Post-Keynesian economics, a school of economic thought rooted in the ideas of John Maynard Keynes, posits that effective demand serves as the primary driver of economic activity. Unlike the mainstream perspective asserting market efficiency and self-adjustment, Post-Keynesian economists underscore the impact of uncertainty, social conflict, income distribution, and financial instability on economic outcomes.
A fundamental tenet of Post-Keynesian economics asserts that investment decisions hinge not on the availability of savings but on the accessibility of credit. Consequently, the money supply is predominantly endogenous, created by commercial banks through lending. While the central bank can influence credit cost and availability, direct control over the money supply remains elusive.
Effective demand, a pivotal concept in Post-Keynesian economics, contends that economic activity is propelled by spending levels rather than output or income. Investment spending, crucial for current and future demand, output, and employment levels, is influenced by the unpredictable nature of entrepreneurs’ expectations and sentiments.
Moreover, Post-Keynesian economics recognizes the significance of income distribution in shaping economic performance. Variations in consumption and saving propensities among different agent groups, such as lower-income households and larger firms, can significantly impact aggregate demand and growth.
Examining the Kenyan economy through a Post-Keynesian lens reveals a developing market-based economy, the largest in East Africa. While experiencing sustained growth driven by public investment, private consumption, and exports, Kenya faces challenges like vulnerability to external and internal shocks, high public debt, and low private investment.
Addressing these challenges from a Post-Keynesian perspective suggests a balanced and inclusive growth strategy for Kenya. This could include countercyclical fiscal policies supporting public investment, accommodating debt sustainability, and fiscal discipline. Additionally, monetary policies ensuring liquidity and low interest rates for the private sector, along with financial policies promoting inclusion and stability, are recommended.
An industrial policy fostering strategic sector development and supporting small and medium enterprises, coupled with a social policy improving income distribution and reducing poverty, completes the proposed strategy. Implementing such measures could propel Kenya toward a more resilient, diversified, and equitable economy, aligning with its vision of becoming a newly industrialized country by 2030.