World Trade Organization (WTO): the Power it Wields over the World
1.0 Introduction
The document “WTO in Brief”[1] describes the World Trade Organization as the only trade organization dealing with the global rules of trade among nations. Its main function is to ensure that trade flows smoothly, predictably and as freely as possible. In promoting free trade the WTO focuses on assisting consumers enjoy from a variety of choices, assuring producers and exporters that foreign markets will be available and by lowering trade barriers, it assists to lower other barriers amongst people and nations.
The heart of the WTO is the Multilateral Trading System[2] consisting of agreements, negotiated and signed by a wide majority of the World’s trading nations and ratified by their parliaments. These agreements are legal ground rules for international commerce. Essentially they are contracts guaranteeing member countries important trade rights. They also bind governments to keep their trade policies within limits to everybody’s benefit.
2.0 Evolution of the GATT to WTO
The Bretton Woods conference (1944) was the starting point for a new world order with three cornerstones: International Monetary Fund (IMF), International Bank for Reconstruction and Development (IBRD) and International Trade organization (ITO). During the negotiations for ITO some countries saw a need for immediate tariff reductions that resulted in a General Agreement on Tariffs and Trade (GATT) with an initial membership of 23 nations in 1947. GATT was intended to be a stepping stone towards the establishment of the ITO and embodied many principles of the proposed ITO Charter.
In 1948 the ITO Charter was successfully completed in Havana which set basic rules for international trade and other international economic matters. The ITO charter however never entered into force, the US congress rejected it repeatedly. The usual argument against the new organization is that it would be involved into internal economic issues. In 1950, President Harry Truman announced that he would no longer seek the approval of the ITO charter and thus doing formerly away with ITO. In the absence of ITO, the world nations turned to GATT to handle problems concerning their trade relations.
GATT became an important provisional but promising institution for the promotion of an integrated global trading system. It is classified in the US as a treaty based on Reciprocal Trade Agreement Act. The agreement is based on the “unconditional most favored nation principle.” This means that the conditions applied to the most favored trading nation (i.e. the one with the least restrictions) apply to all trading nations.
One striking feature of the GATT history is the successive rounds of negotiations which led to new schedules of tariff concessions and new commitments towards greater liberalization. GATT signatories occasionally negotiated new trade agreements that all nations would enter into. Each set of agreements was called a round. In general each agreement bound members to reduce certain tariffs. Usually this would include many special cases of individual products, with exceptions or modifications for each country. The eighth round held in Uruguay from 1986 to 1994 is the one that ushered in the World Trade Organization along with many other agreements.
3.0 The GATT/WTO Rounds
As has been mentioned above, each set of GATT agreements was known as a round. Each of the eight rounds is summarized as follow
3.1 Geneva Round (April to October 1947)
The negotiations were based on bilateral “product by product request offer” basis. 123 negotiations were completed and 20 schedules established containing the tariff reductions. The agreements covered 45,000 tariff concessions amounting to about $10 billion in trade. This was a successful round since the US was enthusiastic about free trade, was willing to cut its tariffs on imports from Europe and did not put pressure on European countries to abandon their trade restrictions.
3.2 The Annecy, France Round (April to August 1949)
There was an additional 10 in membership. 13,000 more tariff reductions were negotiated. An agreement was reached that the accession of a new member country does not require unanimity, but only 2/3 majority of all existing member countries. And if a member votes against accession does not need to extend trade policy concessions to this country.
3.3 Torquay Round, England (September 1950 to April 1951)
Accession was extended to five more countries. There were additional tariff reductions emerging from 500 negotiations which were modest. 8,700 tariff concessions were made. The major problem during this round was between US and UK on bilateral trade cuts. During this round US communicated that the ITO charter would not be resubmitted to the US congress and thus marked the end of ITO.
3.4 Geneva Round (1955/1956)
After the difficulties in Torquay GATT remained in active and membership stagnated with some members withdrawing and very few more members being accessed. The momentum to lower tariffs was lost. There was growing protectionism in the US in retaliation to the European countries who were reluctant in eliminating their trade barriers. Low tariff countries were also frustrated by their inability to bargain effectively by high tariff countries. This round too produced meager results worth $2.5 billions of tariff reductions.
3.5 Dillon Round (1960-62)
This round was named in honor of the US Undersecretary of State Douglas Dillon who proposed the negotiations. Issues at table included sharply differing tariff rates within the European Economic Community (EEC). The round was divided into two phases: the first phase was concerned with negotiations with EEC member states on creation of a single schedule of concessions based on Common External Tariff (CET). This phase resulted in 4,400 tariff concessions covering $4.9 billion of trade. The second phase was a further general round of tariff negotiations with the CET for EEC falling to 10.4%. The agricultural and textile sectors were still not considered.
3.6 Kennedy Round (1964 to 1967)
This was the first round where the negotiations reached a stalemate. Senior politicians from US, UK and EEC put together a crisis agenda to break the deadlock. Sectoral groups for the discussion of five sensitive product sets (aluminium, pulp and paper, chemicals steel, textiles and clothing) were created which allowed more scope for lobbying by producer interest groups. As a result of this round tariff protection in manufacturing dropped significantly to be between 36% to 39% in late 1960 to early 1970’s.
3.7 Uruguay Round (1986 to 1994)
A committee was established to determine the objectives of a new round of negotiations to be launched in 1986. There was no agreement among the US, UK and the EEC. The initiative was taken by G9 group of mid sized industrial nations led by India and Brazil. The Uruguay round had four themes discussed by four groups as follow: trade barriers and related matters, sector specific matters, procedures and other matters regarding trade such as TRIPS and TRIMS.
3.8 Tokyo Round (1973 to 1979)
The Tokyo Round not only focused on further reducing the tariffs but addressed various non tariff barriers to trade. These included subsidies and countervailing measures, technical barriers to trade, import licensing procedures, government procurement, customs valuation, anti dumping, bovine meat arrangement, international dairy arrangement and trade in civil air craft.
3.9 Uruguay Round (1986 to 1994)
The eighth Round of negotiations. Besides negotiations for further tariff reductions, the agenda also included negotiations on new topics including services, intellectual property, agricultural goods, textile and clothing and investment measures. Two issues relating to institutional aspects were also addressed during the negotiations: the dispute-settlement rules and the "Future of the GATT System".
The Uruguay Round is probably the most important Round in the history of the GATT/WTO, not only because it is the longest in time (1986-1993), but also because of its achievements. It is in the framework of the Uruguay Round that the WTO was created.
3.10 Doha, Quatar Round (2001)
At the Ministerial Conference in Doha, in November 2001, WTO Members decided to launch the Doha Round. Twenty-one subjects are listed in the Doha Declaration mainly centered on implementation-related issues, agriculture, services, market-access for non-agricultural products, trade-related aspects of intellectual property rights, trade & investment, trade & competition policy, transparency in government procurement, trade facilitation, anti-dumping, subsidies, trade regional agreements, dispute settlement understanding, trade & environment, electronic commerce, small economies, trade, debt & finance, trade & technology transfer, technical cooperation & capacity building, least-developed countries, special & differential treatment.
4.0 Criticism of the WTO
The WTO has been placed under strong criticism. It is seen as a growing monster that interferes with the sovereignty of nations. Some critics argue that the WTO system has gone awry and if not checked, will permanently sacrifice state sovereignty on the alter of laissez faire trade liberalism. This criticism comes as a result of its record of striking down national laws that infringe free trade principles. This shift in power from a country to a global level bureaucracy undermines the cornerstone of democracy – the citizens working with the public officials to develop laws that protect the public welfare.
The WTO negotiations take place behind closed doors and they shut out a big number of interest groups. It hence lacks a mechanism of public accountability or participation. It is not required to consult with NGO’s or release documents until after decisions are made.
Trade liberalization and Multi-lateral Investment Agreement (MIA) undermines the least developed countries long term development prospect. Small scale, locally owned firms have difficulty in competing with transnational firms because they lack comparable access to capital, economies of scale or advanced technology. This concern is particularly acute in agriculture, where WTO rules on trade and domestic policy reform undermine national strategies to ensure food security.
The violation of worker’s rights and environmental standards is used by governments to gain unfair advantage in trade. Issues of child labour or environmental destructive technologies are not taken into account. Hence a feeling that the WTO puts downward pressure on country laws to match lower international standards. A country with lower international standard could therefore challenge the law as an impediment to trade.
5.0 WTO and Power
5.1 About Power
This analysis therefore discusses the evolution and operations of the WTO from a power perspective. Power has been defined as the capacity of one person’s actions to get another to do otherwise than he or she would have done. Power is extended to other concepts such as influence which simply is the realized or exercised power and authority which is the legitimated power.
Emerson (1962), provides that power to control or influence others resides in control over the things he values, which may range all the way from oil resources to ego support. Power therefore resides implicitly in the other’s dependency. Dependence and power are thus explained as follow:
Dependence (Dab). The dependence of actor A upon actor B is (1) directly proportional to A’s motivational investment in goals mediated by B and (2) inversely proportional to the availability of those goals to A outside the A-B relationship.
Power (Pab). The power of actor A over actor B is the amount of resistance on the part of B which can be potentially overcome by A.
5.2 The WTO and Power
5.2.1 The anatomy of the WTO
5.2.2 The WTO Membership and Structure
The WTO is made up of 146 members. It has several groups members. The main driving force behind the WTO is the USA and the EC. The second group wielding influence is the Cairns Group of Nations led by India and Brazil. These countries are mainly considered to be the middle income countries. Other small coalitions include the Third World Network (TWN), the Like Minded Group (LMG).
The following table summarizes the organogram of the WTO. See the appendix for the real organogram.
Top Organ
Ministerial Conference also referred to as Committee of the Whole (Cow)
Second level Bodies
Dispute settlement body
General Council (Trade negotiating Committee
Trade policy review Body
Third level
Committees,
Council for trade in goods
Council for TRIPS
Council for trade in services
parties and working groups
Committees, parties
Plurilaterals, committees and working parties
The needs of the countries represented by their Ministers of Trade is to find markets for the product produced in their countries and to negotiate for best deals for products not available in their own countries. The various interest groups exist to ensure that they get the best out of the WTO negotiations.
The second level and third level consists of country representatives and WTO bureaucrats. Country representatives are there to advance the interests of their own countries while the bureaucrats are there to advance the ideals espoused by WTO.
This is the anatomy of the WTO from the charts. However, the real WTO is not as presented here. In essence the Ministerial conference is not the overall decision making body. Some of the country representatives are just holding pseudo portfolios in Geneva and may not be effectively representing their countries. The decision making process is carried out in “green houses” by hand picked committee of whole. Other ministers attending the meeting are only surprised by the launch of a final agreement which they are required to sign.
