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Creative development : the political economy of the urban informal sector in Kenya Winterford, David Bruce 1979

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CREATIVE DEVELOPMENT THE POLITICAL ECONOMY OE THE URBAN INFORMAL SECTOR IN KENYA by DAVID WINTERFORD B.A.(Hons.), U n i v e r s i t y of A l b e r t a , 1971 M.A., The U n i v e r s i t y of B r i t i s h Columbia, 1972 A THESIS SUBMITTED IN THE REQUIREMENTS DOCTOR OF PARTIAL FULFILLMENT OF FOR THE DEGREE OF PHILOSOPHY i n THE FACULTY OF GRADUATE STUDIES (Department of P o l i t i c a l Science) We accept t h i s t h e s i s as conforming to the req u i r e d standard THE UNIVERSITY OF BRITISH COLUMBIA September, 1979 © David Winterford, 1979 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make i t freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the Head of my Department or by his representatives. It i s understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of P o l i t i c a l Science The University of British Columbia 2075 Wesbrook Mall Vancouver, Canada V6T 1W5 Date J^/ei^r/C / f 79 ABSTRACT There seems to be a widely shared consensus in the literature on the comparative study of development about the main characteristics of underdevel-oped countries, the causes of their underdevelopment, and the appropriate policies for securing their development. Some of the ideas and suggestions resulting from this conventional approach do not appear to be consistent with empirical observation, and do not seem to take into consideration the unin-.. tended consequences of policy proposals. This may have often resulted in public policies which conflict with the ostensible goal of securing higher standards of l i v i n g . One reason for the apparent failure of many development models may be the restrictive focus of much of the p o l i t i c a l and economic research on underdevel-oped countries. While many economic studies can be justly accused of abstract-ing from p o l i t i c s , many p o l i t i c a l studies of development seem to ignore economic variables. This thesis explicitly recognizes the interrelationship of p o l i t i c a l , economic and social factors in the pursuit of development. The interplay of these factors seems to have resulted in the evolution of an informal (unoffi-cial) economy as a counterpart to the state-favoured formal ( o f f i c i a l ) economy. The existence of this informal sector has been used in the thesis to provide new perspectives on some of the main policy issues of development, for example, the creation of employment and income opportunities, urbanisation, migration and urban p o l i t i c a l s t a b i l i t y . .It challenges the accuracy of standard measures of underdevelopment such as Gross Domestic Product, per capita income, and i i unemployment r a t e s , as w e l l as the u t i l i t y of a range of e s s e n t i a l l y normative concepts l i k e "employment," "unemployment," " p r o d u c t i v i t y , " "subsistence," "modern," and " t r a d i t i o n a l . " E m p i r i c a l data was c o l l e c t e d i n Kenya to t e s t the main hypotheses advanced i n the t h e o r e t i c a l model. The data i n d i c a t e that the i n f o r m a l sector i s a development sector.spontaneously created through the a c t i o n s and i n i t i a -t i v e s of i n d i v i d u a l A f r i c a n s . I t i s important i n p r o v i d i n g low cost goods and s e r v i c e s as w e l l as employment and t r a i n i n g . This occurs des p i t e the l a c k of s t a t e support and often i n the face of a c t i v e s t a t e harassment and discourage-ment. The i n f o r m a l s e c t o r appears to be a r e p o s i t o r y f o r s i g n i f i c a n t a t t i t u d e s and b e l i e f s favourable to development, f o r example, the i n t e r e s t i n securing higher incomes, determination i n the face of poverty, the abundance of ambition s e l f - r e l i a n c e and a sense of personal r e s p o n s i b i l i t y f o r one's economic fortune the b e l i e f that wealth i s the r e s u l t of hard work, and an a p p r e c i a t i o n of r i s k -t a k i n g i n the e x p l o i t a t i o n of new o p p o r t u n i t i e s . The c r e a t i v e c o n t r i b u t i o n ofthe i n f o r m a l s e c t o r to economic development and p o l i t i c a l s t a b i l i t y i s seldom recognized by development planners or p o l i t i -c a l leaders and i s f r e q u e n t l y ignored i n development models. The formulation > of development s t r a t e g i e s and the goals of development a d m i n i s t r a t i o n would be enhanced through the enlightened a p p r e c i a t i o n of the c o n t r i b u t i o n of s m a l l - s e a l " i n f o r m a l " e n t e r p r i s e s to n a t i o n a l development. TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES AND.ILLUSTRATIONS v i i ACKNOWLEDGEMENT v i x INTRODUCTION 1 A. B. The General Perspective (1) Order of Presentation (7) Part One: Development Theory I. INDIVIDUAL. ACTIONS AND DEVELOPMENT .THEORY 12 A. Introduction (12) B. The Importance of Free Individual Actions for Development (13) C. Effects of External Contacts on Acquired Human Qualities (19) D. Macro-Concepts and Development (21) E. Summary (23) II. DEVELOPMENT THEORY AND. THE URBAN ECONOMY IN LESS DEVELOPED COUNTRIES 26 A. Introduction (26) B. Urbanisation in Less Developed Countries (26) C. Rural-Urban Migration (29) D. Development Theory and Urban Employment (36) E. The Dual Framework (43) F. The Structure of the Urban Economy (51) G. The Formal-Informal Model (60) H. Weaknesses in the Formal-Informal Dichotomy (62) I. The State and Economic Activities (67) J. Informal Activities: A Creative Response to State-Centred Development (75) K. Summary and Implications.: for Development Theory (78) A. Introduction (83) B. / Problems with the Statistical Measurement of National Income (84) C. Kenya's Estimated National Income (88) D. Employment: Growth and Structure (92) E. The State and Employment Creation (99) F. Summary and Conclusions (106) Part Two: The Kenyan Case III. NATIONAL INCOME AND EMPLOYMENT IN KENYA 83 IV. POPULATION AND THE LABOUR FORCE 109 A. I n t r o d u c t i o n (109) B. Some probable I m p l i c a t i o n s of Population Growth f o r Development Theory (110) C. Population and Labour Force Dynamics i n Kenya (112) D. Change i n Population S t r u c t u r e , 1962-1969 (116) E. Summary and Conclusions (125) V. PUBLIC POLICY AND URBAN GROWTH IN KENYA 127 A. I n t r o d u c t i o n (127) B. Urbanisation i n Kenya: A B r i e f O u t l i n e (127) C. Urban Growth i n Kenya (131) D. Patte r n of Mig r a t i o n (134) E. Urban-Rural Wage D i f f e r e n t i a l (140) F. Dynamics of Urbanisation (144) G. Summary and P o l i c y I m p l i c a t i o n s (150) VI. THE POLITICAL ECONOMY OF URBAN STABILITY IN KENYA 155 A. I n t r o d u c t i o n (155) B. The Kenyan Case (158) C. I n t e g r a t i o n i n t o the Urban Economy (159) D. Perceptions of Government (175) E. Perceptions of S t r a t i f i c a t i o n (181) F. Perceptions of M o b i l i t y (193) G. Summary (200) SUMMARY AND CONCLUSIONS 202 A. I n t r o d u c t i o n (202) B. A R e c a p i t u l a t i o n (202) C. Concluding Remarks (211) NOTES TO CHAPTERS 217 SELECTED BIBLIOGRAPHY . 244 APPENDIX A: RESEARCH METHODOLOGY 267 APPENDIX B: SUPPLEMENTARY TABLES 281 i v LIST OF TABLES 1. Urban-Rural Population of Developing Countries 27 2. Projected growth of the Total and Urban Population 1970-1980, Selected Countries in Tropical Africa 28 3. Population, Labour Force, Employment and Unemployment, 1960-1990 . . . 37 4. Industrialisation and Employment in Developing Countries 38 5. Rates of Urban Unemployment by Age 40 6. Types of Income Earning Opportunities •'. • . in the Urban Economies of Less Developed Countries 61 7. The Informal Sector Share of Employment .'. . , . in Selected Less Developed Countries 78 8. Gross Domestic Product by Sector, Kenya, 1964-74 89 9. Formal Employment by Sector, Kenya, 1964 and 1974 92 10. Output, Recorded Employment and Rates of Change in Kenya, 1964-1974 . 94 11. Estimates of Employment by Sector, 1969 and 1971 94 12. Persons Engaged: Recorded Totals, 1972-74 95 13. Total Employment: Actual 1972 and Target 1978 96 14. Projected Kenya Population and Labour Force, 1970-2000 .113 15. Population of Kenya by Race, 1962 and 1969 117 16. Age Structure of the African Population by Sex, 1962 and 1969 . . . 118 17. Population of the Ten Largest Centres, 1962 and 1969 133 18. Proportion of Population without School Education and with Higher Education by Age Group and Place of Residence, 1969 . 139 19. Data on Adult African Earnings in Kenya, 1969 ............ ... 141 20. Benefits from Extra Wages Paid on Transfer of the Marginal African Male Adult Worker 143 21. Sectoral Shares of Monetary GDP and Employment Arising in Nairobi . 148 22. Average Formal Sector Earnings and Average Rates of Change of Earnings and Formal Employment, Urban Areas, 1964-1973 . . . . 149 v i LIST OF FIGURES AND ILLUSTRATIONS Kenya . v i i i Figure 1. Structure of Urban Employment in a Developing Economy 53 v i i v i i i ACKNOWLEDGEMENTS I t i s with pleasure that I acknowledge the s u b s t a n t i a l debt that I owe to Dr. Robert Jackson who, as a s c h o l a r , research s u p e r v i s o r , academic c o u n s e l l o r and f r i e n d , has profoundly i n f l u e n c e d my t h i n k i n g i n both d i r e c t and i n t a n g i b l e ways. . I would a l s o l i k e to thank my t h e s i s committee at the U n i v e r s i t y of B r i t i s h Columbia for. t h e i r . v e r y h e l p f u l comments. As w e l l , I g r a t e f u l l y acknowledge the f i n a n c i a l support provided by the I n t e r n a t i o n a l Development Research Centre i n Ottawa. F i n a l l y to my w i f e , E l i z a b e t h , I acknowledge with g r a t i t u d e the typ i n g she has done of t h i s t h e s i s . Moreover, I hap p i l y acknowledge a much greater debt to her f o r being a robust, f e r t i l e and c r e a t i v e i n t e l l e c t u a l who e n l i v e n s my every day and who immeasurably s t i m u l a t e s my own t h i n k i n g . I end with the usual statement that I alone am re s p o n s i b l e f o r the v.; e . views expressed and e r r o r s contained i n t h i s study. Whitehorse, September 1979 David Winterford i x INTRODUCTION A. The General Perspective ..• In the last three decades, social scientists have become increasingly interested in understanding and perhaps ultimately shaping economic, politica and cultural change in less developed countries. The multitude of perspec-tives, styles of thought, or "models" that has>: emerged collectively define the floating boundaries of "development studres." At the same time, the interdisciplinary nature of the f i e l d has resulted in an extensive and inten-sive debate concerning the meaning of development, i t s most important goals, and the link between these goals and means of attaining them. Despite this measure of/disagreement, most observers might agree with the view that the aim of development i s to increase total welfare. Styles of thought or models which may hamper this end ought to be seriously questioned. In this respect, one prominent feature of much of the development l i t -erature i s the.xonspieuous role assigned to the state as the main agent in raising low living standards and generally in improving the quality of l i f e in less developed countries. The primary tool available to the state i s apparently i t s alleged ab i l i t y to plan development. When applied to the state, the concept of planning can be given a vari-ety '.oftdifferent meanings. It may mean the installation of appropriate infra structure and the fashioning of appropriate state policies to f a c i l i t a t e the activities of individuals, businesses and governments. It may refer to the coordination of activities undertaken by different government departments in order to allocate scarce resources ef f i c i e n t l y . It may simply denote counter cyclical f i s c a l policies. In much of current development studies, however, 2 planning has come to mean extensive s t a t e c o n t r o l , d i r e c t i o n and r e g u l a t i o n of 2 s o c i a l and economic l i f e . In other words, the s t a t e i s c a l l e d upon to engage i n comprehensive and d e t a i l e d planning i n order to r e s t r u c t u r e s o c i a l and eco-nomic r e l a t i o n s h i p s to f i t some pre-conceived notion o f the appropriate order of these r e l a t i o n s h i p s . Not only does the c a l l f o r comprehensive planning represent both a marked departure from the h i s t o r i c a l experience of the pres-e n t l y advanced c o u n t r i e s and a challenge to some cherished values, i t a l s o seems to be fundamentally opposed to the r e a l i s a t i o n of the c r e a t i v e c o n t r i -bution each i n d i v i d u a l can make to a nation's progress. In t h i s t h e s i s an attempt i s made to i n d i c a t e that d e t a i l e d s t a t e con-t r o l ' and d i r e c t i o n o f the economy i s u n l i k e l y to be a necessary c o n d i t i o n f o r development. Indeed, comprehensive planning may have adverse e f f e c t s on the probable determinants of development, the acquired q u a l i t i e s of a po p u l a t i o n . While i t may no longer be fashionable to defend the market economy, t h i s the-s i s i s presented as a small c o n t r i b u t i o n to the body of thought which a s s e r t s that the market economy represents the best (although not p e r f e c t ) means of securing the happy coincidence of d i g n i t y f o r the i n d i v i d u a l , the maximum scope f o r human c r e a t i v i t y and the f u l l e s t u t i l i s a t i o n of dispersed i n d i v i d u a l knowledge and t a l e n t s i n meeting the pr e s s i n g need to r a i s e m a t e r i a l standards of l i v i n g i n l e s s developed c o u n t r i e s . To uphold the market order r e q u i r e s a c r i t i c a l a p p r a i s a l of the economic d o c t r i n e s c u r r e n t l y i n fashion and a w i l l i n g n e s s "to poi n t out the a r i d i t y of t h e i r c o n c l u s i o n s , the u n r e a l i t y of t h e i r assumptions, the a r t i f i -c i a l nature of t h e i r procedures."^ While i t may be s u f f i c i e n t merely to challenge misleading i d e a s , models.", and proposals, without o f f e r i n g any "con-s t r u c t i v e " a l t e r n a t i v e , i t i s doubtless more persuasive i f one can i n d i c a t e with some p r e l i m i n a r y e m p i r i c a l evidence the accomplishments and p o t e n t i a l 3 accomplishments of human a c t i o n s u n f e t t e r e d by d e t a i l e d s t a t e c o n t r o l s and r e g u l a t i o n s . This i s p a r t i c u l a r l y important when the concern i s with under-developed c o u n t r i e s , some of which may be on the road to a new serfdom much more d e b i l i t a t i n g than any a l l e g e d n e o c o l o n i a l i s m by the west. S u r p r i s i n g l y , the e x c i t i n g task of determining the c o n d i t i o n s appro-p r i a t e f o r an open economic order does not seem to have captured the imagina-L t i o n of i n f l u e n t i a l groups i n many l e s s developed c o u n t r i e s . While most of these s o c i e t i e s can s c a r c e l y be considered as having enjoyed p o l i t i c a l l y sanc-tioned economic freedom ( i n c o n t r a s t to p o l i t i c a l independence) f o r any length of time, i t i s probably accurate to s t a t e that academics and other i n t e l l e c t u -a l s i n Third World c o u n t r i e s have taken up, rat h e r u n c r i t i c a l l y , the cause of planned development. Several f a c t o r s may account f o r t h i s preference: f i r s t , the profound i n f l u e n c e of c o l o n i a l i s m on most l e s s developed c o u n t r i e s ; see^.t ond,_the spread and general acceptance of s e v e r a l p o l i t i c a l l y i n s p i r e d b e l i e f s on the r i s e of c a p i t a l i s m i n the west and the d e l e t e r i o u s consequences t h i s i s a l l e g e d to have had on the working poor; t h i r d , an i n a b i l i t y or re l u c t a n c e to conce p t u a l i z e i n the a b s t r a c t the general workings o f an economy; f o u r t h , the appeal to human v a n i t y of the b e l i e f that something as complex as an e n t i r e s o c i e t y can be re-designed to f i t some a r t i f i c i a l p l a n ; and f i f t h , the c r e a -t i o n of l u c r a t i v e employment o p p o r t u n i t i e s f o r i n t e l l e c t u a l s i n . t h e p u b l i c s e c t o r when development i s centered on the s t a t e . While s u b s t a n t i v e d i s c u s s i o n of some of these i n f l u e n c e s i s reserved f o r l a t e r i n the t h e s i s , i t i s appropriate to make some general comments. F i r s t , i t should be noted that one of the l e g i t i m a t e and major c r i t i c i s m s that can be made against the c o l o n i a l s t a t e i s that i t was an i l l i b e r a l s t a t e . I t i s d i f f i c u l t to maintain that the economy and s o c i e t y fashioned by the c o l o n i -a l i s t s represented a " l i b e r a l - c a p i t a l i s t order." Not only was the c o l o n i a l state a regulatory state, i t also consistently denied equality before the law. In other words, the colonial state was a dirigiste state, hostile to free ex-change of the market and free competition between individuals. In this thesis the term "formalised development" i s used to indicate the continuing legacy and subsequent elaboration of the regulatory colonial state in the post-independence period. On the other hand, colonialism has set in motion many beneficial forces which have proved of fundamental importance in the development of less devel-oped countries.^ Colonialism represented an unexpected change inconsistent in many respects with the previous social structure. It could not simply be "absorbed" by the local society. Besides the obvious and undeniable benefits of colonialism,^ for example, physical infrastructure in the form of sea- v.. ports, roads, communication f a c i l i t i e s * and the social infrastructure of edu-cation, health and disease control, colonialism wrought significant changes in the cognitions of individuals in the local population. Much has been written of the alleged debilitating effects of colonial.^ ism on the mental framework of indigenous peoples.^ Very l i t t l e has been written of the positive impact of colonialism on what are probably the main determinants of development: attitudes; aptitudes, aspirations, expectations, 8 motivations, faculties, and s k i l l s of a given group of individuals. Disregard of the positive impact of colonialism on these likely deter-minants of development has resulted in the acceptance of the popular (though largely incorrect) notion that the very existence of the west, or at least the existence of western ("neo^"^colonialism, has prevented and i s continuing to prevent the development of underdeveloped countries. It i s more accurate to acknowledge that most forms of contact between western countries and under-developed communities have promoted development by suggesting that change i s 5 possible and by weakening attitudes and customs inimical to material progress. As well as providing physical and social infrastructure, contacts between western and non-western societies have probably served to promote new ideas, attitudes, methods and wants,, one result of which seems to have been to en-courage production for the market. In other words, one result of these con-tacts appears to have been the transformation of economic performance through linking the acquisition of desired goods to a different type of productive exchange. The benefits of this novel productive exchange system appear to have been readily appreciated by countless members of the local population. Thus i t i s now possible to delineate the existence of a competitive economic order that has been voluntarily created and which i s both influencing and being i n -fluenced by the surrounding social order. This unofficial development sector represents spontaneous, creative, or "informal" development. Informal development i s the antithesis of planned or formal development. Indeed, in their underlying logic, the two types of development are incompat-ibl e . The continuation of informal development seems to have depended up to now partly on i t s existence remaining obscure to p o l i t i c a l leaders, planners, and other administrators in the state and partly on the inabi l i t y or reluc-tance of state o f f i c i a l s to enforce the rigi d prerequisites of comprehensive planning. Informal development i s "development by stealth" in the sense that the rules, regulations and controls of the state have so far.been largely i n -capable of penetrating i t s structure. It i s creative development in the sense that i t i s the unintended result of countless voluntary individual actions. There are probably many people who may be adverse to the emergence and evolution of this order. Some, possibly, w i l l deny i t s existence altogether 6 or at least deny that i t makes any worthwhile contribution to several of the dilemmas facing less developed countries. There are numerous grounds for this h o s t i l i t y . Thus, for formal sector businessmen, informal sector enterprises may represent "unfair" competition. That i s , informal business may hinder formal enterprise from securing the income that would otherwise be possible as a result of preventing or restricting entry into any given activity. Informal enterprises also seem to offend the aesthetic sensitivies of such privileged groups. As well, many of the believers in the necessity of comprehensive state planning may be hostile to the concept and reality of the informal economy. The existence of this sector may exemplify the motivations, attitudes, capaci-ties and s k i l l s , the presence of which they must deny i f the claim about the necessity of comprehensive state planning i s to be accepted. Related are those who seek, for numerous and perhaps not entirely rep-utable or ethical reasons, revolutionary upheaval in less developed countries. Their arguments are typically founded on the alleged immiseration of.the popu-lation under "capitalist" development. As well, proponents of revolution seem to derive some strength from the frequent assertion that unemployment has now reached a " c r i s i s " level in less developed countries. Even i f this i s the case, which I will.attempt to show i s doubtful, there i s certainly no neces-sary relationship between high unemployment and f e r t i l e ground for revolution-ary activity. Nor i s i t likely that a "radical" government i s any better equipped to i n i t i a t e and carry out policies the result of which would be an improvement in general welfare. On the other hand, for a l l those who believe in the creative potential of unrestricted individual actions, the awareness of an informal development sector may giveisome basis for a redirection of development studies and thus u l t i m a t e l y of s t a t e p o l i c i e s . I f the two t e s t s of development are r i s i n g standards of l i v i n g and i n c r e a s i n g personal c h o i c e , then the e x i s t e n c e of a 9 "spontaneously-formed" i n f o r m a l economy may serve to r e t a r d the deepening gloom and sense of f r u s t r a t i o n r e v i d e n t among these students of development. B. Order of P r e s e n t a t i o n This t h e s i s i s p a r t l y an attempt to examine some of the most widely p u b l i c i s e d p o l i c y i n i t i a t i v e s i n the f i e l d of development. These p o l i c i e s appear to be e i t h e r l a r g e l y untenable or simply incompatible w i t h one another while o f t e n having a cumulative, although perhaps unintended, e f f e c t of weak-ening economic freedom i n l e s s developed c o u n t r i e s . As w e l l , t h i s t h e s i s i s p a r t l y concerned with some of the complex problems of methodology, e s p e c i a l l y the meaning and measurement of s e v e r a l of the standard concepts used i n d e v e l -opment s t u d i e s . F i n a l l y , t h i s d i s s e r t a t i o n presents the r e s u l t s of i n t e r v i e w s undertaken i n N a i r o b i ' s i n f o r m a l economy, r e s u l t s which may have a bearing i n p a r t i c u l a r on the t h e s i s that development i s probably dependent on the a p t i -tudes, a t t i t u d e s , e x p e c t a t i o n s , m o t i v a t i o n s , f a c u l t i e s and s k i l l s found w i t h i n a given p o p u l a t i o n . No comprehensive theory of the p o l i t i c a l economy of development i s ad-vanced i n t h i s work. I t i s l i k e l y the case that development, as part of the h i s t o r i c a l change of e n t i r e s o c i e t i e s , i s not amenable to general theory. At the same time, development appears to be mainly dependent on f a c t o r s about which we know very l i t t l e and which at any r a t e cannot be r e a d i l y accommodated i n a general theory. Nevertheless, systematic research and a n a l y s i s can make a s i g n i f i c a n t c o n t r i b u t i o n to the s u b j e c t , not the l e a s t of which i s a c h a l -lenge to p o l i c i e s adverse to the attainment of higher m a t e r i a l standards of l i f e . To be s k e p t i c a l about the p o s s i b i l i t y of a general theory of the 8 p o l i t i c a l economy of development does not mean, of course, that major and v i t a l l y important phenomena cannot be investigated. Indeed, in this thesis an attempt i s made to discern uniformities, particularly in the relation between the state and development and in discussing the probable determinants of development. At the seme time, i t i s part of the nature of our understanding that we are often in a better position to offer guidance on what not to do rather than on what to do to promote the development of less developed countries. To eschew such "positive" policy articulation i s just another way of admitting our inevitable ignorance of (and therefore our inability to control or direct) the numerous phenomena associated with human actions. It i s more to the point (and perhaps more within our grasp) to examine the conditions most favourable to the emergence of those forces which promote development rather than to de-termine the precise pattern of relationships among a l l the elements concerned or the explicit directions in which each element w i l l arrange i t s e l f in rela-tion to the others. In Part One, beginning with Chapter I, there is a discussion of some of the probable links between economic freedom and the attainment of higher livA. ing standards as well as an appraisal of selected aspects of current theoris-ing in the f i e l d of development studies. This i s followed in Chapter II by an analysis of development theory and the structure.of the urban economy in less developed countries. The model presented';in Chapter II i s perhaps an 1 improvement on the usual dual-economy models in that i t stresses the v i t a l re-lationships between the state (its policies and actions) and the structure and institutional direction of development. As well, the analysis of the urban informal or unofficial economy may offer further support for arguments presented in Chapter I. 9 In Part Two, beginning with Chapter III, a detailed investigation of a single country, Kenya, i s undertaken both to elucidate some of the general points advanced as well as to highlight one of Africa's more stable and pros-perous nations. The analysis presented i s based on primary documentary mat-erial that was available in Nairobi as well as direct observations and inter-views in Nairobi's informal economy. While Chapters III-VI offer a detailed factualland technical interpretation of some salient features of Kenya's de-velopment, an attempt i s made to place each chapter within the more general framework of development studies. Thus, in Chapter III, on national income and employment in Kenya, not only i s the Kenyan case examined but also gen-eral methodological issues are raised which may be applicable to the study of other less developed countries. This i s followed in Chapter IV by an analysis of population and labour force growth in Kenya. Again, the issues discussed and the general conclusions that are reached may have application to other less developed countries. Chapter V deals with public policy and urbanisation in Kenya. It i s important not only for the interpretive analysis presented but also as an il l u s t r a t i o n of the tremendous influence that a p o l i t i c a l l y determined development strategy can have on shaping the broad contours of a country's economic structure. The final substantive discussion, Chapter VI, offers an analysis of a preliminary investigation of the awareness, motivations, expectations, a t t i -tudes and desires of a small group of individuals in Nairobi's informal eco-nomy. One of the aims of this chapter i s to link development theory, and Kenya's p o l i t i c a l economy, to individuals on the frontier of development i t -self. It i s hoped that coherence and unity i s given to the presentation through using the theme of urban p o l i t i c a l stability in Kenya. .ih.-=the context of explosive urban growth. In concluding this introductory chapter, i t i s acknowledged that de- :. spite some grave misgivings about Kenya's development that are discussed in the thesis, the Kenya government ought perhaps to be congratulated for main-taining one of Africa's least coercive societies. Particularly at this time in Africa's long history, Kenya's experience with stability and relative eco-nomic freedom i s a priceless and increasingly rare achievement. Hopefully, the Kenyan government w i l l do i t s utmost to encourage and not discourage the creative potential of each Kenyan to make his own unique contribution to the nation's development. PART ONE DEVELOPMENT THEORY I INDIVIDUAL ACTIONS AND DEVELOPMENT THEORY A. Introduction This chapter attempts to place voluntarily undertaken individual ac^i ; tions within the framework of development studies. The purpose i s neither to present a detailed theory nor to offer a detailed critique of the main:;ap-proaches to development. Rather the aimiis to highlight some probable aspects of the process of development. While the discussion inevitably runs in gener-a l i t i e s , the specialised chapters which follow hopefully compensate by offer-ing a more detailed analysis of specific issues. The primary thesis i s that the essence and appropriate taskoof governi-ing in less developed countries should be the creation of a suitable environ-ment for the maximum utilisation of the dispersed knowledge and talents found in society. In other words, one aim of governing should be the creation of a society where coercion i s used only where i t is required by general rules or principles, equally applicable to a l l . While this is admittedly an ideal, i t i s perhaps the type of ideal which can be progressively realized through con-sciously guided policies. Extensive state activity i s not incompatible with this goal insofar as arbitrary coercion is used as l i t t l e as possible. Indeed, appropriate state policies and actions are necessary for the establishment of a framework condu-sive to the pursuit of creative individual actions. The state, for example, has a responsibility to provide the basic infrastructure of roads and communi-cation,, health and educational services, an appropriate institutional frame-work, an effectively managed monetary system, and the maintenance of law and order. Thus the goal i s not laissez-faire. Rather the hope i s that the state 12 13 w i l l effectively discharge i t s essential duties and thereby f a c i l i t a t e the general pursuit of higher living standards. Currently, the governments of some less developed countries appear to be already over-burdened in attempting to meet these basic and v i t a l obligations, obligations which do not require comprehensive planning. For ease of exposition i t i s preferable f i r s t to outline in a broad manner the probable links between economic freedom and development. This involves presenting some aspects of an older, and to some extent currently neglected,-'view of the process of development. Finally, i t i s argued that the use of macro concepts has diverted attention from the human actions that may largely determine material advance. B. The Importance of Free Individual Actions for Development An important relationship seems to exist between freely undertaken eco-nomic activities and the attainment of higher standards of l i v i n g . One reason for emphasising this link i s indicated in the following passage: We want the individual to have liberty because only i f he can decide '"..what to do can he:.talso.usela'lli'his.Lunique;;c6mbihation 6,ffinformation, s k i l l s and capacities which nobody else can fully appreciate. To en-able the individual to f u l f i l his potential we must also allow him to act on his own estimates of the various chances and probabilities. Since we do not know what he knows, we cannot decide whether his de-cisions were jus t i f i e d ; nor can we know whether his success or f a i l -ure was due to his efforts and foresignt, or'.to good luck. In other words, we must look at results, notiintentions or motives, and can allow him to act on his own knowledge only i f we also allow him to keep what his fellows are willing to pay him for his services, i r r e -spective of whether we think this reward appropriate to the moral ^ merit he has earned or the esteem in which we hold him as a person. In other words, this passage suggests that creative development, or development as a result of countless individual actions, i s incompatible with coercion, comprehensive planning and reward based on privilege. However, extension and elaboration of the formal...sector, the ostensible aim of much of development theory and policy, appears to be largely dependent on coercion and privilege. Since the concepts of "free" (or "freedom") and "developmenfcarennoto?: riously vague and are frequently given shifting and conflicting content, per-haps some general comments wi l l be helpful. F i r s t , i t should be pointed out . that development should not merely be concerned with growth of output as con-ventionally measured in national accounts data. Rather, changes in general living standards and what Lewis has termed "increases in the range of human choice"*^ ought to be the principal and appropriate c r i t e r i a of development. Other scholars have emphasised different c r i t e r i a , for example, the size of the public sector, the volume of manufacturing industry, capital formation, or the performance of particular sectors of the economy. However, policies which are based on these c r i t e r i a may conflict with the ostensible goal of raising living standards. For one thing, growth of output, unless i t i s desired out-put, need bear l i t t l e relation to general living standards. The chief way of evaluating and measuring desired output i s to link output to consumer demand. If supply of output i s to reflect consumer demand, then the a b i l i t y to engage in economic act i v i t i e s freely and to exchange goods and services freely should be permitted. The reconciliation of this supply and demand i s accomplished through free or market determined prices. Proponents of comprehensive state planning frequently appear to disregard the problems of determining the type, quantity and price of the heterogeneous collection of commodities subsumed under "output." Even when these issues are not ignored, the determination of type, quantity and price of goods and services seems to depend on the arbi-trary decisions of a select group of administrators. Furthermore, to equate total output with what is currently measured by the o f f i c i a l data collecting agency has tended to result in a general bias, 15 both scholarly and p o l i t i c a l , in favour of one relatively small sector of the economy for which stati s t i c s (however unreliable) are available. This sector i s typically termed in development theory the "modern" or monetary sector. Development i s then conventionally defined as increasing the output (or the size)ref this sector. •ne result of identifying development with the growth of recorded out-put i s the rather unwarranted belief that, for example, investment or capital formation in the "modern" sector i s the key to developing less developed countries. Since savings and investment appear to be low in less developed countries i t i s then commonly held that the state must act as the prime mover i f low levels of income are to be eradicated. Besides ignoring the experience of countries already considered "developed," this misses the point that a low level of income may be compatible with even rapid rates of change."' Neverthe-? less, to generate investment funds, governments are exhorted to "squeeze" the peasantry and to curtail current consumption. Indeed, prominent socialist observers of development have been among the most insistent and vociferous proponents of the view that current low living standards of the vast bulk of the population must be forcibly depressed to provide "development funds. The resources secured in this manner w i l l then apparently be allocated to more "productive" and "efficient" uses. Often this i s even considered to be a net addition to capital formation. It i s apparent that great harm may be done to the aim of promoting gen-eral living standards when i t i s alleged that current consumption must be de-pressed or "squeezed" in order to raise some typically distant living standard. Indeed, this allegation brings into question the very meaning and relevance of development. Moreover, contrary to the,:more mechanical theories of economic development, future consumption i s not necessarily enhanced by present forced 16 abstire.nce. As Peter Bauer has observed, "less jam today does not necessarily imply more jam tomorrow and indeed when brought about by compulsion i s likely to imply less jam."^ Indeed, exhortations to save and to channel resources into the hands of state planners have often created an il l u s i o n of development without really raising standards of l i f e . Elkan has argued that: Widespread gains in current incomes w i l l do more than forced saving to enhance meaningful development, because a rising standard of l i f e now i s a surer way to greater prosperity than years of misery for the majority whilst a small e l i t e of capitalists, c i v i l servants or highly paid wage earners enjoy a standard of l i f e that isi; unattainable for the rest.8 Second, although there i s certainly a relationship between output and consump-tion, for reasons already given, this relationship i s far from automatic. In-deed, i t may be broken by ill-conceived state policies. The primary result of development should not be the aggrandizement of the state but rather the im-provement of general living standards. One method of securing this result i s to increase the range of human choice. This appears to be inextricably linked to economic freedom for the individual. Indeed, when men are able to use their individual knowledge for their own purposes, restrained only by general rules of universal application, the best conditions w i l l likely be produced 9 for achieving their aims. This, of course, implies that detailed controls and coercion should be limited. The preference for state-centred development has, to some extent, side-tracked development studies. Creativity i s unlikely to reside solely or even primarily in the state. Indeed, i t i s improbable that governments, planning agencies or central directorates know as much about the intricate web of eco-nomic activities engaged in by countless individuals as those individuals know themselves. Yet the state i s frequently given the responsibility for making extensive and detailed decisions and regulations. Given the immense variety . 17 of human ac t i v i t i e s , i f comprehensive planning i s to accommodate, reconcile and "rationalise" them then extensive and effective coercion w i l l probably be required. One result of this coercion would likely be not only the control or "direction" of individuals but also the restriction of the number and variety of economic act i v i t i e s to a form manageable by the limited number of planners with their limited knowledge. On the other hand, i f individuals were permit-ted and encouraged by sensitive state policies to pursue their knowledge v freely, guided by their unique combination of interests, motivations, ambi-tions, faculties, aptitudes and s k i l l s , then one likely result would be marked growth in the range and type of economic a c t i v i t i e s . This, in turn, would probably be reflected in rising standards of l i v i n g . It i s precisely the human factors which are frequently claimed to be deficient in less developed countries. Thus i t i s often alleged that there i s a "lack of entrepreneurship," or "lack of motivation, ambition or the desire for achievement." These arguments may then be invoked to support the claim that state control and direction i s necessary, indeed indispensable, for the occurrence of economic development. However, the actual situation i s probably the opposite: creativity might be either s t i f l e d or directed into socially harmful channels when state direction, controls and regulations are pervasive. Besides, i f i t were correct that a given group of people generally lacked appropriate ambitions, aptitudes and the other attributes mentioned, i t i s d i f f i c u l t to understand why their government would possesscthemiin sufficient abundance to i n i t i a t e , direct and execute a l l economic activity. Indeed, the very meaning of development for these individuals remains unclear. Typically, creative human actions are derived from assessments made concerning options or choices available to the individual. These assessments may then be incorporated into a voluntarily undertaken plan or program of 18 behaviour.. To the extent that development is dependent on these individual plans i t can be a process of continuous change. It i s helpful to elucidate, at least tentatively, the genesis of this process and the mechanisms which may 10 keep i t in motion. It seems that factors of primary importance may include the stimulation provided by the occurrence of unexpected changes, and, as well, inconsistencies between individual plans and over time within a given individ-ual's plan. If these conditions are not f u l f i l l e d , stagnation w i l l likely re-sult. For example, i f a group of people lives in complete isolation from others there is l i t t l e likelihood, of any unexpected change and hence l i t t l e stimulation to undertake novel activities or experiment with different tech-niques. Consequently, the range of options within the society i s restricted. As a result, individual plans may gradually become more consistent internally and with each other as the people come to accept an unchanging environment. On the other hand, the intrusion of unexpected change into a society i s not necessarily a sufficient condition to generate ar.continuous process. Without inconsistency between and within individual plans - an inconsistency derived from differing expectations and desires - even recurring unexpected changes might be successfully accommodated by minute adjustments, one result of which would be to leave the range of options essentially the same. This latter pos-s i b i l i t y i s , however, of l i t t l e general importance as there appear to be only a very limited number of societies whose members do not have their expecta-tions altered by unexpected change. Nevertheless, even in the more usual case, the process of continuous change may be hampered or thwarted. For one thing, expectations, as the ba-sis for human action and derived from differing motivations, aptitudes, fac-ulties, s k i l l s and capacities, are often not f u l f i l l e d . Failure may be due to several factors, some of which include the following: f i r s t , the state may 19 neglect to provide the basic framework or infrastructure necessary for success of individual plans, for example, the construction and maintenance of roads and other basic communications f a c i l i t i e s , the provision of basic health and educational services, the maintenance of law and order, and the promotion of an appropriate institutional framework for activities of individuals. In other words, the state may f a i l to supply the essential requisites that i t alone may be capable of providing. Second, failure may result from the i n -a b i l i t y to engage in economic activities freely subject only to certain gen-eral and universal constraints or, from the deliberate imposition of state authority which systematically seeks to prevent the realisation of creative individual plans. Therefore, to stimulate continuous creative development, there should be at least some provision of collective goods in the form of ba-sic social and economic infrastructure and a general permission to pursue /„-freely inconsistent human plans, the derivation of which i s divergent expectations. In summary, the relation between free individual actions and develop-ment rests on the view that human activity consists in i n i t i a t i n g , executing and revising innumerable individual assessments or plans. It i s improbable that comprehensive planners are in a more knowledgeable position to direct and control the acti v i t i e s of the countless dispersed individuals over whom they rule than those individuals are themselves. !G. "Effects of External Contacts on Acquired Human Qualities It would seem that i f students of development wish to explain the pro-cess of development then much of their attention should be directed to the study of the actions of countless individuals, performing independently or in cooperation with others, to obtain their various ends. The neglect of i n d i -vidual choices and actions i s partly responsible for the dogmatic statements 20 that often appear in the development literature. For example, the alleged necessity of reducing current consumption. At the same time, this allegation 11 has been used as an implicit argument for restricting external contacts. The argument is that individuals in poor countries have their demands for con-sumer goods stimulated by being made aware of how people li v e in richer coun-tries and that this reduces the potential savings that might be used to i n -crease the stock of capital. On the other hand, the classical p o l i t i c a l economists, particularly Adam Smith and John Stuart M i l l , emphasised the positive benefits of an "inter-national demonstration effect." Although concerned with trade as an "engine of growth," Mi l l pointed out that inhai:hitherto-is61ated"country, international trade (a type of contact) might make people "acquainted with new objects" and The easier acquisition of things which they had not previously thought obtainable, sometimes works a sort of industrial revolution in a coun-try whose resources were previously underdeveloped. Further, Mi l l emphasised the "educative effect" of trade: . . . placing human beings in contact with persons dissimilar from themselves, and with modes of thought and action unlike those with which they are familiar . . . has always been . . . one of the p r i -mary sources of progress. 