The Creation of Wealth and the Formula Behind It

Growing up in the Kenyan middle class, I watched as the standard of living in my household and that of my friends drastically declined in the span of 20 years even though my mother (the bread winner in the family) invested in two houses, was promoted at work and got raises in her salary.

I watched my younger siblings being moved from one school to another as their former school got too expensive, we quit eating breakfast as bread, butter and milk became too expensive and we quit doing monthly household shopping since we could not afford it anymore.

My friends and I theorized about the creation of wealth and the formula behind it… if there was any. I wondered (often aloud to my mother) if the creation of wealth was by chance, both for countries and for individuals since I also watched many of my well educated relatives move to wealthier countries to work unskilled jobs for better pay and higher standards of living.

I wondered whether there was a fixed amount of wealth in a given territory demarcated by political boundaries, if that wealth was the raw materials that fell in the boundaries and it required careful planning to determine the most efficient way to allocate the scarce resources, so that everyone would gain. I also wondered if corruption was genetic and Africans were naturally prone to more corruption.

I knew that something was wrong and wondered how I could help make it right, especially when I saw the number of people living on the streets or in the slums, even though some even have Masters Degrees from universities. What baffled me most was why the people in government made promises that did not come true.

Surely if other governments had “plans” that worked to facilitate wealth creation, our leaders needed to abandon whatever plan it was they were using and imitate the magic formula other prosperous countries were using.

I also wondered if corruption was genetic and Africans were naturally prone to more corruption. Perhaps the corruption in the halls of power was eating away at our potential to create wealth.

I wondered whether there was a fixed amount of wealth in a given territory demarcated by political boundaries, if that wealth was the raw materials that fell in the boundaries and it required careful planning to determine the most efficient way to allocate the scarce resources, so that everyone would gain.

Something else that sat heavy on my mind and even made me cry sometimes was the fear that if there was no set formula to wealth creation, poverty was our destiny and we would always be the bottom of the pile economically, forever destined to live on handouts, while plagued with other ills such as perpetual wars, fatal diseases, phenomenally corrupt governments and recurring famines.

All I heard from the “grown ups” was that the government needed to step up and do something about one or another of the different social and economic ills that affected our lives. And the truth is that I really felt sorry for whoever’s task it was to plan everything for 30million people, and alleviate all these problems. I wondered if I would be able to do handle it if it were up to me.

I marveled at the wisdom of the people who had to run all the different government ministries and marketing boards, planning everything and even determining prices of goods and services for the whole economy. It always baffled me why all surplus grain had to be collected and put in the huge silos I saw growing up in the agricultural town on Nakuru.

Wouldn’t it be faster to let the farmers get the food to the market themselves? But on enquiry I was told that some people would not get the food if the government did not procure and redistribute it at affordable prices, and yet in the North of the country, there was always famine.

These same questions dominate the everyday conversation of young people in Kenya today. Students in universities and high schools wonder about their destinies, since a good education does not seem to guarantee wealth with the status quo.

It is generally believed that if you don’t work hard and make it into Law, Medicine, Engineering or one of those traditional professions, then your future is uncertain, I was even sent to Medical school just to guarantee a job though I always wanted to study Law.

My younger brother, Owuor Arunga, who was raised in Seattle, Washington, came across books and magazines that focuses on different approaches to social and economic problems. He subsequently attended several seminars that focused on the role freedom could play in expanding the choices and opportunities people could enjoy. He carried the “newly acquired understanding” to Kenya the next summer while on a family visit.

I listened to his ideas about how freedom worked but was very skeptical since the anti-globalization arguments had reached me first, and I was actively involved in promoting them. Although they did not make perfect sense, they offered a scapegoat for our problems, painted free markets black, and made me feel better by arguing that we were just victims of a complex system of trade where the rich were exploiting the poor.

I listened to his ideas about how free markets worked but was very skeptical since the anti-globalization arguments had reached me first, and I was actively involved in promoting them.

I was introduced formally to freedom and free market by reading books on freedom. The insights it offered were crystal clear. Presenting to me questions I had never contemplated before, such as what the proper role of government is, and the idea that protection of life, liberty and property were the only functions that could be justified in the existence of governments.

I felt relieved and elated. Relieved because I expected creation of wealth to be very complex, and now I realized that in comparison to the task of central planning, deregulation and liberalization are simple.