5.2.3 Resource Flows
Ideally the WTO system is built upon the rule of law, the respect for the sovereign equality of nations. It is an open rule based multilateral trading system based on democratic values. The legitimacy of its processes is based on inclusivity. This should be the first biggest resource available to the WTO, its membership.
A majority of the WTO members are the Least Developed Countries with the least resources. Most of these countries lack the technical know-how of the complexity of international trade. This especially applies when models are presented in the Ricardian or the Hecksher Ohlin traditions or in some theoretical aspects underlying aspects of international trade. On the other hand, the powerful members of the WTO are those from the developed world. These have expertise and enormous resources.
5.2.4 How critical are these Flows
The way resources flow and change hands is mainly to promote the interests of the powerful countries. During 1999, during the electoral process to elect the new director general after Renato Ruggierro a gentleman’s agreement to have a representative from the third world was broken. Supachai Panitchpaki from Thailand was the favorite of the majority. However the selection process was made so tense with pressure being applied to LDC’s to change their position and elect Mike Moore. At long last a negotiation had to be reached which allowed Mike Moore to reign for the first three years then followed by Supachai. During the conclusion of the Doha Rounds countries that remained opposed to the round such as India, Pakistani and Kenya were put under undue pressure with Prime Minister Tony Blair calling directly the prime ministers and the presidents of the countries to advice their ministers to soften their positions. This softening came with various advantages such as Musharaf was accepted by the Americans as a legitimate president, India got enough concessions and Kenya increased its share in the AGOA among other benefits.
The resource flow amongst the rich countries are critical, because they can be used to manipulate the outcomes they want. The Kenyan representative after the Doha agreement expressing his disappointment just said “we were presented with a draft a final draft to which no other adjustments could be made.” In the COW during the Doha Round the last minister to hold onto his position was the Indian minister. The Caribbean too that held up to the end got a massive aid to support their economy after the 9/11.
5.2.4 Bargaining Tacit
Buying Votes
Countries receive a package of aid and a bilateral short term bilateral trade agreement with the US or the EC.
Locked out of the COW (those sympathetic to EU, US)
This is the important committee that ratifies the document. Aileen (2003) in her power and politics says the countries chosen during the Doha finale included those that wield a lot of influence such as Brazil and India amongst the LDC’s. Among the Latin American countries included are Paraguay, Peru and Chile because they tend towards EC and USA. In Africa South Africa, Tanzania, Kenya and Nigeria. Zimbabwe would never get to the COW. In Asia Japan, India, Singapore, Quatar.
Intimidation
Stubborn countries among these few countries would be strongly intimidated to give in while in the green room.
Forced Rounds
This was a case of the Doha Round which was meant to be a Ministerial Conference but was turned to a round despite so much protest from the LDC’s. The LDC’s wanted sometime to digest the results of the Uruguay round.
Parallel Meetings
Many decisions of the WTO are not taken in the COW or in the green room but in informal meetings amongst the rich countries. At other times parallel meetings would be taking place in another location of the world away from the ministerial conferences. One example is a case where while the ministerial conference was taking place in Doha, the agreement document was being developed by the rich countries in Singapore.
Dividing members
Members have been divided into various groups and given labels such as Cairns or MIC’s which makes it shameful for them to take a hard stance against a motion. In fact it is backward to complain in WTO a sort of quasi or no solution to problems. So it has become a fashion whenever the MIC’s have to complain they pretend to be defending Africa while in essence they are releasing their own soul cry.
Terrorism (those who are for us stand with us)
The rise of terrorism too has complicated the ability of the poor countries to challenge the decisions of the WTO. Accounts are also given to show that after 9/11 countries became too cautious to raise complaints openly. They would do so but after a careful survey of the environment around them.
5.2.5 Alternative Strategies
Bhagwati (2004) advices the developing countries with a modicum of power to resist the political play of the rich countries to having the trade-unrelated issues in the WTO. While the WTO continues to serve as an important tool for globalization, sectional agendas could deviate it from the objectives that brought it to existence. This would mean that WTO should concentrate in promoting rule based relationships as opposed to power based relationships. However, as the saying goes you cannot bite the hand that feeds you and may be this would be an expensive way to move.
6.0 Conclusion
We described the WTO as the only organization that deals with trade rules across the world. In the heart of the WTO lies the multi lateral trading system based on the principle of the unconditional most favored nation. It must be acknowledged that the role played by the WTO is important, however, it is important that it tries to consider the interests of all its stakeholders as it evolves. Agendas should not be dominated by a few powerful group of nations but by all the trading nations of the world.
References
1. Bhagwati Jagdish (Jan/Feb 2005) “reshaping the WTO.” Far Eastern Economic Review
2. Richard Emerson, “Power Dependence Relations,” American Sociological Review (1962) (32)
3. Criticism of WTO, http://en.wikipedia.org/wiki/criticism_of_the_wto
4. WTO Structure, www.wto.org
5. Lawrence l. Herman; (15 September 2000)Cross Border Issues - "Criticism Of The WTO Should Be More Balanced" http://casselsbrock.com/publicationdetail.asp?aid=155
6. International Trade Organization http://en.wikipedia.org/wiki/International_Trade_Organization
7. General Agreement on Tariffs and Trade; http://en.wikipedia.org/wiki/GATT
8. General Agreement on Tariffs and Trade (GATT)/WTO History http://www.adb.org/Documents/Others/OGC-Toolkits/WTO/wto0100b.asp
9. Eileen Kwa (2003), Power, Politics in the WTO
[1] Wto.org
[2] Ibid
Wednesday, May 21, 2008
Wednesday, May 14, 2008
The World Bank as a Limited Problem Solver, SSA Case
1.0 WORLD BANK AND DEVELOPMENT AID
1.1 Introduction
In this analysis I intend to look at the decisions of the World Bank in relation to aid. The point of reference to my arguments is Craig Burnside and David Dollar’s work of 2000 on Aid, Policies and Growth which is a review of the World Bank Report, Assessing Aid 1999. Time and again I will make some references on Sub-Saharan Africa. Generally, Sub-Saharan Africa is considered to be the poorest region in the world, suffering from the effects of economic mismanagement, local corruption, political and inter-ethnic conflict. The region contains many of the least developed countries of the world (Wikipedia).
In 1998 the World Bank produced a report known as Assessing Aid that attempted to study the effectiveness of aid. This report assessed aid in terms of “what works and what does not work.” Assessing Aid provided evidence that aid actually works where the environment is conducive, good policies and where there is a good balance between the interests of donor nations and the needs of developing countries. Hence aid works best when it supports local governments that practice “good management” of their social, political and economic institutions. The report concludes that aid should be a mix of ideas and money that is tailored to the conditions in recipient countries.
1.2 Aid and Sub Saharan Africa
Foreign aid has been a spectacular success in some instances and unmitigated failure in other occasions. Botswana in 1960’s and Uganda in 1990’s are given as examples of countries that grew from crisis to rapid development. The successful programs have supported humanitarian relief efforts, improved child immunization rates, reduced the burden of specific diseases (e.g. river blindness and Aids), reduced infant mortality rates, supported agricultural advancement, improved access to schools, access to clean water, sanitation, power and health.
On the other hand aid has had the effect of supporting bad and illegitimate governments. Ayitteh 1992 advices the donors to make a fundamental distinction between the African governments and the African countries. Some of the governments in Africa are not only illegitimate but woefully out of touch with reality and their own people. During the “cold war” era, some bad governments shifted their allegiances according to the level of assistance received.
In other situations development aid has been disbursed repeatedly to countries such as Tanzania, Zambia and DRC. There is little evidence that aid has made a difference in the plight of the citizens of those nations. Generally, aid to Africa has had a particular poor record. Even the World Bank has acknowledged that 73% of its African aid programs have failed. Several studies too are confirming a poor relationship between the aid received and the amount of growth experienced in many African countries over the years.
1.3 Criticism of the World Bank and Donor Agencies
In the last twenty years, the World Bank, International Monetary Fund (IMF) and other institutional aid agencies have been harshly criticized on the way they conduct business. Some popular criticisms were made in “The Road to Hell” by Michael Maren (1997) and the “Lords of Poverty” by Hancock G. (1989). The two authors depicted an aid culture in which corruption is rampant, donor agencies lacking in basic expertise, lack of focus and clear intentions, poor communication skills and cultural understanding. They argued that the aid community is more concerned with competing to lend money and disburse aid than it is with holding governments, managers, programs, governments and its own institutions accountable for failure. Dollar 1998, also point out that there are conflicts of interests on both sides of the donor-recipient equation. These interests might include the voting pattern in the UN, colonial history, donor countries strategic interests and other important relationships developed over time.
As early as 1992, The International Bank of Development and Reconstruction (IBRD), acknowledged what it referred to as an approval culture with a pervasive preoccupation with new lending. This overemphasis on the approval and disbursement of loan led to poor design, poor management and poor implementation of programs. Also noted was lack of institutional transparency, and financial accountability on the part of lenders placing aid risks entirely upon the recipients.
1.4 Difficulties of the Aid Business
All aid is ultimately aimed at promoting growth and reducing poverty. However one big drawback is the lack of cohesive agenda between the lending institutions and the recipient countries. This lack of cohesive agenda fosters miscommunication, distrust and may even be used as rationalization for corruption. The perception that each party is serving its own self-interests could play a big role in promoting corruption. For example a peculiar situation is mentioned in 1990 to 1996 where under mysterious expensive games between Kenya and its donors, USD 7.1 billion was approved for development aid. There is little to show for this money.
The other difficulty has been the fact that recipient governments do not buy the policies and conditionalities of the World Bank. One argument advanced in this area to defend not buying the policies of the World Bank has been the issue of sovereignty. Economists and other theorists too have argued against conditionalities. Arguments for conditionalities include making governments focus on the interest of their populations, guarding against unrealistic political expectations and guarding against specific interest group agendas. Countries would borrow under the World Bank Policies and discard them when it comes to project implementation.
Fungibility of aid causes a lot of problems to donors and recipients alike. Fungibility describes a situation where it is very easy to divert the aid to other purposes other than what was formerly approved. Some World Bank reports also show that there is a positive correlation between the receiving of aid and the increase in government expenditure. This becomes a major difficulty as countries continue this process of aid diversion and the World Bank cannot do anything to pin them down. However, the problem is that once aid has been disbursed, the World Bank has little influence on how it is used by recipient governments.