12 This suggests that i t may be unrealistic to isolate want-creation as a sole or even principal legacy of external contacts. Nevertheless, i t s import tance probably should be stressed since the contribution made by want-creation does not appear to be appreciated in development studies, particularly by those who take a c r i t i c a l or skeptical view of the importance of individual actions. For example, this may account in part for policies which either 13 harass or eradicate middle-men due to their alleged "parasitic" a c t i v i t i e s . These policies seem to be rather short-sighted. Indeed, they may be anti-developmental. Middle-men play a v i t a l role in making available consumer (or "incentive") goods which suggest both new wants and, much more importantly, 21 14 new methods of satisfying those wants. In less developed economies, where large groups of people remain outside the exchange and cash nexus, i t i s rea-sonable to speculate that expectations of a higher and more varied level of consumption have been and w i l l be instrumental in e l i c i t i n g greater effort and more productive saving and investment. This i s in addition to the effects of external contacts in weakening a range of attitudes adverse to material advance while leading to beneficial improvements in the methods of accepted 15 pursuits. Perhaps middlemen may be considered the precursors of the pro-fessional "community development" officers. Middlemen, however, cannot rely on coercion to secure results. Measures that curtail external contacts in order to restrict consump-tion may make i t easier than i t might otherwise be to generate forced savings. However, the appeal of these measures appears to be based on the following unproven and improbable premises concerning human behaviour: economic perfor-mance i s unaffected by the prospect of a higher and more varied level of con-sumption; and, external contacts affect only the consumption patterns of the local population and have ho beneficial effects on either ideas, attitudes., s k i l l s , saving and investment patterns, or methods and types of production. In other words, in models which abstract from human actions i t may be possible to maintain the desirability of forcibly restricting human interchange in order to prevent new comsumption patterns (and thus, other patterns) from emer-ging. However, this seems to reflect a simplistic conception of the process of development. D. Macro-Concepts and Development The preference for detailed state planning of development over freedom to engage in economic act i v i t i e s i s reflected in the choice of concepts, the level of abstraction and the proliferation of sophisticated (or at least s t a t i s t i c a l ) models in much of the current theorising on the development pro-cess. Thus, the fashionable view appears to be that the economies,of less developed countries have been stagnant and that their growth should be stimu-lated, or better, engineered, through increasing state direction of the a l l o -cation of resources. This perspective has been strongly influenced by the use of macro-economic concepts, a use that has led to the relative neglect of 16 the micro-foundations of a l l economic activity. Indeed the grip of macro thinking has prompted one observer to describe the sfudynof developmenteas S3 17 "macromancy." One reason that macro concepts may be attractive to many development theorists i s perhaps the ease with which these aggregates may be manipulated in a perfect or "simplified" environment. In particular, individuals can be ignored, especially the differences between individuals and the general i n -18 equality of men. Thus the core of the complexity surrounding the process o development tends to be brushed aside in an attempt to control some pre-selected "key" variables. This i s beginning to assume the appearance of avoiding some of the real issues of development. 19 Another result of this interest in,macro "growthmanship" has been th proliferating concern with such concepts as the big push, take-off, leap for-ward, unbalanced growth, linkages, disguised unemployment and so forth, with considerably less interest in integrated rural development, agricultural i n -tensification, intermediate technology, appropriate education, labour force explosion, small industries and the whole range of issues subsumed under 20 social and human resource development. At the same time, l i t t l e room appears to exist for individual actions in models which deal largely in categories like "workers," "capitalists," "landlords" or which establish a framework of macro-economic aggregates -23 "investment," "output," "exports," "imports" - which have been drained of human content. The importance of individual aptitudes, attitudes, faculties, s k i l l s , ambitions and motivations, particularly the differential allocation of these-attributes, tends to wither under the crushing weight of these concept-ual aggregates. While a level of abstraction i s certainly necessary in social science, economic events seldom appear to be the result of a collective process of decision-making - rather explanation can typically be found in terms of human choice and decision. Nevertheless, models of development tend to be presented in an "operationally meaningful," that i s , s t a t i s t i c a l l y measurable form. The variability of human preference, shaped by experience and guided by the di f f u -sion of knowledge from one individual to another, i s often not considered. There i s l l i t t l e acknowledgement that macro-variables are in reality the cumu-lative results of millions of past individual actions. Thus, l i t t l e time i s spent in explaining how markets develop, how consumer demand i s met or how policy decisions are determined. Human actions tend to be simply neglected. E. Summary One task for the p o l i t i c a l economy of development i s to explain the emergence of new. productive relationships. A suitable beginning might be to investigate the characteristics of the underdeveloped state that have both hampered the success of comprehensive planning and simultaneously encouraged and permitted the expression of the creative potential of innumerable individ-21 uals. It may be the case that the p o l i t i c a l "indiscipline" often noted in less developed countries has had the unintended and beneficial effect of per-mitting each individual to pursue his own unique combination of knowledge, motivations, aptitudes, s k i l l s , faculties and capacities, the result of which 2S has been not stagnation or retrogression but a general though largely unmeas-ured improvement in.Hiving conditions. This suggests that one probableeresult of permitting individuals to pursue their knowledge for their own purposes i s improvements in the range of choice in less developed countries. However, there are much more significant effects than even current improvements in material conditions. The a b i l i t y to pursue one's own interests may encourage the s p i r i t of discovery, experimenta-tion, and risk-taking; the interest in securing higher incomes; determination in the face of poverty; self-reliance and a sense of personal responsibility for one's own economic fortune; and as well, the belief that wealth;:.is the re-sult of hard work. A l l of these factors may operate in a.:6ircular and cumula-tive fashion to further development. What creative development offers i s , in some ways, a more modest and less ambitious approach to securing higher material standards of l i v i n g , lit is":an approach which eschews the construction of magnificent (and often merely symbolic) comprehensive plans. Instead, greater reliance i s placed on external contacts, widening of opportunities, the provision of incentive goods, the removal of a r t i f i c i a l impediments to individual actions, and an alteration in the role of the state so that i t may subsequently discharge effectively those complex and extensive duties which are essential in any order based on economic "freedom. Development which has i t s basis in creative individual actions - actions arising from the differential allocation of motivations, ambitions, goals, capacities, s k i l l s , aptitudes and attitudes - does not necessarily require 22 natural resources, low, population growth rates, or a large domestic market. Rather,:"„it .appears to depend on having people who are enterprising. This i s not intended to suggest that any particular group of individuals in any given country i s incapable of achieving material progress. Each individual has a 2-5 creative potential, the expression of which i s partly shaped but not deter.--.::: mined by the resource endowment of his lo c a l i t y . The immense variety of i n d i -vidual expectations, of individual plans, precludes change at the same rate for everyone. However, this rate of change and the direction i t takes can be guided in general terms by appropriate state policies and activities (which i s one reason that s t r i c t laissez-faire i s probably unsuitable for less developed countries). If appropriate human actions occur - and they are not dislocated by inimical state policies - even resource poor countries might experience substantial progress. Conversely, without them,Aeven richly-endowed countries might remain at subsistence levels. This chapter has sought to highlight the importance of incorporating individual expectations in theorising about development. It has alsodise:' cussed some aspects of the type of analysis currently in vogue in development studies. The following chapter continues this concern with development theory, examining more closely the remarkable growth of urban centres in less devel-oped countries. This establishes a firmer foundation for an analysis, in sub-sequent chapters, of specific features of Kenya's development. II DEVELOPMENT THEORY AND THE URBAN ECONOMY IN LESS DEVELOPED COUNTRIES A. Introduction The theme of this chapter is complex, as complex as the structure and l i f e of an urban centre. To gain an appreciation of the diversity of relai:.-..'. tionships and the myriad of detail i t i s necessary to simplify and to general-ise. While this may elevate analysis i t i s not without costs. Different countries are at different stages of urbanisation, at different levels of i n -dustrialisation, with different bases to their economic structures. As well, what might be p o l i t i c a l l y encouraged or p o l i t i c a l l y possible in one country may be deplored or impossible in the next. Clearly, a universal theory of the po l i t i c a l economy of urbanisation i s inappropriate, i f not impossible. How-ever generalisations about urban development and by implication individual ac-tions in changing circumstances, do appear in this chapter. The primary aims are to present an overview of some aspects of the theory of urbanisation in less developed countries, to examine several influential models of urban de-velopment and, to articulate the types of relationships that may exist between state policies and the structure of the urban economy. To accomplish,, these ends, local variations must be sacrificed. In later chapters, an attempt i s made to relate these general perspectives to the particular case of Kenya. B. Urbanisation in Less Developed Countries Perhaps urban policy provides one of the clearest examples of the i n -fluence of academic advisors and consultants on Third World governments. •; Decision-makers adopted the models of economic growth popular in the 1950's and 1960's - models which seemed to hold the promise of successfully absorbing 26 27 "surplus" agricultural labour:if the state concentrated i t s investment deci^ 1 sions on the creation of a "modern," that i s , urban and industrial sector. One consequence of the attempt to create an urban industrial sector has been the extremely rapid growth of urban populations throughout the less developed world. As Table 1 demonstrates, urban populations are typically growing in excess of twice the rate of the rural populations. Nevertheless, the rural population w i l l evidently continue to grow in absolute terms for the foresee-able future. Table 1. Urban-Rural Population of Developing Countries 1920 1940 1960 1980 2000 69 128 7-310 693 1436 6 9 15 22 31 1118 1346 1705 2431 3235 94 91 85 78 69 Urban Population (millions) - Per Cent of Total Population Rural and Small-town Population (millions) - Per Cent of Total Population Annual Rate of Increase (per cent) - in Urban Population 3.1 4.5 4.1 3.7 - in Rural Population 0.9 1.2 1.8 1.4 g Urban i s defined as greater than 20,000 persons. Source: World Bank, Urbanization: Sector Working Paper (Washington, 1972). Table 2, derived from U.N. estimates. As the table indicates, the United Nations has projected an annual rate of urban growth in the less developed world of 4.1 per cent between 1960 and 1980, with a corresponding increase in the rural population of 1.8 per cent. This rate of urban growth is greater than that experienced by any developed 2 region with the exception of North America between 1850 and 1920. The trends indicate that the less developed world w i l l be 22 per cent urbanised in 1980, :• in contrast to 15 per cent in 1960. At present, Africa i s the least urbanised of the continents. Of the 1970 estimated population of 242 million (in thirty-five countries), only 26 28 million, or 11 per cent, lived in urban centres of 20,000 or more inhabitants.^ Nevertheless, Africa has probably the highest rate of urban growth in the 4 world. The data in Table 2 compare the projected growth of the urban and Table 2. Projected Growth of the Total and Urban Population 1970-1980 -Selected Countries in Tropical Africa Total Population Urban Population Uiihi-.Millions in Millions 1970'! / 1980 Per Cent Increase 1970 1980 Per Cen I n c r e a s i Totals 158.1 208.7 32.0 18.8 32.7 73.9 Country Nigeria 66.1 87.6 32.5 10.1 17.7 75.3 Ghana 9.0 12.5 38.9 .1.5 2.8 86.7 Congo-Kinshasa 17.4 22.4 28.7 2.2 3.6 63.6 Kenya 10.8 15.1 39.8 0.9 1.7 88.9 Uganda 8.5 11.3 32.9 : 0.2 0.4 100.0 Tanzania 13.2 17.4 31.8 0.7 1.4 100.0 Ethiopia 25.0 31.5 26.0 1.2 1.9 58.3 Zambia 4.2 5.9 40.5 1.0 1.7 70.0 Senegal 3.9 5.0 28.2 1.0 1.5 50.0 Note: These Social figures are based on Statistics Section, estimates Economic prepared by the Demography and Commission for Africa. They in elude, for individual countries, estimates of population growth through migration across national borders, an important factor in many African countries. Source: Colin Rosser, Urbanization in Tropical Africa: A Demographic Intro- duction (International Urbanization Survey, the Ford Foundation, 1972) Table 2. total populations in nine sub-Saharan countries. Between 1970 and 1980 the population of these countries w i l l increase by about 50 million persons at a very high average growth rate of 3.2 per cent per year. However, the urban population w i l l increase twice as fast, adding about 14 million to i t s total, at an average annual growth rate of 7.4 per cent. 29 One consequence of such rapid urban growth i s the proliferation of un-controlled settlements and shanty towns. Grimes cites data indicating that in Addis Ababa 90?o of the population lives in "slums and uncontrolled settlements." The corresponding figures for other major urban areas in Africa are: Douala, 80?o; Mogadishu, 11%; O'uaga-dougou, 70?o; Abidjan, 60%; Dakar, 60%-, Kinshasa, 60%; Accra, 53?o; Dar-es-Salaam, 50?o; and Monrovia, 50?o. 5 While perhaps alarming, these large percentages of slum and squatter housing may overdramatise the de-velopment problems in some less developed countries. Many residents of these settlements apparently have steady jobs and own several consumer goods - for example radios, bicycles, motorcycles - which indicate that personal living conditions may not necessarily be characterised by severe deprivation. Nevertheless, for western observers, conditions in many African c i t i e s appear deplorable. For example in Kano, Nigeria, which I visited recently, t r a f f i c conditions were chaotic; roads were often in an advanced state of dis-repair; the water supply was unhygienic and often unavailable to parts of the city; cuts in electric power were frequent and of indetefminant duration; streets were littered with various types of refuse; public transportation was virtually unavailable. In essence, the state was not providing the requisite infrastructure and services to meet the demands of a growing population. Despite the pressure of population on available urban services, the data in Tables 1 and 2 indicate a continuing massive movement of people from the rural areas to the urban centres. This tremendous shift in population, a shift which has been termed "the largest migratory movement in human history,"^ has been the focus of considerable model-building in development studies. C. Rural-Urban Migration Given the widely varying conditions of the Third World, attempts at ex-plaining internal migration have generated some debate in development studies. 30 Overall, i t i s generally accepted that migration accounted for 30 to 60 per 7 8 cent of urban population growth in the decade 1960-1970. Both case studies 9 and econometric work on the determinants of migration provide strong empirical support for the importance of economic incentives in the decision to migrate. Migrants appear to be less attracted by the "bright lights" of the city or by the availability of urban services and amenities than by the prospect of secur-ing employment at wage levels in excess of the remuneration received for rural a c t i v i t i e s . Of the many studies on rural-urban migration in less developed countries perhaps the most influential have been those undertaken by Todaro and his col-10 leagues. In the Todaro model, potential urban in-migrants are conceived to base their decisions to migrate on the urban-rural real income differential discounted by the probability of obtaining a job in the urban i!mddern"esector. The probability of obtaining an urban job i s , of course, a function of the rate of urban unemployment. In this context, one important question i s the length of time the mi-grant must wait before actually obtaining a job. Todaro argues that although the prevailing real urban wage rate may be significantly higher than the ex-pected rural income, i f the "probability" of obtaining a "modern" sector job is very low then this should influence the individual's decision to migrate. As Todaro observes, "A 70 per cent urban real wage premium, for example, might be of l i t t l e consequence to the prospective migrant i f his chances of actually 11 securing a job are, say, one in f i f t y . " The time dimension i s also important in discounting future earnings to the present time since the probability of obtaining a job presumablyc.ihcreases 12 with the lengthoof stay of the migrant in the urban centre. In other words, i f the migrant has a relatively long time horizon and i f the wage differential 31 is sufficiently large then rural-urban migration may be a:;rational economic choice despite the low i n i t i a l probability of securing a "modern" sector job. Todaro has argued that a relatively high urban unemployment rate of 30 to 50 per cent at' the margin, would not deter migrants i f the urban-rural wage d i f -13 ferential i s of the order of 300-400.per cent, which i s usually the case in African countries, and certainly in Kenya. Even i f the expected urban real i n -come (the prevailing urban wage rate discounted by the probability of obtaining an urban job) i s lower than the rural real income in the period following mi-gration i t could s t i l l be economically rational for the individual to migrate. Although the chance of obtaining a modern sector job may be low, the migrant could s t i l l secure a livelihood in what Todaro terms "the urban traditional sector." Todaro endorses the view (popular at least since the influential Lewis ; 14 ar t i c l e in 1954) that the "urban traditional sector" encompasses " a l l those workers not regularly employed in the urban modern sector, i.e. the overtly unemployed, the underemployed or sporadically employed, and those who grind out a meagre existence in petty r e t a i l trades and services." He feels that throughout the Third World, this sector consists largely of . . . the urban in-migrant who, instead of doing absolutely nothing, joins [the] army of underemployed bootblacks or [the] throngs of se l f -appointed (and tippable) parking directors, or who becomes an extra, redundant, salesman in the yyard goods s t a l l of the cousin who, accord-to custom, i s going to ;have to provide him with bed and board anyway.15 In other words, he assumes that the "urban traditional sector" consists of un-productive, unrewarding, labour-intensive, fringe ac t i v i t i e s into which un-lucky migrants must descend. ',, By viewing the "urban traditional sector" in this way, Todaro i s able to maintain several propositions: f i r s t , migration i s s t r i c t l y a response to the opportunities in the "modern" sector; and, second, in the "long run," the 32 urban unemployment rate w i l l act as an equilibrating factor on additional mi-gration to'.the extent that, for any given urban-rural real income diff e r e n t i a l , the higher the urban unemployment rate, the lower w i l l be the expected income diff e r e n t i a l . When the urban unemployment rate f a i l s to act as an equilibrat-ing factor slowing down in-migration this i s held to be a consequence of the widening urban-rural income dif f e r e n t i a l . The policy implications of these propositions suggest that Todaro views 16 urbanisation with some alarm. Implicitly there i s a concern with reducing the congestion of urban services that has occurred in the Third World as a re-sult of rapid migration. The intent of policy might be, presumably, to re-st r i c t the perceived advantages of urban l i f e to those presently residing in the c i t i e s . Two policy instruments are suggested by the Todaro model to ac-complish this aim: f i r s t , a reduction in the urban-rural wage differential; 17 and, second, a reduction in the creation of urban employment opportunities. In terms of the model, these two policies would reduce the expected income con-sequent upon moving to the urban centres and, therefore, reduce rural-Durban migration. However, the policy perspective that urbanisation ought to be a r t i f i -c i a l l y restricted does not appear to be ju s t i f i e d on the basis of available evidence. On aisimple - but v i t a l l y important - level, the data presented earlier indicate that the urban centres continue to be the preference for many rural residents. This may suggest that the disadvantages of urban l i f e - con-gestion, f i l t h and disease, noise, and lack of privacy - have, to some extent, been mitigated by perceived advantages. Despite the lack of adequate services, for many migrants the urban centre may be considered a rewarding place, par-ticularly in relation to the rural areas. Why else would they move? Given the fact that few less developed countries have succeeded in generating wage 33 18 employment at rates of increase greater than 1/3 of the growth of GNP, we are l e f t with the puzzling problems of how and why urban growth rates from 7 to 12 per cent per year can possibly take place year after year. Aggregate models of. .migration seem to be neglecting some very important aspects of urbanisation. For this reason, caution must be exercised before policies are enacted to restrict the mobility of individuals from rural to urban areas. At a very fundamental level, migration.may be a key component of an individual's plan in which he may link an imagined future to an active present. Of course the suc-cess of this plan i s not guaranteed. If the migrant i s unable to attain the goals of his plan (the object of which may be a wage job) then the extent to which the result diverges from expectations (and leads to disappointments) w i l l probably result in the revision of the plan. However, i t i s not possible to determine what new expectations the individual w i l l substitute for those which have been disappointed. Thus, when migrating to the urban area the i n -dividual may anticipate securing wage employment. But, for a variety of rea-sons specified later, this expectation w i l l probably remain un f u l f i l l e d . He wi l l then have to devise an alternative plan, some of the options of which may be either to remain in theiiurban area supported by friends or relatives, re4i„\ turn to the rural area, or seize any opportunities to create his own type of employment. What plan he devises depends on his new expectations - this i s something about which we know very l i t t l e . Since the cumulative total of these individual plans and their revis sions number in the millions, they do not f i t easily into a formalised "theory" of migration which attempts to assign numerical values to a large number of variables. The principal merit of the Todaro formulation of migration i s not i t s policy implications but i t s reiteration of the importance of expectations. 34 The problems arise when these expectations are incorporated in an alleged ex-planatory theory. Expectations can, and most often w i l l , change in an unpre-dictable manner. To incorporate a time dimension neglects this unpredictabil-ity.-, by treating migration as a "response" to the "stimulus" of discounted expected values. But since migration i s the result of individual decision-making, probably linking an anticipated future to an active present, i t should not be considered a "response" in this manner. To i l l u s t r a t e , i f discounted expected values i s an "explanation" of migration then the puzzle remains why, after a l l , so few individuals in the total population migrate? In fact, i t i s probably impossible to explain why some individuals do and some do not respond to the Todaro stimulus. On the other hand, to regard expectations as inde-pendent variables leaves l i t t l e remaining of the Todaro model. Changes in ex-pectations would then be more important than other "causes" of migration. In other words, i t may be impossible to know a l l the factors involved in millions of plans that result in observed migration flows. To select one f factor - expected income - and elevate i t as the stimulus i s not very satis-' factory. It i s a simplistic method of avoiding the problem of how plans are made while implicitly denying that migration i s the result of countless acts of decision-making. Other c r i t i c s of the Todaro model have concentrated on the d i f f i c u l t i e s 19 in measuring urban and rural wages. An equally decisive criticism however, is i t s complete disregard of the "urban traditional sector" as a focus of mi-grant behaviour. Very likely this i s due to a common view that the urban l a -bour market in less developed countries i s composed of two sectors: one "modern" and therefore desirable and"attractive to the migrant; the other "stagnant and unproductive," and marked by extreme underemployment and unem-ployment. This tends to misrepresent the urban labour market by ignoring the 35 a v a i l a b i l i t y of d i f f e r e n t types of income-earning o p p o r t u n i t i e s i n what./shall s h o r t l y be defined as the formal ( o f f i c i a l ) and the i n f o r m a l ( u n o f f i c i a l ) sec-t o r s . In other words, the Todaro model i s too s i m p l i s t i c i n i t s conceptually z a t i o n of the urban economy. There seem to e x i s t a v a r i e t y of d i f f e r e n t job o p p o r t u n i t i e s s e r v i n g d i f f e r e n t purposes and various types of workers. Moreover, the existence of what Todaro has termed "the urban t r a d i t i o n a l s e c t o r " makes the c a l c u l a t i o n of an e q u i l i b r i u m unemployment r a t e untenable. Given the e n t e r p r i s i n g behaviour of countless i n d i v i d u a l s i n c r e a t i n g a labour-i n t e n s i v e , unrecorded a l t e r n a t e employment s e c t o r , i t i s d i f f i c u l t ( i f not impossible) lt«.o argue that a reduction of "modern s e c t o r " employment would appreciably slow rural-urban m i g r a t i o n . I t does not appear e i t h e r v a l i d or r e a l i s t i c to assume th a t a l l migrants from r u r a l areas are i n t e r e s t e d only i n securing formal employment. This suggests that policy-makers, planners and development s p e c i a l i s t s should focus more a t t e n t i o n on the techniques that i n -d i v i d u a l s have evolved to cope (and perhaps f o r some, to prosper) outside the o f f i c i a l economy. By studying the a c t i o n s of i n d i v i d u a l s i n what Todaro terms the "urban t r a d i t i o n a l s e c t o r " we may o b t a i n a wealth of i n s i g h t s i n t o the processes whereby goods are produced, markets c r e a t e d , s k i l l s d i f f u s e d , and income and employment o p p o r t u n i t i e s generated. Concise but s i m p l i s t i c models of the emigration process and the urban economy do not do j u s t i c e to the range of a c t i v i t i e s w i t h i n , and the l i n k a g e s between i n d i v i d u a l s i n the urban and r u r a l s e c t o r s of l e s s developed c o u n t r i e s , At the same time these models may perpetuate misleading conceptions of the nature and extent of the employment problems c o n f r o n t i n g l e s s developed c o u n t r i e s while prolonging the r a t h e r morbid f a s c i n a t i o n many development s p e c i a l i s t s seem to have with attempting to measure urban unemployment r a t e s . 36 D. Development Theory and Urban employment The literature of development studies has become increasingly concerned 20 with the "urban unemployment problem." This concern has been stimulated by the rapid increases in the rate of urban unemployment alleged to characterise many less developed countries in the 1960's and 1970's. Indeed, some observers have concluded that urban unemployment has now reached the c r i s i s stage with 21 the numbers out of work threatening the stability of the regimes in power. It i s not uncommon to find unemployment estimated at 25-30 per cent of 22 the urban labour force in some less developed countries, with one observer 23 estimating the rate of increase of unemployment to be 8.5 per cent per year. A summary picture of what are^believedtto'.be':.the trends in employment and un-employment for a l l less developed countries i s presented in Table 3. As the table indicates, estimated unemployment increased from 36.5 mil-lion in 1960 to 54 million in 1973. This averages out to a 3 per cent rate of increase per year which i s higher than the annual growth of recorded employ-ment. As a result, the estimated unemployment rate increased from 6.7 per . 24 cent to 7.6 per cent. If unemployment and underemployment are considered together, then the combined ratelreaches 29 per cent for a l l less developed countries. Among the three continents, Africa experiences the highest rate of labour underutilisation, reaching 38 per cent. Sabolo's projections indicate that unemployment w i l l continue to i n -crease over the next 12 years, reaching almost 90 million by 1990. Although Asia w i l l have the largest absolute number of unemployed, Africa w i l l have the highest rate of unemployment, a rate approaching 10 per cent. Much of the attention given to unemployment arises from the very slow growth of "modern" sector employment. Despite substantial investment and high rates of growth of industrial output in many less developed countries, 37 Table 3. Population, Labour Force, Employment and Unemployment, 1960-1990 Indicator 1960 1970 1973'; 1980 1990 3 A l l Developing Countries Population (000) D .1,384,198 1,899,590 1,956,250 2,379,839 3,103,262 Labour Force (000) 543,880 666,042 712,130 838,730 1,080,293 Employment (000) b 507,416 617,244 658,000 773,110 991,600 Unemployment (000) 36,466 48,798 54,130 65,-620 88,693 Unemployment rate (?o) 6.7 7.4 7.6 7.8 8.2 Combined Unemployment and Underemployment.. I rate (%) g 25 27 29 Africa 31 39 38 Asia 24 26 28 Latin America 18 20 25 A l l Africa Employment (000) b 100,412 119,633 127,490 149,390 191,180 Unemployment (000) 8,416 12,831 13,890 15,973 21,105 Unemployment rate (%) 7.7 9.6 9.8 9.8 9.9 A l l Asia 3 Employment (000) b 340,211 413,991 441,330 516,800 660,300 Unemployment (000) 24,792 31,440 34,420 43,029 59,485 Unemployment rate (?o) 6.8 7.1 7.2 7.7 8.3 A l l Latin America Employment (000) b 66,793 83,620 89,180 106,920 140,120 Unemployment (000) 3,258 4,527 5,820 6,6.18 8,103 Unemployment rate (.%) 4.7 5.1 6.1 5.8 5.5 Notes::: in.Excluding China b l :•:;>•.!•:-IricludinglUnderemployment V!T.;; . : .qNot .calculated for 1980 and 1990 Source: Yves Sabolo, "Employment and Underemployment, 1960-1990, Interna- tional Labour Review, CXII,';N6. 6- (December 1975), Table 3 and Appen^ dix. industrialisation has brought disappointing results in terms of both the .1 divergence between output growth and employment creation and of an increasing divergence between the growth of the labour force and the jobs available. The validity of this view i s demonstrated by reference to Table 4 which underlines the considerable lag in recorded employment growth relative to that of output. Table 4. Industrialization and Employment in Developing Countries - far! • rWanuf aetu.fcing-. f : :>.'c,ii::: Manufacturing Annual Output Growth Employment Growth Region/Countries 1963-1969 1963-1969 Ethiopia 12.8 4 > 3 Kenya ^.4 ^ Nigeria 'I 0.7 Egypt 1 1 - Z A s i a s g 5.3 I n d i a , 2 3 2.6 Pakistan 4 > 8 Philippines _ 1 2 > Q Thailand m ' / Latin America Brazil 6.5 1.1 Colombia 5.9 2.8 Costa Rica 8.9 2.8 Dominican Republic 1.7 -3.3 Ecuador 11.4 6.0 Panama 12.9 7.4 Source: David Morawetz, "Employment Implications of Industrialization in De-veloping Countries," Economic Journal, LXXXIV, No. 335 (September, 1974), Table 1. As the table shows, in seven of the fourteen countries the rate of growth of recorded employment in manufacturing was substantially less than one-third the rate of growth of manufacturing output. Only in the cases of India, Philippines, Ecuador, Panama and Kenya did the rate of job creation even ex-ceed one-half of the output growth rate. In Egypt despite an impressive growth of output there was virtually no job creation while in Thailand and the Dominican Republic, recorded employment in manufacturing actually declined. Many observers are thus inclined to agree with Reynolds that unemployment seems to be growing as fast as output and often appears to be associated with rapidly rising investment.^ } 39 Policy-makers expected that rapid growth would be adequate to ensure the creation of sufficient employment opportunities to accommodate the rapidly 26 expanding number of job-seekers. This was based on the historical evidence of the industrialisation process in the developed countries. In western coun-tries the generation of employment opportunities matched the growth of the l a -bour force. However, in the less developed countries the interdependencies of the rural and urban labour markets have consistently frustrated policy measures to deal with this growing employment gap. Since the industrial sector stands as a highly visible enclave in the midst of an overwhelmingly larger rural \.~z 27 periphery the inflow of job-seekers has become an endless stream. No conceivable rate of industrial job-creation would be sufficient to absorb a l l of the aspiring job-seekers. One reason i s that in most less de-veloped countries the urban industrial sector i s very small, employing only 10 to 20 per cent of the total labour force. For example, i f the manufacturing sector employs 15 per cent of the country's labour force, i t would need to ex-pand employment by 20 per cent per year just to absorb the increase in a total labour force growing at 3 per cent per year (that i s , 0.15 x 0.20 = 0.03). In other words, no likely rate of industrial job creation i s sufficient to absorb a l l of the aspiring job-seekers. Early models of economic development based on western experience tended to neglect this structural imbalance between the labour requirements of capital-intensive, labour-conserving industrial tech-nology and the abundant labour supply of less developed countries. On the basis of the data in Tables 1, 2, and 4, one would expect that a typical result of rapid urban population growth in contrast to slow or stag-nant growth of urban wage employment would be high and escalating urban unem-ployment. However, assessments of the magnitude of urban unemployment in less developed countries have been exceedingly rare. The available evidence, as 40 summarized by Turnham in Table 5, seems to suggest that levels of urban unem-ployment are a significant and pervasive phenomenon in less developed coun-t r i e s . Yet i t would be highly misleading to interpret these data as i f they represented what they purport to measure. Table 5. Rates of Urban Unemployment by Age 15 and 15-24' Over Ghana, 1960 Large Towns Bogota, Colombia, 1968 Buenos Aires, Argentina, 1965 Chile, 1968, Urban Areas Caracas, 1966 Guyana, 1965, Mainly Urban Areas Panama, 1963/64, Urban Areas Uruguay, 1963, Mainly Urban 21.9 23.1 6.3 12.0 37.7 40.4 17.9 18.5 11.6 13.6 4.2 6.0 18.8 21.0 10.4 11.8 155and. 15-24 Over /Venezuela,11969, .'UrbanAAreas 14.8 7.9 Bangkok, Thailand, 1966 7.7 3.4 Ceylon, 1968, Urban Areas 39.0 15.0 India, 1961/62, Urban Areas 8.0 3.2 Korea, 1966, Non-farm Households 23.6 12.6 Malaya, 1965, Urban Areas 21.0 9.8 Philippines, 1965, Urban Areas 20.6 11.6 Singapore, 1966 15.7: 9.2 Tehran City, Iran, 1966 9.4 4.6 Source: David Turnham, assisted by Ingelies Jaeger, The Employment Problem in  Less Developed Countries (Paris: 0ECD, 1971), Table III.2. For one thing, economists have failed to derive unambiguous definitions and measures of "employment," "unemployment," and "underemployment." Indeed the very meaning of "unemployment" in non-industrialised societies i s relative and arbitrary, i f "employment" i s taken to mean "wage employment" in the "mod-28 ern" sector. More to the point, the severity, both economic and social, of unemployment i s probably ameliorated given the wide range of alternative, un-o f f i c i a l a c t i v i t i e s , seemingly available to urban job seekers. As well, in Africa (except in Egypt and the Republic of South Africa) there are no reliable data on unemployment rates over time. The data that are 41 collected at labour exchanges have methodological problems that render them unhelpful as measures of unemployment or as bases for predicting trends in un-employment rates.-i.Seldom do labour exchanges function as they are intended -not a l l of the jobless bother to register and frequently those already in em-ployment also register as "unemployed" in the hope of securing better jobs. At the same time there i s a strong possibility that when registered job-.v<.\: seekers are successfully matched with job-openings their names s t i l l remain on the l i s t s of the "unemployed." Given these problems, Turnham, for example, must have been forced to rely on isolated surveys and census results. The striking feature of his data is not that they record unemployment rates in excess of 20 per cent (which would have been expected since there i s agreement among many observers on the "staggering" unemployment problem). Rather, his data indicate that in virtu-ally a l l instances unemployment rates in the 15-and-6ver category were less than 20 per cent, and in several urban centres the unemployment rates were actually quite modest. It could be that these surveys have consistently biased downward the unemployment results, either because the relevant definitions are too narrow or because a large amount of underemployment has been ignored (underemployment which, i f converted to equivalent unemployment, would yield rates in excess of 29 20 per cent). However by the same token i t could be said that they overes-timate unemployment because they have in fact largely measured "underemploy-ment." At the same time, neither surveys nor census data separated temporally can be considered to measure "trends," since different things may have been measured at different times. At the very least the implied precision of the figures to the f i r s t decimal i s probably unwarranted given the severe problems in determining the size of the labour force, the labour force participation rate and indeed even the total number of those in employment. 42 The d i f f i c u l t i e s are only compounded i f unemployment and underemployment are combined into one m e a s u r e . F o r one thing, "the concept of an 'equiva-...: 31 lent' rate of unemployment i s misleading and non-scientific." For another, for the concepts of "unemployment and "underemployment" to have u t i l i t y , they must mean different things. Presumably the impact of "unemployment" on i n d i -viduals i s different from that of "underemployment" as well as there being a differential impact of either phenomenon on society. This would indicate that 32 different policy options must be considered, j Very l i t t l e i s gained by treat-ing unemployment and underemployment in one composite measure unless one . places a high value on the p o l i t i c a l u t i l i t y of an exaggerated s t a t i s t i c of "unemployment.""^ At least with respect to Africa, there i s l i t t l e convincing empirical evidence of unemployment in excess of 20 per cent."^ Thus, i t seems that development specialists have been perhaps excess-ively preoccupied with "unemployment." This i s reflected in the relative ne-glect of the types of a c t i v i t i e s engaged in by individuals unable to secure "modern" sector jobs. This i s unfortunate since a r e a l i s t i c appreciation of employment-unemployment, standards of li v i n g , economic growth, income d i s t r i -bution and thus the human determinants of economic development demands more than simply focussing on the rather small "modern" sector. The remainder of this chapter i s largely concerned with these alterna-tive a c t i v i t i e s . Their existence helps to establish the point that the s p i r i t of i n i t i a t i v e can exist and even flourish among those too often considered part of a "pre-capitalistic traditional sector." To begin to gain an under^, standing of this complex phenomenon, i t i s worthwhile to examine briefly one of the primary theoretical constructs in development studies, the "dual eco-nomy." Onohevlevel it'seems that the early dual economy theorists have l e f t an unfortunate legacy of simplistic - indeed misleading -r assumptions :..: concerning individual behaviour in less developed countries. On another level, their emphasis on one sector of the economy has had a continuing influence on development theory and hence, on development strategies and.policies. E. The Dual Framework The concept of a dual economy was introduced by Julius Boeke in 1910 and subsequently became the chief theoretical tool in the study of Third World development."