The Effect of Political Processes on Economic Performance

International Business
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International Business
With globalization becoming the norm of business, countries are exporting their products to foreign markets. Consequently, outsourcing has become easy than before. Countries are able to get what they need without incurring much costs. However, although globalization has resulted in making things easy, it is affected by various factors such as political factors and processes. Consequently, it is not easy to assess the impact of political processes on economic performance considering the fact that the current national institutions and economies have been shaped by the long-standing bureaucratic controls. Given the same political processes set in two different nations can produce totally different results. Consequently, different political processes set in two different countries can produce the same economic results. From this inconsistency, one question stands out, what can account for this and what is the effect of political processes on economic performance?
There is enough evidence from the various studies that have been conducted throughout history that demonstrates that economic institutions such as regulatory, conflict management, property rights and macroeconomic stabilization are the primary influencers of economic growth (Rodrik, 2008). Consequently, economic institutions have a critical impact on investments in industrial production, human and physical capital, and technology. Most importantly, besides playing a significant role in economic growth, they also have a decisive influence on resource distribution.
As result, some groups are able to gain more than others from the existing economic and resource allocation conditions. According to Acemoglu and Robinson (2006), economic institutions are endogenous and they reflect the unending conflict of interests in the society. Therefore, the nature of the existing economic institutions is dependent on the allocation of political power among the elites. This means that political processes either formal or informal are the determinants of the constraints and incentives available to economic institutions. Provided the endogenous characteristic of political institutions and their strategic allocation of power to some groups, well chosen institutions can result in credible mechanisms that have the potential of creating an environment that does not favor opportunistic political and economic behaviors. This implies that political institutions must create incentives that encourage politicians to abide by them.
Various questions arise when assessing the impact of political institutions or processes on economic development. Some of the questions that are asked by carious scholars are: what form of political processes facilitate economic development? Do political institutions or processes have an impact on economic development regardless of the preexisting conditions or economic development phase? In general, does the type of democracy new or consolidated produce the same results in different countries if they have distinct political institutions/processes?
As an attempt to establish the impact of political institutions/ processes on economic development, this paper analyzes the various political processes such as change in leadership in Kenya. Kenya is located in the Eastern part of Africa with Ethiopia to its North, Tanzania to south, Somalia to East and Uganda to and South Sudan to Northwest. It has a population of approximately 40 million people. It was colonized by Britain until 1963 when it attained its independence.
Among the investable things in any striving society is change and for it to be meaningful, leadership must be of quality. Since its independence, Kenya has experienced a number of political and economic changes. This is demonstrated by the shifts from the central government to county governments, agriculture to industries. These changes have had little impact if there is any on the larger population. Only those who are in power and have a good social network have reaped much while the common citizen is struggling to survive. In other words majority of the Kenyan population is poor despite the economic developments the country has experienced over time.
For Kenya to attain its economic and political objectives, it requires a committed leadership. Citizens have the right and power of choosing the leaders they think will bring them the change that they want, but this is an exercise that most people are taking advantage of. Especially those voters who are easily swayed by the elites. Unless the elected leaders make sacrifices, it will not be easy for the citizens to root out malpractices within the government and embrace good governance in the public. Kenya’s economic development depends on decisions made by present leaders and citizens’ desire to develop their future.
Kenya has experienced progress in terms of development in terms of economic and political despite having different types of leadership regimes. According to Lawson politics is an activity where individuals seek to influence decision-making in society either for their self-interests or the majority. On the other hand, Harold Lasswel asserts that politics is all about “who get what, when and how” in the society. Additionally, Duverger’s believe is that political leaders are individuals who hold public office with the responsibility of making binding decisions on behalf of the majority. These decisions made by leaders have a significant impact on economic development of a country.
In the Kenyan economy, its political leadership can be analyzed from two perspectives; government level and political party affiliation. After its independence in 1963, Jomo Kenyatta took the leadership of the country. Considering the instability of political alliances that were formed after independence, the first Kenyan government under the KANU party declined the adoption of the Majimbo Constitution which was regional governance. Instead it created a central authority that adopted a Unitary Constitution that it followed until 2010 when it adopted a new one. The adoption of a central governance structure might have not been after independence but seems to have been there even before it. The Kenyatta can be characterized in two aspects in regard to development planning. First, it was in support of the African socialisms and second it adopted state capitalism.
Hindrance of any form of development is due to poor governance. Over the years Kenya has faced a major problem of the political elites dominating the political institutions and using public resources in advancing their self-interests. As a result, corruption is on the rise and has led to a decline in public institutions, disrupted growth as well as elevated levels of poverty in the country. Various commissions have been set up to formulate policies to put the lost institutions back on track, but the political elites have greatly opposed these efforts because they stand to benefit from the existing status quo.
The transition of KANU government to NARC government in the 2002 created a good environment for a sustainable development in the country. The new government focused on the poor by providing free primary education. Since independence, NARC was the second party to govern Kenya. The entry of NARC into power changed how things were done setting the country’s economy on motion. The new regime led by Mwai Kibaki initiated new strategy reform processes that ignited the country’s economic development as well as its governance. However, despite the change of leadership being a significant factor, it is not enough to bring significant changes in a country whose former government did nothing to improve its economy. The instability of political coalitions may risk all the gains a country makes bearing in mind that they are fragile. The political elites could initiate their way back to the previous behavior to maintain the status quo and oppose any policy that would try to bring any change.
The NARC government led by the third president Mwai Kibaki initiated a road map for transforming the country into a middle-income country by 2030 under the name Vision 2030. It was a planning document, bu...