut back and by negotiating entry into paris club for cheap loans.
For next gov - to do bottom up - somebody has to pick the tabs - and finance informal sector. For me the guys to get hit are the private sector - formal - they cannot hope for low taxes - I'd even tax them more - but give low taxes only to informal sector.
This is what Nordic do - Swiss do the sames - tax the rich and private sector upto 50% - and provide social services for everyone.
We want a mixed economic model - heavily tax kenyattas to provides for kamaus -"The Nordic model is a mixed-market economic system that combines elements of both capitalism and socialism"
Trickle down is saying low taxes for everyone - and kenyattas will pass benefits to everyone. We have seen it doesnt work. Not here in developing country. Not in the US a developed country.
'
What works is countries who taxes heavily the private sector and individuals - and then finance social investment for everyone.Clearly you don't know informal sector, informal sector pays taxes. From your economic adviser David ndii https://mobile.twitter.com/davidndii/status/1372073922368319488
When taxes are lowered the government collects more. Lowering broadens and simplifies taxes, leading to more compliance, case in point 10% rental income tax.
Deregulation and liberalization is supply side economics (think chile under pinochet). Regulation for the most part can be dealt with at the county level while liberalization at national level.
Capital: Lowering interest rates will mean banks will start lending to private sector . To do that government has to stop crowding out the private sector. This means budget deficit has to be lowered. Banks have to lend money money to make money either to government or to private sector. The solution is to cut government borrowing so that private sector can get credit. This is what happened during narc administration.
Economic of scale is wonderful if its earned not forced clusters. Otherwise monopolies are created that end up hurting the intended beneficiaries. Case in point cooperative societies in coffee.
For distillers to get tax rebate it would mean they'd have to become brewers. The taxation of base alcohol i.e ethanol is higher even when producing a low percentage alcoholic drinks. I can produce a 5-7% alcohol per vol. coffee based cocktail but I'd not get a rebate even if I used sorghum.
More government spending and involvement in the economy as proposed by both bottom up and dynasty is what I am against. The solution for our economy isn't more government its more private free markets.
You're about to get it. Now informal sector is focus on bottom up. Now those guys are informal - they are not getting taxed. If you go informal sector - and ask them what there problem is - taxes is the last thing on their mind. They have not seen KRA except through
indirect taxes.
What ails the informal sector -
1) Overregulation leading to harassments from kanchos, and 30 gov bodies looking for 30 stupid licenses. Gov can fix this by simply having one certificate of registration - and waive regulation for business making say less than 5 million per annum.
2) Lack of capital - cheap capital - not shylocks like - Ngao credit or plantinum or banks - or guys loaning out cars - then repossing them - and charging punitive penalities. Will lowering of bank interest trickle down in commercial banks? Very unlikely. It appears to me we need special state banks - but then we have corruption problem? Maybe gov can subsidize commercial loans given to informal sector? Like kenya mortgage refinancing is attempting to.
3) Lack of economies of scale - this is where cooperative comes in - to organize these people so they can get group discounts, can imports as groups, and even sell as groups. This will also deal with licensing and regulation. Sacco will handle all the regulation - and members do not need to be bothered.
For local brewers - their major problem is regulation - otherwise you're allowed to do that and get tax rebate. But regulation in beer industry with KRA wanting to inspect everything making very hard for local brewers to operate.
Bottom line - at least we have finally having the right conversation.
NOT KAM or KEPSA - who are cronies of political class - but millions of kenyans. Any benefits given to KAM or KEPSA - will never trickle down - it will probably trickle out to Swiss Banks.
Can someone explain this bottom's up economic model to me in light of the fact that Africans make nothing. There's basically no manufacturing of any kind. How can you create wealth when you make nothing short of basic agricultural farming? How will this work in countries that are facing severe demographic pressures and why do you think Kenya, which is approaching 50 million people is immune to these economic pressures? Saw a tweet by DAvid Ndii saying 50% of Kenyans are under the age of 15!! this is a demographic disaster
These people are not sleeping 24-7. They are productive just that their productivity is totally bludgeoned by the government policies and kanjo by laws. People want to make manufacturing that you have a big factory. Extracting sugar cane juice is micro/cottage industry. Thousands of Kenyans are making ice cream, yoghurts, school shoes, suits, kitenges, shirts, weldings, name it - you should also check Ndii's MadeinKenya Challenge.
If what you are saying is true, it would have been a very simple problem for say Kibaki to fix - Just change the government policies and Kanjo by laws that are bludgeoning them, but why couldn't Kibaki do it? It is really just kanjo by laws?
"The Nordic model is a mixed-market economic system that combines elements of both capitalism and socialism"
The Nordic countries are highly productive and highly efficient (they make things) and Norway has huge oil reserves. How can you compare these mzungu's to mwafrika starving in Wajir?
Norways chief industries are machinery, motor vehicles, paper, pulp and wood, iron and steel products, and chemicals. Finlands main industrial branches today are the telecommunications and electronics industries. Wood, pulp and paper, basic metal industries and engineering are, however, also important branches. Denmark is a net exporter of food industry products and energy, but some other industries, such as pharmaceuticals, have also been significant for some time.
Hustlers harassment could end tomorrow and hustlers would still be mired in economic stagnation. Kenyans are borrowing 1.2b a day from Fuliza at 120% annual rate. This as a result of government crowding out business in the credit market. CRB listing was suspended after heavy government lobbing by nyamakima/ kirinyaga rd. hustlers via sabina chege, this is macro. Cost of goods has gone up due to increase in taxes from vat in fuel to excise duty on almost everything. This is what's affecting hustlers to a greater extent than lack of "dignity from the top".