^ The essence of his conception of dualism rested on the existence, side by side, of a "foreign" sector and an "indigenous" sector. Boeke's conception of the indigenous sector was derived from distinc-tions he f e l t existed between social and economic needs. He referred to i n -nate, "East-West" cultural differences which precluded normal ("Western") economic motives in "Eastern" man, thus making traditional economic theory i n -applicable in non-western areas. Ihithis respect, he stated that one of the distinctive features of the dualistic economy i s "limited needs" in contrast to the "unlimited needs" of western society. Therefore Boeke declared, . . . anyone expecting western reactions w i l l meet with frequent sur-prises. When the price of coconut is', high, the chances are that less of the commodities w i l l be offered for sale; when wages are raised, the manager of the estate risks that less work w i l l be done; i f three acres are enough to supply the needs of the household a cultivator willlnot t i l l six; when rubber prices f a l l the owner of a grove may decide to tap more intensively, whereas high prices may mean that he leaves a larger of smaller portion of his tappable trees untapped.37 Since needs in Eastern societies are "social" rather than "economic," Boeke held that there i s an almost complete absence of profit seeking in the Eastern economy. While speculative profits are attractive "these profits lack every element of the regularity and continuity which characterize the idea of 38 income." Eastern industry i s typified by an "aversion to capital" in the sense of "conscious dislike of investing capital and the risks attending this.!' In further contrast to the Western ca p i t a l i s t i c sector, Boeke f e l t that 44 Eastern industry lacks organization,, discipline and accuracy. While "common sense" rules Western industry, Eastern society was apparently shaped by " f a t 39 talism and resignation." The proposition that individuals in "Eastern societies" (that i s , the "traditional sector") are not responsive to profit or income maximising oppor-tunities has been given the technical term "backward sloping supply of la-, r -bour."^ In effect, i t states that non-western societies w i l l not develop due to the alleged absence of the attitudinal characteristics associated with cap-italism. The belief that non-westerners are not responsive to incentives has achieved a certain persistence in writings and thinking on African labour. For example, the colonial authorities adopted the view that the wants of . Vi:, African labourers were limited, therefore, increases in wages would simply re-41 suit in individuals working fewer hours. Thus the colonialists were " j u s t i -42 fied" in pursuing a low-wage policy. Despite the implicit and explicit acceptance of the backward sloping supply curve hypothesis, there i s l i t t l e empirical evidence from the Third World to support the view that, in the aggregate, labour w i l l work less i f paid 43 more. The persistence of the belief that individuals in less developed coun-tries are not responsive to economic incentives (the "conservative peasantry") i s essentially part of the corpus of ideology that the state must transform 44 Third World countries i f they are to achieve economic: advance. Sir W. Arthur Lewis i s credited with re-working the concept of dualism by using i t as a description of i n i t i a l conditions that could be altered through appropriate policies. In this respect, his dual-economy model has '; been extremely i n f l u e n t i a l . ^ The Lewis model differentiates production, distribution and employment 46 into two-distinct sectors, one "capitalist," the other "subsistence." P.WF-Analysts u t i l i s i n g the Lewis framework have further differentiated the two • sectors as either (a) agriculture and industry, (b) traditional and modern,oor (c) rural and urban. Agriculture, invariably the largest sector in a less developed country, i s predominantly "traditional." Small-holder farmers employ "traditional" methods in "subsistence" production although possibly a growing percentage of output i s marketed for cash:sale. A l l non-agricultural activity i s not of course conceived as s t r i c t l y "industrial." Rather i t includes "traditional" crafts, "cottage" industry, "petty" commerce and "small-scale" construction. Nevertheless the thrust of the Lewis-type models conveys an impression that these activities are unproductive, stagnant, and make only a marginal contri-bution to national output. Indeed, Lewis stated: These occupations usually have a multiple of the number they;'need, each of them earning very small sums from occasional employment; frequently their number can be halved without reducing output in this sector. Petty r e t a i l trading i s also exactly of this type; i t i s enormously ex-panded in over-populated economies; each trader makes only a few sales; markets are crowded with s t a l l s , and i f the number of s t a l l s were greatly reduced the consumers would be no whit worse off - they might be better off, since r e t a i l margins might fal l . ^ 7 Although mainly urban, t h e s e a c t i v i t i e s f i t uneasily into the model of dynamic urban centred growth and are lumped with the "±'Ea:MtronaU"Esec'.tor.. The 'feaditisnaltvy rural and predominantly agricultural " s u b s i s t e n c e " sector per se i s characterized by a lack of capital, poverty levels of income and slow growth or stagnation. By contrast, the "capitalist" sector i s "modern," .\.:±-r" mainly urban and industrial. It i s market-oriented with "modern" commercial, financial and transport f a c i l i t i e s . Using capital-intensive methods of pro-duction i t grows rapidly; labour productivity and wages are substantially higher than in the subsistence sector. Development then becomes a process of expanding this "modern" sector, penetrating the "subsistence" sector and 46 transferring labour from "traditional" to "modern" employment as rapidly as available resources in the "modern" sector w i l l permit. 48 Early Lewis-type dual economy theories were thus equilibrating given the condition of "unlimited" supplies of labour, industrial expansion was not constrained by a shortage of manpower. Indeed, since these theories assumed that the marginal product of agricultural labour was negligible, zero or even negative i t was f e l t that surplus rural workers could be absorbed into indus-t r i a l employment without reducing total agricultural output and with the^in^ dustrial wage rate constant at or near the subsistence level. Lewis, for ex-ample, assumed that constancy of wages would lead to high and possibly rising rates of profits as a result of technological progress. This would increase capital formation and continuing re-investment thus raising the demand for l a -bour and finally exhausting the labour surplus in agriculture. The period of constant wages would then be superceded by one of rising wages; and the whole process would be accompanied by increasing productivity, increasing capital formationn and modernization of technology, that i s , "development." Moreover, in a practical sense, wages would not be at a subsistence level but would i n -49 elude a differential over and above agricultural income of, say, 30 per cent* In terms of the model, inequality in income is essential for economic development.^ However, mere inequality of income i s not enough to ensure a high level of saving. Lewis was concerned that landlords might be given to "prodigal consumption" rather than productive investment. Therefore i t i s the inequality which goes with profits that favours capital formation, and not the inequality which goes with rents. The Lewis model suffers from the same defect as Boeke's conceptualiza-tion. Fundamentally, the distinction between the two sectors i s too sharp. The subsistence sector is apparently characterised by a complete lack of i n -vestment; the supply of productive effort i s not responsive to new wants; the 47 opportunity costs of labour are negligible; and, there i s no apparent movement toward an exchange economy. These notions have had a profound influence on dev velopment thinking until the very recent past. They have contributed to the formulation of development strategies that have been consistently biased .. : against both agricultural development and small-scale business. As well, the belief in the existence of unresponsive peasants in a stagnant subsistence sec-sector appears to be linked to state policies that restrict consumption in or-der to generate savings for state-directed investment in the "capitalist" sector. Indeed, Lewis has said that the . . . central problem in the theory of economic development i s to under-stand the process by which a community which was previously saving and investing':^ or 5 per cent of i t s national income or less, converts i t -self into an economy where voluntary savings i s running at 12 to 15 per cent of national income or more.51 He leaves l i t t l e doubt of the "process" he i s contemplating: since higher wages, earnings in agriculture or rents retard capital accumulation, they must be resisted. In other words, the model largely dismisses the u t i l i t y of higher and more varied consumption as an incentive for either investment or greater effort. The legacy of this model l i e s in the tenacity of the mechanical approach to development - an approach so rar i f i e d that i t abstracts from human actions. Certainly i t s predictive capability has been low. F i r s t , the model assumes that the rate of rural-urban labour migration and employment creation in the "modern" sector i s proportional to the rate of capital accumulation. In other words, the proportion of the labour force in industry should increase, and the rate of growth of industrial employment ; should equal the rate of growth of industrial output. However, as was shown in Table 4, throughout the Third World, industrial output and employment have not 48 increased at the same rate. More important, there are countries in which the proportion of the labour force employed in manufacturing has increased much less than the model would predict (for example, Ethiopia, Nigeria), others in which the relative size of the industrial labour force has remained virtually constant (for example, Egypt, Brazil), and s t i l l others in which the absolute number in industrial employment has declined (for example, Thailand) despite impressive output growth rates. Moreover, even though the proportion of those engaged in ''modern"iiridustryMay increase in relation to other i'lrnddern^esector activities and even though the absolute number of those engaged in a l l i"mddem" sector ac t i v i t i e s may increase, the proportion of the labour force engaged in "modern"ssedtor activities may decrease. Indeed, this i s most likely to occur, bearing in mind the differential growth rates of the urban and rural popula-tions and the very small size offthetv-'modern'" sector in a typical less developed country. Second, there is l i t t l e evidence to substantiate the existence of ex-52 tensive "surplus" labour in the rural areas. While there may be some sea-sonal unemployment, rates in excess of 5 per cent are now considered to be very rafe.^^ Indeed, at peak periods in the agricultural cycle there may be an acute shortage of labour."^ This suggests that i f the same organization i and techniques of agricultural production are retained, then transferring l a -bour to the urban industrial sector must lead to fal l i n g agricultural output. Third, at the same time, a most important finding i s that seasonally available rural manpower appears to be fully engaged in self-created non-agricultural a c t i v i t i e s - for example, furniture making, saw mills, bicycle repair, charcoal burning, tailoring, and light manufacturing."^ This suggests that voluntary saving from consumption i s probably occurring in the "subsis-tence"i.sector and the resources thus secured are probably being invested in 49 different types of income-earning a c t i v i t i e s . To the extent that this i s the case, i t i s misleading to characterise an entire category of individuals as un-responsive and unenterprising in the face of possible income maximising oppor-tunities . Fourth, with respect to agricultural activities the assumption that farmers in less developed countries do not respond to price incentives has not been substantiated. Even a cursory look at cash crop production indicates that small-scale farmers carry out substantial capital formation in order to in-?::?; crease output for sale in domestic and foreign markets. The quantitative sig-nificance of this activity can be inferred from the notable and rapid expansion of smallholder cash crops such as the kola nut in Nigeria, cocoa in Ghana, rubber in Malaysia and tea and coffee in Kenya. While the Lewis model was a significant advance in welding some observa-tions to theory, i t s misleading assumptions about individual behaviour seem to have had an unfortunate effect on the study of the developmenttprocess. The focus on "capital formation," "investment" and "saving" has contributed to the neglect of the human actions that l i e behind these macro concepts. As well, the Lewis approach remains unconvincing since i t offers no answer to the ques-tion "why should capitalists invest and re-invest?" particularly when there are no apparent consumers for any goods that are to be produced. Unlike the Lewis formulation, later dual economy theories are essen4-i:c.l.". t i a l l y d i s e q u i l i b r a t i n g T h e "modern" sector i s seen as exploiting the "traditional" sector principally through adverse terms of t r a d e . S i n c e urban wages, subject to the combined pressure of government minimum wage laws and trade union activity, grow much faster than rural incomes, a mass exodus from the rural areas occurs. As well, the pattern of urban industrialization fv. emphasises product types and production techniques at variance with the factor 50 endowment of the country. C a p i t a l - i n t e n s i v e advanced technology u t i l i s e d i n the production of e l i t e - o r i e n t e d consumer goods minimises the labour absorp-t i o n c a p a c i t y of the "modern" sect o r while f a i l i n g to meet the " b a s i c needs" 58 of the m a j o r i t y of the p o p u l a t i o n . While these l a t e r dual economy models thus o f f e r v a l u a b l e i n s i g h t s i n t o some of the symptoms of misguided development, the dual economy approach so permeates research t h a t some very important aspects of the process of development i n poor c o u n t r i e s are perhaps being overlooked. Between the " t r a -d i t i o n a l " economy of peasant a g r i c u l t u r e and the "modern s e c t o r " of a few densely populated c i t i e s , there appears to be an unregulated s e c t o r of e n t r e p r e n e u r i a l a c t i v i t y . Since t h i s a c t i v i t y does not appear i n s t a t i s t i c a l yearbooks or economic surveys development s c h o l a r s have l a r g e l y by-passed i t s c o n t r i b u t i o n to the generation of employment, the d i s t r i b u t i o n o f income and the p r o v i s i o n of goods and s e r v i c e s . In other words, dual economy models, by presenting an o v e r s i m p l i f i e d conception o f the development process have d i v e r -ted a t t e n t i o n from some of the main aspects of economic advance. At the same time, t h i s s e c t o r may be o f c o n s i d e r a b l e i n t e r e s t f o r de-59 velopment theory to the extent that i t represents a "spontaneous order," an order a r i s i n g not from anyone's p a r t i c u l a r design or plan but r a t h e r the .sum of countless voluntary i n d i v i d u a l p l a n s . The existence of a s e l f - g e n e r a t i n g endogenous competitive order would f u r t h e r challenge models o f development th a t s t i l l d i s t i n g u i s h between the dynamic responsive "modern" sect o r and the unresponsive, stagnant " t r a d i t i o n a l " s e c t o r . As w e l l , i t may help to r e f u t e the e s s e n t i a l l y i d e o l o g i c a l c l a i m that development caneohly occur through comprehensive s t a t e p l a n n i n g , increased " d i s c i p l i n e , " and f o r c i b l y reduced consumption. ' 51 Rather than inquiring into the origin of this spontaneously evolving order, the remainder of this chapter i s concerned with the apparent structural result of countless individual plans and their revisions. It seems that the pursuit of these plans has helped to fashion a distinctly complex urban eco-nomy in the less developed world. F. The Structure of the Urban Economy Developmental economists and planning o f f i c i a l s have been mainly uncon-cerned with, and often unaware of the existence (let alone the significance) of a novel development sector in their midst. On the other hand, spatial geo-graphers and social anthropologists can be credited with highlighting the pre-sence of a range of activities that do not f i t into the usual dual economy framework. For example, McGee has characterised most c i t i e s of the less developed world as "consisting of two juxtaposed systems of production - one derived from capitalist forms of production, the other from the peasant system of pro-duction."^ Milton Santos has recently described these two systems of produc-61 tion as "circuits," a concept which effectively portrays the dynamic aspect 62 of activity and flow within and between these sub-systems. A similar concern with moving away from the static dualistic approach i s FriedmanntanrJSullivan's effort to construct a "heuristic model" of the urban economy.^ Their model i s particularly interesting as i t is concerned 64 with rural-urban migration and hints at the complexities this introduces for the concept of urban unemployment. The model i s intended for countries with rates of urban growth roughly twice the rate of increase in total population, and whose larger c i t i e s have a "modern" sector that accounts for at least 15 per cent of the urban work force. These c r i t e r i a are generally typical of African countries. Since the model indicates the intricate pattern of the urban economy i t i s worthwhile examining i t in some detail. The model i t s e l f consists of three urban sectors distinguished accord-ing to the forms of activities within each s e c t o r ^ (see Figure 1). The "individual-enterprise sector" (I) i s the least capital intensive, has the least productive labour and "includes the unemployed and self-employed workers that make up the 'street economy' of a c i t y . " ^ Two subsectors'.are:.assigned..' to sector I: f i r s t , unemployed workers, the U-subsector, which includes f i r s t -time job seekers, recent migrants to the city and workers laid off from jobs i in any of the subsectors; second, thelindividual enterprise subsector (I). The authors give an indication of the range of a c t i v i t i e s in the I-subsector: handicraft workers (seamstresses, rope makers, silversmiths), street traders and service workers (peddlars, shoeshine boys, parking lot attendants, messen-gers, food vendors, repairmen), casual construction workers (carpenters,.; bricklayers, plumbers, electricians) and "underground1^ occupations (prosti-tutes, professional beggars, police spies, pickpockets, dope smugglers). While the I-subsector i s strongly competitive, there i s a good deal of lateral movement of workers from one category to another with many holding multiple jobs. That these are not necessarily dead-end jobs i s indicated by the "astonishingly versatile urban experience" of many I-sector workers which "may f a c i l i t a t e upward job-mobility later on."^ If the available work i s spread among the largest possible number of workers at the expense of income, incomes may be very low and frequently intermittent. This sector may be considered part of the o f f i c i a l l y invisible or • b'^.r* phantom-survival economy into which flow urban job-seekers excluded from the corporate sector. Being unrecorded and often involving i l l e g a l (that i s , non-licensed) activity, workers in this sector are often harassed by police and 53 Figure 1: Structure of Urban Employment in a Developing Economy subsector designation P -P C E CO i—I CO - c CO O -P f-l CO -H D P TJ CD CD CD C Q. f-l CD O f-i -Q_ CD i—I CD CO CO •H E f-l f-l _ Q. O CD f-i Ci_ CD C i—I -P -H CO C ID CD ** •a co •H ^ cn > i-H C •H -H -H •a E > C CO CO •H C|— CO I o I—I C L C E -P CD CD C a. c CD O D E ?o urban labor force - p c CD CD cn E f-l CD C co -P t-i >, i—1 CO CD -P p > •H - o o CO c CL cn c O P CD • H O ~ 4-> -P O -P CO c CO *H CD •H P --o O CD CD C r-H Q. CO P CD CO P -H O > -P O P CD •H O . P CL P C co - CD CO o 4-> -P _Q C C -C CD CD » cn E CO •H C >s Oi .c P M C CD -H -H > E > o co co Cn Ci_ CO y co C|-co -P •H C L CO >,| O -P •H E CO 3 C •H CD "O 4-> CD C E -H CO - p > •H -P D.-H co co o c CD 2 -P O C P/M Senior 1 Business I i ' 1 1 University f; 1 Free < 3 Government 1 Leaders & 1 Professors \ 1 Professionals Offic i a l s , 1 Corporate . r I 1 including 1 Military 1 Officers «j_ -j—> <— J — > <<_.-L> 1 Cs Owner-entrepreneurs, middle-level o f f i c i a l s , supervisors 2-5 Cp Office Workers, Officials & Teachers Trade & Service Workers Factory Workers Skilled Construction Workers 10-30 F Trade & Service Workers Workmen 35-45 D Domestic Servants Handicraft I Street I Casual "Underground" 20-Workers I Traders & I Construction Occupations 25 I Service I Workers I Workers I ' <- —-> <— —> <— —> A V Unemployed Workers 5-15 ./ CD C C L D C P-O < CD CD rt i-J P- CO O P-ZZ r f / co o CU CD f—1 "O CD P-i-i r f P- CD CD I—' CL P-CO CO rt CD O CD rt" D O CL i-i CD CD C L CO CD o r f O i-l CO TD co CD ti CD O O n r f r f O O CD 3 i-i n C L •a r f CD CD H p ' C L 3 s CD CD CD ti C L CD C o CD CO CD C L CD r f C O CO Z3 P- o rt CD O O CD O O Z3 n- H r f 1 p- O x ; \ O >-i ZJ o r f CD O r f CD C L P- P-O n-o CD CD "O 3 i-i D IS CD 3 CO CL P- P- C • 3 r f i-J P- CD r f < M I") CD P-=3 < P- . r f CD r f CD h-" CD C L i-i C CO CD O CD O CD Z3 O •< r f O r f p - O: O P- i-i D D O O 3 CD Note: Structure of urban employment in a developing economy. Agricultural labor force residing in urban areas i s excluded from this model. Unemployed workers belonging to the educated elit e (P/M- and Cs-sectors) are not formally included in this model. So urce: John Friedmann and Flora Sullivan, "The Absorption of Labor in the Urban Economy: The Case of Developing Countries." Economic Development and Cultural Change, Vol. 22, No. 3 (April 1974) p. 338. 54 misunderstood by government. Friedmann and Sullivan note that: A large proportion of the urban labour force, [about 20-25 per cent], living within the interstices of urban society, has therefore no legal existence at a l l . This, surely, is one of the most incredible facts of city l i f e in the developing countries.68 It should be remembered that "having no legal existence" means this whole stratum of activities i s excluded from o f f i c i a l s t a t i s t i c s and therefore from the bulk of academic writings. In the second sector, the "family enterprise sector" (F) are workers in small trade and service establishments and manufacturing workshops employing less than 10 workers. The F-sector i s distinguished from the I-sector by a higher degree of organisation, the employment of both wage and unpaid family workers, the occupationcrif ;a fixed abode and a larger amount of capital per worker. It produces "traditional" commodities for a low-income mass market, and uses indigenous raw materials. Product pricing in the F-sector is ex-tremely competitive, the lower limit being related to the subsistence level of the family. Firms in this sector are often initiated by the pooling of resources by a clan or extended family. Like the I-sector, stat i s t i c s are typically not available on the number of urban workers in the F-sector, although Friedmann and Sullivan estimate that 35-45 per cent of the urban labour force may be in the "family enterprise sector." If this i s the case then the I- and F-sectors together act as remarkable absorbers of urban job-seekers in employment ac t i v i t i e s , again, for the most part, unrecorded in of-' f i c i a l s tatistics and therefore ignored in most academic analyses of " .' development. The third sector i s the "corporate sector" (C) containing the corporate production subsector (Cp), the corporate supervisory subsector (Cs) and the professional-managerial e l i t e (P/M). This i s the sector that most economists refer to as the "modern" sector. It i s that part of the economy which is 55 directly affected by labour legislation in the form of working conditions, :i minimum wages and other forms of state regulation. Workers in this sector, perhaps as few as 10 per.cent of the urban labour force, are the "labour aris-tocracy" enjoying legal rights and incomes far in excess of those in the other sectors. As the chief beneficiary of development policy, and partly due to i t s enumeration in o f f i c i a l s t a t i s t i c s , the C-sector appears to be the most productive sector of the economy. However, as a result of i t s high capital intensity, the a b i l i t y of this sector to expand employment i s exceedingly restricted. From this model, Friedmann and Sullivan suggest three hypotheses. : Fi r s t , the I-sector (U + I), as a percentage of the urban labour force "tends 69 to remain f a i r l y stable over a wide range of variable conditions." They ar-gue that unemployment and underemployment in the I-sector does not depress wages in the "high ranking" sectors because: (1) the Todaro-derived expecta-tional attraction for migrants controls the rate of migrant activity ;eahd( ('2) the total surplus over subsistence (coming primarily from F- and Cp-subsectors) establishes an upper limit to the absorption of labour by the urban economy. They appear to endorse the Todaro view that a significant improvement in the urban job situaton w i l l accelerate the inflow of migrants, which increases the absolute number (not the per cent) of unemployed; at the same time, more urban in-migrants decrease the available income surplus, thus reducing migration. The second hypothesis i s a "pressure to subsistence" as urban workers redistribute their earnings among members of the extended family. The maximum urban size i s then at subsistence levels. Again, they argue that i f more urban services are provided, for example, low-income housing, this increases the income in kind available for sharing and w i l l result in greater in-, :;. migration from rural areas. The third hypothesis i s "proletarianisation" caused by accelerated i n -dustrialisation in the corporate sector. Incomes increase in Cs and P/M over time while the expansion of corporate production destroys F-sector businesses, driving labour back into the I-sector. Despite this, in-migration s t i l l i n -creases due to rising expectations of employment in the C-sector. They pre-dict that increased industrialisation w i l l result in higher unemployment and lower aggregate labour productivity, creating impoverishment in the i - and F-sectors. The Friedmann-Sullivan model has been presented in some detail since i t portrays something of the complexity of the urban labour market in a manner not indicated by the usual dual analysis. Also i t reinforces the contention made earlier: to equate rapid urban growth and slow, growth of recorded em-ployment with increasing rates of unemployment i s simplistic and misleading. Through work and income sharing the I- and F-sectors may be capable of absorb-ing great amounts of labour, although this i s not registered in o f f i c i a l sta-t i s t i c s . This must certainly weaken those analyses of unemployment and income distribution which depend on available s t a t i s t i c s of the labour force, employ-ment and earnings. Indeed, given the range of acti v i t i e s - many of which could not possibly be considered "unproductive" in the Lewis sense - the valu-ation given in o f f i c i a l s t a t i s t i c s for such standard concepts as "capital for-mation" and "Gross Domestic Product" must be treated with some skepticism.^ On a related issue, the preoccupation of policy-makers and scholars with the size and rate of growth of "modern" sector employment and output has diverted attention from techniques of survival and progress of 60-85 per cent 71 of the urban labour force. This suggests that definitions of "employment," "unemployment," "productive," and "unproductive" are essentially open to choice. They seem to depend on the meaning given to a "worthwhile" pursuit, 57 a procedure at once value-laden and conditioned to some degree by the position 72 of the viewer in the social and economic structure of the country. Despite the value of the Friedmann-Sullivan model in delineating the salient features of the urban economy in less developed countries, the inter-actions posited by the authors raise several other issues that deserve comment. Firs t , they have relied on the slippery concept of a "subsistence level" of income in establishing a link between the employment of labour and remuneration of labour. The notion of a subsistence level i s also inherently a normative concept involving a judgement which i s unlikely to be;the same for o f f i c i a l s , planners and the population concerned. As well, i t i s not clear why workers in the I- and F-sectors..would;price their products with reference to the sub-sistence level. Conditions in their market are uncertain and the subsistence level i t s e l f i s probably unknown.^ Second, under the f i r s t hypothesis the authors clearly f e l t that "unem-ployment" in the I-sector ought to depress wages in the other sectors. They discount this on the basis of the Todaro expectational framework. Yet they also noted that C-sector workers have greater legal protection through such measures as o f f i c i a l minimum wage laws. It has become standard in the eco-nomic literature on Third World employment to point out that simply because they are not allowed to f a l l , wages do not act as a labour market clearing function. This downward rigidity thus insulates the C-sector from the free play of supply and demand of labour in the urban economy. Hence the C-sector wage rate cannot function to clear the market; that role belongs to the unem-ployment rate. However, the concept of "unemployment" certainly suffers when self-help employment and the family structure of business i s the backbone of the urban economy. 58 Perhaps the major weakness of the.Friedmann-Sullivan model i s the ne-glect of intersectoral dynamics, particularly the role of the state vis-a-vis the C-sector on the one hand and the I- and F-sectors on the other. The v authors do remark that: In a situation such as this, marked by extreme and steadily increasing forms of inequality, governments have essentially two options: either to side with those who wield theiinstrument of economic power and use repressive measures against the poor and their advocates in order to maintain p o l i t i c a l s t a b i l i t y , or to assume the active leadership of the mass of the population, both.rural and urban, and to devise an economic  system that w i l l achieve continued economic expansion together with i n - creased equality in the distribution of the product.74 Friedmann and Sullivan argue that to achieve such an economic system^ the state must simply shift i t s policies: 1. from maximising growth in GNP to maximising "human potential"; 2. from a system based on inequality to one of greater equality and social justice; 3. from foreign dependence to greater national autonomy and self-reliance; 4. from import substitution to an explicit policy of industrial dualism; 5. from urban primacy to balanced rural-urban development; 6. from high rates of population increase to stabilisation. Some of these policy shifts seem vague and mutually incompatible as ob-jects of policy. For example, what i s the meaning of "industrialisation"? Does i t refer to the growth of manufacturing as part of the secular growth of the economy or a policy of state subsidisation or state operation of manufac-turing? If the latter, from whom i s the state to receive the necessary re-sources, particularly i f foreign involvement i s to be eschewed in favour of "national autonomy"? The necessary investment must come from either resources saved from consumption (since Friedmann and Sullivan giventhe primary role to the state, this must involve compulsion) or increased resources from improved economic performance or resources supplied ex ternally. Presumably a shift from "foreign dependence" to "national autonomy" rules out the last method. 59 Therefore, resources must come either from forcibly reducing consumption or improved performance. But is the f i r s t compatible with "maximising human po-tential" (however defined) and "equality"? Is the second compatible with a shift from maximising growth? Similarly, given the differential allocation of attitudes, aptitudes, motivations and s k i l l s within any population, i s "maxi-mising human potential" compatible with "greater equality" or "social justice"? Nor i s i t clear that maximising growth in GNP i s incompatible with long run improvement in the distribution of the product, especially i f the composition of the GNP reflects desired goods and services. Although some of these policy i n i t i a t i v e s may be laudable (few individ-uals are against "social" justice - although fewer s t i l l may agree on what i s meant by that term), Friedmann and Sullivan do not indicate either the degree of incompatibility between the goals themselves or between them and other ob-jects of policy. In effect the authors have ignored the role of polities in fashioning a development strategy, the result of which may be a tiny protected sector of affluence in the face of mass poverty.^ What seems to be required in model building in development studies i s the avoidance of what one observer has termed "the abstraction from poli^Y.:c,, t i c s . " ^ One approach, derived from studies in West and East Africa, and used here, appears to offer some promise for incorporating p o l i t i c a l factors into development models. On one level, this approach may help to focus on the state's role as regulator in terms of access to opportunities and resources in the economy. Thus, i t may serve to demonstrate that access i s unequal, and hence that inequality i s inherent in the p o l i t i c a l structure of less developed countries. On another level, this approach emphasises the wide-ranging ingen-uity of individuals in meeting their basic needs, one result of which may be a spontaneous development sector. In other words, as i t i s used here, i t seeks to avoid what may be termed the "abstraction from human actions," an abstrac-tion as prominent in much of the development literature as the "abstraction from p o l i t i c s . " G. The Formal-Informal Model The Friedmann-Sullivan model indicates that the conventional dual ;-':< framework, which distinguishes between a "traditional" sector and a "modern" sector i s i l l - s u i t e d to an analysis of the urban economy in a less developed country. For one thing, in terms of the dual economy model, individuals who are not engaged in either agriculture or industry are typically assumed to be unemployed. However, with Hart's pathbreaking analysis of the "informal" urban eco-78 nomy in Ghana, emphasis has shifted to the variety of hew income-generating activities, a c t i v i t i e s that have heretofore remained relatively obscure. His distinction between formal and informal opportunities i s based on that between wage-employment and self-employment. By their nature, informal activities are concentrated in the unenumer-ated sector of the urban economy. Since they are not counted by the o f f i c i a l data collection machinery, public o f f i c i a l s , planners and other interested in 79 development do not include them as part of the monetary or "modern" sector. Hart, on the other hand, indicated in his typology of informal sector a c t i v i -ties, numerous legitimate and illegitimate income opportunities in the urban economy,, (see Table 6). The wide range of acti v i t i e s i s reminiscent of the Friedmann-Sullivan model of the urban economy except that Hart emphasized the unofficial production and distribution of goods and services. The value of this typology i s that i t dispels the view that unenumerated activities consist largely of boot-blacks and street-hawkers. 61 Table 6: Types of Income Earning O p p o r t u n i t i e s i n the Urban Economies of Less Developed Countries Formal Income Opp o r t u n i t i e s (a) P u b l i c s e c t o r wages. (b) P r i v a t e s e c t o r wages. (c) Transfer payments - pensions, unemployment b e n e f i t s . Informal Income O p p o r t u n i t i e s : Legitimate (a) Primary and secondary a c t i v i t i e s - farming, market gardening, b u i l d i n g c o n t r a c t o r s and as s o c i a t e d a c t i v i t i e s , self-employed a r t i s a n s , shoemakers, t a i l o r s , manufacturers of beers and s p i r i t s . (b) T e r t i a r y e n t e r p r i s e s - w i t h r e l a t i v e l y l a r g e c a p i t a l i n p u t s - housing, t r a n s p o r t , u t i l i t i e s , commodity s p e c u l a t i o n , r e n t i e r a c t i v i t i e s . (c) S m a l l - s c a l e d i s t r i b u t i o n - market o p e r a t i v e s , p e t t y t r a d e r s , s t r e e t hawk-e r s , c a t e r e r s i n food and d r i n k , bar attendants, c a r r i e r s (kayakaya), commission agents,.and d e a l e r s . (d) Other s e r v i c e s - musicians, launderers, shoeshiners, barbers, n i g h t - s o i l removers, photographers, v e h i c l e r e p a i r and other maintenance workers; brokerage and middlemanship (the maigida system i n markets, law c o u r t s , e t c . ) ; r i t u a l s e r v i c e s , magic, and medicine. (e) P r i v a t e t r a n s f e r payments - g i f t s and s i m i l a r flows o f money and goods o between persons; borrowing; begging. Informal Income O p p o r t u n i t i e s : I l l e g i t i m a t e (a) Services - h u s t l e r s and s p i v s i n gen e r a l ; r e c e i v e r s of s t o l e n goods; usury, and pawnbroking (at i l l e g a l i n t e r e s t r a t e s ) ; drug pushing, p r o s t i -t u t i o n , poncing ( ' p i l o t boy'), smuggling, b r i b e r y , p o l i t i c a l c o r r u p t i o n Tammany H a l l - s t y l e , p r o t e c t i o n r a c k e t s . (b) Transfers - petty t h e f t (e.g. p i c k p o c k e t s ) , larceny (e.g. burglary and armed robbery), p e c u l a t i o n and embezzlement, confidence t r i c k s t e r s (e.g.. money d o u b l e r s ) g a m b l i n g . Source: K e i t h Hart, "Informal Income Opp o r t u n i t i e s and Urban Employment i n Ghana," Jo u r n a l of Modern A f r i c a n S t u d i e s , X I , No. 1 (1973), p. 69. The ILO mission to Kenya incorp o r a t e d the " i n f o r m a l " s e c t o r as a par t 80 of i t s a n a l y s i s . That report defined i n f o r m a l a c t i v i t i e s as ways of doing t h i n g s , c h a r a c t e r i s e d by: ease of entry; r e l i a n c e of indigenous resources; family ownership of e n t e r p r i s e s ; s m a l l - s c a l e of ope r a t i o n ; l a b o u r - i n t e n s i v e and adapted technology; s k i l l s acquired outside the formal school system; and unregulated and competitive markets. The characteristics of the formal sector are the obverse of the above. Thus, entry by new enterprises i s d i f f i c u l t ; enterprises frequently rely on overseas resources and are corporately owned; they are large-scale, capital-intensive and often use imported technology; s k i l l s are formally acquired and often expatriate; and, formal enterprises 81 operate in protected markets. These relatively crude i n i t i a l studies performed a useful service for development theory by indicating some neglected or at least relegated areas. Thus i t becomes more apparent that the manner and ways in which individuals cope with rapid social and economic change might have an important bearing on the genesis and direction of that change. In other words, the existence of the "informal sector" provides an entry into development theory for an appre-ciation of the micro foundations of the process of development. Nevertheless, the concept of the "informal sector" i s not without draw-backs. The criticisms which may be levelled against i t , indeed against the formal-informal dichotomy, indicate that problems exist with this attempt at bifurcating the?economy into units useful for development policy. It i s these criticisms which occupy the next section of this chapter. H. Weaknesses in the Formal-Informal Dichotomy The main drawbacks of. the "formal-informal" distinction can be viewed from the following perspectives: level of aggregation; linkages between the sectors; and the determinants of inter-^and intra-sectoral change. An examination of Hart's typology of formal and informal opportunities indicates the presence of an astonishingly varied range of ac t i v i t i e s within the urban economy. While this opens up exciting and new vistas for the study of urban employment and unemployment i t simultaneously^complicates an analyt-i c a l approach concerned with the formulation of development policies. In 62 other words, while useful as a heuristic device in development studies the : "formal" and "informal" elements are presently too broadly conceived to be helpful in policy formulation. It i s apparent from both Hart's formulation and the ILO l i s t of defining characteristics that a significant degree of structural heterogeneity exists within the informal sector. Indeed, the formal sector is scarcely more homo-geneous. This certainly tends to weaken the appropriateness of single analyt-i c a l categories. More to the point, the vast multitude of activities raises the disturbing thought that, as presently conceived, these activities may be sufficiently disparate as to invalidate using the concept of a "sector," except at a very high level of generalisation. Implicitly recognising the d i f f i c u l t i e s associated with highly aggrega-tive concepts, Souza and Tokman refer to "layers" of formal and informal a c t i -82 vities within a structurally differentiated urban economy. However they failed to elucidate the distinguishing features of the "layers" or the pro-cesses which encourage or prevent enterprises from alternating between the "layers." Similarly, Standing has proposed dividing the urban economy into three categories on the basis of employment. Thus, he suggests the following model: the formal sector, sub-differentiated into "core" and "periphery"; the informal sector; and the irregular sector ("which includes the scuffling unem-83 ployed and various fringe groups ... „. .")„ •) Disregarding problems in determin-ing the distinctions between "core," "periphery" and "fringe" ac t i v i t i e s (for example should the distinctions be made on the arbitrary c r i t e r i a of income5 or "productive" employment, or hours worked?) this model i s based on a disag-gregation of urban labour markets rather than urban enterprises. Thus, i t simultaneously simplifies and complicates the formal-informal analysis. Rienefeld has also taken issue with the high level of aggregation in the formal-informal distinction. He favours an analysis "in terms of an interac-84 tion between different modes of production" in the urban economy. At the same time, Sinclair urges the recognition of "gradations" in the urban economy 85 rather than the " r i g i d " and "often unhelpful" formal-informal dichotomy. The recent ILO mission to the Sudan has attempted to combine these var-ious points by arguing that "our understanding of the informal sector would be enhanced i f we viewed i t as a heterogeneous multi-dimensional or multilayered 86 phenomenon." Thus they distinguish four sub-groups within the informal sec-tor. They state: The picture that emerges for the informal sector in the Sudan i s that of heterogeneous and complex a c t i v i t i e s . At i t s most advanced level we have the well-established enterprises carrying out the bulk of r e t a i l trade. At i t s middle level, where the majority of establishments exist, we have the multitude of small manufacturing, service and commercial es-tablishments employing a large number of people who are making a reason-able living and who are there to stay. Finally we have the traditional petty vendors who are in transition to and from formal-sector jobs and who at the moment do not seem to constitute a significant portion of the Sudanese informal sector.