1.5 Environments Conducive for Aid
Assessing Aid argues that economic growth is the most effective mechanism to reduce poverty. Countries with good policies given infra-marginal amount of aid are able to promote some satisfactory growth levels. Hence aid, does the most to support economic growth and reduce poverty when local governments practice good management of social, political and economic institutions. Good management policies are those that promote low inflation, small fiscal deficits, trade openness and liberalization, private investments, political stability, the rule of law and democratic institutions. In this case therefore aid policies recommendations are as follow:
Aid should be allocated more effectively to good policy and high poverty countries
Policy based aid should be used to nurture policy reform in credible reformers
Aid activities must take into account local policy weaknesses and strengths
Donors should impose aid restrictions to nations with distorted policy environments.
2.0 ANALYZING THE WORLD BANK’S AID DECISIONS FROM RATIONAL ACTOR PERSPECTIVE
2.1 Introduction: The Rational Actor Model
In this analysis I evaluate the World Bank in its aid decisions as a rational actor. The theory of organizations as rational actors has four important dimensions
The organization is seen as a unitary actor
It has clear alternatives in its choice set
Its values are clear
The organization has clear casual models
This classical model of decision making is straightforward. There is one best solution to a problem the most important thing would be to find this solution, select it and implement it. The process involves a series of sequential steps as follow:
Determine goals and objectives: This is done well by clearly understanding the problem that confronts the decision maker. The interests and values are translated into a payoff or utility or preference function which represents the desirability or utility of alternative sets of consequences. The decision maker then ranks each possible set of consequences resulting from a particular action.
Define the alternatives: Here the rational agent develops all the options that are potential solutions. In essence he or she chooses among the set of alternatives before him or her.
Examine the Consequences: The agent anticipates the probable effects of each alternative.
Make a choice or decision: Evaluate and choose the best alternative, the one that maximizes the goals and objectives.
Implement the decision: Simply do what you have decided to do.
2.2 World Bank Aid Decisions and the Rational Actor Model
2.2.1 Clear Goals and Objectives
The World Bank is an internationally supported bank that provides loans to developing countries for development programs (e.g. bridges, roads, schools, etc.) with the stated goal of eliminating poverty and promoting sustainable development.
In its endeavor to eliminate poverty and promote sustainable development, the World Bank focuses on the Millennium Development Goals (MDG’s) developed by the United Nations in the year 2000. The MDG’s are as follow:
Eradicate extreme poverty and hunger
Achieve universal primary education
Promote gender equality and empower women
Reduce child mortality
Improve maternal health
Combat HIV/AIDS and other diseases
Ensure environmental sustainability
Develop global partnership for development
From a rational actor model the World Bank has a clear goal; Poverty elimination and sustainable development. This goal has further been broken down into specificities in the MDG’s. From a classical decision making perspective, there is one best solution to a problem. The problem presenting itself here is poverty. The solution proposed by the World Bank is poverty elimination and sustainable development. Another way the World Bank could approach the poverty problem would be to do nothing. Translating Doing nothing and eliminating poverty into a payoff function, eliminating poverty represents the desired alternative set of consequences to the World Bank.
2.2.2 Clear Alternatives
In making its aid decisions the World Bank chooses amongst the following three alternatives
Growth Promotion
Poverty reduction
Supporting Political objectives
These alternatives are clear and in essence provide a clear guidance in the decision making process of the World Bank as far as aid is concerned. The World Bank concern over the years has been to make aid effective. Effectiveness can also be measured on whether immediate project objectives are achieved or not. Achievement of projects becomes problematic where aid is fungible. Many times aid that is given for growth promotion or poverty reduction ends up supporting government expenditure or stashed into corrupt deals.
2.2.3 Clear Consequences
Each of the alternatives above has a set of probable consequences. Growth promotion would invest in the improvement of the gross national product (GNP) of the poor countries. The savings that would accrue as a result would be used for poverty reduction. Poverty reduction on the other hand provides for pro-poor targeted expenditure this basically means that allocations are made and directed on poverty reduction. Supporting political objectives in essence would provide for ensuring institutional development that would be conducive for growth and development.
As can be seen the consequences of each of the alternatives above, is mainly geared to make the whole business of aid quite effective.
2.2.4 Making a Choice or a Decision to Disburse Aid
As can be seen the World Bank has clear goals, alternatives and set of consequences. Problems however creep in at the decision making level. Decisions to extend aid are affected by many factors amongst them
· Much aid is given with political rather than economic reasons. During the cold war Roosevelt comment on Somoza of Nicaragua “he may be a bastard but he is our bastard.” Same applied for Mobutu of Zaire.
· Aid is also associated with donor interests. These interests would include the voting patterns at the UN or other international forums, former colonial links or any relationships that maybe between a donor and a particular government.
· Aid may also be given for purposes other than growth promotion, poverty reduction or institutional development. It may be given to support government budget deficits etc.
· Aid at times has also been used to sustain corrupt governments as long as they are seen to preserve the strategic interests of the donors.
Because of the problems associated with aid the recipient governments on the other hand may use it with the following effects:
· Support public consumption and not investment
· Public investments crowd out the more productive private investment
· Results in appreciation of local currency hence crowding out growth promoting exports
3.0 CONCLUSIONS
3.1 Conditions Effective for Aid
Assessing Aid (1999) advances the view that aid is effective in the presence of good policy and good institutions. Good policy entails fiscal prudence, independent monetary policy, openness to trade and a good attitude towards FDI. Good institutions on the other hand entail clear and enforceable property rights, reliable and fast legal system, lack of corruption and well functioning civil service.
3.2 Problems with Applying the Rational Actor Model to the World Bank
Applying the Rational Actor Model in the World Bank case has obvious problems. First we realize that the World Bank decision makers are human beings with a variety of interests and capable of compromise. While it is true that there is one best overall goal, organizational goals are many and often conflicting and that does suffice too for a great organization like the World Bank. Hence the notion of simple and clear goals for an organization constitutes an oversimplification.
Other issues that affect the clarity of goals include issues such as:
· Uncertainty: It is difficult to make choices with clarity when the situation is rather obscure.
· Best solution: This is more easily said than done. The rational actor model is an ideal rather than the way decision makers function.
3.3 Could things have been better For Sub Saharan Africa given the Massive Aid?
The Rational Actor Application to the Later
Sub Saharan Africa so far has been a big recipient of multilateral aid. This aid has not helped Africa find solutions to its poverty problem. It has made Africa dependent and not creative. Governments shamelessly borrow to finance budget deficits with no clear means of repayment. This has had the effect of encouraging poor and bad policies amongst African governments. A practical example being Kenya where the cabinet that could have been effective at less than 12 is inflated to 42. This structure will certainly find help from the World Bank.
Can the World Bank do anything about the deficit problem? The answer is no because aid is fungible. Governments claim to be sovereign states. Some of these governments do not care about the quality of life of both their present and next generation citizens. The next generations will certainly inherit debts incurred by their parents not on account of investment but on account of consumption.
In their 2002 paper on Aid, Investment and Growth in Sub Saharan Africa (SSA), Gomane, Girma and Morrissey analyze panel data of 25 Sub Saharan Africa from 1970 to 1997 and they find that there has only been growth in real terms of 0.6%. They conclude that this dismal growth rate does not connote aid ineffectiveness but certainly showed that aid had little or no effect on growth SSA’s. The effect on growth however was seen in the terms of aid financed investment. Their concern was based on the fact that the growth performance has not matched the aid receipts. They conclude by maintaining that aid should be maintained while addressing factors that explain poor growth performance. This is such a long period and one certainly asks, how could World Bank continue to lend despite this dismal performance? The answer boils down to the dynamics of the decision making process.
Dollar 1999 in his Assessing Aid finds that aid has positive impact on growth in countries that have good policies. And some of the good cases study that he provides is Botswana, Ghana and Cote d’Voire that have performed very well. A positive point that he ends up making is that there is a marked trend towards better policy among poor countries which means that the climate for aid is improving.
Certainly things would have been better for Sub Saharan Africa if the World Bank had concentrated on the effectiveness of aid from the onset of aid. However many issues that the bank has been dealing with makes it more of a satisficing decision maker rather than a rational actor. Aid would not have gone to corrupt pockets and there would be at least something to show for it.
3.4 A Compromise
From the analysis, it must be acknowledged that any single aid decision takes into it so many considerations. Despite criticisms and dismal performance, aid will thus continue to be disbursed to governments that will not use it well. The World Bank is aware of the weaknesses of recipient countries such as underdeveloped system of fiscal management and also in its aid business it is now more aware of the fact that there will be varying degrees of performance. There are however countries which are heavily indebted and their capability to service their debt is an issue. These countries too will continue to receive aid. The World Bank despite its massive finances, is a human institution.
Hence the rational actor model can not fit in a World Bank Scenario.
REFERENCES:
1. Craig Burnside and David Dollar (2000) Aid, Policies and Growth
http://www.jstor.org/stable/pdfplus/117311.pdf
2. David Ayitteh, Somali Crisis: Time for an African Solution (1994), http://www.cato.org/pubs/pas/pa-205.html
3. Gomane K., Girma S. and Morrissey O. (2002), Aid, Investment and Growth in Sub Saharan Africa,
http://www.eadi-online.org/fileadmin/WG_Documents/Reg_WG/morrissey.pdf
4. World Bank and Milenium Development Goals http://www.worldbank.org/html/extdr/mdggame/
1.1 Introduction
In this analysis I intend to look at the decisions of the World Bank in relation to aid. The point of reference to my arguments is Craig Burnside and David Dollar’s work of 2000 on Aid, Policies and Growth which is a review of the World Bank Report, Assessing Aid 1999. Time and again I will make some references on Sub-Saharan Africa. Generally, Sub-Saharan Africa is considered to be the poorest region in the world, suffering from the effects of economic mismanagement, local corruption, political and inter-ethnic conflict. The region contains many of the least developed countries of the world (Wikipedia).
In 1998 the World Bank produced a report known as Assessing Aid that attempted to study the effectiveness of aid. This report assessed aid in terms of “what works and what does not work.” Assessing Aid provided evidence that aid actually works where the environment is conducive, good policies and where there is a good balance between the interests of donor nations and the needs of developing countries. Hence aid works best when it supports local governments that practice “good management” of their social, political and economic institutions. The report concludes that aid should be a mix of ideas and money that is tailored to the conditions in recipient countries.
1.2 Aid and Sub Saharan Africa
Foreign aid has been a spectacular success in some instances and unmitigated failure in other occasions. Botswana in 1960’s and Uganda in 1990’s are given as examples of countries that grew from crisis to rapid development. The successful programs have supported humanitarian relief efforts, improved child immunization rates, reduced the burden of specific diseases (e.g. river blindness and Aids), reduced infant mortality rates, supported agricultural advancement, improved access to schools, access to clean water, sanitation, power and health.
