Research Paper on Kenya's Economic Challenge: Public Goods & Poverty

Introduction

The major challenge of Kenya as a nation is how to increase the welfare of its people. Kenya, however, has implemented relevant economic policies to help curb this challenge. Governments tend to increase this objective by providing public goods like road infrastructures and services like education, security, health, and sanitation. Kenya's economy, however, is one of the fastest-growing in Africa. Ironically, most people in this country live below the poverty line. Kenya is a market based economic system with an independent external trade structure and variety of state managed enterprises.

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The economic freedom of Kenya as a country is exemplary in the Sub-Saharan region. However, its general score is only beyond the regional average but lower than world average. Historically, as a result of political instabilities, the government establishes new developments that hinders instead of boosting its economic growth. The entrepreneurial growth of Kenya has steadily enjoyed a middle-class level. Nevertheless, the country's financial and development aspects are impaired by weak governance in the country. The newly created governance system of the country has slowly devolved state revenues and responsibilities to counties all over the country leading to improved economic developments.

Tax capacity is the maximum tax a country can raise given its economic, social, demographic, and institutional arrangements (Munya, Hussain, & Njuguna, 2015). In Africa, other developing countries like Kenya have low tax capacity that was noted way back when the country gained its independence. Since then, Kenya has recorded an upward trend as far as the tax effort is concerned. Though relatively small, this shows that the country is on the right economic growth path in line with taxation. Although the nation has shown this positive trend over the years, it has not matched the increase in expenditure, revealing that there is the existence of the please effect, which is the tendency of consumption expenditure to grow with revenue (Njenga, 2019). In Kenya, tax is administered by the Kenya Revenue Authority that was established through the Parliamentary Act in 1995 (Munya et al, 2015). The Authority's primary mandate is to assist the government in mobilizing Kenyans to pay revenue, to provide effective tax administration, and to ensure sustainability in revenue collection. Kenya Revenue Authority, therefore, is a body that cooperates with government agencies for collection and receipt of revenues collected. Currently, Kenya gives a tax rate of 30 percent to top income and incur other taxes like Value-Added Tax and tax on bank interests (Munya et al., 2015) An increase in taxation, however, negatively affects the growth of an economy.

Industrialization is another source of Economic growth in Kenya. Manufacturing industry has enjoyed relatively suitable growth in the early years after independence. However, it has generally been slow without notable shifts in its overall score over the years. Performance shaped by some notable developments, such as the introduction of the Import Substitution (IS) policy introduced during the colonial period and absorbed by the independent system of Kenya (Njenga, 2019). The Import Substitution policy serves the role of ensuring the existence of basic needs in the domestic market. Primary products are overpriced, and the system destroys the growth of industry by encouraging the extra capacity and generalized inadequacy that hindered the ability of Kenyan goods and services to reach external market.

Kenya has shown economic success in its performance as an industrialized country. The right percentage of industrial output in Kenya is directed towards producing necessities like the provision of cheap consumer products like clothing, and, thus, a significant source of employment in the country. Industrialization as a whole has led to increased earning of foreign exchange used to develop other sectors of the economy like health. Additionally, through industrialization, there is improved transport and communication network that are opening up remote areas. Industrialization has also immensely increased agricultural production since industries boost production by using raw materials from local farmers. There is also an improvement in the balance of trade when Kenya exports more of its products than it imports. Industries have also assisted in the diversification of the country's economy through international relations, while also reducing the over-dependence of the economy on agricultural sectors.

On the other hand, industrialization has contributed to several failures within the country, such as the rise in rural-urban migration that results in an increased population in urban centers. Overpopulation in Kenya has resulted in problems such as increased crime rates and the development of slums in urban areas (Munya et al., 2015). The location of upcoming productions results in the displacement of people and results in disruption of people's social, economic life. A larger population also occupy large tracks of land in towns where land is scarce, therefore, resulting in the concentration of developments in a few parts of the country, leaving other rural areas economically undeveloped.

The Kenyan economy has been for several years, affected by inflation. Inflation has eroded the purchasing power of currency due to a rise in prices across the economy. It requires rates to rise within basket goods and services (Munya et al., 2015). As Kenyans spend more, the economy finds itself awash in money. Poor economy has also raised the cost of borrowing as well. Kenya owes China close to 5.7 Billion shillings (Adriani, 2019). Again this lending influenced the Kenyan banks to raise interest rates as the scarcity increases its value. Inflation in this country has reduced employment amongst the Kenyan youth. Currently, Wages and salaries tend to be sticky, meaning that they cannot easily change in response to economic shifts. Inflation discourages saving since the purchasing power of deposits erodes. The situation gives the consumers and businesses an incentive to invest hence an increase in growth.

Kenya has been a democratic and politicized country over many years since it gained its independence. A mature democracy in this country has contributed to its success in arbitration among political parties and amending a constitution that guides and rules the people of the country. The politics in this country are tribe-driven and culture of personality with no proper idea of the economic ideology. However, the government of Kenya and the opposition party have shown an unbeaten stand in appreciating the importance of their role and influence over the economic trajectory of Kenya. The unity happened during a movement aimed at increasing peace stability for economic development known as 'the handshake" of these party leaders after the previous general election in the country (Kanyinga, 2019). The collaboration between these leaders helped unite the different ethnic groups of this country, thus bringing the country to peace for economic growth. However, politics resulted in a lot of tribalism, nepotism, and corruption in the country. Every tribe in this country wants to shine out better than the other economically and would otherwise not mind pulling others down. Political instability is one of the main contributors to weak economic growth in Kenya.

Kenya is a socially economic country. The economy of this country has been successfully attributed to social factors such as education and unemployment. The system of education in Kenya became of the high standard after the introduction of subsidized 8-4-4 type of educations that allowed children and youth to gain proper and relevant knowledge (Oburu & Mbagaya, 2019). This has helped learners gain employment within and away from the country. Kenya offers stable, permanent, and pensionable jobs to its civil servants like teachers, nurses, and doctors. Jobs have provided regular income to the employees up to old age and thus shapes choices about proper housing, education, childcare, food, and medical care.

Kenya has meaningful differences in social and economic opportunities for residents in communities that have been prevented from investments and are discriminated against. These gaps have affected people of color and low-income families that cannot afford education, proper medication, and even miss opportunities in employment positions. Social problems such as unemployment are the leading contributors to an unstable economy.

Kenya, amongst other East African countries, has its economy affected by civil wars. Years ago, the country experienced post-election violence that depreciated the country's GDP growth. The state failed as a result since income like tourism halved, and a lot of financial losses were recorded. The violence had long term effects for close to four years, causing poverty, hunger, displacements, and deaths of residents in this country. However, Kenya managed to `involve an arbitrator who managed to solve the conflict and united the people of this country successfully.

Conclusion

In conclusion, Kenya is a developing country with market structure type of economy. The country has recorded an increasing population with a poverty with increased rate in poverty that acts as threat to its long term position as the largest East African economy. Kenyan economy is a struggling economy when compared to the United States, which has the most technologically stable economy worldwide. In the United States, Federal and state governments trade in goods and services in the private market place. As opposed to Kenya, US has firms ranked top in technological systems, especially in computers, and military equipment. US revenue records.

References

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Munya, A., Hussain, N. H. M., & Njuguna, M. B. (2015). Can devolution and rural capacity trigger de-urbanization? Case studies in Kenya and Malaysia, respectively. GeoJournal, 80(3), 427-443. Retrieved from https://www.researchgate.net/publication/271921805_Can_devolution_and_rural_capacity_trigger_de-urbanization_Case_studies_in_Kenya_and_Malaysia_respectively

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