Government In Business and 21st Century Economics

In the past week I gained from two learning events which though unrelated in occurence, are very much linked to the past as well as the future. Who sets prices? And pricing is to whose interest?

When it is the buyer that increases the price does it negate fundamental economic laws of elements of markets and pricing in particular? Questions have been asked whether at all there exist a price level that reflects the true value of commodity. Is it always statistical arbitrariness resulting from desperations by over fraught buyers at some point and contented lot with deflected priorities at another?

I stand to question the assumptions on which proponents of perfect competitive markets (at instances) base their arguments because in reality markets are surrounded with all manners of imperfections (not necessarily proving the theories advanced for imperfect markets) and uncertainties with so limited time too short for a buyer to make her considerations of available options if any on pricing. Even if it were not so, there are myriads of data and information to process, while the whole time the costs of such processing is enormous in time, acquisitions and interpretation.

That being true, buyers are therefore subjected to constant mis-expenditures where there is no real bargain even when the seller says so. Meaning that all the laws economists have set in their research corridors have no relevance in the streets, from Wall Street to Kimathi Street. There are all those, cartels, monopolies and other similar forms whose dealings do not have to conform to any competitive theories in provisions of basic commodities at all levels from the international oil markets to retail fuel sales at gas points.

The effects of unions and interested bodies and groups with common interests that get it all wrong by trying via crude methods to correct the wrongs and the misconceptions of the economists’ laws that have left the consumer without reliable weapon to fight back the disproportionate effects of deregulations and belief in the efficiency of the ‘invisible hands of markets’.

When the big brother speaks without leaning on a proven theory or law and gives you no option at all on whether to proceed with subsidizing processes of production and marketing, or setting quotas on aspects that balances the considerations of source and destination without depressing the stability of local dependable dynamics and formations, everyone is left to wonder what happens to the left hand – as a rule.

Tea farmers have been the latest to walk the talk that they have threatened since four parliaments before. They are uprooting their crops and switching seeds. This looks like a wise decision because it too is an option to take if the other ain’t working. And it has never been working for the peasants because between them and the buyers are agents and millers and government who in a combined robbery take away 85% of the worth of the produce either as costs, commission or taxes.

This is the disease that has grounded Kenya’s once vibrant agricultural sector, which sadly, also happens to be the country’s only abundant resource, mainstay, backbone and direct employer of 70% of the employable population. Coffee, cotton, sugarcane, cashew nut, macadamia, cereals and all in their categories have traveled the same lost route to leave our food and foreign exchange requirements at dire deficits. Everybody has been monitoring the digression without making any intervention for what it might be worth until it is this late.

Whether it is the 700bln USD to resuscitate America’s (and world leading) financial and economic store that is the Wall Street functionaries that sucks coins from the public with no bullet proof on safety and control, or President Kibaki announcing an ambiguous 30% increase on the prices paid to corn farmers by the government owned National Cereals and Produce Board, something is bound to be seen hidden loose in laws and such policies that follow. With the same breath a dramatic proposal that tea farmers should take home 90% of the produce’s earning more or less show that there is a frantic uncoordinated effort to shake off the gadfly with a swat of a hair strand - a loose end. Not convincing when you consider that the unbearably congested route tea takes from the farmer through the mills to a consumer seated at a cafeteria in downtown Palermo is too enormous with all the many taxable points along that route. Or which 90% of what?

Lastly, it is time for the world to ponder about what sort of economics to deploy since we do not want to imagine that we have all been wrong all along in believing in theories and laws which are as naturally inconsistent as the hour of rain or path of the winds. Regulating a single commodity in a market has disproportionate effect not only on other relations, substitutes or complimentaries, but also indirectly on any other that attracts spending within that market. Correction of that anomaly calls for a delicate balancing act, that even though will be artificial and irresponsive in its solution, can tether the temporal spillages that arise from such unresearched interventions.

In the meantime, such events as of the Wallstreet and commodity situation in Kenya, and the resultant responses taken by the authorities will appal students of economics from their lecture halls and out on the streets wondering who is right - Big Sam or the Professor of Economics who was a little while ago quipping that "government has no business being in business". More puzzling would be the West's SAPs that weighed on the developing world to "privatize or be isolated".