^7 Thus the f i r s t c r i t i c a l problem in using the formal-informal dichotomy is the apparent homogeneity i t confers on a wide range of a c t i v i t i e s . Without 88 disaggregation, this could degenerate into a misleading or t r i t e "reservoir" or residual model thus obscuring the key points of entry for development theory and policy. A less encompassing and more enlightening approach might begin by focussing on the micro act i v i t i e s per se in a manner similar to urban anthropology. This might also mitigate the apparent tendency to assign a p r i -ori:,characteristics to the various "dimensions" or "layers" of the urban economy. The second c r i t i c a l concern involves the interaction or linkages be-tween "informal" and "formal" a c t i v i t i e s . Preoccupation with refining defini-tions and assigning characteristics has obscured theppremise that, to some 65 extent, i t may be the interactions or relations between these sub-systems that give rise to the defining characteristics. Moreover, i t i s unclear whether the formal-informal distinction represents a pattern of continuous variation or an actual dichotomy. This might bevinv.estigated through an analysis of the types of connections between the various elements in the urban economy. Thus, the ILO report on Kenya, by calling for linkages between thejformal and infor-89 mal sectors through such devices as subcontracting, seems to have built a discontinuity into the model which may in fact not exist. King's research for example, indicates that linkages may already be present in terms of materials, 90 products, services and the mobility of individuals. Indeed, i t may be that the structure of relationships between informal and formal enterprises has a direct bearing on the characteristics of informal a c t i v i t i e s . In other words, there may be few inherent obstacles to the expan-sion in size, scope and pr o f i t a b i l i t y of informal a c t i v i t i e s , but such ex=-c.;.---pansionii may be constrained by the structural advantages bestowed on the for-mal sector. Thus, the c a l l for closer linkages should be treated with some caution. Leys, for example, has warned that close relationships between the formal and informal enterprises may eventually result in the demise, or at least "exploitation" of the latter as a result of the oligopolist power of the 91 former. On the basis of available research, however, i t i s too soon to gen-eralise about the extent and manner in which linkages may be occurring between the two portions of the economy. This leads to the third major criticism of the formal-informal dichot-omy. The fact that enterprises in the informal part of the economy may be marked by small scale, low incomes and high labour intensity while formal en-terprises may typically be the opposite, does not reveal the dynamic processes which may give rise to these features. Analysis conducted largely through definition begs the central issues raised in this thesis - what factors largely determine the process of development and what factors largely condi-fik tion the direction of development. Thus, these are three of the main drawbacks of the "formal-informal" dichotomy. F i r s t , heterogeneity within each of the categories renders a high level of aggregation inappropriate. Second, the dichotomous mould obscures the types of relationships between the two parts that may give rise to the ascribed characteristics. Third, the formal-informal distinction does not readily encompass the mechanism for creative of destructive change over time. Thus, even i f there i s agreement on standard terminology this i s unlikely to overcome what seem to be weaknesses in the theoretical basis of the model. However, the model does avoid the negative bias against what i s typi-cally termed the "traditional" sector in development studies. Indeed, i t em-phasises that not a l l the activities excluded from the "modern" sector desig-nation are ipso facto in the "traditional" or "subsistence" sector. Rather, i t implies that an unofficial shift may be occurring among countless individ-uals from subsistence to an exchange economy based on cash income. The manu-facture, production and distribution of goods and services for sale to unknown  others, to others whose principal characteristic i s not ethnic, clan or " t r i -bal" identification but the possession and willingness to exchange something of value (cash) for goods and services cannot r e a l i s t i c a l l y be termed "traditional." Indeed, despite i t s drawbacks, the formal-informal model evokes consid-erable interest from the broad p o l i t i c a l economy perspective. Since i t empha-sises substantial unrecorded economic activity, this model may be useful in highlighting several of the mechanisms that seem to generate some types of i n -equality among social and economic groups as well as the mechanisms that may.,-hold promise for higher overall standards of l i v i n g . Refinement of the model to accommodate these purposes might help to alleviate some of the drawbacks mentioned earlier. In this respect i t i s necessary to place informal and formal activities within the context of their relationship with the. state. I. The State and Economic Activities Within development studies there seems to be an increasing disenchant-ment with the economic achievements.of governments in Third World countries. This disillusionment with ruling elites has tended to fasten on the subject of income inequalities, culminating in a c a l l for a thorough re-distribution of 92 income in less developed countries. However, before hastily advocating the re-allocation of wealth i t i s v i t a l to know the extent to which the observed inequalities of income are the result of preferential access to state resources or the result of differential allocation of attitudes, aptitudes, s k i l l s and motivations in the population. There are important analytical and practical distinctions to be made concerning the origin of income inequality, distinc-tions which may have vastly different policy implications. Income inequality per se i s neither unusual, nor easily rectifiable nor even necessarily deplorable. If i t results from discontinuities in the dis-tribution of individual attributes in the population then income inequality i s of no more special interest than any of the other inequalities between i n d i -divuals that have given rise to i t . However, i f income inequality is the re-sult of unequal p o l i t i c a l access - or arbitrary favouritism in the allocation of state benefits to o f f i c i a l economic act i v i t i e s such that some individuals are considerably better off than their talents and contributions merit - then clearly the cause rather than the symptom deserves to be tackled. The formal-informal distinction can be useful in analysing the generation of this latter type of income inequality. Remedial actions against i t would not of course 68 93 eliminate income inequality. However, they might ensure that each individ-ual in pursuing his own acti v i t i e s would not be a r t i f i c i a l l y handicapped in 94 maximising his opportunities for material advance. In order to gain an appreciation of the state's role, i t i s helpful to assume that the totality of economic activity covers a wide continuum of en-terprises, ranging from the humblest subsistence farm or micro business to the large industrial enterprise. Just as the public manifestation of po l i t i c s i s only one aspect of p o l i t i c a l l i f e , the o f f i c i a l economy represents only that part of the totality of economic activities that'.happen to meet the c r i t e r i a of inclusion in published data. While empirical verification i s necessary, there does not seem to be any technological point which demarcates formal activity from informal activi!. vity, only differences in degree between levels of a b i l i t y , technology, income and wealth. The dichotomy between "formal" and "informal" emerges when some a r t i f i c i a l barrier i s erected in the continuum and discriminating policies are introduced to impedeothe development of smaller businesses. This barrier may subsequently be entrenched in the law and define the entry point for legal i .. 95 business activity. Mazumdar's work on the urban informal sector hints at the pivotal role played by the state in perpetuating the differentiation between types of eco-96 nomic activity. He argues that the formal-informal distinction turns on the idea that employment in the formal sector i s in some sense or senses "protec-ted" so that the wage level and working conditions in that sector are not available, in general, to job-seekers in the market unless they somehow manage 97 to cross the barrier to entry. This protection may arise from the action of trade unions (typically protected and regulated by p o l i t i c a l authorities), and of governments, or of both acting together. The notion of protection and the importance of state regulation is im-98 p l i c i t in the report of the ILO employment mission to Kenya. The character-i s t i c s ascribed therein to the formal and informal sectors may stem largely 99 from the "lopsided" relationship the state has with the formal sector. Thus, the state fosters, nurtures and regulates formal activity. This i s done through a variety of policy instruments: t a r i f f and quota protection for import-substitution industries; import tax rebates on capital and inter-mediate goods; tax holidays; low interest rates; selective monetary controls; and, licensing of operations. At the same time, the "burdens" of state regulatory powers, such as restrictions on the import of competitive goods, probably helps to preserve the internal market for favoured enterprises. License fees and an uncritical pub-l i c policy of "appropriate" (that i s developed country) standards of building, equipment, and sanitation are similarly unlikely to be major constraints for large-scale capital-intensive formal enterprises which typically have their own international controls based on home-country o p e r a t i o n s . E v e n the "burden" of taxation can be reduced through simple evasion. One important effect of this favoured access to the state i s the polite icisation of formal activity. Formal enterprises often pursue economic goals through p o l i t i c a l means. As one astute observer has commented: Pro f i t a b i l i t y , expansion and corporate survival in the new environment become not only questions of cost-efficiency and marketing, but problems which can be partly or totally resolved through petitioning the State for additional or more extravagant economic favours. Thus the conse-quence of formalization i s to make i t impossible to separate out the economics and po l i t i c s of enterprise behaviour. This suggests that the terms "public" and "private" enterprise can have rather different meanings than would be indicated by conventional usage. "Public" i s perhaps more usefully applied to the entire formal sector since i t i s largely the result of state policies which have sought to encourage, ,; • nurture and protect certain types of a c t i v i t i e s . These have typically i n -volved restriction on entry to selected fields. In this way, however, what i s conventionally termed "public" sector or "public" enterprise i s actually p r i -vate since the ac t i v i t i e s so designated are not open to the public. This also affects what i s conventionally termed the "private" sector or "private" enter-prise. In the context of many less developed countries, the politicisation of formal "private" enterprise has meant the exclusion of others from entry into certain a c t i v i t i e s . Thus, in a very real sense, the "public" sector and the "private" sector are perhaps best referred to as the "state sector." When formal private business enjoys substantial and sustained government support, the tests of economic survival and growth no longer necessarily i n d i -cate economic usefulness. To the degree that competitive advantages arise ":..TJ from the allocation of state controlled privileges rather than as a result of efficiency or the a b i l i t y to satisfy consumer demands, a r e a l i s t i c assessment of the formal sector's contribution to development i s rendered more d i f f i c u l t . Indeed, the impressive rates of growth of formal sector output noted earlier are not-surprising given the wide range of benefits conferred on formal enterprise. Development of the formal sector typically involves state-initiated 102 policies of import substitution. In countries with highly unequal income distributions some of the imported goods for which protected domestic products are substituted w i l l likely be inconsistent with the demand structure of the vast majority of the people. The existing set of imports, largely reflecting the import-intensive demands for goods by upper income groups, determines the goods for domestic substitution. Typically, t a r i f f s aimed at limiting growth of imports are imposed on consumer goods, and are higher, the less essential 103 or more luxurious the product. Since the products produced by formal 7il. i n d u s t r y r e f l e c t f o r the most part the p a t t e r n of l o c a l demand (which i s , i n t u r n , i n f l u e n c e d by the d i s t r i b u t i o n of income) the i m p o r t - i n t e n s i v e demands fo r goods by upper-income groups may thus become p o l i t i c a l l y p r o t e c t e d . In t h i s way the p r o d u c t - s p e c i f i c technology r e q u i r e d f o r i m p o r t - s u b s t i t u t i o n may tend to confirm and strengthen an a r t i f i c i a l l y unequal income d i s t r i b u t i o n and the low l e v e l s of income c h a r a c t e r i s t i c of what the ILO has termed thej?A!wog?king p o o r . " ^ ^ At the same time, the f r e q u e n t l y monopolistic nature of the formal 105 s e c t o r , encouraged by s t a t e p o l i c i e s of t a r i f f p r o t e c t i o n , r e s t r i c t i v e l i -censing and quotas, tends to r e s u l t i n higher p r i c e s and higher p r o f i t s than might otherwise be the case thus f u r t h e r c o n t r i b u t i n g to the concentration of wealth i n one s e c t o r of the economy. As w e l l , the p o l i t i c i s a t i o n of the formal s e c t o r may d i r e c t the ener-g i e s and resourcefulness of i n d i v i d u a l s away from economic l i f e and towards p o l i t i c a l a c t i v i t y . . Success or even s u r v i v a l i n formal i n d u s t r y and commerce may come to depend on o f f i c i a l favours and thus on p o l i t i c a l astuteness and connections r a t h e r than on economic performance. Thus, another probable e f - .: f e e t of formal development i s the c r e a t i o n of a s u b s t a n t i a l bloc of vested i n -t e r e s t s dependent upon, and perhaps i n some cases mere c l i e n t s o f , the s t a t e . In t u r n , t h i s may be p a r t l y r e s p o n s i b l e f o r the stunted growth of organised \/: i n t e r e s t s which might, i n the normal coursecof events, have r i s e n to challenge p r i v i l e g e and f a v o u r i t i s m i n s t a t e a l l o c a t i o n s . At the same time, ;a?t i l s Treasonable to speculate t h a t the predominant r o l e of the s t a t e i n promoting development of formal a c t i v i t i e s may have con-t r i b u t e d s u b s t a n t i a l l y to what i s normally considered " c o r r u p t i o n " i n l e s s de-veloped c o u n t r i e s . This may occur f o r at l e a s t two reasons: f i r s t , when s t a t e support i s v i t a l f o r the s u r v i v a l of formal e n t e r p r i s e s , i t may become most important to use a l l a v a i l a b l e means to secure, r e t a i n and i n c r e a s e t h a t support. Well-placed bribes may be a small price to pay for the enormous an-ticipated benefits. Second, for the very small-scale enterprises, some of which are probably teetering on the verge of survival, there may be a pay-off in offering bribes for the non-enforcement of arbitrary state regulations. Excessive state regulation of development may therefore weaken the p o l i t i c a l 107 probity in less developed countries. Moreover, once initiated, the necessity of state support might become cumulative. For example, i f d i f f i c u l t i e s arise due to the alleged "unfair" competition from imports, further protection can always be demanded from the government, protection which the government may feel i t cannot refuse. One alleged justification for further state support i s the claim that without i t unemployment w i l l rise due to reduced output and the forced redundancy of workers. Governments are sensitive to this argument, partly as a result of 108 the " c r i s i s " nature of the literature on employment and unemployment. At the same time the receptivity of public o f f i c i a l s to the petitions of formal private business may stem in part from the desire to attract p o l i t i -cal support rather than the promotion of development act i v i t i e s or growth pol-109 i c i e s . While mechanisms for increasing national income are problematic, the a b i l i t y to allocate or distribute benefits to formal enterprise as a quid pro quo may l i e more within the competence of state authorities. At the same 110 time, those who benefit from restrictions and favours and who would suffer with their removal are probably very aware of these losses whereas those who might benefit from the relaxation of arbitrary discretion may be unaware of how their interests are currently being hampered. In contrast to the close nexus of relationships binding formal activii;': ties to the state, informal activities operate without access to state reB^.:r sources and state protection. Indeed, they take place outside the recognised, 73 o f f i c i a l economy and therefore largely beyond the scope of public regulations governing such matters as the setting up of shops, contractual arrangements between employers and employees, taxation, and technical and quality controls. At the same time, they have no access to government grants and credits, the formal banking system or sources of foreign technology. Often informal activities are actively suppressed and discouraged by 111 the state. To some extent i t seems that these negative and misguided state policies are partly a result of the adoption of alien standards of employment, building, health and safety - standards which are probably at variance with 112 the resource capacity of the country. Endorsement of these standards by public o f f i c i a l s i s in effect a normative rather than a technical assessment of what i s and is not acceptable as "legitimate" economic activity. As well, harassment of informal enterprises as a result of these stand-ards may partly be due to the close ties between the state and the formal p r i -vate sector. For example, formal private employers in Kenya demaridedstha't pub-l i c o f f i c i a l s enforce labour legislation and wage regulations in the informal 113 economy. At the same time, i t i s reasonable to speculate that very high building standards may have been legislated in the Third World in response to demands made by formal sector contractors. These contractors might otherwise 114 face unwanted competition from their counterparts in the informal economy. They would likely have been supported in their demands for high building standards by construction unions which may not relish the abi l i t y of informal contractors to secure labour at wages below union rates. Thus, this demand for "proper" standards in labour, health, or building codes often seems to be a demand for protection of the relative position of individuals and enterprises in the formal economy. In other words, i t appears to be the demand for the protection of vested interests and the creation of a 74 privileged sector of society. This indicates that there may be a general de-nial to the majority of the opportunities and access available to the few. Indeed, favouritism shown for one sector or stratum of activities over another entails at least an implicit policy presumption of a general prohibi-tion on economic act i v i t i e s with specific exceptions, exceptions specified and sanctified by the state. However, i f the primary goal of development is to increase the range of human choice then this policy presumption should be re-placed by one of general permission to engage in economic activities with specific exceptions. This alternative policy presumption may have favourable and cumulative yet largely unnoticed effects on the generation of new ideas, experimentation, changes in attitudes, aptitudes, s k i l l s , and motivations. At the same time i t would reduce the scope for special pleading and the incentive or necessity to circumvent restrictions and controls through bribery and other forms of corruption. In general, discouragement and harassment of informal activities probably makes the poor poorer than they would otherwise be and penalizes and discourages the enterprising behaviour so necessary for development. The d i f f i c u l t y in re-directing economic strategy in less developed countries to accommodate the i n i t i a t i v e and role of informal entrepreneurs arises as much from p o l i t i c a l as from economic and social factors. Ultimately, i t i s perhaps a result of unorganised and weakly articulated p o l i t i c a l demands, an imbalance between the p o l i t i c a l resources of contacts, money and influence of formal enterprise compared to those at the disposal of informal . -entrepreneurs. It might be a relatively simple task to establish the needs of informal business. It i s quite another matter for disparate, competitive small-scale entrepreneurs to organize for the purpose of making collective demands on often unsympathetic planners and decision-makers. By the very nature of the process, governments and development agencies find i t easier to deal with spe-cialised and organised categories of individuals engaged in similar pursuits. When, as may be the case with informal a c t i v i t i e s , individuals are not effec-tively organised, their common needs are unlikely to be recognised. When the state cannot guarantee a right to formal employment, then the right to engage freely in other economic act i v i t i e s i s certainly a worthwhile substitute. J. Informal Activities: A Creative Response to State-Centred Development Informal ac t i v i t i e s are perhaps best considered as an indigenous rep sponse to, or symptom of, the relative failure of state-centred development strategies. They seem to originate partly from the demand for goods and servi ices of a similar type but at a much lower price than those available from the large-scale formal sector. Production ranges from common consumer goods, such as braziers, lamps, clothing, simple furniture, utensils and tools, to more skilled artisan craftsmanship in the production of "machines to make maa-. , i r ; . 115 chines." It i s not clear whether most of this production i s carried out 116 within the household or by individual entrepreneurs. As well, informal :y:r contractors are responsible for much of the construction of low-cost housing (alleviating chronic housing shortages) while informal traders and transpor-ters form the backbone of the internal distribution system in many African . . 117 countries. Informal ac t i v i t i e s may also partly result indirectly from formal i n -dustrialization. The migration of rural labour to the urban centres probably spreads an awareness of styles of living and types of products different from those available in the rural areas. At the same time, the capital-intensive nature of formal industry assures an excess supply of urban labour relative to available formal employment. Thus the creation of new wants in economies 76 where formal employment i s scarce may result in new ways of satisfying those wants in the informal economy. Simply, migration creates the need for vast numbers of new jobs and the migrants themselves appear to be creating those jobs. Some migrants may have enough training and enough capital to begin t their own micro businesses immediately. Others may enter into apprenticeships to learn the s k i l l s necessary to start their own enterprises, or perhaps to 118 obtain a formal job in the future. In any event, one result of the small-scale nature of production, relative ease of entry, rapidity of s k i l l diffu-i.;; sion and abundant supply of potential workers appears to be the creation of an extremely competitive unregulated labour-intensive urban economy. Moreover, i t may be that partly due to the economic act i v i t i e s of indi-viduals in the urban informal economy thesmarket mechanism i s penetrating groups and areas outside the cash economy. Unfortunately we know very l i t t l e concerning the progressive evolution of subsistence production into production for an impersonal exchange economy. In this respect, i t i s v i t a l to know the extent to which the informal production of consumer goods in the urban centres is being marketed through an informal distribution network to rural areas. Possibly the provision of informally produced incentive goods in the rural areas i s providing strong inducements to leave subsistence production and en-119 ter into a money and exchange economy. The importance of this type of transformation, after centuries of subsistence production, can hardly be over-estimated. It would be a transformation that has been neither planned nor co-erced but voluntarily undertaken in the expectation of securing material gain. The informal sector may be making several other positive contributions to meeting the basic needs of low income segments of the population. It i s likely that competition keeps prices lower while increasing the range of goods available to those unable to purchase the higher-priced formal sector products. As well, there seems to be extensive re-use of discarded materials including 120 waste paper, o i l cans, discarded tires, and scrapped automobiles. This CH-recycling of waste material encourages the efficient use of resources. At the same time, employment seems to be generated at a lower cost than in the formal sector: the capital/output ratio i s f e l t to be low; the return on capital, with allowance for the low quality .of output, i s thought to be at least as 121 high as in the formal sector. Indeed, there seems to be l i t t l e reason-— 122 intrinsic to the informal sector - why anyone entering these act i v i t i e s cannot make a profit, accumulate capital and be a productive dynamic contribu^ 123 tor to national development. By the very nature of the activities i t i s d i f f i c u l t to be precise about the volume of employment accounted for by informal-type a c t i v i t i e s . However, given the meagre of complete lack of social security or unemployment insurance benefits in less developed countries, "unemployment" can hardly be an option for very mariyviridi.v.idualstexcliided from."the;.formal"sector. Some idea of the size of the informal sector in urban areas i s presented in Table 7. Even allowing for d i f f i c u l t i e s in measurement, i f these figures repre-sent merely informed guesses then at least some observers consider informal employment to be quite substantial. Indeed, in a crucial sense, individuals in the informal economy seem to be in the front-line of development. The aptitudes, attitudes, motivations and s k i l l s which give rise to informal act i v i t i e s are a nation's treasure to . be guarded, encouraged and nurtured in the .pursuit of higher living standards. Thus, i t i s a l l the more surprising and disturbing that while the state fa-vours one type of activity i t neglects and even actively discourages another. Rather than being treated as a treasure, informal act i v i t i e s appear to embar-rass the authorities. 78 Table 7: The Informal Sector Share of Employment in Selected Less Developed C o u n t r i e s • Per Cent Share Per Cent Share of Employment of Employment Brazil (1972), Ghana (1976), Kumasi 60-70 Belo Horizante 69 „ M n i 7 > Paraguay (1973), Chile (1968), Asuncion 57 a l l c i t i e s 39 n r*c>->n\ Peru (1970), El Salvador (1974), a l l c i t i e s 60 San Salvador 4'6 c , ,in,,< Sudan, (1976), Ivory Coast Khartoum 50 (total country, 1975) Venezuela (1974), industry 61 ,, ., . ' . . 3, . a l l c i t i e s 44 construction 60 Indonesia, (1975), Jakarta 50 Caracas 40 Sources: I.L0, Growth, Employment and Equity;, (Geneva: IL0, 1976); Heather Joshi, Harold Lubell, and Jean Manley, "Urban Development and Em-ployment in Abidjan," International Labour Review, CXI, No. 4 (April, 1974); Dipak Mazumdar, The Urban Informal Sector, Working Paper No. 211 (Washington: World Bank, 1975); S.V. Sethuraman, "The Urban In-formal Sector in Africa," International Labour Review, CXVI, No. 3 (November-December, 1977); Paulo R. Souza and Victor E. Tokman, "The Informal Urban Sector in Latin America," International Labour Review, CXIV, No. 3 (November-December, 1976). H. Summary and Implecations for Development Theory This chapter has sought to present some of the complexity of the urban economy in less developed countries. Evidence was presented on the alleged unemploy-ment c r i s i s facing many Third World nations. Data contrasting formal output to formal employment, and growth of recorded employment to observed rates of urbanisation, were given to indicate one reason unemployment might be thought to be very high. Thus i t became apparent that i f analysis i s restricted to the small formal economy then the inevitable conclusion must be that unemploy-ment i s a serious problem. However i t i s unhelpful and inaccurate to define a "job" or "productive employment" as only that available in the formal sector. Defining i t in this way casts the earning of a livelihood in a restricted and 79 normative framework derived from the very different conditions prevailing in materially advanced countries. At the same time, i f formal employment i s con-sidered to be "employment" then unemployment in less developed countries i s not 20-25 per cent but rather 75-80 per cent. In other words, the concepts of "employment," "unemployment" and "economic activites" are intimately related to the level and structure of an economy our interpretation of which may be conditioned to some extent by currently fashionable p o l i t i c a l beliefs. In addition, a narrow conception of "employment" almost guarantees that our understanding of the manner in which the vast bulk of the population earns i t s living and meets i t s basic material needs i s perpetually bounded and con-strained by the brick wall erected around the "stagnant traditional sector" in many models of development. This helbsito enshrine the ostensible aim of re-plicating the material success of the advanced countries while simultaneously ignoring the probably determinants of that success, acquired human qualities. At the same time, when conceived at a high level of abstraction "devel-opment" tends to be portrayed as a confrontation between "modernising e l i t e s " and a "traditional," "conservative," "immobile" peasantry. In this confronta-tion, the attitudes, expectations, s k i l l s , motivations and livelihood patterns of the latter tend to be either generally ignored or treated as a blank sheet on which "modernity" can be stamped or as lacking any redeemable features and best swept away through revolutionary action or simply allowed to wither under the assumed expansion of the formal sector. Yet, i t seems that numerous human actions have led to the creation of an informal, unofficial, development sec-tor in which individuals voluntarily cooperate to meet collective needs. Par-ticipants in the informal sector may have a more direct contact with the daily r e a l i t i e s of development and thus a better grasp of both the most pressing 80 problems and of.the most promising avenues, than i s generally assumed by those who see modernisation as planned, directed and controlled by the state. In this respect, the existence of a wide range of informal activities i s of some importance to the theory of development. F i r s t , i t challenges the allegation that in some sense of senses a market economy i s not evolving or cannot evolve in less developed countries. Perhaps spurred by contact between dissimilar peoples, an unofficial market order may be spontaneously forming in many less developed countries. Second, the emergence of the informal sector belies the commonly held notion that a vicious c i r c l e of poverty and stagnation traps less developed countries. Third, the existence of informal ac t i v i t i e s suggests that, a profound but subtle revolution may be taking place in the at4^ :. titudes, aptitudes, s k i l l s , motivations, and expectations of various people formerly engaged in subsistence l i v i n g . This revolution has not required com-pulsion, "mobilisation," austerity, compulsory saving, "Great Leaps," and sim-i l a r policies frequently alleged to be necessary for development. Fourth i t indicates the importance of incentives, particularly the prospect of higher levels of l i v i n g , in e l i c i t i n g greater effort, encouraging risk-taking, and suggesting new patterns of l i f e more conducive to the production and distribu-tion of material goods. Finally, the informal sector suggests that detailed state controls and regulation of economic act i v i t i e s are not a necessary con-dition for material advance in poor countries. At i t s current level, the i n -formal sector has required neither state plans, planning nor planners. Indeed, the emergence and evolution of this creative development sector suggests that much higher living standards could be obtained i f development planners, eco-nomists and others put less emphasis on technical relationships which abstract from human actions, and less emphasis on protective t a r i f f s , quotas, licensing and public subsidies which may restrict the variety and volume of economic 81 a c t i v i t i e s , and more emphasis on exposure, strengthening and use of market f o r c e s . In other words, the goal of higher l i v i n g standards might be b e t t e r served i f the a t t r i b u t e s of the i n f o r m a l s e c t o r supplanted those of the formal s e c t o r r a t h e r than the other way around. PART TWO THE KENYAN CASE I l l NATIONAL INCOME AND EMPLOYMENT IN, KENYA. A. Introduction During the past two decades, much of the concern with the economic ad-vance of poor countries has centred-on the formal, sector:; One intent of pub-l i c policies has been to increase the rate of growth of output of that sector. Policy instruments utilised for this purpose include t a r i f f protection, quotas, restrictive licensing, low interest rates, tax holidays, overvalued exchange rates and exemption from import duties. The ostensible aim of these policies i s almost always to achieve a rise in general living standards. For example, in Sessional Paper No. 10 of 1965 on "African Socialism and i t s Application to Planning in Kenya," the Kenyan government defined i t s economic objectives to include universal freedom from want, disease and exploitation; equal opportu-nities for advancement; and high and growing per capita incomes, equitably distributed among the population. The purpose of this chapter i s to discuss some of the salient features of Kenya's development since Independence in December 1963. The aim i s to i n -dicate that although Kenya represents something of an emerging success story in development of the formal sector i t would be highly adventuresome for pol-icy makers to rely on this one relatively small sector to carry the burden of meeting Kenya's several economic goals. Specifically, the discussion relates to employment and national income, with a view to assessing the capacity of the Kenyan formal economy to generate employment. The principal thesis i s that despite what appear to be impressive growth rates in formal output participation in formal activities w i l l only be 83 84 available to a small and declining proportion of Kenya's population. It should be noted that st a t i s t i c s on employment outside the Kenyan formal eco-nomy are far from adequate. Even estimates on the size of the labour force vary depending on differing assumptions as to labour force participation rates. One of the most obvious omissions i s the complete lack of o f f i c i a l data on the 1 "national obsession" of unemployment. In the absence of this information, 2 speculation on the extent of unemployment has been r i f e . In this chapter o f f i c i a l data w i l l be used to assess, f i r s t , the over-a l l rate of growth in output or national income and the overall extent and rate of growth of formal employment in Kenya; and, second, the sectoral compo-sition of income and employment and i t s performance over the years. In other words, the primary focus of this chapter i s on the demand for labour in Kenya's formal economy. The availability or supply of labour i s taken up in the next chapter. Both chapters suggest the very limited potential of the formal sec-tor - and by implication state directed development - in transforming the ways of l i f e of Kenya's citizens. Before analysing the data on Kenya i t i s important to recognise the limitations of measured national income as a concise statement of material . advance. B. Problems with the Sta t i s t i c a l Measurement of National Income The criterion or measure most commonly used to indicate living standards i s the valuation of the final goods and services the exchange of which has been recorded or documented during a given year for a country; in other words, the gross domestic or gross national product. Upward changes in these measure-ments are then used as indicators of material progress. However both the measurements per se and the interpretation of these measurements in less de-veloped countries suffer from a number of problems, problems which may vitiate 85 to some extent the u t i l i t y of using only GDP or GNP as a measure of living standards. More to the point, development may be occurring without any change in economic growth as i t is commonly measured. For example, the transformation of risk-avoiding people into innovating and experimenting achievers can occur without registering any growth in GDP or GNP. At the same time, the standard of living of countless individuals may be improving and improving dramatically, without i t being recorded in national accounts. For one thing, much of the production and consumption of goods and . services in poor countries remains outside the exchange economy. The less ad-vanced the economy the more production takes place by and for the family unit. By definition, the value of "subsistence" production cannot be directly meas-ured since the output i s consumed by the producers. Therefore, the money-values assigned by statisticians to subsistence production in national accounts data must be largely arbitrary. Indeed, the evaluation of non-marketed pro-duction is a "highly a r t i f i c i a l process," the result of which "can never be more than a token figure."^ As well, the distinction drawn between formal and informal activities indicates that much of the marketed production of goods and services may also be excluded from o f f i c i a l s t a t i s t i c s on national income. Since some types of non-marketed production are included in national accounts while other ( o f f i c i a l l y ) non^marketed production is excluded, this suggests that to some degree the constituents of national output are open to choice. Typically, economic welfare i s said to depend on output; however, i t could also be said that the total of output depends on conventional ideas of 4 how economic welfare i s produced. The inclusion of an imputed value for sub-sistence production and the exclusion of informal production for the market i s to a large extent a result of convention. It appears to stem from the 86 inability or unwillingness to incorporate the output of activities which are neither subsistence nor formal. The exclusion of informal output and the arbitrary evaluation of sub-sistence production imparts a serious downward distortion to aggregate e s t i - ' mates of national income. Thus, i t i s very likely that estimates of growth or rate of change of aggregates like GDP or GNP are seriously inaccurate. Pub-lished statistics on economic growth, or the sectoral allocation of activities, in fact refer primarily to the formal economy. Since activities outside the formal economy are largely excluded, a statement such as "per capita incomes .:. are growing by 2 per cent per year" must be used very cautiously as an indica-tor of changes in standards of l i v i n g . Besides the wide range of activities which may be excluded from the national accounts framework, the accuracy of the data, s t r i c t l y as measure-ments of what i s being measured may be profoundly unreliable. Probable sources of error include those associated with the enumeration or sampling of economic act i v i t i e s and the degree of extrapolation and interpretation i n -volved in f i l l i n g in gaps in the data. This suggests that the degree of pre-cision implied b'y.y.for example, a change in the rate of growth from 6.8 to 7.0 per cent i s unwarranted. At the same time, there are often revisions of o f f i -c i a l data, revisions which have for example occurred in Kenya since independ-ence. These revised s t a t i s t i c s may not be much more accurate than the o r i g i -nal data.- Thus, each revision in a series may be a f f l i c t e d with i t s own error, and one does not know when or i f the original error has been eliminated, or even whether i t has been reduced. Indeed, Rimmer has commented that i f the margin.of error was "plus or minus 5 per cent, s t i l l a..conservative allowance, the growth rate represented by 1.8 per cent could be anywhere between -7.9 and 12.5 per cent."'' These considerations weaken the u t i l i t y of o f f i c i a l data in 87 the formulation of policies, especially policies concerned with detailed state allocation of resources. However, national income st a t i s t i c s remain the principal medium through which we "see" an economy. Often, this image may be severely distorted as the following passages indicate: In Thailand I saw a people not prosperous by European standards but ob-viously enjoying a standard of living well above the bare requirements of subsistence. Many village communities seemed to have attained a standard of material comfort at least as high as that of slum dwellers in England or America. But at my desk I computed statistics of real national income showing people of underdeveloped countries including Thailand to be desparately i f not impossibly poor. The contrast between what I saw and what I measured was so great that I came to believe that there must be some large and fundamental bias in the way income stat i s -tics are compiled. . . . Something i s very wrong with these s t a t i s t i c s . For instance, i f the figure of.