Jaramogi and Jomo: A brief history of crony capitalism

What you need to know:

  • The free enterprise economy is where people like Jaramogi Odinga and Njenga Karume prospered in the colonial era.

  • This was their vision of independence, an equal opportunity economic system, not a continuation of the colonial crony capitalism system that privileged Europeans over the other races.

  • The fallout was about Jomo Kenyatta and his cronies using the pretext of Africanisation to enrich and concentrate economic power among themselves.

  • They were the lucky ones.

In The Politics of Independence of Kenya, Kenneth Kyle narrates an incident at the Lancaster House Conference in which Jaramogi Oginga Odinga let rip on Colonial Secretary Reginald Maulding.

He writes: “Odinga warmed up to his theme. The British were playing, he said, at “divide and rule.” He (Odinga) had been called a communist but he had a greater stake in Kenya. He had 12 children and was the biggest capitalist in the country with £50,000 worth of property.”

The idea that Jaramogi was a socialist, and perhaps even a communist, is accepted by many, perhaps most Kenyans as a historical fact. By today’s value, Jaramogi’s £50,000 wealth at independence is close to Sh140 million. That Jaramogi could have been one of the wealthiest Africans at independence, and a self-confessed capitalist will come as surprise to many.

The narrative that the Jomo and Jaramogi wings of Kanu were capitalist and communist respectively is a false one. In the transition to independence, left leaning was the default alignment for African nationalists since the East Bloc supported liberalisation movements because the colonial powers were their Western adversaries. Kenyatta himself was associated with the leftist Pan-Africanist movement and had visited the Soviet Union during his sojourn to Britain. Both sides of the Kanu political divide espoused a mixed economy with extensive state intervention, such as price and foreign exchange controls.

One of the tenets of socialism and communist economic systems is collectivisation of land as was pursued by socialist Tanzania, communist Ethiopia, our southern and northern neighbours respectively. The Kanu left wing did not advocate collectivisation of land. The battle was about restitution of land to the people from who it had been taken, a policy that they were all agreed on before against the “willing buyer, willing seller” policy that the Kenyatta column adopted after independence. In effect, they were championing private property rights, only they were championing the property rights of the peasants. Private property is a tenet of capitalism. The land cleavage then, was a war within the capitalist paradigm, not between capitalism and socialism or communism.

So if both left and right of Kanu were capitalists, what is it that they disagreed on so virulently. The popular narrative is that the dispute was the toxic brew of power politics and tribalism that continues to poison our politics. This is only part of the story, and in my view, not the most salient.

The fiercest protagonists on the land question were Jomo Kenyatta and Bildad Kaggia, both Kikuyus, a contest that ended with Kenyatta’s infamous outburst: “Kaggia, we were together with Paul Ngei in jail; if you go to Ngei’s farm, he has planted a lot of coffee and other crops. What have you done for yourself? If you go to (Fred) Kubai’s, he has a big house and a nice shamba. Kaggia, what have you done for yourself? We were together with Kung’u Karumba in jail, now he is running his own buses. What have you done for yourself?”

Kaggia’s sin was to refuse to join the gravy train. Kaggia remained the moral conscience of the nationalist movement to the end of his days. He was not alone. James Gichuru could theoretically speaking have been Kenya’s first president. He stood down for Kenyatta twice, as president of KAU, Kanu’s precursor upon Kenyatta’s return from Britain in 1947 and again as president of Kanu upon Kenyatta’s release from jail in 1961. Gichuru was Kenya’s first finance minister, and in my book, the most accomplished one to date.

Gichuru had no interest in self-aggrandisement and social status, preferring to enjoy his tipple with regular folk at Karai Bar and such places, where most of cabinet colleagues never set foot again after they gained access to the erstwhile whites only country clubs and hotels. By the early 70s, he was a disillusioned man, but perhaps too loyal to Kenyatta and Kanu, he drifted off and although he retained a cabinet portfolio to the end, he spent more time in Karai Bar than in his Defence Ministry office.

At the heart of the ideological conundrum lies a remarkably simple conceptual problem, namely the failure to distinguish two paradigms, namely the historical western capitalism, and a free market economy as a universal economic system or theoretical construct as the case may be.

