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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 o f A l b e r t a , 1971 M.A., The U n i v e r s i t y o f B r i t i s h Columbia, 1972  A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY in THE FACULTY OF GRADUATE STUDIES (Department o f P o l i t i c a l S c i e n c e )  We a c c e p t t h i s t h e s i s as conforming to the required standard  THE UNIVERSITY OF BRITISH COLUMBIA September, 1979  ©  David W i n t e r f o r d , 1979  In presenting  t h i s thesis i n p a r t i a l fulfilment of the requirements for  an advanced degree at the University of B r i t i s h Columbia, I agree that the Library s h a l l make i t freely available for reference  and  study.  I further agree that permission for extensive copying of t h i s thesis for scholarly purposes may by his representatives.  be granted by the Head of my Department or It i s understood that copying or publication  of t h i s thesis for f i n a n c i a l gain s h a l l not be allowed without my written permission.  Department of P o l i t i c a l Science The University of B r i t i s h Columbia 2075 Wesbrook Mall Vancouver, Canada V6T 1W5  Date  J^/ei^r/C  / f 79  ABSTRACT There seems to be a widely shared consensus i n the l i t e r a t u r e on the comparative study of development about the main c h a r a c t e r i s t i c s of underdeveloped countries, the causes of their underdevelopment, and the appropriate p o l i c i e s for securing their development.  Some of the ideas and suggestions  resulting from t h i s 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 i n  public p o l i c i e s which c o n f l i c t with the ostensible goal of securing higher standards of l i v i n g . One reason for the apparent f a i l u r e of many development models may be the r e s t r i c t i v e focus of much of the p o l i t i c a l and economic research on underdeveloped countries.  While many economic studies can be j u s t l y 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 e x p l i c i t l y recognizes the i n t e r r e l a t i o n s h i p of p o l i t i c a l , economic and s o c i a l factors i n the pursuit of development.  The interplay of  these factors seems to have resulted i n the evolution of an informal (unoffic i a l ) economy as a counterpart to the state-favoured formal ( o f f i c i a l ) economy. The existence of t h i s informal sector has been used i n 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  ii  unemployment r a t e s , as w e l l as t h e u t i l i t y o f a range o f e s s e n t i a l l y n o r m a t i v e c o n c e p t s l i k e "employment," "modern," and  "unemployment,"  "productivity,"  "subsistence,"  "traditional."  E m p i r i c a l d a t a was c o l l e c t e d i n Kenya t o t e s t t h e main hypotheses advanced i n t h e t h e o r e t i c a l model.  The d a t a i n d i c a t e t h a t t h e i n f o r m a l  i s a development s e c t o r . s p o n t a n e o u s l y t i v e s of i n d i v i d u a l Africans.  sector  c r e a t e d t h r o u g h t h e a c t i o n s and i n i t i a -  I t i s i m p o r t a n t i n p r o v i d i n g low c o s t 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 o c c u r s d e s p i t e t h e l a c k o f  s t a t e s u p p o r t and o f t e n i n t h e f a c e o f 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 t o 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 f a v o u r a b l e  t o development, f o r example, t h e i n t e r e s t i n s e c u r i n g  h i g h e r incomes, d e t e r m i n a t i o n  i n the face o f poverty,  s e l f - r e l i a n c e and a sense o f p e r s o n a l  t h e abundance o f  r e s p o n s i b i l i t y f o r one's economic  ambition fortune  the b e l i e f t h a t w e a l t h i s t h e r e s u l t o f hard work, and an a p p r e c i a t i o n o f r i s k t a k i n g i n t h e e x p l o i t a t i o n o f new  opportunities.  