On the other hand aid has had the effect of supporting bad and illegitimate governments. Ayitteh 1992 advices the donors to make a fundamental distinction between the African governments and the African countries. Some of the governments in Africa are not only illegitimate but woefully out of touch with reality and their own people. During the “cold war” era, some bad governments shifted their allegiances according to the level of assistance received.
In other situations development aid has been disbursed repeatedly to countries such as Tanzania, Zambia and DRC. There is little evidence that aid has made a difference in the plight of the citizens of those nations. Generally, aid to Africa has had a particular poor record. Even the World Bank has acknowledged that 73% of its African aid programs have failed. Several studies too are confirming a poor relationship between the aid received and the amount of growth experienced in many African countries over the years.
1.3 Criticism of the World Bank and Donor Agencies
In the last twenty years, the World Bank, International Monetary Fund (IMF) and other institutional aid agencies have been harshly criticized on the way they conduct business. Some popular criticisms were made in “The Road to Hell” by Michael Maren (1997) and the “Lords of Poverty” by Hancock G. (1989). The two authors depicted an aid culture in which corruption is rampant, donor agencies lacking in basic expertise, lack of focus and clear intentions, poor communication skills and cultural understanding. They argued that the aid community is more concerned with competing to lend money and disburse aid than it is with holding governments, managers, programs, governments and its own institutions accountable for failure. Dollar 1998, also point out that there are conflicts of interests on both sides of the donor-recipient equation. These interests might include the voting pattern in the UN, colonial history, donor countries strategic interests and other important relationships developed over time.
As early as 1992, The International Bank of Development and Reconstruction (IBRD), acknowledged what it referred to as an approval culture with a pervasive preoccupation with new lending. This overemphasis on the approval and disbursement of loan led to poor design, poor management and poor implementation of programs. Also noted was lack of institutional transparency, and financial accountability on the part of lenders placing aid risks entirely upon the recipients.
1.4 Difficulties of the Aid Business
All aid is ultimately aimed at promoting growth and reducing poverty. However one big drawback is the lack of cohesive agenda between the lending institutions and the recipient countries. This lack of cohesive agenda fosters miscommunication, distrust and may even be used as rationalization for corruption. The perception that each party is serving its own self-interests could play a big role in promoting corruption. For example a peculiar situation is mentioned in 1990 to 1996 where under mysterious expensive games between Kenya and its donors, USD 7.1 billion was approved for development aid. There is little to show for this money.
The other difficulty has been the fact that recipient governments do not buy the policies and conditionalities of the World Bank. One argument advanced in this area to defend not buying the policies of the World Bank has been the issue of sovereignty. Economists and other theorists too have argued against conditionalities. Arguments for conditionalities include making governments focus on the interest of their populations, guarding against unrealistic political expectations and guarding against specific interest group agendas. Countries would borrow under the World Bank Policies and discard them when it comes to project implementation.
Fungibility of aid causes a lot of problems to donors and recipients alike. Fungibility describes a situation where it is very easy to divert the aid to other purposes other than what was formerly approved. Some World Bank reports also show that there is a positive correlation between the receiving of aid and the increase in government expenditure. This becomes a major difficulty as countries continue this process of aid diversion and the World Bank cannot do anything to pin them down. However, the problem is that once aid has been disbursed, the World Bank has little influence on how it is used by recipient governments.
1.5 Environments Conducive for Aid
Assessing Aid argues that economic growth is the most effective mechanism to reduce poverty. Countries with good policies given infra-marginal amount of aid are able to promote some satisfactory growth levels. Hence aid, does the most to support economic growth and reduce poverty when local governments practice good management of social, political and economic institutions. Good management policies are those that promote low inflation, small fiscal deficits, trade openness and liberalization, private investments, political stability, the rule of law and democratic institutions. In this case therefore aid policies recommendations are as follow:
Aid should be allocated more effectively to good policy and high poverty countries
Policy based aid should be used to nurture policy reform in credible reformers
Aid activities must take into account local policy weaknesses and strengths
Donors should impose aid restrictions to nations with distorted policy environments.
2.0 ANALYZING THE WORLD BANK’S AID DECISIONS FROM RATIONAL ACTOR PERSPECTIVE
2.1 Introduction: The Rational Actor Model
In this analysis I evaluate the World Bank in its aid decisions as a rational actor. The theory of organizations as rational actors has four important dimensions
The organization is seen as a unitary actor
It has clear alternatives in its choice set
Its values are clear
The organization has clear casual models
This classical model of decision making is straightforward. There is one best solution to a problem the most important thing would be to find this solution, select it and implement it. The process involves a series of sequential steps as follow:
Determine goals and objectives: This is done well by clearly understanding the problem that confronts the decision maker. The interests and values are translated into a payoff or utility or preference function which represents the desirability or utility of alternative sets of consequences. The decision maker then ranks each possible set of consequences resulting from a particular action.
Define the alternatives: Here the rational agent develops all the options that are potential solutions. In essence he or she chooses among the set of alternatives before him or her.
Examine the Consequences: The agent anticipates the probable effects of each alternative.
Make a choice or decision: Evaluate and choose the best alternative, the one that maximizes the goals and objectives.
Implement the decision: Simply do what you have decided to do.
2.2 World Bank Aid Decisions and the Rational Actor Model
2.2.1 Clear Goals and Objectives
The World Bank is an internationally supported bank that provides loans to developing countries for development programs (e.g. bridges, roads, schools, etc.) with the stated goal of eliminating poverty and promoting sustainable development.
In its endeavor to eliminate poverty and promote sustainable development, the World Bank focuses on the Millennium Development Goals (MDG’s) developed by the United Nations in the year 2000. The MDG’s are as follow:
Eradicate extreme poverty and hunger
Achieve universal primary education
Promote gender equality and empower women
Reduce child mortality
Improve maternal health
Combat HIV/AIDS and other diseases
Ensure environmental sustainability
Develop global partnership for development
From a rational actor model the World Bank has a clear goal; Poverty elimination and sustainable development. This goal has further been broken down into specificities in the MDG’s. From a classical decision making perspective, there is one best solution to a problem. The problem presenting itself here is poverty. The solution proposed by the World Bank is poverty elimination and sustainable development. Another way the World Bank could approach the poverty problem would be to do nothing. Translating Doing nothing and eliminating poverty into a payoff function, eliminating poverty represents the desired alternative set of consequences to the World Bank.
2.2.2 Clear Alternatives
In making its aid decisions the World Bank chooses amongst the following three alternatives
Growth Promotion
Poverty reduction
Supporting Political objectives
These alternatives are clear and in essence provide a clear guidance in the decision making process of the World Bank as far as aid is concerned. The World Bank concern over the years has been to make aid effective. Effectiveness can also be measured on whether immediate project objectives are achieved or not. Achievement of projects becomes problematic where aid is fungible. Many times aid that is given for growth promotion or poverty reduction ends up supporting government expenditure or stashed into corrupt deals.
2.2.3 Clear Consequences
Each of the alternatives above has a set of probable consequences. Growth promotion would invest in the improvement of the gross national product (GNP) of the poor countries. The savings that would accrue as a result would be used for poverty reduction. Poverty reduction on the other hand provides for pro-poor targeted expenditure this basically means that allocations are made and directed on poverty reduction. Supporting political objectives in essence would provide for ensuring institutional development that would be conducive for growth and development.
As can be seen the consequences of each of the alternatives above, is mainly geared to make the whole business of aid quite effective.
2.2.4 Making a Choice or a Decision to Disburse Aid
As can be seen the World Bank has clear goals, alternatives and set of consequences. Problems however creep in at the decision making level. Decisions to extend aid are affected by many factors amongst them
· Much aid is given with political rather than economic reasons. During the cold war Roosevelt comment on Somoza of Nicaragua “he may be a bastard but he is our bastard.” Same applied for Mobutu of Zaire.
· Aid is also associated with donor interests. These interests would include the voting patterns at the UN or other international forums, former colonial links or any relationships that maybe between a donor and a particular government.
· Aid may also be given for purposes other than growth promotion, poverty reduction or institutional development. It may be given to support government budget deficits etc.
· Aid at times has also been used to sustain corrupt governments as long as they are seen to preserve the strategic interests of the donors.
Because of the problems associated with aid the recipient governments on the other hand may use it with the following effects:
· Support public consumption and not investment
· Public investments crowd out the more productive private investment
· Results in appreciation of local currency hence crowding out growth promoting exports
3.0 CONCLUSIONS
3.1 Conditions Effective for Aid
Assessing Aid (1999) advances the view that aid is effective in the presence of good policy and good institutions. Good policy entails fiscal prudence, independent monetary policy, openness to trade and a good attitude towards FDI. Good institutions on the other hand entail clear and enforceable property rights, reliable and fast legal system, lack of corruption and well functioning civil service.
3.2 Problems with Applying the Rational Actor Model to the World Bank
Applying the Rational Actor Model in the World Bank case has obvious problems. First we realize that the World Bank decision makers are human beings with a variety of interests and capable of compromise. While it is true that there is one best overall goal, organizational goals are many and often conflicting and that does suffice too for a great organization like the World Bank. Hence the notion of simple and clear goals for an organization constitutes an oversimplification.
Other issues that affect the clarity of goals include issues such as:
· Uncertainty: It is difficult to make choices with clarity when the situation is rather obscure.
· Best solution: This is more easily said than done. The rational actor model is an ideal rather than the way decision makers function.
3.3 Could things have been better For Sub Saharan Africa given the Massive Aid?
The Rational Actor Application to the Later
Sub Saharan Africa so far has been a big recipient of multilateral aid. This aid has not helped Africa find solutions to its poverty problem. It has made Africa dependent and not creative. Governments shamelessly borrow to finance budget deficits with no clear means of repayment. This has had the effect of encouraging poor and bad policies amongst African governments. A practical example being Kenya where the cabinet that could have been effective at less than 12 is inflated to 42. This structure will certainly find help from the World Bank.
Can the World Bank do anything about the deficit problem? The answer is no because aid is fungible. Governments claim to be sovereign states. Some of these governments do not care about the quality of life of both their present and next generation citizens. The next generations will certainly inherit debts incurred by their parents not on account of investment but on account of consumption.