$40 for Ethiopia means what i t appears to mean, namely that Ethiopians are consuming per year an amount of goods and services no larger than could be bought in the United States for $40, then Ethiopians are so poor that they could not possibly survive, l e t alone increase their numbers. If the $40 does not refer to the amount of goods and services that could be bought in the United States for $40, then i t i s not clear what i t does refer to or i f i t refers to anything at a l l . It i s curious that s t a t i s t i c s as ambiguous as these are quoted so frequently. Economic progress enables men to make goods with less expenditure of labour. It has less effect on the provision of services. Rich coun-tries are rich, because they have more things, more cars, more radios, more clothing, more food.. Rich countries are relatively less well-provided in services, in c i v i l servants, policemen, domestic servants, r e t a i l traders, barbers, and teachers. Since goods enter international trade, while services as a rule do not, an international trade causes prices of goods to be more or less the same everywhere (this i s the rationale of the purchasing power parity doctrine), but services are relatively cheap in poor countries where they are abundant, and expensive in rich countries where they are scarce. Consequently national incomes of rich countries are high because rich countries consume more goods, and because rich countries put high prices on services. The f i r s t reason corresponds to a genuinely higher standard of li v i n g ; the second does not. National income st a t i s t i c s are the principal medium through which we see the process of economic growth. We characterize countries as devel-oped or underdeveloped according to their national incomes. Income stat i s t i c s are also components of measures of the productivity of indus-tries and of the equality of the income distribution. The main point of this book, brought out both by the theory and by the numbers, i s that the picture conveyed by national income stati s t i c s i s often distorted, not because the s t a t i s t i c s themselves are inaccurate, nor because they f a i l to reflect accepted canons of s t a t i s t i c a l method, but because we attribute to income stati s t i c s a social meaning that they do not necess-arily possess. Higher incomeiis supposed to mean better off; higher 88 productivity i s supposed to mean contributing more to the economic wel-fare of the community. The theoretical, part of the book shows how this association can f a i l . The empirical part of the book shows that there can be a very great discrepancy between conventional stat i s t i c s and re-vised stat i s t i c s designed to reflect more closely the appropriate social facts. Not only i s the discrepancy often large, but i t may vary consid-erably from problem to problem, time to time, or place to place. The consequence of the failure of many income stati s t i c s and comparisons among income stati s t i c s to bear the desired social implications i s that many of our ideas about the nature of economic l i f e in poor countries and about the process of economic growth stand in need of substantial revision.6 The distorted view which may be conveyed by national income st a t i s t i c s i s even more apparent when i t i s noted that the s t a t i s t i c s on income given by Usher refer to a per capita average, therefore, a considerable proportion of the population must have much less income than the $40 cited by Usher for Ethiopia. If this s t a t i s t i c i s taken to mean what i t seems to say, then an Ethiopian could survive in the United States on much less than 11 cents per day. Clearly i t would be unwise to take these figures at face value. Both the meaning and measurement of national income st a t i s t i c s in less developed countries - and comparisons of them with more advanced countries - must be treated with utmost caution. These various caveats are useful as preliminary remarks prior to presenting the data for Kenya in the remainder of this chapter. C. Kenya's Estimated National Income Compared to much of the less developed world, Kenya seems to represent an emerging success story of economic growth. Table 8 indicates that Kenya's estimated Gross Domestic Product (GDP) was K£835 million (expressed in current values) in 1974.7 Deflating for price increases, the GDP i s about K£607 mil-g lion (based on 1964 constant values). Between 1964 and 197.4 the annual 9--"real" increase in GDP may have averaged a very respectable 6.2 per cent."—-7.1 per cent in the monetary sector and 3.6 per cent in the non-monetary sec-10 tor. This relatively rapid economic growth may be converted into a measured per capita income of at least K£47 in 1974. On the heroic assumption that 89 Table 8: Gross Domestic Product by Sector, Kenya, 1964-74 (selected years) (K£ million at constant 1964 prices and percentage of total). 1964 1966 1968 1970 1972 19743 Annual Growth Amount Amount Amount Amount Amount Amount Rate (%) Sector (35) (SO (%) (%) (%) (%) 64 - 74 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) Total non-monetary 89.0 97.6 105.5 112.7 119.9 127.3 27.0 25.6 24.7 23.5 21.9 21.0 3.6 Monetary 1. Enterprise sector agriculture and related 55.8 62.0 65.4 78.0 87.8 94.3 activities 16.9 16.2 15.3 16.3 16.0 15.5 4.8 mining • 1.5 1.4 2.2 2.6 2.5 3.4 0.4 0.4 .0.5 0.5 0.5 0.6 8.9 manufacturing 34.2 37.8 44.6 52.2 63.6 76.1 10.4 9.9 10.4 11.0 11.6 12.5 8.3 construction 6.8 8.5 11.8 12.1 15.7 14.7 2.1 2.2 2.8 2.5 2.9 2.4 8.0 u t i l i t i e s 4.8 4.9 6.0 7.1 8.9 9.8 1.5 1.3 1.4 1.5 1.6 1.6 7.2 transport, storage and 24.5 32.5 38.1 41.2 42.4 48.1 communication 7.4 8.5 >8.9 8.6 7.8 7.9 7.0 trade 33.0 38.4 41.2 37.6 42.6 47.0 10.0 10.1 9.6 7.8 7.8 7.7 3.6 banking and financial 9.9 14.2 15.0 19.6 21.7 23.6 institutions 3.0 3.7 3.5 4.1 4.0 3.9 9.1 ownership of 13.3 13.4 13.9 17.9 19.6 21.6 dwellings 4.0 3.5 3.3 3.7 3.6 3.6 4.9 services 11.9 14.7 17.1 20.3 26.6 34.2 3.6 3.9 4.0 4.3 4.9 5.6 11.1 Total enterprises 195.7 227.7 255.2 288.9 331.4 372.7 59.3 59.7 59.8 60.3 60.6 61.4 6.6 2. Private households 2.9 3,4 3=7 3.6 3.8 4.8 0.9 0.9 0.9 0.7 0.7 0.8 4.9 3. Total general government 42.5 52.7 62.8 73.8 92.2 102.5 12.9 13.9 14.6 15.4 16.9 16.9 9.2 TOTAL PRODUCT Monetary economy 241.1 283.8 321.5 366.2 427.4 479.9 73.0 74.4 75.3 76.5 78.1 79.0 7.1 TOTAL GDP at Factor cost 330.1 381.4 426.8 478.8 547.4 607.2 100.0 100.0 100.0 100.0 100.0 100.0 6.2 GDP PER CAPITA 36.3 . . . . 42.7 45.4 47.0 2.6 Provisional Sources: Cols. 2, 3, 8, 9, 10, 11, 12, 13, derived from Republic of Kenya, Economic Survey 1975 (Nairobi: Government Printing Office, 1975) Tables 2.1, 2.2, 2.4. Cols. 4, 5, derived from Republic of Kenya, Economic Survey 1969 (Nairobi: Government Printing Office, 1969) Tables 1.1, 1.3. Cols. 6, 7, derived from Republic of Kenya, Statistical Abstract 1974 (Nairobi: Government Printing Office, 1976) Tables 47(b), 48. errors in measurement were constant over time, this would:represent a substan-t i a l increase over the 1964 GDP of K£330 million and the estimated per capital 11 income of K£36. As shown in Table 8, the annual growth of product in the formal enter-prise sector was 6.6 per cent between 1964 and 1974. Within this category, the fastest growing activities were rather small, namely, services, banking/ financial institutions, and mining. Of the two major sectors, the fastest growing was manufacturing which achieved an overall rate of growth of 8.3 per cent per annum, compared to agriculture's 5.3 per cent. As a result, formal manufacturing's share of recorded GDP grew from 10.4 per cent in 1964 to 12.5 per cent in 1974, while agriculture slipped from 16.9 per cent to 15.5 per cent. Typically, during the course of economic development, as monetization of the economy spreads through the progressive incorporation of more a c t i v i ^ i j ties into the cash nexus, the proportion of GDP derived from subsistence agricultural activities f a l l s . To some extent this has occurred in Kenya.. However, the combined non-monetary and formal agriculture sector contributed directly 37 per cent to total o f f i c i a l GDP in 1974 and produced 58 per cent of 12 exports by value. As well, i t should be noted that non-monetary output i n -cludes output marketed (often for cash) within d i s t r i c t boundaries. Thus, i t is likely that some of the increase in monetary agricultural output recorded in published data actually represents a diversion of effort from nonmonetary output that has occurred quite some time before i t was measured in o f f i c i a l s t a t i s t i c s . Nevertheless, as Table 8 reveals, the non-monetary sector has not de-clined absolutely since independence; indeed, even the proportion of total ag-ri c u l t u r a l , forestry, and fishing GDP taken by the subsistence sector has been remarkably stable: in 1964 i t accounted for 61 per cent and.in 1974, 57 per cent of this sector's contribution to GDP. Overall, the data indicate that ..; agriculture i s the backbone of the Kenyan economy decisively affecting the standards of living of a l l Kenyans. Within agriculture, the responsiveness of individual Kenyans to eco-nomic incentives and their willingness to forsake subsistence ways of l i f e i f there i s a prospect of higher material living standards i s perhaps indicated •. by data on gross marketed production from small farms. With respect to Kenya''s two primary cash crops, there has been a doubling of small-holder output of coffee between 1964'and 1975 and the doubling of area under tea between 1971 13 and 1975. One result of this growth i s that the relative share of small farms in marketed production has been increasing. It now accounts for more than one-half of gross marketed agricultural output. This rapid switch to cash-crop agriculture has probably provided the basis for the 51,000 very 14 smalltscale rural non-agricultural enterprises enumerated in 1969. Simul-taneously, i t i s possible that the provision of low-cost incentive goods by these small-scale entrepreneurs may be drawing more and more individuals into cash-crop agriculture. Unfortunately empirical evidence i s not available to test this hypothesis. In general, one striking feature of recorded data on Kenya's GDP i s that they do not suggest any marked sectoral re-allocation of the economy de-spite the lavish attention given formal enterprise. On the contrary, Kenya remains overwhelmingly dependent on the rural sector and in the rural sector fundamental changes in attitudes, aptitudes, motivations, s k i l l s and wants may well be occurring. The importance of the rural sector, and the informal eco-nomy which may service i t , i s suggested by anaanalysis of employment genera-tion in Kenya. 92 D. Employment: Growth and Structure Despite a robust growth rate in formal output, formal employment has been expanding at a relatively slow rate. Data in Table 9 suggest that since 1964 total formal employment increased at an annual rate of 3.7 per cent. This would have been much lower had public sector employment not expanded at Table 9: formal Employment by Sector, Kenya, 1964 and 1974 Number Employed (thousands) Percentage Increase over Decade Annual Rate of Increase 1964 1974 1964 1974 Private Sector Agriculture and forestry 202.1 231.7 35.1 25.9 5.7 0.7 Mining and quarrying 2.3 3.1 0.4 0.4 34.8 4.1 Manufacturing and repair 49.1 81.7 8.5 9.9 66.4 6.1 Building and construction 9.2 29.3 1.6 3.5 218.5 14.0 U t i l i t i e s 2.5 a • • 0.4 a • • . . Commerce 49.5 55.4b 8.6 6.7 11.9 0.8 Transport and communication 11.1 17.6 1.9 2.1 58.6 4.9 Services 67.6 95.5° c "11.7 11.6 41.3 3.4 Total Private Sector 393.4 496.2 68.4 60.1 26.1 2.4 Public Sector 182.0 330.1 31.6 39.9 81.4 6.1 TOTAL FORMAL EMPLOYMENT 575.4 826.3 100.0 100.0 43.6 3.7 "Transferred to the public&sector:. Includes restaurants and hotels. To make comparisons with 1964, banking and financial services (amount-ing to 18,700 persons) are combined with employment in wholesale and r e t a i l trade. Sources: Economic Survey 1975, Tables 5.5, 5.6 Stat i s t i c a l Abstract 1974, Table 222. 93 an incredible 6.1 per cent per year. As i t was, private sector formal employ-ment increased by only 2.4 per cent per year, considerably less than the l a -bour force growth rate. At f i r s t sight these relatively low growth rates ap-pear to be due to the sluggish performance of employment in formal agriculture, which even in 1974 accounted for 46 per cent of private formal employment. It is true that other sectors of the formal economy achieved higher employment growth rates between 1964 and 1974, for example, manufacturing (6.1 per cent), building and construction (14.0 per cent) and transport and communications (4.9 per cent). However, by looking at the ratio of incremental output to em-ployment i t appears that the formal economy may simply be incapable of gener-ic ating the vast number of jobs needed to cope with the burgeoning labour force./ Thusj in spite of rapidly growing output levels in the formal economy, in which 16 per cent to 21 per cent of Kenya's national income i s being i n -16 vested, employment i s not growing pari passu. This i s revealed by reference to Table 10 which vividly underlines the considerable lag in employment growth relative to that of output. As the table indicates the rate of expansion of employment in the formal sector i s only about one-half the rate of growth of real GDP. At the same time, even this rate of growth of formal employment should not obscure the small overall size of the formal sector and the rela-tively insignificant contribution made by several of the activities with the fastest growing output levels. 17 In this respect, estimates prepared by the World Bank mission to Kenya give an indication of the overall order of magnitude of employment by sector 18 (see Table 11). It i s evident that what the mission termed "informal rural agriculture" i s the prime employer accounting for 82 per cent of total employ-ment. Informal non-agricultural act i v i t i e s (both rural and urban), however, provide a substantial number of jobs. Indeed, at a very minimum, 36 per cent 94 Table.10: Output.(K£.million), Recorded Employment (thousands) and Rates of Change in Kenya 1964-1974 GDP (constant, GDP Real Rate -Total Employment Ratio of Year 1964 values): of Growth (?<0 Employment Growth Rate (%), Col 5 - Col 3 (10 —-^27"'""^ " ^3-f — — 1 ? j r — " ( 5 ) - '(6)" ' r"~~ 1963 304.32 8.47 1964 330.10 3.62 1965 343.06 11.49 1966 381.36 4.02 1967 396.70 7.59 1968 426.79 6.80 1969 455.80 6.73 1970 486.48 6.28 1971 517.01 6.52 1972 550.72 6.51 1973 586.56 3.60 1974 607.68 . . 1964-74 . . 7.59 Source: Statistical Abstract 1 Economic Survey 1975, Tables Table 11:Estimates of Employment by Sector, 1969 and 1971 (thousands) Formal 1 9 6 9.Informal Formal 1 9 7 1 Informal Wage Employr meht Employment Wage Employ-ment Employment Sector Rural Urban Total Rural Urban Total Agriculture, forestry and fishing 196 4,168 • • 4,364 i 211 4,436 • • 4,647 fining; -.aridQquarrying 3 1 • • 4 3 1 • • 4 "Manufacturing 75 30 15 120 93 32 16 141 Buildingiiarideconstruction 291? 1 11 41 35 1 12 48 .Electficityaand. .water 5 • • • • 5 5 • • • • 5 Transport, storage and communications 48 3 1 52 46 3 1 50 Wholesale and r e t a i l trade 44 96 30 170 47 102 32 181 Services 227 19 39 285 240 20 41 301 Total 627 4,318 96 5,041 680 4,595 102 5,377 Source: World Bank, Kenya Into the Second Decade, (Baltimore: Johns Hopkins Press, 1975), Table 5, p. 54. 539.2 6.71 0.79 575.4 1.16 0.32 582.1 0.57 0.05 585.4 2.07 0.51 597.5 1.49 0.20 606.4 3.43 0.50 627.2 2.76 0.41 644.5 7.25 1.15 691.2 4.14 0.63. 719.8 5.78 0.89 761.4 8.52 2.37 826.3 • • • • • • 3.96 0.52 974, Tables 47(b) and 221 of a l l non-agricultural employment i s accounted for by the informal sector. T 19 The ILO mission, in what was almost certainly an underestimate, fel t that the informal sector in Nairobi provided employment for 32,000 individuals, 44,000 in Mombasa dnd 49,000 in other urban areas. Even i f this estimate i s accepted, i t means that informal employment accounted for 25 to 30 per cent of total urban employment in 1969, and 28-33 perrcent of African urban employment. If small-scale rural non-agricultural economic act i v i t i e s are included, em-ployment in that sector accounted for 37 to 39 per cent of African adult non-agricultural employment, or about the same as that estimated by the World Bank. The Kenyan government has supplied some data on the growth of informal employment. This i s presented in Table 12. Table 12: Persons Engaged: Recorded Totals, 1972-74 (thousands) Activity i 1972; 1 1973 1974 "Modern" establishments, urban and rural: Wage employees 719.8 761.4 826.4 Self-employed and unpaid family members 50;0 ::54.0 55.9 "Informal" establishments, urban areas only 33.9 41.4 76.2 Total 803.9 856.8 958.4 Source: Republic of Kenya, Economic Survey 1975 (Nairobi: Government Printi.: ing Office, 1975), Table 5.1. It i s d i f f i c u l t to interpret the figures for the informal sector. SI..-..::-F i r s t , the authorities maintain that the data were derived from a survey of :rs urban establishments in the informal sector. However these figures are at sharp variance with those accepted by the World Bank and ILO missions. It i s possible (and probable) that the survey refers only to Nairobi, and within Nairobi only to the squatter settlements. This i s likely since the data for 96 1972 agree with those of the ILO report and the ILO appears to have restricted i t s enumerationllargely to squatter areas. Even i f the data are accepted, however, one could not calculate from them the growth rate of informal employ-ment in Nairobi since i t i s impossible to determine the extent of effective coverage. The figure for 1974 i s likely the result of better recording rather than indicating an increase of 84 per cent from the previous year. Second, i t is completely unclear what the survey measured. The discussion in the ECOH  nomic Survey states that the survey recorded a total countrof 76,200 s e l f -employed persons in the urban informal sector and later refers to employees, thus obscuring what category of informal worker was counted. By examining the data contained in the Development Plan 1974-1978 i t i s possible to analyze the projected growth rates of employment. The o f f i c i a l projections are given in Table 13. Data in the Development Plan indicate thc-t Table 13; Total Employment: Actual 1972 and Target 1978 (thousands) Actual Target Annual Rate of Sector 1972 1978 Growth 1974-1978 Formal sector 762 995 4.5?^ Rural non-agricultural a c t i v i t i e s , small farms and settlement schemes 222 288 4.4 Other wage employment 390 460 2.8 Self-employment and family workers 3,875 4,570 2.8 Urban informal sector 108 166 7.5 Total 5,357 6,479 3.2 Source: Republic of Kenya, Development Plan 1974-1978 (Nairobi: Government Printing Office, 1 9 7 4 ) , Table 3.3, p. 95. that the Kenya government expects the total population to grow by nearly 2.3 million by the end of the current Plan period. If average household size re-mains at 5.6 persons, the provision of one income earner for each household would mean that over 400,000 income-earning opportunities would have to be 97 created during the Plan period just to provide for the increase in population. The government planners, however, appear to recognise that often more than one income earner i s required.in a family. They therefore consider instead, that 21 35 per cent of the population requires employment. Based on this, the num-ber of new jobs necessary would appear to be in excess of 800,000. It i s very unlikely that 400,000-800,000 new jobs can be created in.the formal sector in the foreseeable future. Indeed, the Development Plan rather optimistically projected that 200,000 new formal jobs would be created by the end of the current Plan period in 1978 (Table 13). Even before the deleteri-ous consequences of the world-wide inflationary spiral of recent years, the creation of this number of newjjbbs would have meant a significant and marked improvement on past Kenyan experience. Thus the Development Plan projected that real Gross Domestic Product would grow by 7.4 per cent per year between 22 1974 and 1978. Corresponding employment in the formal sector was projected 23 to increase by 4.5 per cent per year, giving an I0ER of 1.6 to 1. To expect this to occur i s surprising in view of Kenya's performance in the last decade 24 and is at variance with experience in other underdeveloped countries. Harbison has concluded that for less developed countries the very lowest I0ER would be 1.5 to 1 and for many, particularly those like Kenya in which the formal sector i s expanding with modern capital-intensive technology, i t i s a l -25 most certain to be considerably higher than 2 to 1. Even in the unlikely event that 200,000 additional formal sector jobs w i l l be created this w i l l not significantly alter the dilemma facing Kenya's planners. For example, the projected output of Form IV and VI leavers in 1978 26 i s 300,000 and 100,000 respectively. In other words, even making the im-probable assumption that only those with higher form education were offered the total projected increase in formal employment opportunities, fully .r, 98 one-half of the number would s t i l l remain outside the o f f i c i a l wage economy. Simultaneously, millions of Kenyans with education to. the Standard VII level, and millions more with very l i t t l e or no formal education would then lack any entry into the formal economy. The inescapable conclusion from theseidataf.is that the bulk of Kenya's educated population and-almost a l l of those with no education may have to secure a livelihood outside formal a c t i v i t i e s . In other words, almost everyone may in some ways.be excluded from officially-sanctioned development. It i s certainly peculiar that a p o l i t i c a l l y determined develop-ment strategy should effectively disenfranchise the bulk of the people. That this may be occurring i s also indicated by contrasting labour force growth with growth of formalremployment. Between 1969 and 1974, the l a -27 bour force probably increased by at least 690,000. In contrast, formal em-ployment increased by only 199,000. In other words, the formal development sector i s barely absorbing 29 per cent of the growing labour force. At this rate the proportion of employment provided by the formal sector w i l l decline quite rapidly. The disparity i s even more marked when i t i s remembered that formal private non-agricultural employment expanded by only 71,000 between V..'7 1969 and 1974. T:he stark reality of these comparisons should be-of great con-cern to Kenya's planning authorities and should alert them to the v i t a l neces-sity of harnessing rather than harassing, of liberating rather than inhibiting, the creative talent, energy and knowledge of the countless individuals in the country interested in material advance yet destined to remain outside the formal sector. Implicit in Table 13 i s an acknowledgement by Kenya's planners that the-informal activities w i l l not only grow absolutely but w i l l provide an increas-ing proportion of Kenya's employment. Byv.the standards of the formal economy-which are the standards of materially advanced countries - the prospect of a 99 rapidly growing informal economy seems to connote a failure of development. The truth i s more nearly the opposite. What i s indicated i s the relative failure of a particular development strategy, that i s , state directed expansion of formal a c t i v i t i e s , in providing both o f f i c i a l l y sanctioned types of employ-ment and a variety of. mass consumption goods within the income range of most of the population. The objectives of employment creation and higher standards of living are probably being reached, but largely through the self-reliant efforts of individual Kenyans. At the same time, i t should be acknowledged that the Kenyan authorities have expressed considerable distress at the lagging generation of formal em-ployment opportunities. Two prominent policy i n i t i a t i v e s , the ostensible aim of which was to increase formal employment, merit some discussion. E. The State and Employment Creation In Kenya, the government has often expressed the laudable hope that pro-ductive, rewarding and satisfying employment will':be available for a l l Kenyans. Implicitly this has come to mean increasing the availability of formal jobs. When i t became apparent that the formal economy was not going to produce the desired number of employment opportunities the government resorted to what i s perhaps i t s ultimate tool, coercive action. This is evident in two distinct realms: formal commercial act i v i t i e s and the Tripartite Agreements. An anal-ysis of state intervention in these areas may indicate some of the unfavourable although perhaps unintended consequences of p o l i t i c a l l y popular economic pc-l policies. Thus, in formal commerce, employment did not exceed i t s pre-independence 28 peak until 1974. However, this obscures significant changes in the racial composition of owners and employees which has occurred as a result of govern-ment intervention. Through the Trade Licencing Act of 1968, non-citizen 100 (mainly Asian) business activity was restricted to the centre of urban areas, excluding completely non-citizen trading in rural areas. As well the govern-ment took powers to withdraw progressively trade, licences from non-citizen 29 traders within the areas where they were s t i l l legally permitted to trade. The IL0 reports that by mid-1971, 1,068 businesses which were formerly owned by non-citizens had been transferred to c i t i z e n s . ^ Since then, the Kenya government has frequently issued mass "quit no-tices" to non-citizen businessmen. In June 1973, over one thousand non-citizen traders were served with "quit notices," with President Kenyatta directing t ' - t 31 that these traders were to leave Kenya immediately. In April, 1975, 463 non-32 citizen businesses were ordered to be transferred to citizens. These actions are f e l t by policy-makers to be in keeping with the government's aim of pro,^ moting Africanisation in commerce and industry. However, i t i s most unlikely that a policy of forcing non-citizens out of business i s aarelatively costless means of suddenly expanding the stratum of African entrepreneurs. For one thing, the cancellation of non-citizen trade licences may lead to the permanent loss for Kenya of artisan and commercial expertise. A sample of names of eBusinesses affected in 1975 indicates the types of s k i l l s that may be entirely lost due to blunt action under the Trade Licensing Act: Nairobi: Nairobi Building Works'; Rehal Electrical Services; Nairobi Tin Works; Ideal Steel Works; Geerdial Engineering Works; Shah Electrical Distributors; City Spray Painter; Excelsior Wood Works; Sira Electrical Printing; Highland Industrial Garage; Flora Garment Factory; Steel and Metal Works; Regal Joinery Furniture Works; Kaijia Engineering Works; Kariru Metal Works; Baluc's Auto Electrician; Kisumu and Nyanza: Eagle Engineering Works; Autar Engineering Works; Rehal Construction; Paramount Engineering Works; Naktifu and Rift Valley: Kendil Chemists; Sira Engineering Works; Central Province: Woodside Agricultural Engineers; National Electrical Services.33 101 The policy of promoting African commercial and industrial enterprises would probably be Uetter served i f the s k i l l s available in these small engi-r neering, metal, and wood workshops could be tapped before the artisans l e f t Kenya. As i t is now conceived, the current policy seems to assume that A f r i -cans withesimilar5ski'llsleyels''td;;non^eitizens are available and can be simply inserted in their places with l i t t l e or no harm to the operation of the enter-prise, employment creation, and consequently national development. However this view i s belied by the constant reiteration in Kenya of the need to train Africans in technical, artisan, and "practical" s k i l l s . Once the non-citizen artisan or businessman has l e f t Kenya, his s k i l l s , which might have been cap-tured through sensitive policies, are lost forever at what must be a heavy so-c i a l and economic cost. As well, restricting non-citizen traders to the c i t i e s and the subse-quent cancellation of many trading permits in the urban areas probably reduces both the aggregate volume of trade and the volume of economic a c t i v i t i e s . That this may indeed be occurring in Kenya i s suggested by comments made by Kenya's then minister for Commerce and Industry, Dr. Kiano, when he noted the commer-c i a l enterprises taken over from non-citizens featured much less variety in types of products, favouring instead a few "safe" commodities such as beer, cigarettes, posho, sugar and sal t . " ^ Thus i t appears that the aggregate vol-ume of trade handled by African traders has been reduced rather than increased by restrictions imposed under the Trade Licencing Act. This would seem to harm the economic interests of the bulk of African producers, consumers and workers. At the same time, the distribution of a variety of low-cost incen-tive or consumer goods may be less than i t would otherwise have been, thus probably slowing the spread of the exchange nexus. In addition to using ithe Trade Licencing Act to "promote" Africanisa^:'.?.> tion, the government has established the Kenya National Trading Corporation 102 (KNTC). The ostensible purpose of the KNTC i s to secure;'a major local share of the import-export trade. However i t has proved to be a means of reserving r e t a i l and wholesale trade to favoured individual Africans (as opposed to c i citizens, who might be non-African). Essentially the KNTC has a monopoly of trade in specific commodities (for example, sugar, salt, edible o i l , cement, wire, hardware, some types of cotton fabrics). Since the establishment of the KNTC in 1965, i t s African traders have consistently worked for a protected f, sinecure in the market place. Typical of what has been noted earlier as the general thrust of formal sector development, these traders wanted: . . . fixed shares of specific markets, public loan funds, or publicly guaranteed commercial credits, fixed suppliers, and fixed prices. Without these things, [formal] African trading was ground between the upper m i l i -ar/ stone ofisthetestabl&s'hed:inonsAf ricanstfra'derr (or in^someseases,-!.consumer)i t'.tand the nether millstone of mass competition from other Africans prepared to operate on minimum turnover. But the effect of granting the conditions in which African traders could make profits and begin to accumulate capital was to bind them tightly to the established foreign suppliers and to the state, making them into highly dependent clients, not entrepreneurs. . . . Above a l l , the implication was that African traders learned to make their profit through monopoly, adding no value whatever to the goods they han-^  died, or even reducing their value.35 At the very least, these types of policy measures betray an uncritical acceptance by Kenya's decision-makers of the notion that non-citizens (partic-ularly Asians) have been able in some sense or senses to secure rewards . . \: through a process of "exploitation" of A f r i c a n s . T h e r e seems to be l i t t l e appreciation of the probable role of Asian entrepreneurs in expanding the ex-change nexus by penetrating the rural areas in ways not undertaken by large-scale formal enterprise. By their want-creating activities Asian businessmen may have been decisive in accelerating the market mentality among subsistence, rural producers. At the same time, the activities of Asian traders and a r t i -sans may have had the unintended effect of stimulating informal African entre-preneurship through both demonstration effects and s k i l l diffusion. In this 103 respect informal activities in Kenya probably owe a great deal to the country's various Asian communities. It i s unfortunate that there i s l i t t l e o f f i c i a l recognition of the ex-pertise available for diffusion to Africans from Asian workshops and trading establishments. In effect, the authorities have responded in a punitive nan.-:.-:.' manner to the undeniable fact that many Asian businesses can effectively com-pete with large-scale formal concerns, concerns already favoured by licencing, commodity distribution, and public loans. It would seem that i f the non-citizen entrepreneur were in fact not performing a useful service then he would be by-passed by the consumer without the necessity of o f f i c i a l restrictions. Actions taken under the;,Trade Licensing Act or through the KNTC penal-ise both the Asian businessman and the African informal sector operator and may therefore reduce income and employment opportunities. The mere taking over of already established businesses i s hardly creative and does not repre-sent a net gain to the economy. Indeed, preferential treatment in the a l l o -cation of licences or supplies or credit i s the antithesis of any spontaneous development of entrepreneurship and therefore may not encourage v i t a l risk-taking activities or the accumulation of innovative business experience. At the same time, the p o l i t i c a l gains of patronage and privilege in protected formal trading may eventually arouse antipathy among those excluded from the system of benefits. The government's distress at the lagging growth in formal employment i s also indicated by the two "Tripartite Agreements" concluded in 1964 and 1970 between trade unions, private formal employers and the government. These -; agreements indicate an attempt by the government to expand employment directly by requiring employers to increase the volume of labour u t i l i s e d . 104 In the 1964 Agreement unions agreed to a one-year wage freeze in return for which private employers were to increase their labour forces by 10 per cent while the government was to hire 15 per cent more employees.. The agree-ment was. meant to be short-term and clearly had very l i t t l e long-term impact on the creation of formal employment. The government faced financial con-straints and could not honour i t s part of the Agreement. Private employers did take on additional workers but neglected to offset attrition by hiring new employees so that in a few months the working forces in most of the private establishments had dropped to their former levels. One observer has remarked that "the effort was a colossal failure.""^ This conclusion i s supported by the finding in Table 10 that in 1965 the economy experienced the lowest rate of increase in the number of people in formal employment (0.57' per cent). A detailed examination of the 1970 Agreement was carried out by Francis Stewart for the ILO mission to Kenya, and much of the analysis which follows I 38 i s derived from that report. Unlike 1964, the 1970 Agreement stipulated that both private employers and government would increase the volume of employment by 10 per cent. Em-ployers could neither dismiss staff nor cut back on surplus labour, nor were there to be any lockouts during the Agreement. Two secondary provisions are of some interest. F i r s t , the Agreement stipulated that additional employment was to be created as far as possible in rural areas, Second, employers were given an option, in certain areas, of making a financial contribution to nan tional projects instead of expanding employment. For their part, the unions again agreed ifcotafcwagerfreeze and undertook not to strike. During the term of the Agreement 45,680 jobs were provided, 30,203 by i the private sector and 15,477 by the public sector. While this did not meet the target of 10 per cent, the ILO has concluded that i t did go a good way 105 toward meeting the goal. Nevertheless, the data collected by Stewart indicate that the number of jobs created represented only a tiny proportion of persons registered as seeking employment (about 16 per cent, which i s almost identical to that in 1964). Altogether 290,211 people registered or about 46.4 per cent of the total employed in the formal sector in 1969. The number of registrar;.:, tions cannot be interpreted, however, as a measure of unemployment since many individuals who registered were already employed and were presumably looking for a better job. One probable result of the low rate of placements relative to registrants i s that government, by undertaking such a p o l i t i c a l l y visible role, generated a great deal of i l l - w i l l towards public authority: the Agree-ment likely raised expectations for some individuals that could not conceiv-ably be f u l f i l l e d . During the term of the Agreement the urban areas attracted a dispropor-tionate share of registrations, reflecting the belief, according to the IL0, that good jobs were more likely to be found in the larger towns. As in 1964 ;<,-. when, according to Harbison, the Agreement "acted like a magnet attracting new 39 workers into the urban labour market," registrations and placements in 1970 were concentrated in the urban areas. The Agreement therefore failed in i t s secondary goal of making rural areas benefit as much as possible from the additional jobs. It i s also questionable whether the Agreement f u l f i l l e d i t s primary pur-pose. Similar to the 1964 Agreement, the expansion of jobs in 1970 cannot be regarded as a net increase in the volume of formal employment. Some jobs would have been created regardless of the Agreement. In addition, labour turnover : and attrition might be expected to open up 15 per cent of the jobs in a typical formal sector firm. Furthermore, the IL0 has found evidence that some substi-tution of regular for casual employment and of adult for juvenile labour V,-J~ 106 occurred during the term of the Agreement. As well, the data in Table TO imply that a certain amount of the growth in employment in 1970-71 pre-empted the growth that might have occurred in 1972. A l l of these considerations suggest that the effects of direct employment creation by government f i a t can only be temporary and have l i t t l e long-run impact. The attempt to generate formal employment through decree and the curb on non-citizen participation in economic activities indicate a preference for regulatory control and direction. In essence, these measures mark the ascend-ancy of immediate p o l i t i c a l benefits over present economic r e a l i t i e s . It i s improbable that this discrepancy w i l l lead to sustained expansion of product five, rewarding and satisfying employment and hence general improvements in living standards. F. Summary and Conclusions. The typical accounting framework used in analysis of national income i s an inadequate, i f not misleading, measure of the dimensions of development. For example, these accounts and the; related concepts for identifying the nature and relation of systematic changes in the structure of a developing economy are accurate, even i f then, only for those activities which are sanctioned as part of the o f f i c i a l economy. As the level and structure of an economy changes the social meaning and technical measurement of standard concepts may also have to vary. However, this framework may provide at least some understanding of the economic forces at work in a nation. Indeed, without i t , i t would be d i f f i c u l t to obtain even a partial image of the total economy. With respect to Kenya, published data suggest that national income may have grown at an impressive rate of 6-7 per cent per annum between 1964 and 1974. A substantial part of the increase in o f f i c i a l national income occurred in relatively capital-intensive labour-conserving act i v i t i e s such as ;\, 107 manufacturing, mining, and u t i l i t i e s . This i s reflected in the relatively slow growth in formal employment. During the decade 1964-1974 formal employ-ment in Kenya seems to have expanded at a rate of 3.7 per cent per annum. However employment in the private formal sector expanded by only 2.4 per cent. About 43 per cent of the total private formal employment was s t i l l in agricul-ture and related ac t i v i t i e s by 1974, a sector where employment increased by only 0.7 per cent per annum. In six of the years covered formal employment did not expand faster than the net growth of the labour force. Indeed, given the small size of the formal economy, the proportion of employment in the for-mal sector i s declining rapidly with less than 30 per cent of the additions to the labour force being absorbed into the formal economy. One significant :•:-growth sector appears to be the informal economy which provides, at the very minimum, 40 per cent of African adult non-agricultural employment. In urban areas the informal economy i s f e l t to be growing at 7.5 per cent per annum, at least double the rate of the formal sector. To stimulate the expansion of African formal employment the government resorted to direct job creation by f i a t and to the restriction of non-citizen economic a c t i v i t i e s . Both of these measures Hav-e had unimpressive results with the latter in fact probably adverse to economic advance. However they indicate the general thrust of the formalisation of development: the aversion to market forces in favour of p o l i t i c a l l y secured jobs, markets, supplies and prices. !•! In passing, i t can be noted that i f the talent, expertise and capital of Kenya's Asian communities had been fully tapped then the pattern of Kenya's Jo development might have been considerably different. For example, at least one probable outcome of discriminatory policies against Kenya's Asian communities 40 is a potential capital flight of K£250 million. More important, however, i s the loss of the s k i l l s and talents that might otherwise have been transmitted 108 to Kenyans.. This might have been accomplished through s e n s i t i v e s t a t e p o l i -c i e s , p o l i c i e s derived from the premise t h a t contact between d i s s i m i l a r peo-p l e s i s a l e a r n i n g and rewarding, r a t h e r than negative and i r r e m e d i a l l y " e x p l o i t a t i v e 1 , experience. Moreover the a n a l y s i s of employment c r e a t i o n i n t h i s chapter suggests t h a t the b e l i e f that most of the l o c a l p opulation can be accommodated i n the formal economy, the i n c o n c e i v a b l e although o s t e n s i b l e goal of much of the de-velopment l i t e r a t u r e and the apparent aim of development planning, ought per-haps to be replaced by a concern with p o l i c i e s that encourage and nurture s e l f - r e l i a n c e , r i s k - t a k i n g , and a general i n t e r e s t i n m a t e r i a l advance. The need to promote and s t i m u l a t e e n t e r p r i s i n g behaviour i s even more apparent ': when c o n s i d e r a t i o n i s given to demographic v a r i a b l e s . The f o l l o w i n g chapter turns to the growth of p o p u l a t i o n , examining some of the i n t e r a c t i o n s between i n c r e a s i n g numbers of people and the process of development. IV POPULATION AND THE LABOUR FORCE A. Introduction It was estimated that by mid-1978, the world's population had passed 4.25 b i l l i o n . According to projections by the United Nations this may increase to nearly 7 b i l l i o n by the end of the century. Nearly two-thirds of that pop-ulation w i l l then li v e in the less developed world. It i s a formidable task to accommodate this number of people within effective state-created social and economic structures. However, the pressure of population need not necessarily lead to despair. Given the complexity of the interrelationships, population growth may have some indirect and largely unnoticed beneficial effects on the self-reliant achievement of higher material standards of l i v i n g . The extent to which this may occur seems to depend on sensitive state policies and on the individuals concerned. This chapter begins with a brief analysis of some of the probable links between population growth and economic achievement. The themes raised are ., then more fully explored in the Kenyan context through a brief account of the nature of the growth in population and labour force. Subsequently, some of the quantitative and qualitative changes in the population are assessed, par-ticularly the implications they may have for further strengthening the infor-mal economic order in Kenya. The complications introduced by the rapid growth of urban centres are assessed in the next chapter. 109 110 B. Some Probable Implications of Population Growth for Development Theory Much of the concern with population growth in less developed countries has centred on the issues of unemployment and income generation. Numerous mod-els have been constructed to indicate the impact of differential rates of pop-ulation growth on such aggregate variables as size of the labour force, eco-nomic growth, per capita income, urbanisation and on the attainment of higher 1 standards of health, education and similar components of living standards. Dharam Ghai has summarised some of the main results of projections made by •;!: these models as follows: i ) The level of aggregate output over a given period as well as during the period, usually taken as 30 years from.the time the decline in f e r t i l i t y begins, w i l l tend to be higher under the declining rela-tive to the constant f e r t i l i t y case; i i ) The per capita advantage of declining f e r t i l i t y w i l l be greater and w i l l increase cumulatively over time; and i i i ) The economy w i l l have a more "modern" structure under declining fer-t i l i t y , as reflected in the relatively greater share of manufactur-ing, transportation, communications and relatively smaller share of agriculture in total output.2 However, with conditions varying enormously throughout the less devel-oped world, i t i s d i f f i c u l t to state categorically that either rapid population growth or high population density i s a significant independent cause of low standards of l i v i n g . For example, such densely populated areas as Japan, Hong Kong, Singapore and Taiwan have achieved significant material advance while many sparsely populated areas in Africa with stagnant population growth rates have remained desparately poor.? Even within a given country, the materially most advanced area may also be the most densely populated, as in Kenya's Cen-tr a l Province. As well, a high rate of national population growth has not prevented some groups within a country from securing material progress, as i s indicated by Kenya's Asian communities. In other words, macro models abstract the' human actions that may determine the nature of the relationship between population growth and economic expansion. 111 The examples cited here suggest that the size of the population and i t s growth rate are not likely to be the main determinants of economic advance. Rather they may reflect the stage of material progress which in turn i s prob-ably determined by the aptitudes, attitudes, motivations, s k i l l s and knowledge of the population.