The c r e a t i v e c o n t r i b u t i o n o f t h e i n f o r m a l s e c t o r t o economic development and p o l i t i c a l s t a b i l i t y i s seldom r e c o g n i z e d cal  l e a d e r s and i s f r e q u e n t l y i g n o r e d  by development p l a n n e r s or p o l i t i -  i n development models.  The f o r m u l a t i o n >  o f development s t r a t e g i e s and t h e g o a l s o f development a d m i n i s t r a t i o n would be enhanced through t h e e n l i g h t e n e d  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 t o n a t i o n a l development.  TABLE OF CONTENTS  LIST OF TABLES LIST OF FIGURES AND.ILLUSTRATIONS  vii  ACKNOWLEDGEMENT  vi x  1  INTRODUCTION A. B.  The General Perspective (1) Order of Presentation (7) Part One:  I.  INDIVIDUAL. ACTIONS AND DEVELOPMENT .THEORY A. B. C. D. E.  II.  12  Introduction (12) The Importance of Free Individual Actions for Development (13) Effects of External Contacts on Acquired Human Qualities (19) Macro-Concepts and Development (21) Summary (23)  DEVELOPMENT THEORY AND. THE URBAN ECONOMY IN LESS DEVELOPED COUNTRIES 26 A. B. C. D. E. F. G. H. I. J. K.  Introduction (26) Urbanisation i n Less Developed Countries (26) Rural-Urban Migration (29) Development Theory and Urban Employment (36) The Dual Framework (43) The Structure of the Urban Economy (51) The Formal-Informal Model (60) Weaknesses i n the Formal-Informal Dichotomy (62) The State and Economic A c t i v i t i e s (67) Informal A c t i v i t i e s : A Creative Response to State-Centred Development (75) Summary and Implications.: for Development Theory (78) Part Two:  III.  Development Theory  The Kenyan Case  NATIONAL INCOME AND EMPLOYMENT IN KENYA A. B. / C. D. E. F.  Introduction (83) Problems with the S t a t i s t i c a l Measurement of National Income (84) Kenya's Estimated National Income (88) Employment: Growth and Structure (92) The State and Employment Creation (99) Summary and Conclusions (106)  83  IV.  POPULATION AND THE LABOUR FORCE A. B. C. D. E.  V.  I n t r o d u c t i o n (109) Some p r o b a b l e I m p l i c a t i o n s o f P o p u l a t i o n Growth f o r Development Theory (110) P o p u l a t i o n and Labour Force Dynamics i n Kenya (112) Change i n P o p u l a t i o n S t r u c t u r e , 1962-1969 (116) Summary and C o n c l u s i o n s (125)  PUBLIC POLICY AND URBAN GROWTH IN KENYA A. B. C. D. E. F. G.  VI.  109  127  I n t r o d u c t i o n (127) U r b a n i s a t i o n i n Kenya: A B r i e f O u t l i n e (127) Urban Growth i n Kenya (131) P a t t e r n o f M i g r a t i o n (134) Urban-Rural Wage D i f f e r e n t i a l (140) Dynamics o f U r b a n i s a t i o n (144) Summary and P o l i c y I m p l i c a t i o n s (150)  THE POLITICAL ECONOMY OF URBAN STABILITY IN KENYA A. B. C. D. E. F. G.  I n t r o d u c t i o n (155) The Kenyan Case (158) I n t e g r a t i o n i n t o t h e Urban Economy (159) P e r c e p t i o n s o f Government (175) P e r c e p t i o n s o f S t r a t i f i c a t i o n (181) P e r c e p t i o n s o f M o b i l i t y (193) Summary (200)  SUMMARY AND CONCLUSIONS A. B. C.  155  202  I n t r o d u c t i o n (202) A R e c a p i t u l a t i o n (202) C o n c l u d i n g Remarks (211)  NOTES TO CHAPTERS  217  SELECTED BIBLIOGRAPHY  .  244  APPENDIX A: RESEARCH METHODOLOGY  267  APPENDIX B: SUPPLEMENTARY TABLES  281  iv  LIST OF TABLES  1.  Urban-Rural Population of Developing  Countries  2.  Projected growth of the Total and Urban Population  27  1970-1980, Selected Countries i n Tropical A f r i c a  28  3.  Population, Labour Force, Employment and Unemployment, 1960-1990 . . .  37  4.  I n d u s t r i a l i s a t i o n and Employment i n 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 The Informal Sector Share of Employment .'. . , .  61  7.  