And elated because after understanding the institutions of a free society and how they function, I knew that our African parachute had a chance to open and my country had a chance to survive. The plunge into eternal poverty could be broken and we could steer our destiny.

Hernando De Soto’s Mystery of Capital offered the final piece in the puzzle, demonstrating how vital a comprehensive property law system is to awakening dead capital. The lack of a rule of law that upholds private property and provides a framework for enterprise is the greatest challenge that we face before we can ever reap significant gains from liberalizing our economy.

It is hard to sit back passively with the knowledge that tried and proven solutions exist for the questions and fears that many of my peers still have in Kenya -- to sit back knowing that it is within each individual’s reach if only he was “deregulated”.

It is harder to watch the law break the people, demoralize and impoverish them when one clearly understands what it would take to improve their lot. It is particularly uncomfortable in a global context to see what manner of intolerance repression can breed when we witness terrorism, and by the same token what manner of wealth, health and peace free societies enjoy.

It only took my younger brother’s understanding of the role of free markets in wealth creation to induce enough curiosity in me, and set me on the journey to explore and read on my own how freedom works. Poverty is unpleasant and millions of young people like myself are seeking an escape, seeking solutions, guess who is reaching them first and harnessing their energies to rally for their cause…anti-trade, anti-capitalism and sustainable development promoting organizations.

Who is going to be the voice of freedom, which will introduce and promote and defend the role of free markets to high school and University students in Kenya? I hope to create an organization for young Kenyans that will help them understand the power that freedom has to improve opportunities for all Kenyans.

The Mobile Phone, the Radio, the Television and How Kenya got its Groove! What else is reined in?

The Kenyan music scene has recently burst into action. Change radio stations and it is Kenyan music all over! Kenyans are singing about the politics of the day, the hopes of the people, warnings on HIV and admonition to practice safe sex. Songs about the party scene in the country and what young Kenyans do when clubbing, songs denouncing corrupt government practices, and even songs about how prolific Kenyan music has become!

"Nchi ya kitu kidogo ni nchi ya watu wadogo" is one of the first popular songs that hit the airwaves and resonated resoundingly with Kenyans. The title translates to "Country of small things, country of small people". Bribes are colloquially referred to as "something small" or "tea". The song narrates the different ways in which government officials solicit bribes before they could deliver services that they were paid salaries to deliver.

Traffic policemen on the road randomly stop cars and demand bribes even when there is no offence the driver has committed. Judges turn the accused into the accuser for a few shillings at the courts. At the national hospitals the nurses were stealing bed linen and medicine to sell on the black market. Everyone could sing along passionately to this song and this is fortified internal pressure to fight corruption in Kenya.

Rather than the propaganda the government had been spreading of how great the country was while it was actually rotting at the core, finally people could just call it as they saw it, and so all the talented young people began singing about life as they saw it and Kenyans have loved it.

I had given up on musical talent in Kenya since I never heard any music produced by young people. I actually thought that while running marathons was our thing, music just wasn't. At schools the talent was overflowing, at parties and churches, people made music that one would wish they could sell.

Since as far back as I can remember, my country had only had one Kenyan radio station, and it was government owned. There was only one Kenyan TV station and it was government owned too. The only other station that people listened to was BBC radio and this was not allegiance to the queen, it was simply because BBC offered an alternative view on local and international politics to what the Kenyan government offered.

Growing up I had always assumed it was because our country was poor that we had one broadcaster, but later discovered that it was by law. No one else was allowed to own a TV or Radio station!

It is only now when the law has changed that I realize just how much this law robbed Kenyans of a chance at making a living, a choice of quality entertainment, an incentive to sharpen talent for the young and the old, and most importantly for freedom of speech so that Kenyans did not even know what other Kenyans across the country thought of the state of the economy, the political structure or of ideas that people had about how things could be made better!

I would look at the marathon runners who could use their talent and envy them, since they had an outlet. They could take a flight to the country that was having competitions, do their thing, get paid and come back home to use the money to educate their children, build a proper home, buy proper food, and clothes, and help their less fortunate relatives too.

I have been trying to figure out why it is only now that young Kenyans are taking to music composition, production and distribution, and I must say my findings leave me wondering what else it is Kenyans have to offer themselves and the world, and how that creativity can be unleashed. Many of my friends often spoke of wanting to follow their passions in music professionally but they would starve for sure if they did.