^ If these latter variables change as a cause and effect of a desire for a higher material standard of l i v i n g , a desire stimulated by con-tacts between diverse peoples, then birth rates w i l l probably also change. In this respect, the creation of and exposure to a competitive want-creating economic order might be expected both to significantly improve living standards and lower population growth rates. But in these circumstances the latter w i l l not be a cause of the former: both w i l l reflect changes in a t t i -tudes, particularly toward the desirability of improved material conditions of l i f e and how these conditions can be obtained, in other words, changes in i n -dividual expectations. At the same time, i t i s almost certainly the case that the very rapid increase in population, and therefore the labour force in many less developed countries (including Kenya) is far in excess of the capacity of the formal sector to generate employment. Indeed, a frequent argument for the extension of the formal economy, particularly expansion of formal manufacturing, i s based on the necessity of relieving both population pressure and the wide-spread unemployment of labour alleged to exist in most less developed coun^.. t r i e s . However, analysis of the population data for Kenya indicates the im-plausibility of any conceivable growth rate of the formal sector generating opportunities of the magnitude necessary to transform the structure of employ-ment in any time period meaningful to human actors. Less developed countries like Kenya may have few options other than relying on the i n i t i a t i v e , motiva-tion, hard work and effort of individuals pursuing their own interests within a framework of appropriate state policies and actions. 112 C. Population and Labour Force Dynamics in Kenya There are at least two striking features of the data on Kenya's popula-tion. F i r s t , in 1969 (the year of the latest population census), 90 per cent of Kenya's 10.9 million people lived in the rural areas. Although i t i s com-monplace to indicate that agriculture i s the primary economic activity in most less developed countries, i t i s seldom appreciated how stark the imbalance can be in the rural-urban distribution of the population. Given the low urban base, i t i s unrealistic to expect a relatively straightforward transfer of l a -bour from agriculture to formal industry even i f there were a fast rate of growth in formal employment. Second, there has been an acceleration in the rate of population growth in Kenya over the years (see Appendix B, Table 3). Between 1931 and 1948 the population i s estimated to have grown by 35.8.per cent while in the shorter period between the 1948 and 1962 censuses the population grew by 59.8 per cent, rising from 5.4 million to 8.6 million. By 1969 the population had further .it increased by 2.3 million to reach 10.9 million. It i s probably currently (1978) about 14*8 million.'' In other words, the rate of increase in popular tion i s i t s e l f increasing and i s now approximately 3.5 per cent per year com-pared to 2.0 per cent estimated for earlier this century. At this rate, Kenya's population w i l l double in 20 years or less. Consistent with the trend in the rest of the less developed world, the decline in the crude death rate seems to have made a substantial contribution to the population increase in Kenya.^ In this respect, a rapid rate of popu-lation growth may be considered a result of significant past improvements in living conditions, particularly in health and l i f e expectation. Indeed, the f a l l in the crude death rate i s an instance of the beneficial effects of : = 113 contacts between diverse peoples, as the decline has largely come about through contact with western medical advances.^ It i s the case, however, the Kenya's rapid population growth outstrips the employment generating capacity of the formal sector. The urgent need for additional employment opportunities i s starkly revealed in Table 14. The table gives two projections of growth of Kenya's population between 1970 and 2000. The high projection assumes a steady decline in mortality with a corresponding rise in l i f e expectancy from 49 years to 60 years and no change in f e r t i l i t y rates. The low projection also assumes a slow decrease in mortality rates but predicts a decline in the average number of children per surviving adult fe-male from 7.6 to 2.0 by the year 2000. Table 14: Proj ected Ken ya Population and Labour Force, 1970 -2000 High Pro jection a Low Proj ...... b. ection Total Total Total Total Popu- Average Labour Average Popu- Average Labour Average lation Annual Roreec Annual lation Annual Force 0 Annual (thou- Growth (thou? Growth (thoua Growth (thou- Growth Year sands) {%)• sands) (Si)' sands) (?•) sands) 1970 11,247 . . 3,818 . . 11,247 . . 3,818 . 1975 13,413 3.58 4,515 3.41 13,413 3.58 4,515 3.41 1980 16,053 3.65 5,358 3.48 15,752 3.27 5,357 3.48 1985 19,310 3.76 6,376 3.57 18,186 2.92 6,376 3.57 1990 23,302 3.82 7,667 3.70 20,521 2.44 7,667 3.70 1995 28,213 3.90 9,258 3.85 22,626 1.97 9,060 3.85 2000 34,286 3.98 11,215 3.91 24,249 1.35 10,473 2.99 ^Assumes (1) a slow but steady decline in mortality and rise in l i f e ex-pectancy from 49 years in.1969 to 60 years in the year 2000 and (2) no change in specific f e r t i l i t y rates. ^Assumes (1) slow decrease in mortality ratesas above, and (2) a decline in "total f e r t i l i t y " - average number of children per surviving adult female -from 7.6 in 1969 to 2 in the year 2000. c Labour Force i s defined as 95% of males and 45?o of females between the ages of 15 and 59. Source: Kenya, St a t i s t i c a l Digest, June 1971 114 It i s probably r e a l i s t i c to assume that the actual population w i l l f a l l within the range of the two projections. A sustained and increasing popula-tion growth rate of 3.5 per cent to 4 per cent would likely be an extreme li l i m i t . Nevertheless the decline in f e r t i l i t y of 62 per cent assumed in the low projection i s quite optimistic. If the high projection holds, Kenya's population w i l l t r i p l e by the year 2000 and be in excess of 34 million. Even with the lower rate of growth the population w i l l more than double by the turn of the century. Significantly, the trend during the 1970's bears out the higher population projection with the rate of growth currently averaging 3.5 per cent per annum. Of some importance, wide differences in the population growth rate appear to have l i t t l e effect on the growth of the labour force. Indeed, as Table 14 indicates, even a very low population growth rate w i l l have no effect on the labour force for over two decades. This paradox i s due to the fact t that the labour force for the next fifteen to twenty years i s essentially pre-determined by themmore or less predictable mortality rates among age groups presently l i v i n g . As one observer has noted, even a crash programme of family planning, assuming.it were immediately effective, wouldrhave no real impact on 9 Kenya's labour force until at least the year 2000. Table 14 indicates the magnitude of employment generation needed in the Kenyan economy: the labour force w i l l at least double in twenty years irrespective of which projection i s realised. Even i f the birth rate i s substantially lowered, the labour force w i l l almost tr i p l e in size between 1970 and 2000 reaching nearly 10.5 million workers. As well, given the built-in momentum in population dynamics, even under the low projection the rate of increase in the labour force w i l l s t i l l be about three per cent at the turn of the next century. 11.5 In other words, even extensive adoption of birth control would not bring about any appreciable change for decades to come in the required number of job opportunities. Nor for that matter, would an extensive population con-t r o l programme appreciably affect per capita incomes in the foreseeable future. Indeed, significant changes in living standards are more likely to be brought about by changes in motivations, a b i l i t i e s , attitudes and policies than by a reduction in the population growth rate. In this respect i t i s worthwhile noting Leibenstein's comments: In a broad sense human investment - the acti v i t i e s that create the essential changes in the acquired economically valuable qualities of the work force - must be the c r i t i c a l element which determines whether or not population growth in any particular case has adverse economic con-sequences. Even the process of capital accumulation i s not a mechanical one. Obviously entrepreneurial qualities (which are for the most part acquired qualities) are essential elements in the process. Economic growth requires more than the accumulation of capital goods of the type already in use. New types of productive instruments have to be created; new occupations learned, induced, generated, and f i l l e d in new contexts and locations; new types of risks have to be assumed; and, to some de-:-..: gree, new social and economic relationships have to be forged. Hence, the characteristics of the population that are transmitted from gener-ation to generation through nurture and education become the v i t a l fac-tors that determine the rate of growth. But the transmission of such characteristics does not result in a replica of the previous genera-tion's occupational s k i l l s , and attitudinal characteristics. The trans^ mission process creates the potential for change. In most instances, economies do not operate at their productive and technical upper bound. Developing countries do not have to invent new techniques. They can borrow techniques and types of capital that a l -ready exist. (Of course, in detail, some research and experimentation i s frequently necessary to adapt broadly known techniques to specific local conditions.) In view of these considerations, the findings that'; traditional inputs [land, labour and capital.], account for only a small proportion of the growth that takes place i s hardly surprising. The old Malthusian argument that additions to the population come into the world with additional hands but without the additional capital or land necessary to produce at the same level as their forebears i s not en-ti r e l y true. The nurture and educational system can create to ;some de-gree the additional capital necsesary. Whether this "human capital" i s adequate or not depends upon the rate of transmission of known and new s k i l l s , the simultaneous introduction of other types of capital into the population. (The word s k i l l i s used in i t s broadest possible sense in this context.) The rate of growth of physical capital may be to some extent a function of the growth rate of human capital. The basic argument i s neither pro-nor anti-Malthusian. Rather i t suggests that 116 the traditional approach misses to a considerable degree the fundamental processes which determine whether or not given rates of population growth are adverse to economic growth.1n The "fundamental processes" referred to by Leibenstein probably include the actual s k i l l s of the labour force; the incentives that exist in the eco^ nomy; and the degree to which individuals respond to such incentives. The point i s that the acquired qualities of the population that may determine de-velopment depend on motivations and expectations and these are d i f f i c u l t to quantify in any meaningful way. Differential rates of population growth per se probably do not have an independent influence on these likely determinants 11 of economic development. It i s worth noting in passing that Kenya was the f i r s t African country south of Sahara to declare i t s e l f in favour of a population programme. Never-theless i t s policy-makers are:,not of one mind when i t comes to evaluating rapid population growth. Some o f f i c i a l s appear to feel that Kenya's resources 12 are adequate to support a much larger population. As well, others believe that "family planning was a trick by imperialists to keep African populations down, through economic suppression so that those countries could not rise up 13 to their strength." However, s t i l l other o f f i c i a l s urge s t r i c t birth con-14 t r o l as a means of enhancing economic development. Even i f desired, i t i s unlikely that such a controversial programme as statevrdirected birth control could be successfully carried out when policy-makers themselves are divided over i t s merits. D. Change in Population Structure, 1962-1969 Significant changes seemed to have occurred in the racial composition and structure of Kenya's population. Thus, as Table 15 indicates, the non-African population has substantially declined. 117 Table 15: Population of Kenya by Race,1962 and 1969 (thousands) 1962 1969 Race Males Females Males Females (1) (2) ' (3) (4) (5) African 4,134.6 4,341.3 5,373.9 5,359.3 Asian :T92.4 84.2 71.6 67.4 European 29.9 25.8 21.1 19.5 Arab 18.1 15.9 14.8 13.1 Other 1.9 2.0 1.0 1.0 Sources: Cols. (2) and (3) St a t i s t i c a l Abstract 1969, Table 17: Cols. (4) and (5) St a t i s t i c a l Abstract 1974, Table 17. This change reflects the restrictive policies adopted by the Kenya gov-ernment towards non-citizens in the commercial and industrial sectors. As discussed in the last chapter, Kenyanisation was seen by policy-makers as one method of expanding formal employment opportunities. Indeed, the data suggest that localisation in the;;public service and in the formal private sector has been quite successful as a means of reducing non-citizen participation in the economy. But, by the same token, the dwindling number of non-Africans in Kenya indicates that localisation w i l l soon be exhausted as a source of "easy" employment creation for Africans. Thus, increasing numbers of Africans who might formerly have obtained politically-created employment w i l l most likely find i t necessary to enter the self-help economy. Another significant change in Kenya's population pertains to age dis-tribution. Table 16 presents the relevant data. Although the total African population increased by 28 per cent between 1962 and 1,969, there were d i f f e r -ential rates of increase by age group. Among males, the largest increase oc-curred in the 20-24 age group which, as the next chapter indicates, i s a prime age for those seeking employment in urban areas. Kenya's high rate of ; r ; , i ; 118 population growth i s also reflected in the 0-9 age group which increased by 40 per cent between 1962 and 1969. Most of these young people are now about to enter the labour force for the f i r s t time. Many w i l l be relatively educated compared to similar age-cohorts at earlier times and some of them w i l l probably be attracted to the urban economy in the hope of securing formal employment. Table 16: Age Structure of the African Population by Sex, 1962 and 1969 Males ? Females Numberi" (thousands,-), a Percentage Numbers:- (thousands") 1962a 1969 Percentage Age Group Change Change 0- 4 708.1 1,046.6 -: 47.8 737.8 1 ,035.6 40.4 5- 9 662.8 903.5 36^3 656.0 880.7 34.2 .1.0*14 601.5 701.6 16.6 501.0 651.3 30.0 15-19 424.1 549.9 29.7 405.6 534.6 31.8 20-24 271 .6 420.0 54.6 392.3 440.7 12.3 25-29 275.8 341.2 23.7 372.1 402.5 8.2 30-34 227.3 272.2 19.8 285.2 290.9 2.0 35-39 200.3 243.8 21.7 216.3 257.9 19.2 40-49 315.0 354.0 12.4 299.4 355.6 18.8 50-59 190.9 238.8 25.1 160.7 235.2 46.4 60 and over 228.6 302.1 32.2 178.7 274.3 53.4 Not stated 28.5 • • • • 26.2 • • • • • Total 4,134.6 5,373.9 29.9 4,231.3 5 ,359.3 26.7 aThe figures for 1962 are those reported for the African and Somali pop-ulation. They are based on complete enumeration in urban areas and 10 per cent sampl e census in rural areas. The sample figures hav e been rated up to give the sex totals obtained in the general census. Sources: Stat i s t i c a l Abstract 1969, Table 17, for 1962; Stati s t i c a l Abstract 1974, Table 17, for 1969 119 In. other words, just as the creation of formal opportunities through localisation dwindles sharply, a surge cf young Kenyans w i l l enter the labour market seeking formal employment. Since formal employment is only available to a small fraction of the net additions to the labour force, the vast bulk of Kenya's young and better educated population must turn to infofmalrand s.:::'. agricultural a c t i v i t i e s . To the extent that entrants into these activities are of higher quality (that i s , higher education, more s k i l l s , greater recep-t i v i t y to change) than those currently active in these pursuits or those who leave^through retirement or death, marked qualitative chanqesm ' -u may occur. In particular,:,new entrants may have a higher productive capacity as reflected, for example, in the willingness to experiment with new tech^.:. niques and equipment, an interest in novel occupations and a desire for geo-graphical mobility. To the degree that these qualities are acquired through contact between dissimilar peoples, the p o l i t i c a l l y determined exodus of non-citizens from Kenya weakens the transmission of characteristics v i t a l for ma-t e r i a l advance. This i s occurring just as the labour force enters a sustained period of explosive growth. However, i f the state emphasised the sensitive policies advocated in the last chapter, then i t i s conceivable that imprqvemeihtscin tfchelqbaclityco f&} the laboufoforce^randiitherefore a rise in standards of l i v i n g , might occur more rapidly with higher rathern than lower rates of-population growth. This i s in contrast to most macro,models of population growth and economic develop-ment - models which abstract human actions and expectations - which almost uniformly urge lower population growth rates through the adoption of s t r i c t birth control programmes. One reason for the repeated advocacy of population control i s the al^:. ; leged "dependency burden" on the working population as a result of a high 120 15 birth rate and a declining death rate. The data in Table 1:6 indicate that these two factors have been operating in Kenya. Indeed, a population pyramid exists in which close to 50 per cent of the total African population i s under 16 years of age. It is important, however, to separate the effects of any po-tential "dependency burden" on given individuals from the effects on Kenya as a whole. If the average effort, productivity and output of a new addition to the population i s higher over his.working l i f e than that of the average pres-ent worker then the nation may benefit rather than suffer with population growth. Similarly, a longer l i f e span, as suggested by Table >16, must of ...v.: course mean a longer working l i f e . Even i f i t i s demonstrated rather than as-16 sumed that productive output declines with age, i ;it ;is conceivable and prob-able that this i s mitigated by reduced material needs. Thus the effect of high birth rates and declining death rates on Kenya's development may not be as clear cut as i t appears. As such, calculation of a nebulous "dependency burden" in order to strengthen the argument for population control does not seem particularly f r u i t f u l . Indeed, for Kenya, other considerations should be taken into account before assuming the existence of a "dependency burden" on the working popula-tion. For example, since independence the Kenyan government has vigorously 17 pursued a policy of expanding educational opportunities. This i s reflected in the expansion of primary school enrolments which increased by a fantastic 175 per cent between 1965 and 1974. Even more impressive i s the 400 per cent 18 expansion -in secondary enrolments during the same period. By 1974, the com-bined enrolments totalled 2.5 million. These tremendous increases in enrolments are a credit to the Kenya gov-ernment's sensitivity to the popular demand for education. However, the : 121 demand i t s e l f i s indicative of the probable changes in motivations, aspira-tions and expectations of Kenya's young people. These changes in conjunction with the reinforcement provided through the beneficial effects of education suggest a marked improvement in the quality of the labour force. Thus the "burden" of providing an education and other f a c i l i t i e s for Kenya's youth i s likely to be richly repaid through lifetime contributions to national advance. Nevertheless, despite accomplishments in rapidly expanding educational opportunities and removing facia l segregation in the schools, the Kenyan educational system may have had at least two adverse effects on the labour 19 market. Fi r s t , most of the gains from state-directed economic growth have tended to concentrate in the formal sector. This has drawn increasing numbers of job-seekers into this intensely competitive arena. Entry into this sector has been easiest for those who have completed higher levels of education. Second, the content and structure of the education.;system has emphasised s k i l l s 20 suitable for formal employment, while offering l i t t l e preparation for the vast majority of school leavers who must seek employment in the rural economy or the informal sector. One result i s that many school-leavers gravitate to the formal urban labour market. They may do so less as a result of unrealis-t i c aspirations and more as a result of development policies which have con-21 centrated highly visible opportunities in Kenya's main towns. The school system, in turn, has been shaped by this urban bias, a bias which has given 22 Nairobi in particular, economic, p o l i t i c a l and social dominance in Kenya. The interaction between conflicting signals.from the formal labour market and the formal education system may be cumulative and self-reinforcing.. Emil Rado has analysed this in terms of an "explosive model" of demand for ed-23 ucation. The model i s based on two assumptions: f i r s t the rate of increase of opportunities for formal employment (determined exogenously) i s slower than 122 the r a t e of increase of the p o t e n t i a l labour f o r c e ; second,^employers faced with an excess of a p p l i c a n t s s s e l e c t by l e v e l of education. For example, once a formal employer knows there i s an excess o f secondary school l e a v e r s , he w i l l employ them f i r s t even i n jobs "normally" performed by primary school l e a v e r s , who get the r e s i d u e . The model i s e x p l o s i v e i n the sense t h a t : As job o p p o r t u n i t i e s f o r the uneducated d e t e r i o r a t e , youngsters s a f e -guard t h e i r p o s i t i o n . b y a c q u i r i n g a primary education. The demand f o r primary education a l s o i n c r e a s e s , f o r some of those p r e v i o u s l y content with no education, are now being "squeezed." The more u n p r o f i t a b l e a given l e v e l of education becomes - as - a t e r m i n a l p o i n t , the more the de-mand f o r i t i n c r e a s e s as an intermediate stage, a p r e c o n d i t i o n f o r the next l e v e l of education.24 B a r r i n g the i n t r o d u c t i o n of some p h y s i c a l resource c o n s t r a i n t , each wors-ening of the formal employment s i t u a t i o n c a l l s f o r t h an a d d i t i o n a l demand f o r (and supply o f) more education at a l l l e v e l s . One probable r e s u l t of the "sur-p l u s " of educated workers r e l a t i v e to formal s k i l l e d jobs i s that some of the surp l u s educated persons move to the f r o n t of the formal job-seeking queue, 25 "bumping" l e s s educated i n d i v i d u a l s from j o b s . Uneducated workers i n un-s k i l l e d formal jobs might be f i r e d and replaced immediately or i n s t e a d d i s p l a c e d over time as educated workers replace uneducated r e t i r e e s . I f bumping occurs, educated workers are o f f e r i n g t h e i r s e r v i c e s i n the u n s k i l l e d formal job market and are h i r e d i n preference to uneducated workers. The l a t t e r are l e f t with whatever u n s k i l l e d jobs the educated w i l l not take. Education may a l s o be de-manded, t h e r e f o r e , i n order to r e c e i v e the advantage of a b e t t e r r e l a t i v e chance of being h i r e d f o r an u n s k i l l e d formal j o b . With continued expansion of the education system there may be so many educated persons t h a t the uneducated are excluded from o b t a i n i n g even l o w - l e v e l formal employment thereby i n c r e a s e i n g the r e l a t i v e advantage of being educated. One r e s u l t may be that i n an > i unexploding formal job market the demand f o r education i s e x p l o s i v e . 123 The applicability of the model to Kenya i s evident in the vicious c i r -cular movement of more young people with higher pro forma qualifications chas-ing fewer jobs in one small part of the economy. By 1978, 2.5 million Kenyans wi l l have a Standard VII education, compared to 800,000 in 1969. The corres-ponding numbers for Form IV and Form VI leavers are 300,000 and 100,000. But as indicated earlier, even i f optimistic Plan projections are realised there w i l l be in total only 995,000 formal jobs. Since these jobs are mainly con-centrated in the urban areas, the interaction between the education system and the structure of formal employment i s probably one key factor in the con-tinuing and accelerating growth of Kenya's urban centres. Thus, given the limited availability of formal urban employment oppor-tunities, the quality of the^labour force in the informal economy may improve dramatically as tens of thousands of "surplus" primary and even secondary school leavers join those currently engaged in informal a c t i v i t i e s . In this respect, as early as 1968, the Tracer project of the Institute for Development Studies, University of Nairobi, revealed the increasing d i f f i c u l t i e s faced by 26 secondary shcool leavers in securing formal employment. Indeed, there i s l i t t l e doubt that mosbnofjKenya's young labour force must secure employment outside the non-agricultural formal economy: on small-holdings, on larger farms and in a variety of informal rural and urban enter-prises. Two simple projections indicate the desirability of Kenya's policy-makers strengthening the informal rural and urban.economic order. F i r s t , asi sume that the population and labour force grows at a rate of 3.5 per cent per year and that non-agricultural formal employment achieves a relatively high sustained growth of 4.0 per cent per annum. In an economy like Kenya's with 90 per cent of i t s population in agriculture, after 50 years, 87.5 per cent of the population w i l l a s t i l l be in agriculture. The farm population i t s e l f 124 w i l l s t i l l be growing in absolute terms. Alternatively, assume that popular! tion control measures are immediately introduced and stringently enforced. As indicated earlier, there w i l l be no change in labour force growth for at least 15 years. Thereafter, assume that the labour force increases by a relatively low 2 per cent per annum and non-agricultural formal employment expands on a sustained, relatively high basis of 5 per cent per year. After 50 years, 70  per cent of the population w i l l s t i l l be in agriculture. Thus, neither s t r i n -gent birth control measures nor any conceivable rate of growth of formal em-ployment opportunities w i l l make any appreciable change in the p o l i t i c a l eco-nomy of population distribution in countries like Kenya for decades to come. Indeed, such structural transformation w i l l be a slow and hence very long process. These simple exercises serve as an antidote to the excessive optimism of much of the development literature and much of the public rhetoric of de-velopment planners. Contrary to those who advocate comprehensive development planning, formal development i s unlikely to alter the structural contours of countries like Kenya in any time period meaningful to human actors. The re-luctance to face this stark reality may have served to perpetuate i l l -conceived, unrewarding and negative policies that have reduced current consump-tion and penalized and harassed hard work, self-reliance, and individual i n i -t i a t i v e . Widespread gains in current living standards as a result of these latter factors may do more to enhance meaningful development than comprehenr-sive planning and state directed birth control programmes. At the same time, changes in human actions and expectations favourable to material advance in the short-run may contribute significantly to population control in the long run. The latter i s unlikely to have a significant independent effect on the former. 125 E. Summary and Conclusions The growth of total population in Kenya has accelerated over the de-cades, with the rate of growth now in excess of 3.5 per cent per annum. This i s largely a reflection of a decline in mortality rates, that i s , of s i g n i f i -cant past improvements in the quality of l i f e . Continuing high birth rates and declining death rates mean that Kenya's population w i l l continue to grow. It i s estimated that by the year 2000 the population w i l l be between 24 mil-, lion and 34 million. The higher estimate implies a rising average rate of growth from 3.5 per cent during 1970-1978 to 3.9 per cent during 1995-2000. Should total f e r t i l i t y decline from 7.6 in 1969 to 2.0 in the year 2000, the growth rate would be reduced to 1.35 per cent per year. Both of these e s t i -mates must be viewed with some skepticism. Nevertheless, of utmost importance, the labour force w i l l be about three times i t s 1970 size, that i s , about 10.4 to 11.2 million irrespective of which of the two projections is more accurate. This substantial increase i s beyond any conceivable employment generation in the formal sector. Indeed, the data on Kenya's population and labour force indicate the largely forlorn nature of planning for the absorption of even the relatively well-educated into formal employment. At the same time, the built-in momentum of population and labour force dynamics indicates that even a stringent birth control programme would have l i t t l e appreciable effect on measured per capita incomes for decades to come. Indeed, significant changes in living standards are more likely to be brought about by changes in motivations, aptitudes, attitudes, a b i l i t i e s and states policies favourable toward individual i n i t i a t i v e and self-reliance than by a reduction/, in the population growth rate. It i s unlikely that differential rates of population growth per se have any independent influence on these 126 determinants of economic advance. If appropriate acquired human qualities are wide-spread then even a very rapid rate of increase in the population and l a -bour force growth rates, as evident in Kenya, i s probably compatible with higher overall standards of l i v i n g . The acquisition of these qualities, par-ticularly interest in securing material advance and the adoption of new meiv.: thods for attaining that goal, are likely stimulated by contacts between dis-similar peoples. Thus the politically-determined exodus of non-Kenyans from Kenya may result not only in a reductionn in the aggregate volume of economic act i v i t i e s , but as well, in a restraint on the transformation of social and economic relationships in the economy. This may be occurring just at the time of a surge of youthful entrants into the labour force. Most of Kenya's population w i l l have to continue securing i t s livelihood in the rural and informal sectors for any projected time period meaningful for human actors. Formal employment i s , and w i l l likely remain, of consequence for only a very restricted fraction of Kenya's labour force. Thus, one impli-cation for the thrust of development policy i s to stimulate spontaneous econ nomic activities through encouragement of individual i n i t i a t i v e and self-reliance. The previous two chapters have given some indication of the dynamic forces at work in Kenya's economy. The next chapter continues this theme by focussing;on the striking phenomena of urbanisation. Urban growth i s viewed primarily from the perspective of state actions, some of which have changed remarkably l i t t l e from the colonial period. V PUBLIC POLICY AND URBAN GROWTH IN KENYA A. Introduction Although the growth rate of population and labour force i s an enduring and central theme in development studies, i t i s in the c i t i e s of the less de-veloped world that many observers f i r s t encounter the manifestations and per-haps intractable dilemmas associated with increasing numbers of people. One result has been a considerable debate among development specialists concern-ing the benefits and costs of urbanisation. Entry into this debate i s f a c i l -itated by placing the growth of urban centres within the broader context of a country's development strategy. In this way, the focus becomes the degree to which rapid urbariihgii^wthsemaymbeosyjh^ state policies. In this chapter an analysis i s presented of urbanisation in Kenya. The primary thesis i s that development of Kenya's formal economy has concentrated resources at the centre of the economy. As a result of the continuation and elaboration of colonial policies in the post-colonial period, formal opportu-nities have been largely restricted to two c i t i e s , eachoof which i s equipped with f a c i l i t i e s of high technical quality. In turn, the concentration of re-sources in the urban formal sector has attracted numerous individuals leading to rapid rates of urban growth. B. Urbanisation in Kenya: A Brief Outline Kenya i s usually divided into five main geographical regions: the Lake Victoria basin, the central r i f t and associated highlands; the eastern plateau foreland; the coastal region; and the semi-arid Northern, North-eastern and 127 128 and Southern Kenya. However, a look at population density indicates that the population i s unevenly distributed: eighty per cent of the people li v e in the southwestern parts of the country favoured by reliable r a i n f a l l and promising yields, although the area comprises only about fifteen per cent of the Kenyan land mass.^ For geographical, climatic and historical reasons, Kenya was the only African country north of the Zambezi river to attract large numbers of white settlers.'' Patterns of urbanisation in Kenya today are mainly a product of this European settlement. Indeed, Kenya's main urban centre, Nairobi, i s a European creation. Prior to European penetration, the land on which the city of Nairobi i s now located was a marshland that served as a natural border between the southern Kikuyu population of Kiambu, and the Athi Plains, controlled by the Masai. Early white travelers had noted the apparently deserted nature of the terrain and i t seemed that frictio n over the appropriation of land would be minimal. In fact, Nairobi appeared to be a natural site for a camp in the construction of the Uganda railway as i t lay between the relatively easy terrain of the Athi Plains and the more foreboding slopes of the Rift Valley escarpment. Building in the site did not begin until 1899 when the railhead from Mombasa actually reached Nairobi.'' By 1906, the population s t i l l numbered only about 12,000.6 Nairobi's population was always st r a t i f i e d by race. Although typically about eight or ten per cent of the population, Europeans dominated the govern-ment and the larger financial institutions. Asians, most of whom came from ., the Indian sub-continent to work on the construction of the railway, were en-gaged in a l l ranges of commerce as well as virtually monopolising artisan work. They accounted for about one-quarter of Nairobi's population. Africans, making 129 up the remaining two-thirds of the residents, provided the unskilled labour needed for the lowest ranges of the occupational ladder. The city's current residential pattern dates from the actions of the early railway authorities: l i t e r a l l y , on one side of the track they placed the higher-income European houses and on the other side were the lower-income groups. An Indian bazaar, of later .importance to the development of the A.':rv African:inf6rmal;;sectorr, was^subsequentlyk'establishedrnear thelrailway head-quarters. 7 Duality was built into the spatial organisation of the city. In the European sections (areas like Karen, Westlands and Ngong) no house was sur-rounded by less than one acre of land. Asians, on the,other hand, were con-fined to Parklands and the areas surrounding the bazaar. Like the Indians, Africans lived mainly in high density housing though of a much inferior qual-i t y . From the earliest years, scattered African villages of huts constructed from paraffin tins and thatch surrounded the. more permanent dwellings of the g railway and administration. The largest part of the African squatter v i l i lages was Pangani although other areas existed such as Kaburini, Karioriki, Maskini, Mombasa village and Kileshwa. When plague broke out in 1902 i t occurred f i r s t in the Indian Bazaar 9 where sanitary f a c i l i t i e s were lacking. Later, not respecting area (or race) renewed plague outbreaks occurred in the African areas. Fearing a spread to European areas the authorities faced two alternatives: ensure a supply of clean water, garbage collection and sewage disposal; or, separate the area to be protected from contagion by s t r i c t residential segregation, destroying squatter settlements and developing controlled urban African locations. Largely for reasons of cost, the colonial municipal council chose the second 130 alternative, thereby establishing precedents for later actions undertaken by post-independence authorities. Nor i s this surprising for the colonial authorities conceived of an African;as?.a temporary urban residents whose home was not the town but the rub-ral areas. Elkan and van Zwanenberg have observed that, Africansiwere?wanted only as employees in the towns, and a policy of segregation, coupled with a restriction of entry by special passes issued only to those who had "legitimate" employment, would ensure that "undesirables" were effectively excluded.10 By exercising some control over the movement of Africans into Nairobi the authorities were thus able to strengthen the security of Europeans and Asians. Indeed, as part of this policy and foreshadowing similar measures in therpost-r-colbnial period, the villages of Mombasa, Kaburini, Kileshwa and Maskini were burned down in 1923. A new village, Pumwani, was planned as a model African location but i t was not until 1938 that sufficient funds were found to provide even minimal services. By that time Pumwani was also ex-tremely overcrowded. Van Zwanenberg comments that . . . as the African population of the city had increased,tthe numbers of people who. had not the cash to find a bed, had also increased. It was estimated . . . that there were, in principle, bed spaces' in 1937 for 22,000 Africans in Nairobi but that there were actually 31,000 Africans in the city.11 Since 1945, when the o f f i c i a l policy of segregation in the urban areas was discontinued, the rapid growth of peripheral low-income settlements has maintained the dualistic structureoof the c i t y . While independence has meant that increasing numbers of Africans have moved into formerly Asian and Euro-:.<: pean areas the great disparity in incomes between the races has perpetuated informal segregation. With respect to economic structure the informal economy has evolved to provide employment, goods and services to Nairobi's low income groups, while the formal economy caters to the consumption needs of the higher income population. 131 Kenya's second major city i s Mombasa on the Indian Ocean coast. While Nairobi i s a new and European-created city Mombasa was an established settle-ment centuries before European colonisers f i r s t landed on the coast of East 12 Africa. The coastal location, probably selected by the Persians, served as a link and focal point between the Middle-eastern and Indian Ocean trade and the African continent. One result i s that Mombasa was repeatedly devastated in the campaigns of colonial rivals who wished to secure hegemony over the strategically placed port. Mombasa, therefore, developed as a part of the Indian Ocean l i t t o r a l , with i t s Asian and Arabl influences, rather than as an African settlement. Nevertheless, most of what constitutes present-day Mombasa was built after the arrival of the British . Kenya i s fortunate to have two main c i t i e s : being Kenya's major ocean port as well as the best equipped of East Africa's coastal terminals, Mombasa has not been totally eclipsed by the subsequent development of Nairobi as the administrative, com-mercial and industrial centre of Kenya, i f not East Africa. C. Urban Growth in Kenya 13 Similar to other East African countries two of the more significant features of Kenya's urbanisation during this century are (1) that the popula-tion remains overwhelmingly rural, and (2) the disproportionate growth of the capital city. Growth of urban centres, as a major aspect of Kenya's develop-ment, i s comparatively recent. The number of urban centres i s relatively few and most are small in size, compared with urban centres in other less devel-14 oped countries in Asia and Latin America. For example, in 1948 there were 15 three urban centres with populations in excess of 10,000; in 1962 there were seven; by 1969 there were s t i l l only ten. Of the total population, the urban areas represented 7.8 per cent in 1962 and 10 per cent in 1969. At present i t i s probably about 1.75 million or 13 per cent of the total Kenyan population. 132 Despite Kenya's strikingly rural population concentration, the urban centres overall are growing substantially faster than the total population. According to the 1969 census the number of people in towns with two thousand or more inhabitants was 1,079,908, an increase of 65 per cent over the 1962 total of 660,000. Between 1962 and 1969 the average' growth of the urban popu-lation was 7.3 per cent per year, a rate which would double the number of ur-16 ban residents every ten years. Indeed, the present annual increase in the urban population i s perhaps a minimum rate for future expansion. O f f i c i a l projections indicate that by the year 2000 about nine million people, or almost 17 six times the present urban population, w i l l reside in the urban centres. The substantial urbanisation now taking place as well as that projected for the immediate future i s well above a growth rate that could be attributed to natural sources. However, given the small size of Kenya's original urban base, urban in-migration has been removing only a small portion of the total rural population. It has been estimated that the net growth in the Kenyan African population in urban areas between 1962 and 1969 represents only 3.4 18 per cent of the potential migrants in the rural areas. Indeed, even assum-ing that a l l of the 344,000 urban migrants to Kenya's eleven main towns in this period were adults, this would represent only 23 per cent of the growth in the rural African population between 1962 and 1969. Although the projected increase in the urban population i s significant, the impact on population increase in the rural areas w i l l s t i l l be small. Thus the Development Plan estimates that total rural to urban migration w i l l probably amount to less ;.• ~ 19 than 15:per cent of the total rural population increase. At the same time, the rapidly increasing urban population puts consid-erable stress on the available f a c i l i t i e s . For example, the o f f i c i a l demand 20 for new housing in Nairobi stands at a staggering 6,000 units per year. It 133 i s inconceivable that formal resources can meet even this demand, a demand which must be considered an underestimate. For example, in Phase Two of Nairobi's Buru Buru Housing Estate, a joint venture of the Commonwealth Devel-opment Corporation, the Nairobi City Council and the Kenya government, between 720 and 960 new housing units w i l l be constructed. The cost is estimated to be K£4 million or between K£4,167 and K£5,556 per unit. To construct 6,000 similar units each year to meet the o f f i c i a l housing demand would require be-tween K£25 million and K£33 million. If allocated, this expenditure would be significantly higher than total recurrent and development expenditure for the 21 entire agricultural sector in 1973-1974.. Thus this standard of housing can only be available to a few of Kenya's urban residents. Concentration on aggregate urban growth data masks considerable d i f f e r -ences between the main towns, as shown in Table 17. Table 17: Population of the Teh Largest Centres, 1962 and 1969 (thousands) Census Population Annual % of Total % of Popul ation Town 1962 1969 Growth C5S) 1962;: 1969? 1962 1969 Nairobi 266.8 509.3 9.6 46;:-5 v 5556a 3.09 4.75 Mombasa 179.6 247.1 4.6 31122 26i9>y 2.08 2.26 Nakuru >38.2 47.2 3.1 6.6 5.1 0.44 0.43 Kisumu 23.5 32.4 4.7 4.1 3.5 0.27 0.29 Eldoret 19.6 18.2 -1.1 3.4 2.0 0.23 0.17 Thika 13.9 18.4 4.0 2.4 2.0 0.16 0.17 Nanyuki 10.4 11.6 1.6 1.8 1.3 0.12 0.11 Kitale :9.3 11.6 3.1 1.6 1.3 0.12 0.11 Nyeri 7.9 10.0 3.5 1.4 1.1 0.09 0.09 Malindi 5.8 10.8 9.2 1.0. 