The unintended consequences of political and economic paralysis

Forget the sophisticated language of economists, their graphs and equations, the bottom line of economics is human activities. Despite all the hype about artificial intelligence (AI) or the Fifth Industrial Revolution (5IR), someone must work and do real things.

Planting, cleaning, bricklaying, transporting, cooking and thinking. All these activities are coordinated by the market to achieve either personal or national goals. 

AI and technology help us become more efficient, doing more with less. They can’t replace us. When is the robot going to cook chapati or chew for us? 

That is why dynamism is celebrated in economics, when everyone is busy. That is why a higher population is celebrated; there are more actors. That is why cities attract lots of citizens, and their ideas and economies of scale come into play. 

Are we not fascinated by full streets, evidence that something is happening? Traffic jams signify economic activities. What if all the roads are empty?

Traffic jams often remind us, the economy needs more space. Bigger cities are bigger markets. The competition (more activities!) leads to innovation and dynamism.  Ask Kenyans who relocated to the counties after devolution why they came back to Nairobi or commute from a big town. 

Economic dynamism hates paralysis; when things don’t move, when decisions can’t be made. A good example is the government shutdown in the USA. This has a ripple effect because the private and public sectors are like the blades of a pair of scissors; they work together.

You also probably know of cases where things can’t move because someone, a leader or a CEO, can’t make a decision. It’s worse when voting is involved. 

Politics is one source of economic paralysis. It has no right or wrong answers; it’s about conviction and ideologies. It’s about emotions. And political power.

The collateral damage of paralysis is the ordinary people.  Keynesian economics, where government spending can stimulate the economy, makes paralysis worse. Add the fact that the government has a monopoly over lots of services. 

The other driver of economic paralysis, which may not surprise you, is over-centralisation, which leads to over consultation as everyone tries to avoid responsibility and blame. Employees often feel it’s better not to make a decision than risk their jobs.

Yet a wrong decision is better than no decision; it can be corrected. 

Paralysis often results when there is too much information or too little. It’s worse when information is used as a means of control or power. Economic paralysis is similar to courting. You could fail to marry a girl because you know too much about her or too little.

Curiously, economic paralysis can be mistaken for economic stability. Reflect on that statement before sunset.  

Why is paralysis rare in the private sector? The results often matter more than politics and power. Responsibilities are clearly spelt out and penalties.

In the public sector, things are more amorphous, more so when power is wielded by non-elected people or non-state actors. 

Economic paralysis annoys leaders; it portrays them as ineffective. That tempts them to be authoritarian. In most cases, that leads to father paralysis, quite common in Africa.We love quoting China as an exception. Deng Xiaoping broke the paralysis in 1978, the economy grew, and the resulting prosperity led to acceptance of the leadership.

South Korea broke their economic paralysis through some authoritarianism.

African leaders thought they would overcome political and economic paralysis through a single party. The results were opposite to what China got. Even Kenya tried a party system. Coalitions have brought further paralysis. 

Are we trying to remove paralysis through over-centralisation again? Will it work? Every political ideology must take cognisance of the political and economic realities. And unintended consequences like muting competition and dynamism.

The outcome of economic prosperity is freedom and liberty. That is why “poor” people tend to be happier in freedom than in serfdom.  Authoritarianism, as a route to ending paralysis, looks neat and efficient, but the cost in lost freedom is too high. The bigger cost is having citizens fail to reach their potential. The economy operates suboptimally.

Does that sound familiar? 

Some observers note that political and economic paralysis can be a strategy. Citizens will call for someone to jumpstart things. What if the causes of paralysis emerge as the solution? 

Political and economic paralysis are giving conservatives a new lease of life. Think of the United States, Canada, the UK, and Australia. Add Ghana and Malawi. Paralysis can be a tool in the political toolbox. It’s not the most effective.

Dynamism, where decisions are expeditiously made, where economic and political players are allowed to exercise their discretion within the confines of law and traditions, works best in the long run.