In their 2002 paper on Aid, Investment and Growth in Sub Saharan Africa (SSA), Gomane, Girma and Morrissey analyze panel data of 25 Sub Saharan Africa from 1970 to 1997 and they find that there has only been growth in real terms of 0.6%. They conclude that this dismal growth rate does not connote aid ineffectiveness but certainly showed that aid had little or no effect on growth SSA’s. The effect on growth however was seen in the terms of aid financed investment. Their concern was based on the fact that the growth performance has not matched the aid receipts. They conclude by maintaining that aid should be maintained while addressing factors that explain poor growth performance. This is such a long period and one certainly asks, how could World Bank continue to lend despite this dismal performance? The answer boils down to the dynamics of the decision making process.
Dollar 1999 in his Assessing Aid finds that aid has positive impact on growth in countries that have good policies. And some of the good cases study that he provides is Botswana, Ghana and Cote d’Voire that have performed very well. A positive point that he ends up making is that there is a marked trend towards better policy among poor countries which means that the climate for aid is improving.
Certainly things would have been better for Sub Saharan Africa if the World Bank had concentrated on the effectiveness of aid from the onset of aid. However many issues that the bank has been dealing with makes it more of a satisficing decision maker rather than a rational actor. Aid would not have gone to corrupt pockets and there would be at least something to show for it.
3.4 A Compromise
From the analysis, it must be acknowledged that any single aid decision takes into it so many considerations. Despite criticisms and dismal performance, aid will thus continue to be disbursed to governments that will not use it well. The World Bank is aware of the weaknesses of recipient countries such as underdeveloped system of fiscal management and also in its aid business it is now more aware of the fact that there will be varying degrees of performance. There are however countries which are heavily indebted and their capability to service their debt is an issue. These countries too will continue to receive aid. The World Bank despite its massive finances, is a human institution.
Hence the rational actor model can not fit in a World Bank Scenario.
REFERENCES:
1. Craig Burnside and David Dollar (2000) Aid, Policies and Growth
http://www.jstor.org/stable/pdfplus/117311.pdf
2. David Ayitteh, Somali Crisis: Time for an African Solution (1994), http://www.cato.org/pubs/pas/pa-205.html
3. Gomane K., Girma S. and Morrissey O. (2002), Aid, Investment and Growth in Sub Saharan Africa,
http://www.eadi-online.org/fileadmin/WG_Documents/Reg_WG/morrissey.pdf
4. World Bank and Milenium Development Goals http://www.worldbank.org/html/extdr/mdggame/
Sunday, May 4, 2008
Pain Associated with Project Failures and Complexities
Introduction
In the light of my topic I would first like to look at the decision making processes, aligning them to various theories ranging from compensatory to non compensatory theories. Compensatory theories refer to Subjected expected utility theory (SEU), prospect theory, additive difference while the non compensatory refer to lexicographic choice, elimination by aspect and satisficing. Compensatory theories have a heavy cognitive assumption regarding value trade offs while the non compensatory have a low value tradeoff component. Then I will associate these theories to the pain associated with project failures and complexities. This article will take quite some time to complete, so kindly come back to look at it time and again. The examples I will give in this article are all from Kenya. But they form a very important learning occassion. Then my analysis follows and a conclusion is made.
Theoritical overview
I begin by explaining the compensatory theories. The SEU evaluates the decision making process in reference to a strict axiomatic approach. If all the axiom are satisfied the decision maker is presumed to be rational and a utility function can be assigned to him. The decision maker in this aspect is presumed to take the decision that will yield the highest utility to him. The prospect theory evaluates the decision with respect to a reference point. It is usually mapped in the four quadrants of the cartesian coordinates. Gains are in the positive side of the quadrants while losses are in the negative side of the quadrant. The reference point which is the origin is characterised with a kink separating the gains and the losses. The curve for the losses is much steeper than the one for gains. So in essence the gains being too sharp for a decision maker, he would try to in as much as possible to maximixe the gains. The additive difference theory is concerned with a way to chop a complex lots of information down to the essence of the problem at hand. It pursues this through puting like outcomes together and getting their summation which in essence becomes the basis for decision making.
The non compensatory theories as mentioned above include lexicographic, satisficing and elimination by aspects. The lexicographic theory treats a problem in an ordered dictionary manner. It makes a specific reference to the user and their needs i.e. what is needed to solve a set of specific problems that pop up for a set of user situations. Satisficing theory on the other hand tries to fit the decision into the specifications and sets minimal and maximal standards or specifications. It assumes that the decision process might be subjected to a particular range that would be acceptable. Elimination by aspects theory consideres a sequential process of making a choice. Faced with a set of decisions, at each stage individuals will eliminate all options not having a given attribute until only one option remains.
Specific Scenarios
Case One: Riruta Environmental Service (RES)
In the year 1999, a project was started by two footbal teams known as Yassets and Kamagera in Riruta Satelite in Nairobi. This project was an income generating project based on solid waste management project known as Riruta Environmental Service (RES). Yassets Footbal Club contained youngsters from middle class families while the Kamagera had youth who had difficulties in upbringing and several of them had been former street children. In the begining the project was started to silicit for support from Riruta for Yassets footbal team. While Yassets were going around Riruta cleaning, they attracted the attention of Kamagera who joined them in the garbage cleaning exercises. This experience was good for Yassets as it started endearing them to the community. In 2000, RES got some sponsors who were interested in it. Hence it officially became a serious organization and the initial members forming it being Yassets and Kamagera members. Unfortunately the members were so young and did not have the required skills such as marketing and serious management skills. These skills had to be sought out of the two teams. The recruited members did not possess the same spirit of the young RES founders and sought either to fight them or teach them opportunistic behavior. On the other hand when it came to role division Yassets members preffered to work in the management of the project while the Kamagera members preferred the actual field work of collecting garbage from the estates.
RES members being so naive and young trusted so much on the donors. They revised their policies and gave so much power and influence to the sponsors. The assets of the project were being bought in the name of the sponsors. In the long run the sponsors took over the making of important decisions about the project without consulting the project members. The founding members were all thrown out of the project as the sponsor replaced the project with new members. Once the new members came in, they were not always feeling safe as the donor influence in the project has been too big. In a period of seven years the project has had more than 10 coordinators. RES lost the support of the community and became a stand alone tower in Riruta Satelite. In most of the cases they find themselves sidelined and it has been labelled as "Riruta Historical Injustice." The project members have made various attempts to meet the donors to solve the impasse but it has never been successful. There is hope that one day this problem might be solved so that the project may attain its full potential and initial goodwill it had. On the other hand the youngsters who were the original members of the project have always contemplated taking serious action against the project but since some of the people employed in the project are their friends, they have always decided to hold on. It is not clear however how much resilience these founding members have. One member expressing his strong sentiments about RES said, "justice will be achieved. If we cannot do it, our children will."
A brief analysis shows that the project today has members who do not bear the burden of success or failure of the project at heart as the original members. The members are not very clear of their future in this project and they are each and everyday not sure of what the original members will do and whether they will one time come to claim their right in the project or not. The donors on the other hand are not very much affected by what happens to the project. They only respond in ways that suits their momentary needs. This has had a bad effect of creating division between the original members of the project and the present members. Lastly, the founders of the project. They are devastated and they are not happy at all whenever they see that the project that they formed is heading to its own death for problems that they are to willing to help solve. Of course, just like in the Kenyan scenario, if the present "Riruta Historical Injustice" is not solved then the project will always be skeletone. The sad conclusion is that the biggest pain and complexity associated with RES has led to a derail in the achievement of its objectives.
Case two: Employment and Enterprise Program (EEP)
In the year 2003, Employment and Enterprise Program (EEP) was formed in Riruta Satelite as a micro finance to empower the poor as a collaboration between a Western Donor and a local development Consultancy body in Kenya. In the first years the relationship between the donor and the consultants were good as the representative of the donors knew how to handle intercultural differences. When this manager was changed then there were problems between this consultancy and the donors. These problems will be discussed later.
In EEP's portfolio of clients there were former street children, and all people considered to be "economic outcasts" within the Dagoreti Region. While relationships were good, the repayment rate was higher and there was little interference of the donor into the project. This gave the project implementers legitimacy and they were respected by the clients. The clients took their responsiblities seriously. With the change of management within the donor ranks, the new manager came in with a know it management style. He wanted to centralise the management of the project to himself and hence formed personal relationships with the project staff and made it impossible for the consultancy to manage EEP. Sometimes the consultants would be told by project members that "this is what we were told by the donor." And the consultants would not go further even though they knew that the directions were completely wrong. The donors would also bring in students from abroad as interns in the project. Instead of these students working and learning they became bosses and started prescribing to the project. The worst moment reached when the activities of the donor were considered to be dangerous even for the consultancy as the consultancy had really been weakened even to carry its own work. The consultants moved in very strongly and communicated their decision. The donor seeing this strength decided to withdraw.
In analysing this, it can be seen that strong donor implementer partnership in implementing a project has an effect of weakening the implementer and ultimately the project in question. In the long run, the project ends up surviving but without accomplishing any of its original objectives. In essence therefore when coming together "minimal standards and requirements" of the partnerships have to be stipulated very well. It is unfortunate that the implementers are always on the weaker position, when infact they tend to understand fully the context in which they would like to intervene. The weakness of implementers would therefore not allow them to risk breaking away with their donors even at the expense of ultimately killing their project. Another example is given of a refugee school intervention where a donor asked those loyal to him to break away from those opposed to him and they went and formed a parallel intervention. The disenting group remained and they continue with their work though with minimal resources but with alot of dignity. When interracting with one of the disenters she told me, "I cannot sell my integrity for money. I also do not understand the objective of this particular donor and I am happy he is working with people who understand him. Let them go, my initiative will has survived and will survive out of my resilience and hardworking spirit and not out of free gifts."
Case three: A Donor Foundation
Then there is this case of a donor foundation which came to Kenya without having done any feasibility studies of how it would intervene. The relationship with this foundation with Kenya began by friendship between a person in Kenya and a representative of the donors. So when the foundation reprsentative came to Kenya, he started giving money out to anyone coming to him with a project. There was no structured way in which the projects were analysed. This increased opportunistic behavior from people who were just looking for cheap money.
The result is the fact that so much money was wasted and could not be accounted for. Some of the projets initiated started failing one by one. Some of the project managers too became too opportunistic and they too aked for moneys that they now find it very difficult to account for.
Analysis of this case is very simple. The donor here made it too easy for the burden of failure not to be accounted for by the recipients. It is possible that in this circumstance the donor will feel blackmailed and cheated. But it is a fact that he has created the opportunity that allows him to be cheated. The result here would be to in the long run come up with a conclusion that "I would never invest in Kenya again." However, whatever the decision, it is always important to work within a specific frame of reference.