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 i n Kenya, 1964-1974  . 94  11.  Estimates of Employment by Sector, 1969 and 1971  94  12.  Persons Engaged:  95  13.  Total Employment:  14.  Projected Kenya Population and Labour Force, 1970-2000  15.  Population of Kenya by Race, 1962 and 1969  16.  Age Structure of the African Population by Sex, 1962 and 1969  17.  Population of the Ten Largest Centres, 1962 and 1969  18.  Proportion of Population without School Education  Recorded Totals, 1972-74 Actual 1972 and Target 1978  96  117  Data on Adult African Earnings i n Kenya, 1969  20.  Benefits from Extra Wages Paid on Transfer  ...  118 133  and  with Higher Education by Age Group and Place of Residence, 19.  .113  1969  .  139  ............ ...  141  of the Marginal African Male Adult Worker 21.  Sectoral Shares of Monetary GDP  22.  Average Formal Sector Earnings andv i Average Rates of Change of Earnings and Formal Employment, Urban Areas, 1964-1973  143  and Employment Arising i n Nairobi  ....  .  148  149  LIST OF FIGURES AND ILLUSTRATIONS Kenya Figure 1.  .viii Structure of Urban Employment i n a Developing Economy  vii  53  viii  ACKNOWLEDGEMENTS I t i s with pleasure  t h a t I acknowledge t h e s u b s t a n t i a l debt t h a t I owe  t o Dr. Robert Jackson who, as a s c h o l a r , r e s e a r c h c o u n s e l l o r and f r i e n d , has p r o f o u n d l y and  s u p e r v i s o r , academic  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  i n t a n g i b l e ways. . I would a l s o l i k e t o thank my t h e s i s committee a t t h e  U n i v e r s i t y o f B r i t i s h Columbia f o r . t h e i r . v e r y h e l p f u l comments. g r a t e f u l l y acknowledge t h e f i n a n c i a l s u p p o r t p r o v i d e d  As w e l l , I  by t h e 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 t o my w i f e , E l i z a b e t h , I acknowledge w i t h g r a t i t u d e t h e t y p i n g she has done o f t h i s t h e s i s .  Moreover, I h a p p i l y acknowledge a much g r e a t e r  debt t o h e r f o r b e i n g a r o b u s t ,  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 w i t h t h e u s u a l statement t h a t I a l o n e am r e s p o n s i b l e views e x p r e s s e d and e r r o r s c o n t a i n e d  f o r t h e v. e . ;  i n t h i s study.  W h i t e h o r s e , September 1979  David  ix  Winterford  INTRODUCTION A.  The General Perspective  ..•  In the l a s t three decades, s o c i a l s c i e n t i s t s have become increasingly  interested i n understanding and perhaps ultimately shaping economic, p o l i t i c a and c u l t u r a l change i n less developed countries. t i v e s , s t y l e s of thought, or "models" that has  >:  The multitude of perspecemerged c o l l e c t i v e l y define  the f l o a t i n g boundaries of "development studres."  At the same time, the  i n t e r d i s c i p l i n a r y nature of the f i e l d has resulted i n an extensive and intensive debate concerning the meaning of development, i t s most important goals, and the link between these goals and means of attaining them.  Despite t h i s  measure of/disagreement, most observers might agree with the view that the aim of development i s to increase t o t a l welfare.  Styles of thought or models  which may hamper t h i s end ought to be seriously questioned. In t h i s 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 i n r a i s i n g low l i v i n g standards and generally i n 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 a b i l i t y to plan development. When applied to the state, the concept of planning can be given a v a r i ety '.oftdifferent meanings.  I t may mean the i n s t a l l a t i o n of appropriate i n f r a  structure and the fashioning of appropriate state p o l i c i e s to f a c i l i t a t e the a c t i v i t i e s of i n d i v i d u a l s , businesses and governments.  