Saturday, July 25, 2009

Capitalism- in the real world. Making it work for Kenya/Africa

Even without ever have met me, I'm sure you would not imagine that I'm the sort of fella who ever give Usain Bolt a run for his money. So just think of a situation where I was told that from now hence-forth I'd have to earn a living by competing against the likes of Usain!

That in a nutshell is what free market adherents and their neo-con friends believe economies around the world should use as their operating theory and model.

I like what capitalism can do for economies and society at large.

My worry is that many including the majority of its cheerleaders don't understand capitalism.

Capitalism = arbitrage. As long as an individual, a firm a country is able offer a distinctive

  1. product
  2. service
  3. skill
  4. experience

and do so at a mark up to cost with people willingly paying, a profit will be made.

The two key words are distinctive and able. Going back to the running example, the distinctive offering is a skill to able to outrun a cheetah. I don't have, so what happens to me. Secondly, I may have the distinctive advantage of being to run that fast , but how'd reach the pinnacle of my career if I am located in Mathira?

The obvious point is that capitalism can only work if it has strong institutions to backfill all the gaps that exist in terms of people who don't distinctive something or the ability have vis a vis others in the same society.

In Africa especially, its vitally important to recognise the role that private sector can play in transforming industries and therefore economies, but be prepared to mid-wife those industries and societies until they are in a position to be able to compete.

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