The March of Folly of a Vanquished and a Deluded Nation

By Mwarang'ethe

In the recent past, we have seen news by the DN focusing on the potential of so called new counties under our new wonderful constitution. For instance, see Turkana wonder tree here , Jua Kali in Kiambu here. Not to be left out, the elders and professionals have been gathering to strategise how develop their counties as we see in Mbeere, Narok and in Kiambu. All this noise stems from the failure to distinguish between availability of resources and the ability to create wealth from the same. In any case, we can dismiss all these meetings by asking, what is the material difference between these counties and existing municipalities? However, this is not the main issue.

To add flavour to all these, we are now training youthful leadership as we see here. Furthermore, in line with our “welfare state,” the poor Kenyans are demanding “free health care” led by professor Anyang Ny’ongo as we see here. Not to be left out, are our old men and women are asking the state to use violence so as to give effect to their right to pensions as we see here.

Meanwhile, few seem to realise that we are already raising taxes for the poor people so as to fund their “welfare” as we are reading: “Oil sector to break Sh100 mark over refinery's new fees”. In an earlier article on energy question, we wrote this: “The best way to understand how a society functions and therefore, malfunctions is to understand the energy question.” Please refresh your memory here.

As we read all of the above, we are also reading this: “KPLC pretax profit hit Sh5.6 bn" Inter alia, we are told that this “... was due to revenue growth and relatively lower increase in overall expenditure.” To the initiated, this simple statement tells the whole story. But, we shall return to this later. At the same time, we hear our Minister Mwakere lament that, the cost of energy is the major hindrance to our economic growth as we hear here. In this last video, we also we hear the C.E.O of EPZA saying how these zones create jobs, bring in foreign exchange and facilitate technology skills transfers. This is all monkey language, but, that’s a story for another day.

What these videos illustrate is nothing, but, a vanquished, but, also, a very deluded nation whose elite are unable to grasp that, we are a RENTIER ECONOMY or DEBT PEONAGE ECONOMY. And, the bitter truth is this. A rentier economy can only increase poverty for the majority, while enriching a few beyond imagination no matter what we do. But, what is a rentier economy? A rentier economy refers to an economic arrangement whereby, certain persons earn profit without production. Such profits like the KPLC’s, if they can be so called, are rents, which constitute a parasitic extraction of wealth from the REAL ECONOMY, i.e. labour and industrial economy. This economy is tilted to favour property owners (land owners), monopolists and creditors at the expense of those who produce goods and services. A widening share of national income must go to the landlords, creditors and other rentiers at the top of the income and wealth pyramid increasingly free of taxes. The wealth that produces these rentier incomes is not real capital investment, nor is it technological. It is created by law and politics, often by stealth and insider dealing.

When the West was industrializing (they have now foolishly de –industrialised), the guiding principle was public regulation of areas where competition cannot bring costs down such as transport, mineral bearing land, electric power, communications, radio spectrum etc. It is for this reason these nations kept natural monopolies like power in the public domain. In the USA, they organised them as regulated public utilities. All this was meant to limit the economic rent by bringing market prices into line with actual costs of production.

According to the economists who industrialised America (forget about useful idiots and deluded economists like Jeffrey Sachs who favour colonial welfare to be provided by bankrupt Western nations to Africa in the name of MDG’s), the success of public infrastructure investment in natural monopolies like the KPLC is its ability to lower the economy’s cost structure. For instance, the Erie Canal brought grain from the Western States to upstate New York minimising the cost of doing business. Thus, to seek the highest profit as the market would bear is to make rent – burdened economy uncompetitive which reduces industrial profits for the economy at large. This is the exact role the KPLC and other privatized monopolies are playing in our economy.

It was for this reason in the USA; the Interstate Commerce Commission put an end to the watered financial charges imposed by the RAILROAD BARONS (remember Kenya Railways saga?). Also, for the same reason, the Sherman Anti Trist Act of 1890 was used to break up the Standard Oil of the Rockefeller. These measures enabled the USA out compete others who did not enact progressive fiscal and financial policy.

In simple words, we have an economy full of toll booths installed at the most critical access points. To remove these toll booths, we must appreciate the financial debt dynamic which undercuts the INDUSTRIAL CAPITALISM in Kenya as well as in the USA and all over the world today. But, how does this come about?

Firstly, a nation is ordered by the IMF and WB to make sure its central bank (this is the FOURTH BRANCH of government, and an oligarchy) does not do what central banks were created to do. In our case, this happened in 1996 as we “struggled” with Moi with the assistance of our “friends.” Once this has happened (make the central bank “independent” and therefore, a lobbyist for commercial banks), our ability to create credit for public investments is cut. Once that is accomplished, we are instructed to privatise the natural monopolies which we cannot fund anymore.