I t may refer to the  coordination of a c t i v i t i e s undertaken by d i f f e r e n t government departments i n order to allocate scarce resources e f f i c i e n t l y . cyclical fiscal policies.  I t may simply denote counter  In much of current development studies, however,  2 p l a n n i n g has come t o mean e x t e n s i v e 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 o f 2 s o c i a l and economic l i f e .  I n o t h e r words, t h e s t a t e i s c a l l e d upon t o engage  i n comprehensive and d e t a i l e d p l a n n i n g i n o r d e r t o r e s t r u c t u r e s o c i a l and economic r e l a t i o n s h i p s t o f i t some p r e - c o n c e i v e d o f these r e l a t i o n s h i p s .  notion o f the appropriate order  Not o n l y does t h e c a l l f o r comprehensive p l a n n i n g  r e p r e s e n t both a marked d e p a r t u r e  from t h e h i s t o r i c a l e x p e r i e n c e o f t h e p r e s -  e n t l y advanced c o u n t r i e s and a c h a l l e n g e t o some c h e r i s h e d v a l u e s , i t a l s o seems t o be f u n d a m e n t a l l y  opposed t o t h e r e a l i s a t i o n o f t h e c r e a t i v e c o n t r i -  b u t i o n each i n d i v i d u a l can make t o a n a t i o n ' s p r o g r e s s . In  t h i s t h e s i s an attempt i s made t o i n d i c a t e t h a t 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 t h e economy i s u n l i k e l y t o be a n e c e s s a r y development.  condition f o r  Indeed, comprehensive p l a n n i n g may have a d v e r s e e f f e c t s on t h e  probable determinants  o f development, t h e a c q u i r e d q u a l i t i e s o f a p o p u l a t i o n .  W h i l e i t may no l o n g e r be f a s h i o n a b l e t o defend t h e market economy, t h i s t h e sis  i s presented  as a s m a l l c o n t r i b u t i o n t o t h e body o f thought which a s s e r t s  t h a t t h e market economy r e p r e s e n t s t h e b e s t ( a l t h o u g h n o t p e r f e c t ) means o f s e c u r i n g t h e happy c o i n c i d e n c e o f d i g n i t y f o r t h e i n d i v i d u a l , t h e maximum scope f o r human c r e a t i v i t y and t h e f u l l e s t u t i l i s a t i o n o f d i s p e r s e d i n d i v i d u a l knowledge and t a l e n t s i n meeting t h e p r e s s i n g need t o r a i s e m a t e r i a l o f l i v i n g i n l e s s developed  standards  countries.  To uphold t h e market o r d e r 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 o f t h e economic d o c t r i n e s c u r r e n t l y i n f a s h i o n and a w i l l i n g n e s s " t o p o i n t o u t t h e a r i d i t y o f 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 o f t h e i r assumptions, the a r t i f i c i a l nature o f t h e i r procedures."^  W h i l e i t may be s u f f i c i e n t merely t o  c h a l l e n g e m i s l e a d i n g i d e a s , models.", and p r o p o s a l s , w i t h o u t o f f e r i n g any "cons t r u c t i v e " a l t e r n a t i v e , i t i s d o u b t l e s s more p e r s u a s i v e i f one can i n d i c a t e w i t h some p r e l i m i n a r y e m p i r i c a l evidence  t h e accomplishments and p o t e n t i a l  3 accomplishments o f 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 regulations.  T h i s i s p a r t i c u l a r l y i m p o r t a n t when t h e c o n c e r n i s w i t h under-  developed c o u n t r i e s , some o f which may be on t h e road t o 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 t h e west.  