I would look at the marathon runners who could use their talent and envy them, since they had an outlet. They could take a flight to the country that was having competitions, do their thing, get paid and come back home to use the money to educate their children, build a proper home, buy proper food, and clothes, and help their less fortunate relatives too.

Music composition was prolific, but most composers could only be high school teachers. Something was wrong with the picture. In other countries, if you have talent to act, sing, compose, are a great public speaker, or artist, you become a millionare, but in Kenya you just let go of these as a hobby, and by the time people leave school, they would just let their talents rot if they were not singing at church or at the local soccer match.

Since the law forbidding independent radio and television stations was changed about five years ago, 7 new TV stations have sprung up. There are now more than 8 Kenyan radio stations, and I am losing count because there seems to be a new one every time I check. All these radio stations are competing for young people's attention to increase revenues from advertising contracts.

Many started as music stations on FM and held auditions for young people as presenters, and DJs. If you could make people laugh you had a job. To play good music, you need a good DJ and to be a good DJ you need to be interested in music, and so the brewing musical talent rushed for the auditions.

At first the air waves were dominated by American and European music, but it was only a matter of time before enterprising young Kenyans realized that they could produce music for the many music stations, and so people went into action composing, others saved and invested in production equipment, and before you knew it demand for Kenyan music was rising after listeners sampled a few of the first ones, with themes of Kenyan life.

The freedom to use the airwaves has not only created thousands of jobs in journalism, advertising, music production, and entertainment in general, but with more broadcasters joining the game, all the people working in this industry are getting higher and higher wages as every new broadcaster competes for the most skilled and talented young people, thus offering better and better pay packages. Entrepreneurs of all sorts also have competitive rates for advertising their goods and services, thus increasing their profits and standards of living, but the telephones have also considerably cut transaction costs, so that people can now call places they had to travel long distances to, in order to close a deal.

The quality of journalism has improved, with the well educated talented people now interested in the jobs that were low paying government jobs before. With better journalism, politicians are put to task over their actions and there is more critical analysis of political action. The people have been empowered by having the chance to scrutinize the law and law makers in the public square.

One radio station has a program called the people's parliament, where people call in and ask questions to various politicians sitting in at the station, on the implications of their policies on the standard of living on Kenyans.

Just 5 years ago, even if the radio stations had call in programs to grill, the people would not have been able to call since there were only 300,000 telephone landlines in Kenya, most of which were in the homes of the political elite and in government offices. And again most young Kenyans just never dreamt of having phones in their homes. I for one thought my parents were just too poor to afford phones. But again I discovered that there was a law that permitted only the government to operate telecommunications. Gratefully this law was also changed and two cell phone companies were licenced to set up shop in Kenya. In the span of 5 years, they have over 1 million subscribers, over 3 times the number of people who had landlines. Where did these people come from?

Kenyans had need for communication and the money with which to purchase this service, and across the law from them were entrepreneurs who were willing to provide the service at a price that they could afford, but the law stood in the way.

I am now very skeptical of our legal system, since I realize perhaps we should not take the lack of opportunities, the dysfunction of things and the ostensible lack of economic progress at face value. I am a witness along with many young people in my country, that when human beings seem to be stifled there must be a road block in their way.

I am glad Kenyans can make music. I am on a mission to find out all the great things they desire to do and what stands in their way of making it happen. If it is legislation, I will call the radio stations and call attention to it.

I strongly believe that the television, the radio, the freedom to use the air waves, and the mobile phone have contributed a lot in the positive political change that Kenya is going through, including the recent change in government after a 26 year dictatorship.

This brings to mind a saying my grandfather pumped into me all the days I was growing up, "if it has been done, you can do it even better". If the rest of the world is being innovative, finding better and faster ways to do things and improving their standards of living, even Kenyans can.

If a good or service seems to be only affordable to the elite, I can bet you someone is only permitting his friends to have monopoly over it and if there were more people selling it, the common man would afford it just like the cell phone in Kenya, which is not only being bought, but also sold by so many people who just recently had only used a public pay phone to make calls.

I am glad Kenyans can make music. I am on a mission to find out all the great things they desire to do and what stands in their way of making it happen. If it is legislation, I will call the radio stations and call attention to it.

I have lost faith in "poverty reduction papers" written by government experts, in complex language that confounds the simple like me. Just let the people be, get off their backs and permit Kenyans to take care of themselves.




Contributed by June Arunga. Reprinted with permission from A World Connected.

To read another Global Envision article about June Arunga is, see An Interview with June Arunga.

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