1.2 0.07 0.10 Total largest towns 575.1 916.5 6.9 100.0 100.0 6.67 8.48 Total nation 8,636.3 10,942.7 3.4 • • • • 100.00 100.00 Source: Population Censuses, 1962 and 1969 as derived by Lui gi Laurenti and John Gerhart, Urbanization in Kenya (Ford Foundation, International Urbanization Survey, 1972). 134 In 1962, Nairobi, with a population of 266,794, was only 1..5 times as large as the second largest town, Mombasa, which had a population of 179,575. Mombasa, in turn, was 4.7 times as large as Nakuru. By 1969, Nairobi's popu-lation was 2.1 times as large as Mombasa, while Mombasa was 5.25 times as large as Nakuru. What seems to occurring in Kenya i s not only rapid rates of urban growth but an accelerating concentration of the urban population in the two main towns. In 1969, Nairobi and Mombasa together accounted for 82.5 per cent of the total population of the largest towns. As for growth rates, Nairobi's population is increasing at nearly t r i p l e the rate of the total pop-ulation and over double the rate of the second largest centre, Mombasa. This is reflected in the declining share of every other centre (with the exception of numerically small Malindi) in the. total urban population between 1962 and 1969. Five of the ten centres shown did not grow faster than the overall rate of population increase with one centre actually declining in population. This i s perhaps indicative of the concentration of resources and opportunities at the centre of the Kenyan formal economy. At the same time, however, the pat-tern of rural-urban migration in Kenya indicates that caution should be exercised before drawing analogies with western experience. D. Pattern of Migration During the colonial period migration to Kenya's towns mainly involved young men looking for employment.. Data for the total African formal sector employment in 1952 indicates the overwhelming predominance of adult male workers. Of the Africans in formal employment (about 434,000) 81 per cent were adult males. This feature was even more marked in the case of non-agricultural (including public service) employment where approximately 97 per 22 cent of the African employees were adult males. As late as the mid-1950's colonial authorities s t i l l lamented the "enervating and retarding influences" 135 of the rural cultural background on the urban labour force. " For example, the Carpenter Report suggested that: Of the total of some 350,000 adult male African workers in employment outside the reserves, i t i s estimated that more than half are of the mi-grant or "target" type; that i s to say, they are workers who have l e f t the reserves for a specific purpose - for example, to earn sufficient money to pay tax, replenish a wardrobe, or acquire a wife or, perhaps, merely for a change of environment - r and return to the reserves once that purpose has been achieved. Many of them spend no more than six months outside the reserves in any one year and, for a l l practical pur-poses, they may be regarded as temporary workers.24 Even among those migrants who were not considered to be target workers the colonial authorities argued that there was l i t t l e permanency in employment. Most of the Africans retained close ties with the rural home area and the pre-vailing view was that "there are few who, even after long periods of employ-ment outside the reserves, are not li a b l e , with l i t t l e or no provocation, to 25 pack up their belongings and return to their native land holdings." Others have c r i t i c i s e d the colonial view of the "labour commitment problem" pointing out that low wages and appalling working conditions meant that migrants quite 26 rationally may have preferred rural work to that,provided by Europeans. Whatever the causes, the pattern of urbanisation that emerged in colon-i a l Africa was one of "circular migration" or frequent reciprocal movement be-27 tween the rural: home and the towns. Berg has argued that this pattern of seasonal and/or temporary migration best satisfied the economic needs of the migrant and of the urban employer. At the same time i t permitted retention of the social relationships of the rural areas. The latter was of crucial im-portance to the migrant's sense of security. Mitchell describes the process as follows: The set of social relationships which, a person builds up in a rural area . . . possess a certain centripetal influence; once the social re-lationships are built up they are d i f f i c u l t to break. This centripetal influence i s connected with the nature of the social system. A person in a social system, particularly in a well-integrated system as in a tribe, occupies a position which links him to many other people around 136 him. These links serve to define for him exactly his rights and obliga-tions towards those persons. . . . He lives in an ordered society where his behavior towards other's and others towards him i s known and relaMvs-tively predictable. A person enmeshed in such a system of social rela-tionships therefore has that sense of security and confidence which springs from the familiarity of his role vis-a-vis his fellows around him. He does not lightly abandon this security for the uncertainty and caprice of the polyglot aggregation of the labour centres.29 Yet the desire for higher material standards of living probably oper-ated centrifugally drawing the migrant out of the rural social nexus and into the urban labour market. It was the tension between these two opposing forces which may have accounted for the distinctive pattern of migration. This circular pattern of migration has no':doubt been modified although perhaps not substantially changed in recent y e a r s . T h u s , i t i s unlikely that the f i r s t v i s i t to the urban centres has become, for very many migrants, 31 the start of a permanent break with the rural areas. For one thing, the family's base i s s t i l l securely rooted in the rural area-^and this probably mi-tigates the insecurity of the urban economy or the dependence on income derived s t r i c t l y from urban employment. African nations are not "welfare states" since public authorities do not undertake to provide comprehensive care and maintenance for individuals in d i f f i c u l t times. Rather, an encompassing family-based social security system probably provides assistance for individ-uals during periods of sickness, old age and unemployment. If an individual severs ties with the rural home area, he breaks his link to this naturally-evolving security mechanism. This has prompted Weisener to offer what:he terms the "one family - two 32 household" model of African urbanisation. Based on research on the Kisa colony in the Kariobangi housing development in Nairobi, his data reveal a type of urbanisation characterised by strong rural-urban tie s , relatively i n -secure employment in the towns and constant interchange of men, families and their rural kin between the rural farm and the urban location. In short, they 137 were families with two households: a permanent rural one and an actual or po-tential urban one. He found that the urban and rural households did not d i f -fer on (a) a series of variables designed to show rural-urban changes in fam-i l i e s andi^household, or (b) a series of measures designed to tap differences in socio-economic status and "traditionalism." This similarity has led one observed to remark that urban migrants should be regarded as partly-urban-based peasants rather than "proletarians.""^ Thus, mere st a t i s t i c s on rapidly grow-ing urban centres are therefore likely to be misleading. A man's right to li v e and support his family on the rural land apparently s t i l l seems to depend largely on his acceptance of membership in the rural ethnic group. Nevertheless some observers argue that a work force has emerged in Nairobi wholly and permanently dependent upon formal employment and fully com-34 mitted to urban l i f e . ,; Often shifts in sex ratios are used as proxy measures of the extent of temporary migration. Nelson has stated that: . . . where men substantially outnumber women, as in most of the c i t i e s of South Asia and sub-Saharan Africa, much of the explanation usually l i e s in a pattern where large numbers of single men migrate to the c i t i e s but return home to marry, and/or married men go to work in the c i t i e s for long or short periods but leavertheir families at home. Both patterns are associated with non-permanent migration.^ Analysis of census data indicates that the aggregate male:female ratio in Nairobi i s indeed declinging over time. For example, in 1948, there were about 500 adult men for every 100 women (almost the same as in 1911); in 1962 the ratio was about 250 to 100."^ Data especially computed for the ILO em-ployment mission now indicates that the gross sex ratio among Nairobi's African population i s 159 to 100 ((see Appendix B, Table 4). If the urban population i s becoming more permanent there should be a reduction in the imbalance between men and women in the urban areas since more mem;will bring their wives with them instead of leaving them in the rural home area. Yet as Elkan points out, part of the improved sex ratio between 1962 138 and 1969 i s accounted for by those between 10 and 19 years old. There has been no change in the sex ratio of young adults between 20 and 24 years. Among those 25 or over the balance has improved although significantly the disparity between men and women i s s t i l l very large; at no age above 30 i s the ratio lower than 3:1. The pattern of circular migration has meant not only the predominance of younger men in the migratory stream but also the tendency of older men to leave:.-the urban area and retire to the rural home. As a result the urban pop-ulation i s more clustered by age than that of the total population. For exam-ple, Nairobi's population i s under-represented in both the younger and older age groups and overrepresented in the middle ages - the ages when people are most likely to migrate in search of higher standards of l i v i n g . Although only 5.9 per cent of the residents of Nairobi were 50 or over in 1969, 9.9 per cent of the total population exceeded this age. As well, 41.5 per cent were between the ages of 20 and 39 years compared to 25 per cent of the total population. While 44.4 per cent of the city's population were under 20 years of age, 58.5 38 per cent of the total Kenya population were in this age category. Thus, the age distribution of the urban population, with i t s notable clustering in the middle-ages i s also indicative of the probable ambivalence with which urban l i f e i s regarded by most Africans. At the same time, Rempel has indicated that a direct relationship may 39 exist between education and the propensity to migrate. Census results tend to support this thesis. The data presented in Table 18, indicate that the Nairobi population has considerably more education in every age group than the total population or the population resident in any given province. The data also reflect the marked though unequal expansion of the Kenyan educational - .M system since independence in 1963: theyashow conclusively that levels of ^v* 139 education are negatively correlated with age. The table also indicates that education i s a major contributor to the population clustering evident in Nairobi, particularly in the prime migrating age of 20-24 years. The ILO re-port stated that "the men who lack the most minimal educational qualifications no longer migrate at a l l in significant numbers in search of urban employ-40 ment." This i s not unexpected since the educational qualifications for ob-taining formal urban employment have risen tremendously in recent years, partly as a result of the higher urban wages characteristic of the formal urban economy. Table 18: Proportion of Population without School Education and with Higher Education by Age Group and Place of Residence, 1969 Five Years or More No School Education School Education Place of 3 Age Groups Age Groups3 Residence 10-14 20-24 30-39 50+ 10-14 20-24 30-39 50+ Nairobi 19.2% 16.1% 33.6% 65.3% 34.5% 73.9% 50.9% 27.3! Central Province 22.9 27.9 52.3 87.3 15.4 57.1 27.2 7.8 Coast Province 59.3 61.4 76.5 91.0 13.2 30.2 16.6 6.7 Eastern Province 49.9 49.2 76.3 95.7 7.0 35.2 12.6 2.5 North-Eastern 95.1 95.1 97.9 99.5 0.6 4.2 1.3 0.3 Nyanza Province 51.6 51.0 76.0 91.7 .10.8 38.0 14.5 5.3 Rift Valley 59.6 58.2 76.8 93.4 8.6 31.0 14.0 4.3 Western Province 41.3 35.8 62.0 88.7 9.8 48.3 20.1 6.4 Total Population 48.2 46.6 69.2 90.9 10.8 41.8 18.1 5.8 aFor each education group the two figures within th e same age group to-gether with the figure not included for 1-4 years of education total 100 per cent. Source: Derived from Republic of Kenya, Sta t i s t i c a l Abstract 1974, (Nairobi: Government Printing Office, 1974) Tables 18(a) and 19(b). 140 E. Urban-Rural Wage Differential' It i s widely believed that migrants are attracted to the urban areas by the prospect of securing higher incomes. While comprehensive data on income distribution are unavailable for Kenya there i s l i t t l e doubt that marked dif -ferentials exist between the rural and urban areas and formal and informal a c t i v i t i e s . Until the late 1950's urban wages in Kenya were low and had not i n -41 creased much since the early post-war years. Rural incomes, on the other hand, increased rapidly, particularly after the outbreak of the Korean war. However, from the late 1950's onwards urban wages increased sharply relative to rural incomes. Some evidence indicates that this gap i s growing. Thus, Dharam Ghai has calculated that between 1960 and 1966, the average total i n -come of farmers rose at half the rate of unskilled urban workers.^ Data are unavailable for wages in small farms prior to 1969, but i t is estimated that real incomes per capita have risen at a compound annual rate of approximately one per cent in the agricultural sector as a whole. Real wages in the private 43 formal sector have risen by at least twice that much. Wage-earning employees are often viewed as part of the disadvantaged sections of the population; therefore, higher wages may seem desirable on i n -come redistribution grounds. However, in Kenya wage gaps between formal and informal, rural and urban sectors are truly marked and indicate that formal sector wage earners, many of. whom are unionised, are a privileged minority of 44 the labour force. Table 19 presents some data on average earnings by sector for Kenya. As can be seen from the table, differentials between formal and . informal average earnings are considerable. Average formal sector wages in the urban area are two to four times greater than average earnings in the ur-ban informal sector for the self-employed (and greater s t i l l for marginal 141 self-employed and informal wage-earners). The gap within the formal sector i s also striking: male wage-earners in formal agriculture in 1969 earned an average of K£73 compared to KE250-471 for urban formal workers. Table 19: Data on Adult African Earnings in Kenya 1969 (K£ per year) Rural Males Females g Average large farm regular employee 73 46 g Average small farm; regular employee 41 1:34 Average small scale r. :• g non-agricultural enterprise regular employee 67 49 3 Self-employment - small holders 113 • • Self-employment - owners of non-agricultural enterprises' 3 130 • • Urban a b Average employee formal sector ' 250-471 185-297 Statutory minimum wage in formal sector, Nairobi 105 84 g "Unskilled" employee formal sector 120 90 g Average self-employed informal sector 120-- 100 g Marginal self-employed informal sector 60 50 Wage-earner in informal sector 40 36 d aDerived from IL0-UNDP Report, Table 27. b F i r s t figure i s an independent estimate by M. Fg. Scott, Estimates of Sha- dow Wages in Kenya; second figure i s for Nairobi derived from IL0/UNDP Report. TThe minimum wage was raised to K£135 for men and K£117 for women in Nairobi and Mombasa on September 1, 1973. In other urban areas and municipal-i t i e s i t was raised to K£123 for men and K£111 for women. ^Estimated using 19 per cent discount found by J.C. Johnson, The Determin- ation of Individual Hourly Earnings in Urban Kenya, Discussion Paper No. 115 (Nairobi: Institute of Development Studies, September 1971). Source: World Bank, Kenya: Into the Second Decade (Baltimore: Johns Hopkins Press, 1975), slightly modified by data in IL0, Employment," Incomes  and Equality (Geneva: International Labour Organization, 1972) V:1 142 The table shows that statutory minimum wages in urban area are consid-erably above the incomes of a l l groups in the rural areas except the more .. prosperous small-holders and the owners of non-agricultural enterprises. The table also implies that earnings of the average self-employed individual in the urban informal sector are well above those of a l l wage employees in the rural sector, including those in formal agriculture. To assess whether these differences establish economic incentives to migrate, i t i s at least necessary to ascertain the change in income which a migrant might expect to receive from re-locating, correcting for the differen-ces in cost of l i v i n g . In other words, i t i s possible that the nominal d i f -ferences shown in Table 19 exaggerate the differences in real income between rural and urban areas. Although suitable data for determining whether this i s the case are not available, i t i s certainly the implication of Scott's analy-s i s , the results of which are depicted in Table 20. Taking the ratio of the urban to rural price index to be approximately 1.69, Scott has estimated the benefits of changing occupation and/or location in Kenya. It would appear that substantial improvements in real income only occur unambiguously when a small farm worker migrates to a large farm or to ! the urban formal sector, or when an urban informal sector worker moves to ur-ban formal employment. Yet Scott's data do not really permit firm generalisations of this sort. Although i t i s certainly reasonable to assume that the cost of living i s higher in the urban centres than in the rural areas, the ratio i t s e l f cannot be known with precision since the Kenya government collects and publishes only rudimentary st a t i s t i c s on changes in the consumer price (index and even these sta t i s t i c s are gathered only for Nairobi. Thus, Scott's calculation of eorc-comparaitivecinE-reases in disposable income should be treated with some caution. 143 Table 20:. Benefits from.Extra Wages Paid on Transfer of the Marginal African Male Adult Worker (K£ per annum) Increase in Disposable Income Compensation Net Gain Occupation to which Worker Goes Small farm worker to: Total Relatives Worker.and Family for Change in Conditions of Work of Worker and Family !. vRural.. unemployed 4^1 -10 -31 -11 -§20 3 Urban unemployed -41 -16 -25 - 5 ..£20 3 Urban informal 19 0 19 19 30 Large farm 30 0 30 0 30 Urban formal 75 0 75 45 30 Urban formal'3 75 0 75 55 20 Urban informal worker to: Urban unemployed -60 -16 444 Q12 -32 Urban formal 0 56 15 41 0 41 Family l e f t in rural area ^Family brought with worker in urban area Q Family in urban area Source: M. Fg. Scott, "Estimates of Shadow Wages in Kenya," (unpublished mimeo, Nuffield College, Oxford, February 1973) cited in World Bank, Kenya: Into the Second Decade, (Baltimore: Johns Hopkins Press, 1975), p. 271. As well, in making his calculations Scott takes into consideration such fac-torss as "the :cost of family separation." This must reflect a normative judge-ment: i t i s certainly not self-evident how this "cost" could be known or measured. Moreover, urban formal employment i s , in some aspects homogeneous (for example, hours per day, days per week) while rural conditions vary enor-mously (for example, intensity and duration of work, land/soil/rainfall condi-tions). At the same time, agricultural work i s seasonal while urban employment i s largely independent of changes in the calendar. These various considerai . tions limit the u t i l i t y of Scott's data and thus restrict generalisations that 144 can be made on the comparative income benefits of labour transfer. It i s prob-ably the case, however, that the general direction of Scott's analysis i s broadly correct. The review of evidence on wage differentials presented above, though far from complete, does suggest that the real wage rate of a worker in the formal urban economy i s significantly higher than that available in the rural areas (whether in formal or informal employment). It seems therefore fair to con-clude that despite the problems faced by scholars in measuring real wage d i f -ferentials between j u r a l and urban employment, even the remote probability of obtaining a higher-paying formal sector job may figure prominently in the c a l -culus undertaken by some migrants.Obviously, given the great number of indiv viduals migrating, i t must be f e l t that there i s some benefit to residing in the urban centres. When the individual who i s unable to secure formal employe ment in the urban economy gravitates to the informal economy, i t i s not cer-tain whether he i s i n i t i a l l y better off in real income terms than his rural counterpart. However, by remaining in the urban economy he may increase his 45 chances of securing formal employment relative to those of rural residents. At the same time there might be a hidden advantage in that opportunities for informal s k i l l acquisition are probably greater in the urban centre with i t s diversity of peoples and a c t i v i t i e s . F. Dynamics of Urbanisation Rapid rates of growth of the Kenyan formal economy have not been matched by similar rates of growth of formal employment.// In spite of this lag, rural-urban migration has occurred on a substantial scale, induced partly by the large gap in rural and urban wages and abetted by highly visible yet mainly f u t i l e attempts by the Kenya government to create urban employment by l e g i s l a -tive f i a t . In addition to these factors, however, state policies appear to 145 have been instrumental in creating- and perpetuating a sectoral and geographi-cal bias in the country's development. Indeed, Kenya's development strategy seems to have focussed less on the growth and elaboration of the formal sector per se and more on the development of the formal sector in the urban centres, particularly in Nairobi.^ Thus, despite Kenya's success in achieving rapid rates of economic growth, persistent and perhaps widening distinctions in income and public serv-ices .appear .to exist both within and between rural and urban areas and between different geographical and ethnic regions of the country. These disparities seem to be pervasive and in a dynamic context to be channelling the flow of resources into a few areas for the benefit of a'minority. In this respect, slow growth of formal employment and rapid rates of urbanisation may be symp-tomatic of these fundamental imbalances in Kenya.'s development strategy. The imbalances themselves stem from a long-standing mercantilist trust in Kenya's state policies. Indeed, state restriction imposed on economic acf:> t i v i t i e s and restrictions placed on the access to and distribution of resources are not peculiar to the post-independence period. The colonial economy was also lopsided in that i t s organisation was designed to maintain a privileged l i f e s t y l e for a small minority of Europeans. In other words, throughout the period of colonial control ah economy was fashioned in which the white settlers derived disproportionate benefits as a result of their p o l i t i c a l resources. The essence of the colonial economy was the restriction of the free market through a series of monopolies designed to enhance the role of the Euro-47 pean as a producer. The settlers had a monopoly of high-potential land in the Kenyan highlands (the "White Highlands" policy). They had a monopoly of agricultural labour through the hut-and-po«ll-tax system. Rail lines and gov-ernment extension services mainly benefitted European agricultural areas. The 146 marketing board system in conjunction with t a r i f f s preserved the internal mar-ket for temperate zone foodstuffs produced by European agriculture in the high-lands while excluding Africans from the most profitable crops. Restrictions orn access, necessary for European survival, permeated the colonial economy. At the same time the incomes enjoyed by Europeans enhanced Nairobi's importance as the main urban centre while attracting formal industries and services. By the early 1960's, racially ascribed income inequality was stark in 48 the Kenyan economy. While i t i s doubtful that pre-colonial African society was homogeneous, the rigours of subsistence living probably exerted a leveling influence. Colonialism introduced a new factor: a set of differential racial policies designed to create and perpetuate inequalities through ascriptively allocated benefits. The mere fact that colonialism fostered inequalities i s not the issue. Any economic system founded on the basis of individual as op-posed to collective i n i t i a t i v e w i l l create inequalities due to the differential allocation of aptitudes, attitudes, motivations and s k i l l s in a population. The objectionable feature of colonial economic policy was i t s racial implica-tions: the concentration of wealth did not arise as a result of equal oppor-tunity but rather was nurtured by a racially-based system of both allocating benefits and imposing restrictions on economic pursuits. The colonial eco-nomy was simply not a li b e r a l economy. Even i f the settlers had permitted the operation of market forces this would not, of course, have produced economic equality. However policies designed for a creative market order would have removed some of the worst aspects of racism in state economic policies and would thus have significantly reduced racially defined access to opportunities. The i l l i b e r a l economic milieu fashioned by the colonial authorities has been a heritage of doubtful value for independent Africa. In Kenya, rather than dismantling the protective restrictions surrounding the formal sector, 147 the p o l i t i c a l aim of taking over the economy was understood as rapid African-isation of the c i v i l service and as much of the formal private sector as possible: Since independence, economic growth has largely continued on the lines set by the earlier colonial structure. Kenyanization has radically changed the racial composition of the group in the centre and many of i t s policies, but has had only a limited effect on the. mechanisms which maintain i t s dominance - the pattern of government income and expendi-r ture, the freedom of foreign firms to locate their offices and plants in Nairobi, and the narrow stratum of expenditure by high-income e l i t e super-imposed on a base of limited mass consumption.49 One effect of this has been to perpetuate a distinction between pre-:>-ferred and discouraged economic a c t i v i t i e s . Indeed, there has scarcely been a period of p o l i t i c a l l y sanctioned liberalism in Kenya in which o f f i c i a l en-couragement was given to economic act i v i t i e s per se. One legacy of the continuing appeal of mercantilism in the post-colonial period i s the concentration of resources in the urban areas, particularly Nairobi. For example, public sector investment in infrastructure, designed to f a c i l i t a t e the growth of the formal sector, i s geographically clustered. In 1973, Kenya's electrical capacity amounted to 202,500 Kilowatts of which the Nairobi, Mount Kenya and Mombasa areas accounted for a l l but 12,000."^ Social services are also localised at the centre. Of the 18,000 hospital beds and cots available in 1973, 40 per cent were in Nairobi and neighbouring Central 51 Province. Of the 7,500 housing units constructed by the National Housing Corporation in the period 1970-1973, nearly 60 per cent were located in N'v... 52 Nairobi. Similarly, of the reported completion of new non-residential buildings for private ownership in the main urban areas for the period 1969-1: 1973, over 80 per cent by value were constructed in Nairobi."^ Inherent in these figures i s marked centralisation of formal sector production and distribution of public services. While the data in Table 17 demonstrate that in 1969 Nairobi had only 4.75 per cent of the national i-.<r,<-> 148 population, in 1970 i t accounted for an overwhelming share of formal GDP and •-. employment. This i s shown in Table 21. Table 21: Sectoral Shares of Monetary GDP and Employment Arising in Nairobi Nairobi's Percentage Share (1970) Activity GDP Employment Mining and quarrying 20;0 31 Manufacturing and repairs 56.4 56 Construction 66.9 56 Electricity and water 54.0 40 Transport, communication 41.6 49 Commerce 55.4 54 Services 51.8 38 Source: A.M. Mukovitch, "Industry," (Nairobi Urban Study Group Working Paper, Nairobi, mimeo., 1971), in Jr.. Weeks, "Imbalance Between the Centre and Periphery," in Ivar Oxaal, Tony Barrett and David Booth, eds., Beyond  the Sociology of Development: Economy and Society in Latins America  and Africa (London: Routledge and Kegan Paul, 1965). — Reflecting this agglomeration of formal activity, the Nairobi labour market accounted for nearly 70 per cent of the formal employment in Kenya's 54 five main towns. Not surprisingly, i t also claimed 76 per cent of the urban wage b i l l of these five towns and 69 per cent of the total urban wage bill.''*' As Table 2-2 indicates, employment in Nairobi's formal sector i s expanders ing .much faster than total urban formal employment. Between 1964 and 1973, formal employment in Nairobi grew at an average rate of 3.5 per cent per annum. In contrast,itotal urban formal employment grew by only 2.8 per cent per annum. If Nairobi i s excluded from the total then formal employment in a l l other urban areas increased by only 1.8 per cent per year. Of the main towns only Malindi exceeded the rate of growth of formaleemployment in the Nairobi labour market. Indeed in three of the main towns (Eldoret, Nyeri and Nanyuki) formal employment actually declined between 1964 and 1973. 149 Table 22: Average Formal Sector - Earnings.and Average-Rates of.Change of Earn-ings and Formal Employment, Urban Areas, 1964-1973 (selected years) Average Percentage Change Ave rage Ea rmngs (K£ p.a .)• Per Year 1964-1973 Town 1964 1966 1968 1971 1973 Average Earnings Employment Nairobi 330.7 400.4 446.3 495.0 520.1 5.3 3.5 Mombasa 269.9 299.1 323.0 460.0 398.4 4.5 2.4 Nakuru 231.8 274.1 288.1 312.0 334.5 4.3 2.8 Kisumu 214.8 243.1 266.8 282.9 290.2 3.4 0.8 Eldoret 162.2 193.2 227.8 240.0 181.0 1.6 -2.4 Thika 174.7 207.3 215.9 285.0 268.4 5.0 5.8 Nyeri 181.9 215.4 236.6 246.0 310.8 6.4 -0.8 Kitale 168.7 195.6 207.3 215.0 232.5 3.7 2.4 Nanyuki 132.8 185.4 195.2 185.0 199.1 4.2 -0.5 Malindi 163.2 191.2 236.5 240.0 256.4 5.3 5.3 A l l urban areas excluding Nairobi 3 217.9 250.4 266.6 288.4 320.9 4.5 1.8 " A l l urban areas" include those l i s t e d in the table except Nairobi plus 36 other small urban centres. Source: Republic of Kenya, Statistical Abstract 1974 (Nairobi: Government Printing Office, 1974), Calculated from Tables 229 and 244. It i s instructive to compare the annual growth rates of the ten largest towns given in Table 17 with the growth rate of employment in Table 22. One striking feature revealed in the comparison i s that only in the case of Thika did the rate of growth of formal employment exceed the rate of growth of total population. Despite out-migration of Europeans and Asians, Nairobi's total population increased by three times the growth rate of formal employment. The same pattern i s apparent in the other towns. Indeed, in Eldoret the rate of out-migration (a decline in population of 1.1 per cent per year) was less than the f a l l in recorded employment (an average decline of 2.4 per cent per annum). The inference to be drawn i s that formal employment i s available to a declining . 150 proportion of the urban population. It seems reasonable to speculate that the informal economy i s of greater relative importance in those urban centres where the ratio of growth of total population to formal employment i s greatest: Nairobi, Kisumu, Nyeri, Nanyuki and Eldoret. Despite the declining relative availability of formal employment to ur-ban job-seekers the monetary attractiveness of formal employment i s revealed in Table 22. This i s particularly evident with respect to Nairobi. Not only have the average earnings of Nairobi's formally employed grown at a rate faster than a l l other centres except Nyeri (where wages rose by 6.4 per cent per year while employment declined by 0.8 per cent per year), in addition, the level of earnings in Nairobi i s considerably higher than in any other urban centre. Thus earnings in wage-employment grew at 5.3 per cent per year in Nairobi yielding average earnings in 1973 of K£520 p.a. or nearly three times that available in Eldoret. Even the gap between Nairobi and Mombasa i s sub-stantial, amounting to over K£120 per year. It seems fair to conclude that Nairobi's formal sector employees have benefitted much more than others from the cumulative impact of development policies. Indeed towns like Nakuru, Eldoret, Nanyuki and Kitale have experienced both the slowest rates of popula-tion growth and the slowest increase in average earnings. One conclusion to be drawn from the various indices cited in this anal-ysis i s that migration to Nairobi i s probably based on a r e a l i s t i c perception that development policies have concentrated wealth, resources, and opportuni-ties at the centre of the Kenyan economy. The degree of concentration i s stag-gering and i s reflected in the slow growth of the other peripheral centres. G. Summary and Policy Implications The mechanisms underlying urbanisation in Kenya were set during the colonial period when the p o l i t i c a l power of the settlers ensured that a system 151 embracing l i b e r a l economic policies was not going to be seriously entertained. Independence did not bring a relaxation of the control and restriction mental-ity of Kenya's policy-makers. The p o l i t i c a l protection afforded the formal sector through t a r i f f s and quotas, administratively cheapened capital and ac-cess to investment credits, permits and other favours encouraged the develop-ment of the urban formal sector. Nairobi emerged as the chief beneficiary and crowning achievement of resource concentration. At the same time other varia-bles intervened including the expansion of the educational system and the evo-lution of a youthful work force which created increasingly mobile job-seekers. One result of the p o l i t i c a l distribution of significant resources and opportunities in Kenya has been the creation of enormous gaps between rural and urban areas and both within and between the urban areas themselves. Conse-quently migration has probably occurred largely in response to the relative availability of opportunities. In other words, migration likely reflects an imbalance between the geographical distribution of the population and the dis-tribution of varied economic a c t i v i t i e s . When the free mobility of labour i s not restricted by state policies, migration may reconcile demography with the prevailing p o l i t i c a l economy. However, both explicit and implicit in much ofr'the contemporary analy-ses of "obvious" and "high" urban unemployment i s the policy proposal that i t can be controlled through simply restricting urban migration.^ The consider-ations given in this chapter and earlier chapters cast doubt on the adequacy and relevance of this type of neat solution to the " c r i s i s " of urban unemploy-ment. Indeed, i t i s doubtful whether simplistic policies to curb urban growth would in fact be effective. For example, despite the substantial disparities, mere tampering with rural-urban wage differentials i s unlikely to overcome the impact of the impressive concentration of resources in Kenya's urban centres, 152 especially Nairobi. Even i f formal agricultural wages were raised, assuming i t i s even possible to enforce minimum wage laws in the rural areas, the most likely result would be a reduction in the availability of the limited formal agricultural employment as employers substituted machines for labour. This would probably increase urban in-migration while not addressing the fundamen-tal fact of resource concentration. The view that urban migration should in fact be restricted or controlled raises several other issues directly related to the perspectives advanced in v.i. this thesis. F i r s t , to stop or even to reduce substantially the flow of mi-grants would probably require draconian measures, for example, the rigi d en-forcement of pass laws and permits, that in reality would be l i t t l e different from colonial Kenya or the Republic of South Africa. Even the fe a s i b i l i t y of enforcing these measures i s doubtful since the formal, urban areas exist as privileged centres surrounded by an overwhelmingly larger rural population. Second, ideally urban migration results from the attraction of higher living standards, not by repulsion from the grinding poverty of the village. However, i f i t i s due to the impoverishment of the countryside then individuals are exerting their influence on government by voting with their feet. Restric-tions on migration are restrictions on an individual's opportunity to vote with his feet and hence on his a b i l i t y to influence government. To the extent that elections do not f u l f i l l the purpose for which they are intended, migration in response to opportunities provides a type of p o l i t i c a l participation. Using Hirschman's terms, "exit" i s not an alternative to "voice" but a necessary c.r. condition for the exercise of "voice."''7 Third, while there i s some evidence that living standards for many urban residents may be quite low, there i s l i t t l e evidence that they are lower than or even as low as those available to most of the rural population. The ;a:cIi"'-153 proliferation of urban squatter housing i s possibly uglier than the rural dwellings in which many of the rural residents l i v e . It certainly appears to be more alarming to some planners, politicians and scholars who seem to prefer having the poor widely dispersed and therefore less v i s i b l e . But for many i n -dividuals who migrate from the rural areas urban residence may mean a distinct improvement over previous conditions. Fourth, attempts to restrict migration may create important but not im-mediately obvious adverse effects on the general improvement of living stand-ards. Migration represents the movement of human resources, including ideas, attitudes, s k i l l s and wants. Restrictions oh this mobility would inhibit the establishment of new contacts and weaken opportunities for experimentation and expression of the entrepreneurialsspirit. The heterogeneous nature of the ur-ban economy i s probably conducive to the dissolution of those aspects of the rural culture (for example, deference to authority of t r i b a l elders, taboos, status ranking of occupations) which may be inimical to enterprising behaviour. As well, the necessity of forming wide-ranging contacts in the urban area for continued advance may stimulate the voluntary adaptation of values to meet new opportunities. At the same time, a diversity of new s k i l l s may be acquired more readily in the urban economy with i t s greater variety of economic a c t i v i -ties. This is particularly important for younger and better educated migrants who must at least be given the opportunity to test their worth in the urban economy while securing s k i l l s of a directly remunerative nature. Restrictions on migration indicate a failure to appreciate these benefits of urbanisation. It might be argued that::resource concentration in Kenya's urban centres i s beneficial since i t increases contacts and thus may f a c i l i t a t e changes in v values, motivations, attitudes and wants while increasing exposure to new s k i l l s , new goods and new methods of securing higher standards of l i v i n g . •1.54 This i s certainly valid but largely irrelevant to the present discussion. The range of contacts would probably be greater i f resources were not concentrated in one or two main ci t i e s but spread throughout the country. In this respect, the concentration of resources in the urban areas largely as a result of mer-ca n t i l i s t policies i s lik e l y to have adverse effects on the general acquisition of the human qualities that may determine economic advance. The volume of migration currently occurring both in Kenya and other African countries presents a stark challenge to the typical image of rural .dwellers as unaspiring, risk-avoiding individuals intent mainly on maximising security through limited horizons. Many individuals, leaving the "stagnant, traditional sector," may be considered innovators who have chosen to try their luck elsewhere. In other words, the rural milieu does not appear to establish insurmountable barriers to the acquisition of at least some attributes appro-priate for material advance. This topic i s explored in the next and fin a l substantive chapter where an analysis i s presented of some of the perceptions, attitudes, and attributes of migrants in Nairobi's informal economy. VI THE POLITICAL ECONOMY OF URBAN STABILITY IN KENYA A. Introduction There is a relative dearth of empirical research on the attributes, attitudes, motivations, expectations and perceptions of individuals engaged in urban informal activities. Indeed, the study of urban behaviour has been largely dominated by p o l i t i c a l scientists and p o l i t i c a l sociologists, observ-ers whose interests have been concerned primarily with stability (or insta-bility)."'" But their analyses may have suffered from a seemingly insubstantial understanding of the urban economy and hence the methods by which individuals may be coping with the need to earn a daily livelihood. Thus, despite the tremendous movement of people from the rural areas to the urban centres throughout the less developed world there is as yet no integrated theory link-ing the economics of urban living to urban p o l i t i c a l behaviour. Rather, the literature i s replete with hypotheses the cumulative thrust of which suggests imminent p o l i t i c a l disorder in the c i t i e s of the Third World. This view i s partly derived from the premise that prevailing living conditions constitute a recipe for urban upheaval. In other words, the image held by some observers of l i f e in these urban centres appears to affect in a most fundamental way the relationships that are hypothesized to exist between urbanisation and p o l i t i -c a l ! behaviour. Lerner, for example, has graphically depicted urban l i f e in the following sweeping indictment: The most conspicuous symptom of the contemporary disorder i s what happened to urbanisation in the developing areas. Every student of development i s aware of the global spread of urban slums - from ranchos of Caracas and favellas of Rio, to the gecekbndu of Ankara, to the bidonvilles and "tin can c i t i e s " that infest the metropolitan centres of every developing country from Cairo to Manila. 155 156 The point that must be stressed in referring to this suffering mass of humanity displaced' from the rural areas to the f i l t h y peripheries of the great c i t i e s , i s that few of them experience the "transition" from agricultural to urban-industrial labour called for by the mechan-ism of development and the model of modernisation. They are neither housed, nor trained, nor employed, nor serviced. They languish on the urban periphery without entering into any productive relationship with i t s industrial operations. These are the "displaced persons," the DPs, of the developmental process as i t now typically occurs in most of the world, a human flotsam and jetsam that has been displaced from the tra-ditional agricultural l i f e without being incorporated into the modern industrial l i f e . 2 This conception of urban conditions with i t s evident concern with the effects on individuals living in the " f i l t h y peripheries" of c i t i e s , lacking services, houses or employment, i s reflected in a plethora of hypotheses linking alleged frustration in the urban setting to p o l i t i c a l i n s t a b i l i t y . ^ The hypotheses, with their subsumed causal mechanisms, may be summarized in 4 three sets of interrelated propositions. 