This is where it gets interesting. The new owners of these monopolies do not spend any money they have earned. No, since they are connected to the money printing central banks of the West, Japan etc, they print dollars, pounds, yen etc which are WORTHILESS PAPERS and use them to “buy” our hard assets. At the same time, they ensure in our tax laws we treat debt interest payments as tax deductible expenses. In other words, the interest payments to the bankers are guaranteed by our tax laws. This is actual fiscal subsidy as compared to tangible industrial investment and operating profit. In other words, bank credit has been decoupled from CAPITAL FORMATION taking the form of mortgage credit and loans secured by corporate stocks.

Once these arrangements are in place, a number of things happen. For instance, in the case of the KPLC, they increase the cost of electricity connection and the electricity itself. This increment is not done to reflect the cost of connection, but, as a method of wealth extraction method from the labour and industrial capitalists, i.e. tribute. Secondly, once a monopoly such as the KPLC is in the hands of the rentier class, they issue bonds with its income stream and old assets as the collateral. This is in addition to the original debt used to acquire the assets. As a result, when income streams come in, instead of putting the same into expansion of KPLC, in research and development and improvement of services to the labour and industrial sector, the entire surplus is used to pay the creditors who created their money out of thin air. This leaves only the labour and industrial sector to bear the taxation burden.

So, what should be done? We have been told that to increase the efficiency of the KPLC and other monopolies we must privatise them. This is pure fiction. The best way of ensuring competition in natural monopolies would have been to leave KPLC in the public domain and then take bids on its operations. This would preserve it as a common; while through the bid process retain the benefits of competition. Instead of this common sense approach, Africans have been brainwashed to fully give up their rights for local control of land, resources, water and other basic services. The problem is that, once you do this, you must pay monopoly price which makes your economy uncompetitive in the global economy. The question is, with such an economy, how do you create jobs for the unemployed army in your wonderful counties?

Dear reader, you may find this startling, but, it is true. We are in the midst of the greatest commons enclosure which is worse and widespread than those of the land enclosure 18th – 19th Century in England and Scotland. In other words, we are now witnessing the most savage class war fare in the long bloody human history. It is not warfare between industrial capitalism and labour as Atwoli of COTU imagines. No, it is a war against labour and industrial capitalism by financial capitalism and land monopoly. In other words, we are witnessing the reconstruction of FEUDAL SOCIETY like that of the old Europe. However, instead of old military conquest, this time, the super elite are using financial system as the weapon. This makes this weapon even more dangerous because it is so hidden from the masses.

The original liberals, who championed the idea of democracy in the 18th and 19th century or even in the classical Greece, wanted to have popular governments that could stand up to the rentier class, i.e. the land lords and financiers (aristocrats). In the same manner, the classical thinkers like Adam Smith called for free trade to mean an economy bereft of free lunch, i.e. economic rent and financial interest. However, in an ironic twist of fate, the rentier class has captured governments all over the world and turned the meaning of free trade upside down. By so doing, they have effectively nullified democracy. As a result, no matter who you elect, he or she, must implement the on – going neo – feudal policies. It is for this reason we have asserted that, voting is the modern opium of the masses here.

Now, instead of reforming our rentier economy so as to allow labour and industrial capitalism to prosper, and therefore, end the depression, it seems all nations (the oligarchy) including the USA, China, France, and Brazil Kenya (128 KES is equal to £ 1 on 8th Oct. 2010) etc have decided to devalue their currencies. In other words, you devalue your currency, I devalue mine and on and on. This is meant to help the exporters. However, the consequence for the masses will be dire for they are destroying the masses buying power. Dear reader, keep this in mind. “Paper money eventually returns to its intrinsic value – zero,” so taught us Voltaire. You can calculate the loss of purchasing power of these useless papers here.

And, when this shit hits the pan, money being the glue that holds civilised society together, prepare for chaos. This chaos will give an excuse for fascism like that of Hitler and Mussolini. When all fails, there will be a major and we may add catastrophic war. By the way, we add that, today’s fiat currency laws (legal tender laws meant to force you to accept money which is losing value) were enacted in 1909 so as to help fight the 1 World War. So, we are celebrating 100 years of fiat money regime and the bloodshed it has funded.

Finally, we have been accused of writing complex things that many may find difficult to understand. We reply this way. Industrializing a nation requires very complex thinking and not peasant simplistic thinking as we witness in the above videos. But, let us clarify that, we have a lot of respect for peasants. We just note that, they are simple minded people, but, this kind of thinking is awfully inadequate in strategising how to develop a nation.

By this we mean that, we are a nation that seems comfortable in arriving at convictions without any inquiry and, or study. The result of this is that, we are a vanquished nation that is unable to understand the rules of ECONOMIC and FINANCIAL WARFARE. Those who develop economic warfare strategies are first class thinkers. To counter them, we must also deploy first class thinkers. Since we seem unable understand this and therefore, formulate appropriate defence strategies, we say that, in our convictions we are a very deluded nation which is on the march of folly.