Building Inclusive Economies

Folks have been asking: what is your biggest change in perspective after living in Kenya for 6 months. 

First let me start by explaining Kenya is not foreign to me. Dad is Kenyan, Mom is Puerto Rican. I grew up in Kenya from age 2 to age 11. I also visited a few times in the 35 years I was away. Hence, there is no culture shock for me to overcome. 

This being said, what has shocked me is how much of an influence one's surrounding environment has on one's thinking. 

Let us look at the concept of consumer products and market driven economies. 

In the U. S. the consumer product design standard starts with luxury and the low-income consumer is an after thought. Products for low-income consumers are designed with the philosophy: what do we need to take away from the luxury brand in order to bring this price point down? 

In Kenya, those making $1 (100Ksh) a day and those making $500/mth (50,000Ksh/mth) far out number those making $5,000/mth (500,000Ksh/mth) or $5M/mth (500M Ksh/mth). There is not much incentive to buy if the design standard is focused on removing stuff. Here the design standard is: how can we offer the same package as the luxury brand at a lower price point?  

Think of your cell phone. Even in Kenya almost every body has one. Does everyone have an iPhone or an LG G5? No. These are $500 (50,000Ksh) phones. But, if you want a smartphone, you can get an Infinix for $95.60 (9,560Ksh) or a Tecno Phantom 6 for $237.99 (23,799Ksh). The default standard here is dual sim unlocked so I don't have to pay extra for these features. 

https://www.jumia.co.ke/mobile-phones/infinix/

https://www.jumia.co.ke/tecno/

I've never been an iPhone fan or used one but I arrived with an LG G4 and have acquired both brands I mention. 

The same applies to traditional manufactured goods. Let's look at mattresses. In the US a cheap mattress is $400 (40,000Ksh) and your body screams to alert you that you are not sleeping on a $5,000 (500,000Ksh) mattress. But, through local manufacturers and vendors, you can get foam mattresses for as low as $20. I tried one of the $20 (2,000Ksh) variety and it was good for 2 months so now I am trying a $90 (9,000Ksh) medium density foam variety. It is not plush pillow top sleep but it is comfortable and delivers a good night's sleep. 

 https://www.olx.co.ke/m/home-furniture-garden/q-mattress/

Here is the entrepreneurial journey of Nakuru Mattress into Nakumatt supermarket where you can now buy both groceries and mattresses. 

https://www.standardmedia.co.ke/mobile/article/2000036154/the-non-quitter-who-founded-nakumatt-supermarkets

Mind you Kenya has a 13% to 16% VAT (that does cause culture shock galore every time I pay). This shows even with a high sales tax rate quality affordable goods are possible. At the same time I would like to pay tribute to my US roots with the reminder that high taxes and unequal tax burdens tend to make people a wee bit rebellious so the shock is not uniquely mine. 

https://www.history.com/news/10-things-you-may-not-know-about-the-boston-tea-party

Back to the main message here: the same cost breakthroughs we have seen in IT products are possible with traditional manufactured goods if we focus our minds on delivering options instead of restrictions. 

Ditto for gastronomic tourism (which is on my personal list of fundamental human rights). I have the right to enjoy Norwegian goat cheese or lutefisk in the comfort of my Nairobi dining room. Here the barrier is not as much cost as it is trade restrictions. I have heard the arguments in favor of only buying local foods. However, the carbon footprint of me travelling to Norway to eat lutefisk is greater than the carbon footprint of bringing lutefisk to Nairobi. In addition, nobody in Nairobi would understand what the heck I am looking for in terms of taste. By bringing lutefisk to Nairobi (or taking omena to Osloo), others can be inspired to attempt a culinary replica using local fish. The same applies to other food products. 

What does this have to do with an inclusive economy? There are two aspects to consumer spending: (1) acquisition of the product, (2) acquisition of the lifestyle. My definition of an inclusive economy is one where both product and lifestyle are equally affordable to all income levels. 

Is the $90 (9,000Ksh) mattress exactly the same as the $5,000 (500,000Ksh) mattress? No. But the $90 (9,000Ksh) mattress should not make me feel like an oppressed reject either. When I sleep on the $5,000 (500,000Ksh) mattress the difference should be a matter of personal preference not of quality. 

Is eating lutefisk in Nairobi or omena in Oslo the same as having made the trip to eat it locally? No. But with importation I am not excluded from the activity of experiencing international culinary. 

And yes, health care can be delivered inclusively as well. Among other things, if doctors don't have to worry about paying off $300,000 (30,000,000 Ksh) in student loans those who choose can afford to work in community health instead of only top hospitals and private clinics. Government subsidies cannot cover the totality of community health services needed. Right now in Kenya we are bewildered by the prolonged doctor's strike in defiance of the Kenyan Labour Court's ruling that it is illegal. 

https://www.the-star.co.ke/news/2016/12/13/labour-court-declares-doctors-strike-illegal_c1472467?platform=hootsuite

Just like in the US we need to find better ways of finding universal health care. The difference in Kenya, as a country there is agreement that health care is a basic human right that needs to be protected by the Constitution. With the new Constitution we are now forced to focus on finding ways to make our ideal of universal health care an affordable reality for all. 

https://www.healthpolicyproject.com/index.cfm?id=country-kenya

Clearly it is not the size of your GDP that determines what is possible but rather the nature of your beliefs and aspirations. In particular, the extent to which there is a shared belief that good quality and good lifestyle at an affordable rate is not exclusive for the wealthy but rather a basic right all level of consumers must be able to have access to and enjoy. 

Now for academic speak: are inclusive economies and social enterprise the same thing? I would answer social enterprise is a sub-set of inclusive economies but an inclusive economy does not have to only focus on social enterprise. 

Affordable quality products is an inclusive economy perspective. The market focus is on solving the need of low income consumers to the same standard of quality (albeit different standard of premiums and preferences) than the high wealth consumer. 

With social enterprise the social problem drives the market decision. Let's look at my favourite example from Spain: La Fageda dairy. 

https://www.ieseinsight.com/doc.aspx?id=984&ar=3

An inclusive economy perspective would search for ways to make yoghurt affordable to low income individuals and for the most cost-effective effective way to employ those with mental illness.  

The social enterprise perspective starts by saying: how can we create a factory where all those employed have a mental illness then moves to finding how to make their yoghurt high quality and market competitive.

Both approaches include those with mental illness in the economic production system. There is a difference in the level of participation. 

This is the fundamental premise of an inclusive economy: everyone gets to benefit. 

Ultimately, the social enterprise model might become the new business standard but right now we are not there Hence it is not a rejection of Capitalism or an embracing of Socialism but rather a rejection of sub-quality treatment and benefits at the low income end that should be the focus of economic transformation discussions. 

Let us focus on ensuring everyone has good quality and good lifestyle irrespective of income level and we will have made a Moore's Law leap in the direction of inclusive economies.