References
1. Steinbrunner. J.D; The Cybernetics Theoryof Decision, Chapters 2-4
2. Coombs H. C., Dawes M. R., and Tversky A.; Mathematical Psychology: An elementary introduction, Chapter 5
3. Laurent R. A. (2006) Elimination by Aspects and Probabilistic Choice, Journal of Economic Sciences
In the light of my topic I would first like to look at the decision making processes, aligning them to various theories ranging from compensatory to non compensatory theories. Compensatory theories refer to Subjected expected utility theory (SEU), prospect theory, additive difference while the non compensatory refer to lexicographic choice, elimination by aspect and satisficing. Compensatory theories have a heavy cognitive assumption regarding value trade offs while the non compensatory have a low value tradeoff component. Then I will associate these theories to the pain associated with project failures and complexities. This article will take quite some time to complete, so kindly come back to look at it time and again. The examples I will give in this article are all from Kenya. But they form a very important learning occassion. Then my analysis follows and a conclusion is made.
Theoritical overview
I begin by explaining the compensatory theories. The SEU evaluates the decision making process in reference to a strict axiomatic approach. If all the axiom are satisfied the decision maker is presumed to be rational and a utility function can be assigned to him. The decision maker in this aspect is presumed to take the decision that will yield the highest utility to him. The prospect theory evaluates the decision with respect to a reference point. It is usually mapped in the four quadrants of the cartesian coordinates. Gains are in the positive side of the quadrants while losses are in the negative side of the quadrant. The reference point which is the origin is characterised with a kink separating the gains and the losses. The curve for the losses is much steeper than the one for gains. So in essence the gains being too sharp for a decision maker, he would try to in as much as possible to maximixe the gains. The additive difference theory is concerned with a way to chop a complex lots of information down to the essence of the problem at hand. It pursues this through puting like outcomes together and getting their summation which in essence becomes the basis for decision making.
The non compensatory theories as mentioned above include lexicographic, satisficing and elimination by aspects. The lexicographic theory treats a problem in an ordered dictionary manner. It makes a specific reference to the user and their needs i.e. what is needed to solve a set of specific problems that pop up for a set of user situations. Satisficing theory on the other hand tries to fit the decision into the specifications and sets minimal and maximal standards or specifications. It assumes that the decision process might be subjected to a particular range that would be acceptable. Elimination by aspects theory consideres a sequential process of making a choice. Faced with a set of decisions, at each stage individuals will eliminate all options not having a given attribute until only one option remains.
Specific Scenarios
Case One: Riruta Environmental Service (RES)
In the year 1999, a project was started by two footbal teams known as Yassets and Kamagera in Riruta Satelite in Nairobi. This project was an income generating project based on solid waste management project known as Riruta Environmental Service (RES). Yassets Footbal Club contained youngsters from middle class families while the Kamagera had youth who had difficulties in upbringing and several of them had been former street children. In the begining the project was started to silicit for support from Riruta for Yassets footbal team. While Yassets were going around Riruta cleaning, they attracted the attention of Kamagera who joined them in the garbage cleaning exercises. This experience was good for Yassets as it started endearing them to the community. In 2000, RES got some sponsors who were interested in it. Hence it officially became a serious organization and the initial members forming it being Yassets and Kamagera members. Unfortunately the members were so young and did not have the required skills such as marketing and serious management skills. These skills had to be sought out of the two teams. The recruited members did not possess the same spirit of the young RES founders and sought either to fight them or teach them opportunistic behavior. On the other hand when it came to role division Yassets members preffered to work in the management of the project while the Kamagera members preferred the actual field work of collecting garbage from the estates.
RES members being so naive and young trusted so much on the donors. They revised their policies and gave so much power and influence to the sponsors. The assets of the project were being bought in the name of the sponsors. In the long run the sponsors took over the making of important decisions about the project without consulting the project members. The founding members were all thrown out of the project as the sponsor replaced the project with new members. Once the new members came in, they were not always feeling safe as the donor influence in the project has been too big. In a period of seven years the project has had more than 10 coordinators. RES lost the support of the community and became a stand alone tower in Riruta Satelite. In most of the cases they find themselves sidelined and it has been labelled as "Riruta Historical Injustice." The project members have made various attempts to meet the donors to solve the impasse but it has never been successful. There is hope that one day this problem might be solved so that the project may attain its full potential and initial goodwill it had. On the other hand the youngsters who were the original members of the project have always contemplated taking serious action against the project but since some of the people employed in the project are their friends, they have always decided to hold on. It is not clear however how much resilience these founding members have. One member expressing his strong sentiments about RES said, "justice will be achieved. If we cannot do it, our children will."
A brief analysis shows that the project today has members who do not bear the burden of success or failure of the project at heart as the original members. The members are not very clear of their future in this project and they are each and everyday not sure of what the original members will do and whether they will one time come to claim their right in the project or not. The donors on the other hand are not very much affected by what happens to the project. They only respond in ways that suits their momentary needs. This has had a bad effect of creating division between the original members of the project and the present members. Lastly, the founders of the project. They are devastated and they are not happy at all whenever they see that the project that they formed is heading to its own death for problems that they are to willing to help solve. Of course, just like in the Kenyan scenario, if the present "Riruta Historical Injustice" is not solved then the project will always be skeletone. The sad conclusion is that the biggest pain and complexity associated with RES has led to a derail in the achievement of its objectives.
Case two: Employment and Enterprise Program (EEP)
In the year 2003, Employment and Enterprise Program (EEP) was formed in Riruta Satelite as a micro finance to empower the poor as a collaboration between a Western Donor and a local development Consultancy body in Kenya. In the first years the relationship between the donor and the consultants were good as the representative of the donors knew how to handle intercultural differences. When this manager was changed then there were problems between this consultancy and the donors. These problems will be discussed later.
In EEP's portfolio of clients there were former street children, and all people considered to be "economic outcasts" within the Dagoreti Region. While relationships were good, the repayment rate was higher and there was little interference of the donor into the project. This gave the project implementers legitimacy and they were respected by the clients. The clients took their responsiblities seriously. With the change of management within the donor ranks, the new manager came in with a know it management style. He wanted to centralise the management of the project to himself and hence formed personal relationships with the project staff and made it impossible for the consultancy to manage EEP. Sometimes the consultants would be told by project members that "this is what we were told by the donor." And the consultants would not go further even though they knew that the directions were completely wrong. The donors would also bring in students from abroad as interns in the project. Instead of these students working and learning they became bosses and started prescribing to the project. The worst moment reached when the activities of the donor were considered to be dangerous even for the consultancy as the consultancy had really been weakened even to carry its own work. The consultants moved in very strongly and communicated their decision. The donor seeing this strength decided to withdraw.
In analysing this, it can be seen that strong donor implementer partnership in implementing a project has an effect of weakening the implementer and ultimately the project in question. In the long run, the project ends up surviving but without accomplishing any of its original objectives. In essence therefore when coming together "minimal standards and requirements" of the partnerships have to be stipulated very well. It is unfortunate that the implementers are always on the weaker position, when infact they tend to understand fully the context in which they would like to intervene. The weakness of implementers would therefore not allow them to risk breaking away with their donors even at the expense of ultimately killing their project. Another example is given of a refugee school intervention where a donor asked those loyal to him to break away from those opposed to him and they went and formed a parallel intervention. The disenting group remained and they continue with their work though with minimal resources but with alot of dignity. When interracting with one of the disenters she told me, "I cannot sell my integrity for money. I also do not understand the objective of this particular donor and I am happy he is working with people who understand him. Let them go, my initiative will has survived and will survive out of my resilience and hardworking spirit and not out of free gifts."
Case three: A Donor Foundation
Then there is this case of a donor foundation which came to Kenya without having done any feasibility studies of how it would intervene. The relationship with this foundation with Kenya began by friendship between a person in Kenya and a representative of the donors. So when the foundation reprsentative came to Kenya, he started giving money out to anyone coming to him with a project. There was no structured way in which the projects were analysed. This increased opportunistic behavior from people who were just looking for cheap money.
The result is the fact that so much money was wasted and could not be accounted for. Some of the projets initiated started failing one by one. Some of the project managers too became too opportunistic and they too aked for moneys that they now find it very difficult to account for.
Analysis of this case is very simple. The donor here made it too easy for the burden of failure not to be accounted for by the recipients. It is possible that in this circumstance the donor will feel blackmailed and cheated. But it is a fact that he has created the opportunity that allows him to be cheated. The result here would be to in the long run come up with a conclusion that "I would never invest in Kenya again." However, whatever the decision, it is always important to work within a specific frame of reference.
References
1. Steinbrunner. J.D; The Cybernetics Theoryof Decision, Chapters 2-4
2. Coombs H. C., Dawes M. R., and Tversky A.; Mathematical Psychology: An elementary introduction, Chapter 5
3. Laurent R. A. (2006) Elimination by Aspects and Probabilistic Choice, Journal of Economic Sciences
Friday, May 2, 2008
Decisions of President Kibaki from Expected Utility Theory Perspective
Decisions of President Kibaki and Utility Maximization
Introduction
In this paper I look at the decisions of the president of
As a president during 2002 to 2007, Kibaki was faced with a set of very important decisions which would have ensured his re-election in 2007. These decisions included: coalition formation, taking over the office of the president in 2002, maintaining or breaking the coalition government, rooting out corruption, helping effecting changes to
In this paper I analyze president Kibaki’s preferred outcomes as a preference relation between the following:
- Being re-elected in 2007
- Taking power by force in 2007
- Not being president in 2007).
Caution: I am not connoting in any way that President Kibaki took power by force. However, I acknowledge the fact that the electoral process was flawed. International monitors are presently investigating this anomaly. I then use the von Neumann Morgenstein’s axioms to evaluate Kibaki’s preferences in the light of Expected Utility maximization.