1. Urbanisation leads to economic frustration among the migrant population. Migrants, characterised by high aspirations at the time of migration, find they have limited a b i l i t y to participate in the material rewards of the urban economy. High aspirations, inadequate pre-migration preparation, and limited economic opportunities creates a "frustration gap." Lacking saleable s k i l l s or the education needed to learn them, upward mobility among migrants is sharply restricted. The rapid growth of the urban area puts excessive strain on urban services. Thus objective living conditions are often worse than those found in the rural areas. The visible affluence of e l i t e groups makes the migrant increasingly cognisant of income differences. Instead of the relative homogeneity of rural l i f e the migrant sees sharp distinctions as a small minority obtains the benefits of independence. Materially frus-trated and relatively deprived, migrant alienation i s channelled into radical p o l i t i c a l activity. 157 2. The urban environment poses great d i f f i c u l t i e s in social and psychologica adjustment Previous living habits and customs are disorganised. Kinship ties break down or disintegrate in the urban setting. Rural-based norms of r e c i -procity and helping weaken as cumulative urban experience, conditioned by con tinuous demands for assistance, threaten the financial integrity of the urban dweller. Religious values are undermined by constant exposure to an alien l i f e s t y l e resulting in normlessness and insecurity. In search of stable so-c i a l moorings the migrant becomes susceptible to recruitment into emotionally satisfying p o l i t i c a l groups. 3. Urbanisation increases awareness of government The concentration of p o l i t i c a l activity in urban areas, the high v i s i -b i l i t y of national symbols and national leaders, and the increased exposure to mass media communications increases the salience of government as a problem-solving agency. Migrants see government as capable of resolving their d i f f i c u l t i e s , yet government seems in fact disinterested in their needs Awareness i s heightened that the fruits of development are inequitably shared Thus, an explosive p o l i t i c a l situation i s created when government f a i l s to satisfy perceived needs of increasingly politicised urban masses. The primary purpose of this chapter is to investigate several of these hypotheses and hence hopefully gain some insights into urban st a b i l i t y inV Kenya. This i s done through an analysis of results obtained from interviews conducted in Nairobi's informal economy.^ As well, i t i s hoped that the i n -terview results w i l l enhance our understanding of the human actions that may largely determine material advance. Thus, another aim is to provide some partial evidence of the linkages between micro actions, state policies and the creation of an informal economy in Kenya. Since l i t t l e research has been undertaken on the perceptions, actions and attributes, of individuals within 158 the informal economy, i t i s important to stress the tentative and at times merely speculative nature of the conclusions. As well, simplifying assump-tions have been made which invariably reduce the firmness of the analysis. In this respect, i t is hoped that others w i l l be stimulated to investigate in a more substantive manner, and backed by sufficient resources, some of the complex interactions that seem to be occurring. In any event, i t should be emphasised that the findings presented here were drawn from a relatively small number of interviews conducted in Nairobi in 1975. It i s not suggested that they necessarily challenge other research results from other urban cen-tres and/or at other times. They may, however, help to establish the point that excessive generalisation in these matters may be premature given the rich and varied urban reality in the Third World. B. The Kenyan Case Earlier chapters have indicated some of the important social and eco-nomic changes that have occurred in Kenya in recent years. One striking change has been the rapid rate of urbanisation. A l l types of individuals -young and old, literate and i l l i t e r a t e , male and female - have moved in large and ever growing numbers to the towns and c i t i e s . At the same time, the growth in formal employment opportunities has lagged considerably behind the growth in formal output', the growth in population and the growth in the num-ber of urban job seekers. Data on average urban wages indicated the exist-ence of sharp income differences between a relatively small yet affluent sec-tor of society and the remaining mass of people. State policies from the colonial period to the present time have tended to restrict access to re-sources and other benefits thereby creating a protected and privileged sector of the economy, a sector marked by highly visible yet mainly exclusive con-spicuous consumption. 159 A l l these various considerations would seemingly conjoin in Kenya to provide the necessary conditions for the existence of an uprooted, anomic, de-prived, frustrated and angry mass of urban dwellers. In other words, one might expect to find Kenya's towns and c i t i e s marked by p o l i t i c a l i n s t a b i l i t y and smouldering resentments arising from severe disappointments of expecta-tions, sharpened and aggravated by the daily grind for mere survival in the city in contrast to the visible, opulent, high-life of the Wabehzi.6 But i s this characterisation an accurate portrayal of Kenya's towns and cities? The data presented here attempt to indicate that the p o l i t i c a l consequences of rapid urban growth in Kenya may differ sharply - and in some surprising d i ^ rections - from those suggested in much of the literature On urbanisation land c i v i l disorder. In an attempt to test some of the key propositions given earlier, the ensuing analysis covers the following topics: integration into the urban economy; perceptions of government, of "'stratification', - "and of i.mobility. C. Integration into the Urban Economy The urban economy has a far more complex structure than may be gener-ally appreciated, with the variety of economic activities ranging from very humble roadside tea-houses to informal production and distribution of goods to high-wage capital intensive formal enterprises. At the same time, however, the proliferation of squatter settlements around the " f i l t h y peripheries" of Third World c i t i e s suggests that many urban residents probably lack access to the most basic f a c i l i t i e s . It i s thus not unreasonable to assume that for these urban migrants living conditions may be both objectively and subjec-tively intolerable. Data is not available which directly measures material deprivation in Nairobi. Given the massive influx of new residents i t is not surprising that 160 squatter settlements or unauthorized residential areas have been created with-in the city. As much as one-third of Nairobi's African population may live in such areas, most lacking piped water, lighting, sewage and garbage dispos-a l . ^ The o f f i c i a l view i s that these settlements constitute an "urban blight" Q despoiling an otherwise attractive setting. Thus for many migrants to the capital, the move from the rural areas to the city may not have resulted in much improvement in the level of services and other material amenities, access to which i s largely conditioned by economic status and allocated by the p o l i t -i c a l authorities. Nevertheless without data on living conditions in rural areas the belief that contemporary urban conditions induce a "frustration gap" leading to later alienation and thus to p o l i t i c a l extremism must remain speculative. One entry to this problem may be provided by focussing on the integra-tion of migrants into the urban economy. It i s reasonable to speculate that integration into the urban economy might reduce any "frustration gap." -The abili t y to integrate into the urban economy probably depends on the aptitudes, s k i l l s , resourcefulness, determination and persistence that the migrant brings to the urban area. Some indication of these characteristics i s per-haps provided by data on the educational attainment of urban migrants. In the large-scale Rempel, Harris, and Todaro study of migration, 13.5 per cent of the migrants in Nairobi had been to school for 1-4 years, 41.7 per cent v 9 for 5-8 years, and 34.0 per cent for 9 or more years., Only 10.8 per cent of the Nairobi migrants had no formal education. This data stands in contrast to the image of migrants as a mass of untutored and i l l i t e r a t e peasants who, even i f given the opportunity, could not enter "into any productive r e l a t i o n -ship," to use Lerner's terms. 161 Unfortunately, the data in the Rempel survey do not indicate the extent to which the sample reflects the low-income migrants typically conceived as "marginal" or barely eking out an existence in the urban informal economy. The interviews conducted in Nairobi's informal sector dealt specifically with those groups, groups- often-thought: to;-;be:, "peripheral," "surplus," "underem-ployed" and "unemployed." Surprisingly, the educational profile of these respondents does not differ greatly from that found by Rempel and his colleagues,; (see Appendix,B, Table 5). Thus among those who were interivewed in Nairobi's informal eco-nomy, 34 per cent had some primary education, 32 per cent had completed prima-ry school, 18 per cent had some secondary education and 8 per cent had com-pleted secondary school. Only 7 per cent had no formal education. As well, the most recent migrants tended to be better educated than those who had re-sided longer in Nairobi. While 10 per cent of those who had lived in Nairobi for ten years or longer had no formal education, a l l of those who had been in Nairobi less than six months had at least some formal schooling with about 60 per cent having at least completed primary school. These results do of course reflect the marked expansion of enrolments in primary and secondary schools in Kenya that has occurred since the Rempel study. At the same time these figures belie the argument that the informal sector of urban migrants i s the refuge of the uneducated. Indeed there seems to be l i t t l e difference in educational attainment between many of those in the informal sector and the general urban population. Thus the selective factor of education in urbanisation may be operating as well in the urban i n -formal sector. Many of those who are relatively educated may have formerly sought a livelihood only in formal a c t i v i t i e s . Although they may now be "surplus" to that sector of the economy they have the alternative, and appear to be taking i t up, of securing a livelihood in the informal economy. 162 Some idea of the nature of integration into the urban economy cmayv,' be gained by focussing on the employment status of migrants in the informal sector;.,. The results of the interviews indicate that a relatively high pro-portion of the most recent migrants were "unemployed" at the time of the interview„(see Table B.6). This lends some i n i t i a l support to the observation that urbanisation represents migration into unemployment. However, after 6 months of urban residence the number who remain unemployed drops dramatically from 42 per cent to 19 per cent. For more long term residents the numbers unemployed appear to be very low. Of course the data does not indicate the extent to which migrants may return rather quickly to the rural areas after fai l i n g to obtain some type of work. While re-emigration may be substantial, i t i s more plausible to assume that migrants w i l l try to remain in the urban economy for as long as possible in the'ihope of securing employment. In this respect i t i s noteworthy that 44 per cent of the newest arrivals had obtained employment of an unskilled na-ture. While these jobs may f i t the image of dead-end occupations i t i s sig-nificant that with increasing length of urban residence the proportion of migrants doing unskilled work appears to drop dramatically (from 44 per cent to 16 per cent). This suggests that new s k i l l s may be readily diffused among individuals in the informal sector and that opportunities are probably avail-able for u t i l i s i n g these s k i l l s . Indeed, two probable patterns of s k i l l diffusion emerge from the i n -terviews. F i r s t , unskilled work seems to serve as a training ground - on the job or apprenticeship - for future artisans. The rise in those doing artisan work after only six months in the urban area (6 per cent to 29 per cent) i s at least suggestive of the rapidity of s k i l l diffusion. Second, the trends in the data indicate that many artisans may subsequently shift to self -163 employment as length of urban residence increases. While only 12 per cent of the most recent migrants were self-employed or engaged in artisan work, 80 per cent of those who had been in Nairobi over 10 years had moved into these occupations. The figures indicate a probable shift of migrants into higher-status informal occupations out of either unemployment or unskilled work. The sharp decline of those in the latter categories suggests that migrants may not labour under severe handicaps in their search for better and more reward-ing occupations within the informal economy. The educational profile and occupational distribution of the migrants interviewed in Nairobi offers some evidence to challenge the view that mi-grants typically arrive in the city unprepared and bereft of any useful s k i l l s and destined only to languish in unemployment. While c r i t i c a l l y important, the a b i l i t y to find employment (or to create one's own employment) and the movement into jobs of increasing s k i l l intensity i s only one aspect of sue-cessful integration into the urban economy. The often-hypothesised "frustra-tion gap" rests not only on objective economic bases but on the migrant's perception of the urban setting and i t s opportunity structure. Thus, there is a need to examine the migrant's evaluation of his situation and the pros-pects for improvement. A series of questions was asked to tap perceptions of Nairobi as well as to e l i c i t retrospective and prospective assessments of changes in living conditions. With respect to the former, there seems to be an overwhelmingly positive orientation toward Nairobi among migrants in the informal economy (see Table B.7). Fully two-thirds of the respondents f e l t Nairobi was a "friendly place" in which to l i v e . This is even more remarkable when i t i s recalled that most observers feel that the informal economy i s intensely com-petitive. In other words, even though these individuals probably face one 164 another in the scramble for jobs, goods and housing they apparently do not view the urban experience as brutal, nasty, and de-humanising. Given Nairobi's location on the door-step of Central Province and the abi l i t y of the Kikuyus of Central Province to move more easily into Nairobi and thus assume a predominant position in the l i f e of the city, i t was expec-ted that migrants from other provinces would have a less favourable perception of the urban centre. Yet any "Kikuyu domination" of the city does not seem to have led to negative perceptions of Nairobi among other migrant groups. Indeed, migrants from Nyanza and Western Provinces were more inclined to view Nairobi positively than those from Central Province. In other words the var-iable of ethnicity, or the tensions that are assumed to arise between competi-tive ethnic groups, may not be too salient in the urban informal sector. This may be partly due to the minimal involvement of the state in the informal economy (the state i s commonly viewed in Kenya as controlled by the Kikuyu) and partly due to the Horatio Alger attitudes that seem to be prevalent among informal sector migrants, attitudes which tend to impute both success and 10 failure to individual efforts and transcendental forces. Nevertheless, length of urban residence does seem to have some effect on perceptions of Nairobi (see Table B.8). Nearly 70 per cent of those who had been in Nairobi less than six months found i t to be a friendly place. Thus this group does not seem to support the notion of an alienated, lonely existence often thought to accompany recent migration. However, there may be a curvilinear relationship between migrant perception of urban living and length of urban resident: the highest level of positive feelings occurred among those with five to ten years of residence in the cit y . In the beginning, exposure to urban l i f e i s probably positive and re-warding not alienating even though many of the recent arrivals seem to be 165 unemployed or doing low status unskilled work. These feelings may quickly give way to a certain degree of dissatisfaction as only 57 per cent of the migrants who had been in Nairobi 6 months to 1 year found i t a friendly place. This drops further to 52 per cent among those who had been in the city from 2 to 5 years but rises again after that period. This suggests that re-emigration, i f i t i s to occur before normal "re-tirement" age, may come in two bursts. F i r s t , from among those who had per-haps excessive aspirations at the time of migration. For those attracted by the formal sector, the excitement and allure of the city may pale due to the di f f i c u l t y of finding suitable employment. Others may decide to remain in the urban economy in the hope of securing formal employment. If the chances of attaining this goal are indeed low they are almost non-existent in the rural areas. But after a time, some migrants may finally admit that their prospects are no better in the city. This i s likely to be a disillusioning process. Thus some members of this group may also cope with this d i s i l l u -sionment by returning to the home areas. Among the long term residents the perception of Nairobi as friendly was very high. Since many of the long term residents have their own busi.-r: nesses or otherwise engage in place-specific employment such as informal ar-tisan work, they may have the added economic incentive to develop and main-tain close contact with suppliers and customers and thus probably cannot afford to be socially isolated. In other words, their participation in the informal economy probably contributes to the formation of social linkages that may help to attenuate alienation and isolation in the urban centre. Perhaps i t i s the case that occupational status per se affects percep-tions of l i f e in the cit y . In particular, i t appears reasonable to speculate that those doing unskilled work, or even more, those who are unemployed, may 166 find the urban setting especially alienating and lonely. After a l l , these i n -viduals are in the lowest ranks of a sector of the urban economy which i s i t -self disadvantaged. However, contrary to expectations, the unemployed were not found to be more alienated from the urban environment,(see Table B.9). Over two-thirds f e l t Nairobi to be a friendly place despite the assumed precariousness of their situation. This may reflect the existence of a network of friends and relatives that financially support unemployed migrants while at the same time socially integrating them into the urban l i f e s t y l e (see Table B.17). Surpris-ingly, 73 per cent of the artisans but only 60 per cent of the self-employed found Nairobi to be friendly. Perhaps the competitive aspects in t r i n s i c to self-employment account for some of this variation. Nevertheless i t can be inferred that occupational status may not in fact have any particular corre-lation with this measure of alienation. The interviews conducted in Nairobi also attempted to test the exist-ence of feelings of deprivation, frustration and anger through a variety of other measures. Thus, feelings of frustration and the existence of a "frus-tration gap" were assumed to be intimately related to the subjective assess-ment of past relative improvements in living conditions. At the same time, individuals in the informal economy are usually f e l t to have been by-passed by development, in Lerner's terms they are "displaced persons." Yet 45 per cent of the respondents f e l t their living conditions had in fact improved over the last 5 years (see Table B.10). There i s no denying, however, that many of the respondents did not feel they had experienced an improvement in their living conditions in the last five years. Indeed, there seems to be a sharp drop in the perception of improvement among those who have the longest urban residence. While 52 per cent of those who had been in Nairobi less than six 167 months f e l t their living conditions had improved, only 39 per cent of the more long-term residents indicated they f e l t there had been an improvement. However, i t can be inferred from the data that rural-urban migration per se does seem to bring a sense of improvement for many recent migrants. At the same time, increasing length of urban residence likely creates a greater awareness of opportunities and levels of affluence available to others in the urban society. The "demonstration effect" of affluence and conspicuous consumption of others may set into operation cognitive mechanisms of relative deprivation. Whether this has any p o l i t i c a l significance i s probably mediated by several other factors, some of which include: the rea-sons advanced by the migrant to explain why his living standards have not im-proved; the reasons advanced to explain why the living standards of others have improved; and, the importance attached to government as a problem-solving agency. These various considerations w i l l be taken up later in this chapter. Here, i t should be recalled that most of the long-term urban residents interviewed in Nairobi were self-employed or artisans. Their feelings that their living conditions had not improved may have arisen from comparisons with their counterparts in the formal sector. One effect of invidious com-parisons - either cross-sector or retrospective - may be to stimulate the pursuit of material success through new expectations and the adoption of new s k i l l s and new methods to achieve those expectations. Unfortunately the i n -terviews did not probe these types of relationships hence their existence and nature must remain speculative. There i s probably a future dimension to relative and retrospective comparisons undertaken in the present. To tap expectations concerning the future,^respondents were asked to assess what they f e l t their conditions 168 would be 5 years from now. The results indicate that 50 per cent of those i n -terviewed expected their living.conditions would indeed improve (see Table B.11). This stands in contrast to the hopelessness and despair alleged to exist among those by-passed by formal development. As well, overall, only 22 per cent of the sample f e l t that their conditions would be worse five years from now. Among the most recent arrivals this drops to less than one in ten respondents. In other words, this data does not seem to support the notion of widespread and deep frustration of expectations among low-income "marginal" migrants. Nevertheless, the analysis i s complicated by the relatively high pro-portion of the respondents who were unable to predict their future liv i n g con-ditions. While only 25 per cent of the sample could not speculate on future changes in their li v i n g conditions, nearly 40,..per cent of the newest arrivals and 36 per cent of the long term urban residents were unable to reply to the question. Inability to make the prediction asked in this question mayJreflect a number, .ofJ obscure processes, for: example,!;the':concepts;o'f "looking ahead" or "planning for l i f e " may be either unimportant or too d i f f i c u l t to comprehend or simply that "the future," or changes in the future, may be considered too unpredictable. On the one hand, the lack of future orientation may be adverse to securing material advance to the extent that i t represents an abdication of individual responsibility. On the other hand, the inab i l i t y to guess what the future holds probably negates a "frustration gap" since these migrants do not seem to have any firm expectations one way or the other. However, by controlling for the distorting effect of the non-response rate a rather different picture emerges of expected changes in living condi-tions. Indeed, over two-thirds of those who f e l t confident of predicting the future thought that their living conditions would improve over the next five years (see Table B.12). As well, among these respondents there seems to be an 169 inverse relationship between positive expectation of future improvement and length of urban residence. The highest level of positive expectations oc*':„* curred among the most recent migrants, 85 per cent of whom fe l t the future would bring better liv i n g conditions. In contrast, 44 per cent of those who had lived in Nairobi over ten years f e l t their living conditions would be worse. It can be inferred from these findings that expectations among many new migrants are probably quite high upon arrival in,the city and in the early post-migration period. It may be the case that the opportunities, d i f -fering l i f e styles and general affluence of some sectors of the urban society contrast favourably to those available in the rural areas generating high, possibly unrealistic, expectations during the early years of urban residence. In subsequent years, non-attainment of unrealistic expectations may simply lead to a re-adjustment of aspirations to what i s within the migrant's 11 grasp. Moreover, a number of variables of a socio-psychological nature may f a c i l i t a t e this re-adjustment'and thus act to ddefuse any resentment and any potential "frustration gap." These variables relate to the alleged d i f f i c u l -ties faced by migrants in making a successful adjustment to urban l i f e . For example, i t i s often held that an inescapable consequence of urbanisation i s the deterioration of the family unit and the weakening of bonds tying urban dwellers to their rural relatives. As well, i t i s frequently alleged that rural-based norms of mutual-aid and helping suffer in the process of rapid urbanisation as migrants grow weary of frequent calls on their limited r e -sources. Deutsch, for instance, emphasised weakened social cohesion as re-12 suiting in uprooted, alienated urban dwellers. 170 An attempt was made to test these propositions in Nairobi's informal economy. Fi r s t , three indicators were used to guage the existence and the strength of urban-rural ties: (1) remittance of funds to rural relatives; (2) v i s i t s to the migrant's rural home area; and (3) support of self-help a c t i v i -ties in the rural areas. Second, the degree to which rural-based norms of mu-tual assistance and helping are maintained in the urban areas was measured by: (1) extent and type of help received by the migrant when he arrived in Nairobi; and, (2) the subsequent willingness of the migrant to help others. While there is some evidence of substantial transfers of money from 13 individuals in the formal sector to their rural relatives, . there has been .„-:.. l i t t l e light thrown on the patterns of those in the informal economy and the characteristics of the links they may have with the rural areas. Thus i t i s of- considerable interest that an extraordinary 70 per cent of migrants in the informal economy seemed to have sent remittances to their relatives in the ru-ral areas (see Table B.13). Even without considering other data, one may infer from such figures that links between urban and rural areas are probably s t i l l very strong. At the same time,'this may indicate a remarkable, voluntary ab-stention from present consumption among those Lerner has termed the "flotsam and jetsam" of the development process. Moreover, there seems to be a direct relationship between remittance of funds and length of urban residence. While "only" 42 per cent of the most recent migrants sent funds to their rural relatives, 87 per cent of long-term urban residents participated in this relationship. In other words, contrary to expectations, under these conditions of urbanisation, increasing length of urban residence does not appear to weaken but rather to strengthen urban-rural t i e s . 171 One aspect of the remittance of funds to the rural areas i s probably the desire to maintain and secure a place in the rural home for the time when the migrant withdraws from the urban economy. This i s suggested by the finding that a direct relationship seems to exist between the age of respondents and the proportion sending funds to the rural home area (see Table B.14). Thus, among the youngest respondents, those 15-19 years of age, 53 per cent stated that they sent funds home. This rises progressively until virtually a l l of those over 40 years of age reported remitting funds. The transfer of money from those in the urban informal economy to the rural areas i s only one aspect of the maintenance of close urban-rural family ties. In addition, the interview results suggest that frequent v i s i t s are made to the rural home by migrants in the urban informal economy,(see Table B.15). Thus, less than 10 per cent of the respondents indicated that they had rarely or never returned to their rural homes. This did not vary among the responds h ents from the four provinces shown in the table. Not surprisingly, those re-spondents from Eastern and Central Provinces, the areas closest to Nairobi, tended to v i s i t their rural homes much more frequently than those from Nyanza or Western Provinces. Nevertheless, even among the latter respondents, the vast majority reported that they returned to the rural home at least once a year. In other words, close ties seem to be maintained with rural relatives, ties which may prevent the rapid breakdown of traditional social controls in the urban area., The strength of ties to the rural home area may also be inferred from the overwhelming support (monetary and in kind) that i s apparently given to rural "self-help" activities by urban residents.(see Table B.,T6')>„ It seems that over 70 per cent of low income migrants in the urban informal economy make these contributions to self-help activities in the rural areas. As well, i t 172 appears that the strength of commitment to the progressive development of ru-ral areas does not diminish with increasing legnth of urban residence: 80 per cent of the respondents who had lived in Nairobi over 10 years contributed to rural self-help projects. Indeed, i t may be the case that rural self-help ac t i v i t i e s e l i c i t greater interest among individuals in the urban informal economy than do urban self-help a c t i v i t i e s . Thus.overall j "only" 53 per cent of those interviewed stated they supported urban self-help a c t i v i t i e s . Never-theless, the proportion of respondents contributing to urban self-help activ-i t i e s also rose with increasing length of urban residence. Evidently, urban residents see merit in self-help a c t i v i t i e s in both geographical areas but with a preference being shown to the less-developed rural sector. Summarising the analysis thus far, there i s some doubt that the a l -leged deterioration of family bonds typically f e l t to be an inescapable con-sequence of integration into the market-oriented, materialistic urban economy is occurring in Nairobi. At least among those in the informal economy, strong family and kinship ties as well as interest in rural development appear to be wholly compatible with urban l i f e . Indeed, the ab i l i t y to participate ;'.n in the urban informal economy may serve to increase rather than decrease 14 these ti e s . Another aspect of urbanisation i s the alleged severe d i f f i c u l t y expe-r rienced by migrants in making a successful psychological adjustment to urban l i v i n g . While i t seems that the pre-migration preparation of most migrants may be sufficient to permit economic integration into the informal urban eco-nomy, .perhaps they lack a similar social preparation, in the sense of con-tacts in the urban area; that might have served to ease the problems of ad-justment and settlement in Nairobi. The interview results did not confirm this hypothesis. Indeed, an overwhelming proportion of the respondents 173 evidently received some form of assistance from others at the time of their arrival in Nairobi (see Table B.17). Significantly, there does not seem to have been any weakening in this support system over at least the past decade. Indeed, migrants who arrived earliest in Nairobi were apparently less likely to have received any help from friends or relatives than those arriving today. In other words, urban-isation may not temper the availability of assistance; rather i t may have a cumulative effect on enlarging the pool of potential sources of assistance in settling in the urban areas. One effect of social and family contacts on mi-gration i s probably to reinforce the tendency for rural-urban flows to focus on Nairobi. The larger the urban centre, the greater the likelihood that a potential migrant w i l l beyable to secure assistance in settling there. Since resources tend to be concentrated in Nairobi, migrants are attracted to that city; with a growing population, the availability of family networks probably influences other migrants to re-locate in the capital. In rural areas, norms of reciprocity guide the provision of assistance and help. While almost a l l of the individuals interviewed in Nairobi's i n -formal economy had received assistance in settling into the urban area, per-haps they no longer feel they must reciprocate by helping others. To deter-mine whether the rural norm of reciprocity has withered in the urban area, respondents were asked whether they would help friends or relatives settling in Nairobi. Over 64 per cent stated they would indeed help others (see Table B. 18). Even among those who were presumably least able, the unskilled and the unemployed, nearly 60 per cent would apparently provide assistance to others in settling into Nairobi. The reasons given by the respondents for their ac-tions indicate that any refusal to help may be strongly conditioned by eco-nomic factors while the offer of help may be morally-based and represents a 174 continuation of rural norms in the urban setting. Thus, among those who •. would help: 78 per cent would do so either because they must help or because i t i s the charitable thing to do; 12 per cent because they were helped and reciprocity demands that they in turn help others; 5 per cent because they expected later rewards; and only 5 per cent because "living in Nairobi i s d i f f i c u l t . " Of those who would not help others: 7.1 per cent said they would not because they either had no money or no job; 14 per cent because i t would be too expensive; 1.1 per cent because they lacked accommodation; and only 3 per cent because they would advise the requestor not to stay in Nairobi. Thus the interview results tend to cast some doubt on the thesis that kinship ties are disintegrating in the urban setting or the rural-based norms of rec-iprocity and helping weaken with cumulative urban experience. Other evidence i s also available that tends to underline the continu-ing importance of rural beliefs, norms and social controls in the urban area. For example, religious practices seem to be widely observed not forsaken among individuals in the urban informal economy. It appears that 75 per cent of those interviewed attended religious services at least once a month (see Table B.19). Moreover, increasing length of urban residence apparently '.• has l i t t l e effect on the maintenance of religious values: participation in religious services tended to be very high even among long term urban r e s i -dents. The active piety among/all migrants i s quite remarkable. It stands in sharp contrast to the predictions of theorists of urbanisation and c i v i l disorder as well as in contrast to the decline of religion in the great c i t i e s of the west. In summary, the results of interviews in Nairobi's informal economy give l i t t l e support for the propositions that migration produces anomie, psychological maladjustment and social disorganisation and upheaval. As well, 175 there i s l i t t l e evidence that significant social norms and values derived from the rural areas are undermined in the urban centres. The close . " ' . ties between the urban migrant and his rural home may mean that rural values and norms are constantly being reaffirmed in the urban centre. At the same time, participation in religious services and the sense of social cohesion this produces does not appear to be attenuated by increasing length of urban residence. Urban->migrantsvseem;:to<:.havecseverali. supports struetureseusef/ul in adjusting to l i f e in the urban centres. > = Although these support structures may be helpful in limiting resent-ment against the prevailing p o l i t i c a l order, migrants may s t i l l be angry due to a belief that government could but does not attend to their basic economic and social needs. The next"two sections turn.to examine some of the percep-tions of government held by these respondents. D. Perceptions of Government While the theorists of urbanisationand c i v i l disorder refer extensive-ly to social and psychological attitudes in their models, only scant atten-tion tends to be given to popular perceptions of government and p o l i t i c s . At l e a s t , l l i t t l e information appears to be available on this topic among the •15 studies of African urban populations. As well, most of the analyses appear to assume that migrants are p o l i t i c a l l y aware and cognisant of government as a responsible, problem-solving agency. That i s , i t i s implicitly believed that migrants have the historically recent conception of government as a bu-reaucratically organised apparatus responsive to, .and to a significant extent responsible for the plight of individuals in society. The most common observation on the p o l i t i c a l reactions of the urban poor i s the imputation of seething fury and radicalism among the so-called 16 marginal groups. However, the opposite view, derived from anthropological 176 work, stresses the relative passivity of the urban poor and has given rise to the notion of the "subculture of poverty." The poor are thus characterised as apathetic, f a t a l i s t i c , without aspiration and without the minimal cultural and 17 psychic s k i l l s necessary for rational action. Although seemingly opposed, these two views of disadvantaged urban residents seem to share a similar per-spective. Thus, the "marginal radical" approach may reflect e l i t e distrust of disfavoured poor; "subculture of poverty" stresses marginality not as the result of the socio-political order but as the result of the qualitative i n -feriority of the poor. The potential for urban p o l i t i c a l instability probably depends at least in part, upon the interpretations of the p o l i t i c a l , social and economic order by disadvantaged urban residents. The frustration-aggression thesis tends to ignore the possibility that deprivation anger, even i f i t exists, might not be • 18 directed against that order. Without mediating cognitive factors, the emotional energy, the "pent up" frustration, might simply be deflected into alternative channels. For example, i t may be directed into economic activi^J.? ties and the attainment of higher standards of living the pursuit of which may leave very l i t t l e time, or energy or interest for disruptive p o l i t i c a l a c t i v i -ties. As well, perceived causes of social and economic distinctions and, as important, factors to which responsibility for frustration are imputed, may form crucial intervening variables that mediate the effects of frustration on p o l i t i c a l attitudes. If frustration exists and i t i s perceived to result from injustice, class privileges, and selfishness of e l i t e groups then i t may be channelled into p o l i t i c a l a c t i v i t i e s . But i f frustration arising from f e l t deprivation i s focussed on the individual, fate or other transendental forces then i t may be deflected into p o l i t i c a l l y irrelevent but economically impor-tant paths. 177 From the interviews conducted in Nairobi's informal economy, i t seems that the ethic predominant among individuals in the informal economy may not be conducive to imputing responsibility for deprivation to the p o l i t i c a l authorities. For example, since unemployment i s frequently considered as en-couraging p o l i t i c a l i n s t a b i l i t y , the respondents were asked who or what they thought was mainIy.;±esponsible for unemployment among school leavers and others in Kenya. The responses indicate that despite a l l the rhetoric of p o l i t i c a l awakening this key issue was apparently not seen in structural terms. Indeed, less than 20 per cent of those interviewed imputed responsibility for the existence of unemployed school leavers and others to the government (see Table B.20). Non-structural responses - bad luck/fate, own fault, no-one^'s fault \>:ar-were most frequently cited, accounting for over 60 per cent of the responses. Increasing length of urban residence seems to have l i t t l e effect on the dis-tribution of factors. Among long-term urban residents, residents presumably most aware of the presence of the central government, only 18 per cent held the government responsible for unemployment. Thus, individuals in Nairobi's informal economy, irrespective of length of urban residence, overwhelmingly tended to view unemployment as a result of individual and non-structural factors. Even the unemployed did not seem to link their status to the wider p o l i t i c a l economy. Thus, less than one-quarter of the unemployed imputed responsibility for unemployment to the government, a proportion similar to that for self-employed (see Table B.21). Among the unemployed there was a greater tendency to state that "no-one i s to blame" for unemployment. These data cast some doubt on the notion of p o l i t i c a l l y relevant bitterness among the urban unemployed. Indeed, structural causes do not seem to have figured 178 prominently in the cognitions of most individuals in any of the informal occu-pational groups. However, this picture of individuals in the informal economy alters when education i s controlled. It was generally f e l t by observers during the 1960's that frustration among primary school leavers constituted a threat to regimes in power. The interview results do not generally sustain this thesis, however, they do suggest that many secondary shcool leavers may now be seeing some type of connection between unemployment and the actions of government. Thus, among the respondents, 36 per cent of those with some secondary education and 47 per cent of those who had completed secondary school seemed to hold the government mainly responsible for the unemployment of school leavers and others in Kenya (see Table B.22).\ This suggests that the marked ex-pansion of the educational system in Kenya may work to the future detriment of the government unless there i s some change in secondary school leavers' expec-19 tations. It should not be thought that the general reluctance to interpret job-lessness in structural terms i s due to the lack of public awareness of govern-ment acti v i t i e s and the concern of p o l i t i c a l leaders with this issue. The Tripartite Agreements of 1964 and 1971 were highly visible declarations of p o l i t i c a l concern, despite the relative economic ineffectiveness of such p o l i -cies. As well, the Kenya press frequently features discussion of the "unem-ployment problem" and of the government's concern about the shortage of formal sector jobs. Perhaps, though, :;these respondents have not been reached by pub-l i c discussion of the wider issues of the state's role in development. To test this hypothesis, two indicators of media exposure were used: (1) reading newspapers at least once a week; and (2) listening to the radio at least once a week. 179 Overall, 75 per cent of the respondents either read or had newspapers read to them at least once a week (see Table B.23). The results also lend support to the proposition that urbanisation may increase exposure to the printed media: while only 58 per cent of the most recent arrivals frequently read newspapers, 82 per cent of the more long term residents read..newspapers at least once a week. Radio has apparently achieved a marked penetration of Kenya's people. Thus, 92 per cent of the respondents in the informal economy reported listening to the radio at least once a week. Even among the most recent arrivals, exposure to radio appears to be remarkably high. Both news-papers and the Voice of Kenya give elaborate coverage to problems and issues .: of development and the government's involvement in the development of the country. Therefore, i t may be fa i r to conclude that migrants in the informal sector should have at least some idea of some aspects of the p o l i t i c a l economy of Kenya. But in the context of politicisation there may be an important gap be-tween knowledge of wider p o l i t i c a l issues and actively relating that knowledge to one's own fortunes. Do individuals in the informal s