The western capitalist system that emerged from the industrial revolution is one in which capital hires labour. Capital is powerful, and labour is weak. It is prone to concentration of economic power, which invariably translates to political power, thus undermining the democratic principle of political equity. This propensity breeds corruption and state capture, the political system we call crony capitalism. To counter the power of capital, labour has to organise both at the market level (unions) and politically.

A free market economy by definition has no particular prescribed industrial structure. It is indifferent as to who owns what, who hires whom as long as capital, labour and goods are traded at market determined prices. In classical capitalism, landowners hire labour and pay them fixed wages, and keep the surplus or loss as the case may be. Ditto owners of industrial capital (machines). In a free market economy, landowners may hire labour, or labour may rent land, pay landowners a fixed rent and keep the surplus (or loss). In a free market economy, other forms of industrial organization may arise.

Case in point: the boda boda industry is now arguably one of the largest sectors of the economy, with close to a million motorcycles on the road. The boda-boda operators either own the motorcycles or rent them from “capitalists.” Some of the “capitalists” are themselves workers in some other organisation. Some operators own more than one motorcycle which they rent out to other operators. What you seldom find in the boda-boda industry, if at all, is the fixed-wage earner whom we find in the dichotomy between capitalism and socialism. It is not possible to put owners of capital and their interests in one group and workers in another. It is a free market enterprise made up primarily of what economic statisticians call “own account workers.”

Our precolonial stateless societies did not have a public ownership of the means of production. They were non-capitalist, free market economies. Informed by their historical experience, European intellectual establishment denotes them as “pre-capitalist”. This an example of the intellectual ditch that Karl Popper termed as “poverty of historicism”. There was nothing socialist about them. They were welfare societies where people shared and looked after their vulnerable in all sorts of mutual reciprocity norms. These were, still are, insurance mechanisms, not socialism as they operate in the domain of consumption, not production.

This free enterprise economy is where people like Jaramogi and Njenga Karume prospered in the colonial era. This was their vision of independence, an equal opportunity economic system, not a continuation of the colonial crony capitalism system that privileged Europeans over the other races. The fallout was about Jomo Kenyatta and his cronies using the pretext of Africanisation to enrich and concentrate economic power among themselves. They were the lucky ones.

In the aftermath of the KPU fallout, Tom Mboya mobilised the emerging technocracy on the progressive agenda in a manner suggesting presidential ambitions. Though a forceful defender of the political status quo, Mboya was not a primitive accumulator. On July 5, 1969, six months to the general elections, he took a bullet. J.M. Kariuki, a wealthy man pronounced himself against crony capitalism forcefully. He met a gruesome death. Robert Ouko an influential but modest Moi insider took the monster on, and met the same fate. Kenneth Matiba an insider broke ranks and found himself in Kamiti. He survived, barely.

In the end, crony capitalism was to meet its match, not in political adversaries, but by its rival system, free market economy which came by way of structural adjustment programmes. Advocates of liberalisation like yours truly who saw in it the potential for unfettering the economy and society from the shackles of the crony capitalist oligarchy were roundly criticised by the political left that was still trapped in the capitalist-socialism paradigm (Younger Kenyans may refer to the Daily Nation archives for the mid-1990s' David NdiiGavin Bennet debate on liberalisation of the motor vehicle industry.).

By the mid-1990s, bazaars were everywhere. A decade later, hitherto unassailable pampered monopolistic giants like East African Industries and Unga Group, among others, had been toppled by local upstarts. Ordinary Kenyans could drive decent cars and poor rural folk could wear decent clothes every day of the week.

In 1990, the corporatised economy that we call the “private sector”, employed one and a half times more people (700,000) than informal enterprise (450,000). Two and a half decades on informal enterprise employs almost eight times (13.3m) than the “private sector” (1.8m). While the “private sector” has managed to double its workforce every decade, the informal enterprise has increased its workforce thirty-fold. Had we not liberalised, the social implosion that the 1986 Sessional Paper warned out would have come a decade ago. Case in point: Zimbabwe.

Crony capitalism may have subsided in the market place, but it is far from out. Unable to compete in the consumer market place, it retreated into the state sector, where it has re-invented itself as public-private partnership. Crony capitalism is the driving force behind the Jubilee administration’s debt fuelled mega-infrastructure binge.

There you have it.

David Ndii, an economist, currently serves on the National Super Alliance’s technical and strategy committee, in which he leads Nasa's policy team.

Twitter: @DavidNdii


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