Introduction and background
Emilio Mwai Kibaki is the president of the
About President Kibaki 2002-2007
Mr. Kibaki has many strengths - which has enabled his active political career to span five decades. He is an experienced politician. He had a sound training in economics from the
His election in the year 2002 was made successful with the support of several opposition parties that joined together to support him. He made a pact with these opposition parties that is now popularly commonly referred to as "the memorandum" which provided for an equal share of the government. His main agenda during campaigns was based on a number of promises among them:
· Instituting a new constitution for
· Introducing free primary school education
· Deal sternly with corruption
· Create a 100,000 jobs per year
· Introduce an atmosphere conducive for small and micro enterprises to thrive
· Lead the country to a double digit GDP growth
These items were bought by the electorate and he was voted in as the president of
Kibaki's first cabinet was a careful balancing act with one Minister or Assistant Minister coming from each of
During his first term as president the Kenyan government took a decision to abolish school fees for primary education. The GDP index rose from 3% in 2003 to 6.7% in 2006. During this time the S&P index for
In 2005, the drafted constitution by the government of
The consequence of the referendum defeat was devastating for President Kibaki. He dissolved his cabinet and reconstituted it later without the coalition members who were opposed to the draft constitution. These people immediately joined the opposition benches. On the other hand, the failure of the coalition portrayed Kibaki as being dishonest within the Kenyan populace. This coupled with several other government failures made him lose the confidence of the public. On the other hand, this loss, made him concentrate in awarding favours and posts to the members of his community at the expense of the people from the rest of
The Electoral Process in 2007
Having gotten away easily with the unfulfilled "Memorandum" pledges and having dealt with the referendum defectors, made President Kibaki to relax. As early as 2006 other parties were openly declaring their stances and interest to run for the presidency. Kibaki did not declare his interest early enough and hence kept his close allies guessing. Political observers say that Kibaki, relied on on the GDP growth from 2002 to 2007 to do the job of marketing him. There was a big state of confusion among his followers. In the long run some of his allies decided to form political parties and others regrouped in the old parties in order to interest him to join. Some of his followers tired with the fact that he was not declaring his stance, shifted and made alliances with the opposition. Three months prior to the elections the president formed PNU which he used to launch his campaign. But this was not good for him as the opposition campaigns had already taken so much root and he had more explaining to do which he did not do.
During the elections, the president scored very well over 97% in his own home town. He lost so many votes in other provinces. He could have been the most favorable candidate because of the economic record but missed it because he did not really concentrate in planning early for his campaigns and tackling the issues that made him unfavorable. Most of his allies in the other provinces were voted out and opposition candidates were elected in their place. The opposition led by his arch rival, Mr. Raila managed to scoop 105 seats out of the total 222 seats. Kibaki's PNU only managed to get 34 seats. He won by a very small margin in an election considered to have had so many irregularities even among the international monitors. As a result of his winning there were violent protests in the areas considered to be opposition strongholds.
Immediately after he was declared as the elected president of the country, Mr. Raila his rival contestant disputed the elections and invited the public to his own swearing in as the "people's choice." The heavy presence of police and military however would not let Raila to proceed with his swearing plans. There were protests protests which turned violent and ugly. In the beginning efforts to bring the two factions to negotiating table were not fruitful but as things got worse, they decided to negotiate. The two leaders chose representatives to the negotiations and at times participated in them.
Solving the Electoral Crisis
It turned out that the protests were not only about the elections but about historical injustices by the "ruling class," distributive injustices, the culture of corruption and deep seated tribalism that had been downplayed for a long time in
In order to solve the electoral crisis, a
- Stopping violence and restoring fundamental human rights and liberties
- Immediate measures to address the humanitarian crisis, promote reconciliation, healing and restoration
- Overcoming the political impasse and crisis
- Paving a step to start a long term solution to historical injustices in
The whole process of negotiation took a month long. Ending up with an agreement to form a grand coalition.
Tabulation of Some of President Kibaki’s Set of Important Decisions
| Mid 2002 | Formation of National | A coalition of few opposition parties but not strong enough to dislodge KANU |
| Nov 2002 | Raila’s Liberal Democratic Party joins NAK to form National Alliance Rainbow Coalition | This coalition was founded on a memorandum of understanding between NAK and LDP. It provided a bigger force to dislodge KANU from power |
| Dec 2002 | Resounding victory for Kibaki | Makes pledges to tackle corruption, revise the constitution and solve unemployment problem |
| Early 2005 | Great corruption scandals involving some members of the cabinet. No major steps taken against the culprits. | Some of the cabinet resign and are reinstated later by the president. Anti corruption officer takes refuge in |
| Nov 2005 | The government loses a crucial constitutional referendum vote | A draft constitution supported by the government is rejected by 58% of the votes |
| Nov 2005 | Official breaking of the coalition and LDP join the opposition | The president officially drops the dissenting coalition members from his government |
| Nov 2005 | A stronger opposition movement is formed under the banner of Orange Democratic Movement | The government downplays the opposition politics. Trusts that its development record and positive growth will speak for themselves to voters. |
| Dec 2006 | The opposition have already chosen their presidential candidates | Nobody is sure whether or not Kibaki intends to run for a second term. |
| Mid 2007 | Kibaki’s followers kept guessing and they form various political parties to woe the president | The president and his cronies weaken some of his strong supporters by allowing disintegration of their parties |
| Late 2007 | The President forms PNU and declares his candidacy | It was already too late. The opposition was already too strong and had placed itself strategically to win the elections. |
| Dec 2007 | Biggest shock for the president out of 222 seats, his party gains only 34. | The president also looses some of his strongest supporters from other regions of |
| Dec 2007 | Though it is widely believed that the Opposition has won the elections, Kibaki is declared the winner | The process was delayed for various days and it is believed that irregularities occurred then. He is sworn in immediately after being declared the winner. |
| Jan 2008 | The president and the opposition refuse to negotiate maintaining hard-line stances | Protests in |
| Feb 2008 | The two sides brought together by Koffi Annan on a negotiation table and maintain hardliner stances | The opposition maintains that the president resigns or an election re-run be instituted. The government maintains that it is legitimate. The negotiation process was a difficult and painful process. |
| Mar 2008 | An agreement is reached by the rival factions to form a “grand coalition.” | This process had the effects of making the two sides make enough compromises in order to reach a “reasonable” agreement. |
Analysis of the Set of Decisions by President Kibaki
As can be seen from the tabulation of some of the decisions that president Kibaki made at various instances made him a utility maximizer in some occasions a satisficer in other occasions and a boundedly rational decision maker in others. Certainly all decisions made by Kibaki entailed a risk element. It goes without saying that given such conditions he would make decisions which according to him seemed favorable and not take decisions that would be unfavorable.
- Decision one: Formation of National
This time Kibaki's party was the Democratic Party (DP). It did not have a national appeal and was concentrated amongst the people of his home town and a few others. He joined together with other regional parties NPK led by Mrs. Charity Ngilu and FORD-Kenya led by Musikari Kombo. This small alliance was easily manageable and not so complex but its lack of complexity was its great weakness. The simplicity meant that there parties were not strong enough to dislodge KANU from power given the fact that KANU which was fronting Uhuru had also formed a short term alliance with the NDP led by Raila. The marriage between KANU and NDP was short lived. Later Kibaki's NAK alliance joined with NDP to form NARC.
- Decision two: Formation of a Bigger Coalition; The National
The NDP who changed their name to LDP soon broke away from their coalition with KANU and proposed a coalition with NAK. The new coalition became known as National Alliance Rainbow Coalition (NARC). A new set of demands however were placed on the NAK-LDP coalition which included a 50-50 sharing of power and a prime minister for LDP. The coalition became monsterish and complex but had the powers to dislodge KANU out of power. The demands of the coalition parties were signed as a deed between the partnering parties and has become popularly known as the "memorandum." (This memorandum has never been released to the public and it is not very clear what its contents were. What I have written here as its terms have been picked from various press articles). However, NARC did win the elections with a resounding victory. After winning, it became hard for the government to fulfill the LDP-NAK "memorandum" pledges. The coalition broke after two and a half years. The breaking of the coalition had greater repercussions for Kibaki as a section of the public lost confidence in him as a person who could deliver on a gentleman's promise. It also earned him negative scores on his ability to manage complexity within the government structures.
- Decision three: Formation of a government of Coalition Government including major and minor parties that dislodged KANU from power
In 2002, after a landslide victory, Kibaki became the president of
- Decision Four: Going slow on corruption
When he assumed office, some great work was done to purge the judiciary of its corrupt staff. This decision was received very well by the public. Several commissions were established to investigate past “grand corruption cases” (Goldenberg, Anglo leasing) Most of President Kibaki's closest colleagues were implicated in some of these corruption cases. Hence, pursuing these cases seemed to be very sensitive and in the long run no much was mentioned of it and it was swept under the floor. Later two of his ministers resigned on account of corruption charges. In condoning corruption, the president knew that he is inviting public rejection but he did not do much on it once some of his close friends were implicated.
- Decision Five: Campaigning in Favor of “a Possibly Losing Draft Constitution”
This draft constitution was as a result of more than seven years of consultation with the public. An earlier draft that was voted for in a place known as “Bomas of Kenya” by provincial and district level delegates was considered to be the most favourable one. As it provided check and balances between the three arms of the government. The government edited this draft and replaced the checks and balances with an “all powerful president.” The president put in so much support in drumming for this draft yet he knew it was a failure from the very start. The public in the end did vote a resounding “no.” This was a great loss for the government that made it lose popularity with the public for being out of touch with the popular needs. The opposition used this occasion to strengthen themselves and place themselves strategically for the next elections in 2007. Of all other mistakes of Kibaki’s government, this was the worst of all and it weakened his government badly. BBC reports indicated that votes during the referendum did show Kenyans voting according to tribal affiliations - this being clear evidence of how the referendum campaigns did split the nation along ethnic lines. Despite realising the ethnicity problems as early as at this time of referendum, President Kibaki continued with his business as usual. Tribalism remains a monster in the Kenyan society today and if not checked it could completely destroy the country. And politicians have learnt the art of using it to their own benefit as it enhances their chances of success in politics but at what expense?... destroying the country of course!! Will tribalism ever give rise to common sense.... maybe yes maybe no... but even the youth are deeply tribal. But something positive is occuring, intermarriages are taking place.
- Long moment of Indecision to re run for the Presidency
The opposition started positioning themselves strategically soon after the debunking of the draft constitution in 2005 November. Kibaki never declared of his intention to rerun for the presidency and so his followers were kept guessing. New parties and coalitions started being formed and tried to lure him to join them as it seems that he was still a strong contender. But all along he appeared undecided. Late 2007, he formed his own coalition PNU and used it to compete for the elections. This indecision too costed him so much as his party only managed to score 34 seats out of 222 seats in the parliament. His party only won in his central province meaning that even as a president he had lost a national appeal. While the opposition managed to get 105 seats. Though it is widely believed that the opposition won, Kibaki is declared the winner and is sworn in without observing any of the usual protocols. There are many answers than questions here.. how come that even as a president, Kibaki had lost a national appeal and could not be able to exhude confidence in his party amongst other communities in Kenya apart from those of his own ethicity? Why did the public reject his 20 ministers, assistant ministers including the vice president? Were there many things that were going wrong that the president knew nothing about? Was there a problem in the political think tank that was advicing the president? How can this minimal win be explained.... where were the advisors?
- Maintaining a hard Stance towards Negotiation
Immediately he was sworn in, there were protests all over
Much of the government’s effort was directed towards quelling the efforts of the opposition in leading any type of a revolution. The opposition on the other hand organized mass protests all over the country which were met with strong force of the police. In the beginning the opposition wanted to take power by force by declaring a parallel government (an announcement to this effect was made on the official opposition website). When this did not work they used mass protests. When these plans were not bearing fruits that is when they resorted to impressing upon the international community to put pressure on president Kibaki to resign as they were not ready to negotiate with a “thief.”
Reflections: Though we in Kenya have refused to acknowledge, severe attrocities were carried out along ethnic lines. It became very clear that ethnicity had assumed dangerous proportions that need to be addressed. If not we are slowly experiencing the demise of Kenya, our beautiful country. The sheer anger, hatred, loss and destruction experienced this time, made us not only lose property but the lives of Kenya. Our children saw this and they were restless in the schools and strikes and destructions became the order of the day. Are we going to let this moment just pass us... without ever coming together to forgive one another. Even if we go round and round, this problem will always haunt us and we shall come back to address it one day. Then why not just do it today.. start the process of creating Kenyans now that we have Kenya.
PERSONAL DECLARATION: Let no personalities or political party ever lead me to cause an injury to another person. I think that the dignity of God is a human being fully alive. The dignity of God is the dignity of every other man... including my countryman hailing from a tribe I do not like.
- Agreeing to negotiate
With international pressure the two parties met on a negotiating table after one month of feud. Both parties had many wounds to heal. The protests had began as post electoral protest, they then assumed various dimensions: historical injustices, corruption, distribution injustices, inter ethnic discomforts etc. There was deep seated arrogance on the side of government negotiators and on the other hand there were instances of blackmail on the side of opposition negotiators releasing information to the press that was not factual. The talks were about to break but Koffi decided to change the strategy and engage the principals and thus the country was saved. The opposition would not any more maintain its call for mass protests as they were hurting the public and rendering the country lawless. The government on the other hand was tired of the “war like” state of emergency that was bedeviling the country. The negotiations were long and tiresome for the entire country but ended up with a formation of a “grand coalition” with equal power stakes between the government and the opposition.
Important Question: What of if the chief negotiator Koffi Annan had not changed his strategy and met the Principals? Could have reached a stable equilibrium by itself? At what cost?
Reflection: A grand coalition has been made and thanks to our two principals (KIBAKI AND RAILA). We hope that in the long run 1. it does not break up-we need to heal Kenya. It should also work to address some of the questions raised in here. 2. We hope it will not become an oligarchy and perpetuate an elite consensus, which is too afraid to touch on sensitive issues affecting the country for fear of breaking up and being seen as a success. 3. Maintaining a coalition is one of the most difficult tasks. The partners are equal and hence so much leeway is given to the parties. This makes it difficult to come up with performance measures as there will always blames and counter blames. So much is left to our principals, if they will work well together, Kenya will find a way of evaluating the performance of this coalition and in the long run Kenya will see that it is possible that different ethnicities can do something that is good for our country together. Hence good perfrormance is chiefly dependent on our most respected principals.
Is President Kibaki a Utility Maximizer: Rational Actor?
If we analyze Kibaki’s set of decisions since the year 2002 when he contested and won the presidency in
I restrict president Kibaki's set of outcomes to two outcomes which are "getting elected in 2007" or "taking power by force in 2007." Caution here, I am not connoting in any way that Kibaki took power by force. According to the Electoral Commission of Kenya he won the votes though very marginally. It is a fact that there were serious electoral irregularities in both the government and opposition areas. An international commission has been deployed to look into the source of this anomaly and we await the results of its work.
Rational choice theory, is a framework for understanding and often formally modeling social and economic behavior. It is the dominant theoretical paradigm in microeconomics. It is also central to modern political science. Models of rational choice assume individuals choose the best action according to stable preference functions and constraints facing them.
The modern utility theory developed by von Neumann and Morgenstein consists of a set of axioms about preferences. It further states that if an individual’s preferences satisfy the specified axioms his or her behavior can be described, or rationalized, as the maximization of his expected utility. The axioms provide a normative justification of the expected utility principle. The axioms are formulated in terms of a preference relation as follow:
A denotes a set of outcomes
≤ or ≥ Denotes preference relations
(x, p, y) is the probability mixture where x is obtained with probability p and y with probability 1-p.
For outcomes x,y,z in A and probabilities p,q ≠ 0 or 1 the following assumptions hold:
A1
(x,p,y) is in A which is known as the closure property.
In the case of President Kibaki above we evaluate his set of outcomes as
(re-elected in 2007, p, taking power by force in 2007).
Whatever the outcomes of the presidential election results in 2007, Kibaki must remain the president of
A2
Preference relation >. In this case there is a strict preference for re-election.
This second axiom requires that the observed preference or indifference relation to be reflexive, connective and transitive.
(re-elected in 2007 > taking power by force in 2007)
He prefers to be re-elected but if he won’t be re-elected he will take power by force. It is important that the president is re-elected. Re-elections will legitimize his official term as a commander in chief of Kenya. It would also provide him the opportunity to complete his economic agenda for the country. As mentioned above the Kenyan population still liked the president but the opposition in the name of ODM did fabulous campaigns which endeared them to the people. They were seen as champions of the poor and distributive justice. Earlier the opposition launched a successful onslaught that saw the death of the constitution draft proposed by the government. The opposition also used the constitutional debate to build their muscles and ensure that their union was much stronger. The forces behind President Kibaki were acting strategically to find favour with the president instead of looking at the strategy of the opposition. As a result, the president's side after the referendum became much blinder and very sensitive to criticism, asumed a regional perspective hence losing touch with the general populace. The government propaganda machine had a great task to ensure that Kibaki wins. We presume that the stakes were much higher and the president had to win the elections despite the outcome of the voting processes.
A3
[(x,p,y),q,y] ~ (x,pq,y) this is the Reducibility condition
[(re-elected in 2007,p, taking power by force in 2007),q, taking power by force in 2007] ~ (re elected in 2007,pq, taking power by force in 2007)
Getting back to the office of the president is president Kibaki's main objective and no any other outcome will satisfied him. This axiom asserts, in effect that the preferences depend only on the final outcome and their probabilities and not on the process by which they are obtained. The final outcome in this case was very important to Kibaki. Issues of morality are not important in arriving at the final outcome which is simply winning the 2007 elections.
A4
If x ~y, then (x,p,z) ~ (y,p,z) this is known as substitutability assumption
re-elected in 2007 > taking power by force in 2007 then (re-elected in 2007,p, taking power by force) ~( taking power by force in 2007,p, not being president in 2007).
A third outcome “not being president” is introduced in this preference relationships.
This axiom states that if x and y are equivalent then they are substitutable for each other in any gamble.
If we take the proposition the way it is, it means that if Kibaki will not be elected, he will take power by force. In any case winning the elections and taking power by force are substitutable and will enable him to maintain the presidency. Hence if the president is not elected his next prefered outcome will be to take the power by force and this option is prefered to the option of not being the president. Here we see clear transitive preferences the first makes President Kibaki a democrat, the second makes him a dictator while the third just indicates that depending on the outcome of the vote the president will either end up as a democratic choice or a disctator.
A5
If x > y, then x > (x, p, y) > y
This axiom asserts that if x >y then it must be preferred to any probability mixture of x and y, which in turn must be preferred to y.
Certainly in our case “being elected in 2007” is preferred strongly to “taking power by force, which means that it is preferred to any possible probability combination between the two choices and which is in turn preferred to taking power by force. This is an issue of a clear intention. The president preferes o be elected that gives him a stronger mandate than if he came to power through a mix of both being elected and taking the power by force. Striving for legitimacy therefore would make the president really fight hard during the campaigns to ensure that he is elected. Hence in participating at the political campaigns his mind is clearly set... he would like to be elected.
A6
If x>y>z, then there exists a probability p such that y~(x, p, z). Axiom six embodies continuity or a solvability property.
It asserts that if y is between x and z in the preference order (i.e. x>y>z) then there exists a probability p such that the gamble (x,p,z) is equivalent to y.
re-elected in 2007 > taking power by force in 2007 > not being president in 2007. Then there exists a probability that
re-elected in 2007, p, not being president in 2007 is equivalent to taking power by force. Of course suppose that the president is not re-elected? And suppose that he would like to retain the presidency? It is not impossible for him to do so, he can collude with the electoral body or he can use other state machinery to remain in power. He is still the commander in chief even as the country goes to elections and until the new president is sworn in.
Von Neumann and Morgenstein’s Theorem
If axims A1 to A6 are satisfied, then there exists a real valued utility function u defined on A such that:
- x ≥y iff u(x) ≥u(y)
- u(x,p,y)= pu(x)+(1-p)u(y)
u is an interval scale, that is if v, is any other function satisfying 1 and 2, then there exists a number b, and a>0 such that v(x)= au(x)+b.
There exists a utility function that the preference order and satisfies the expectation principle.
Conclusion
Having gone through the axioms of Von Neumann Morgenstein, I conclude that Kibaki’s preference ordering in in line with these assumptions. Therefore Kibaki is an expected utility maximizer and his preferences can be presented in the form of a utility function. It is very clear that president Kibaki strongly prefered to be elected over all the outcomes. The other outcomes in our case included taking power by force or not being re-elected. Given a restriction of the three preferences is President Kibaki a rational actor.... I conclude yes.. strongly in favour of being re-elected.
References
- Tversky A, Dawes R M, Coombs H C; Mathematical Psychology
- Varian R. H, Intermediate Micro Economics. New York. 2006.
- List of positions held: at Africa Database: http://people.africadatabase.org/en/person/6256.html
- State House profile: http://www.statehousekenya.go.ke/presidents/kibaki/profile.htm
- "
- "Kibaki reinstates ministers after scandal", IOL, 15 November 2006. http://www.iol.co.za/index.php?set_id=1&click_id=68&art_id=qw1163590381401B255
- "Kenyan president announces new party affiliation for re-election bid", Associated Press (International Herald Tribune), September 16, 2007. http://www.iht.com/articles/ap/2007/09/16/africa/AF-POL-Kenya-Elections.php
- "
- "Kibaki: I deserve another term", AFP (News24.com), September 30, 2007. http://www.news24.com/News24/Africa/News/0,,2-11-1447_2193347,00.html
- "Kibaki re-elected Kenyan president: official results", AFP (abc.net.au), December 31, 2007. http://www.abc.net.au/news/stories/2007/12/31/2129125.htm?section=world
- "Observers criticize poll standards" Daily Nation, January 18, 2008.
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