S u r p r i s i n g l y , the e x c i t i n g task o f 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 o r d e r does n o t seem t o have c a p t u r e d t h e imagina-L t i o n o f 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 . t h e s e s o c i e t i e s can s c a r c e l y be c o n s i d e r e d  W h i l e most o f  as h a v i n g enjoyed p o l i t i c a l l y  sanc-  t i o n e d economic freedom ( i n c o n t r a s t t o p o l i t i c a l independence) f o r any l e n g t h of time, i t i s probably accurate als  t o s t a t e t h a t academics and o t h e r  intellectu-  i n T h i r d World c o u n t r i e s have t a k e n up, r a t h e r u n c r i t i c a l l y , t h e cause o f  planned development.  S e v e r a l f a c t o r s may account f o r t h i s p r e f e r e n c e :  first,  the profound i n f l u e n c e o f 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 s p r e a d and g e n e r a l  acceptance o f 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 t h e r i s e o f c a p i t a l i s m i n t h e west and t h e 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 t o have had on t h e w o r k i n g poor; conceptualize  t h i r d , an i n a b i l i t y o r r e l u c t a n c e t o  i n t h e a b s t r a c t t h e g e n e r a l w o r k i n g s o f an economy; f o u r t h , t h e  a p p e a l t o human v a n i t y o f t h e b e l i e f t h a t something as complex as an e n t i r e s o c i e t y can be r e - d e s i g n e d t o f i t some a r t i f i c i a l p l a n ; and f i f t h , t h e c r e a t i o n o f 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 c e n t e r e d  on t h e s t a t e .  W h i l e s u b s t a n t i v e d i s c u s s i o n o f some o f t h e s e i n f l u e n c e s i s r e s e r v e d for  l a t e r i n the t h e s i s , i t i s appropriate  t o make some g e n e r a l comments.  F i r s t , i t s h o u l d be noted t h a t one o f t h e 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 a g a i n s t t h e c o l o n i a l s t a t e i s t h a t i t was an i l l i b e r a l  It  i s d i f f i c u l t t o maintain a l i s t s represented  t h a t t h e economy and s o c i e t y f a s h i o n e d  a " l i b e r a l - c a p i t a l i s t order."  state.  by t h e c o l o n i -  Not o n l y was t h e 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 c o l o n i a l state was a d i r i g i s t e state, h o s t i l e to free exchange of the market and free competition between i n d i v i d u a l s . the term "formalised  In t h i s thesis  development" i s used to indicate the continuing  and subsequent elaboration of the regulatory  legacy  c o l o n i a l state i n the post-  independence period. On the other hand, colonialism has set i n motion many b e n e f i c i a l forces which have proved of fundamental importance i n the development of less developed countries.^  Colonialism  represented an unexpected change inconsistent i n  many respects with the previous s o c i a l structure. "absorbed" by the l o c a l society.  I t could not simply be  Besides the obvious and undeniable benefits  of colonialism,^ for example, physical infrastructure i n the form of sea-  v..  ports, roads, communication f a c i l i t i e s * and the s o c i a l infrastructure of education, health and disease control, colonialism wrought s i g n i f i c a n t changes i n the cognitions of individuals i n the l o c a l  population.  Much has been written of the alleged d e b i l i t a t i n g e f f e c t s of colonial.^ ism on the mental framework of indigenous peoples.^  Very l i t t l e has been  written of the p o s i t i v e impact of colonialism on what are probably the main determinants of development:  attitudes; aptitudes, aspirations,  expectations, 8  motivations, f a c u l t i e s , and s k i l l s of a given group of i n d i v i d u a l s . Disregard  of the p o s i t i v e impact of colonialism on these l i k e l y  deter-  minants of development has resulted i n the acceptance of the popular (though largely incorrect) notion that the very existence existence  of the west, or at least the  of western ("neo^"^colonialism, has prevented and i s continuing to  prevent the development of underdeveloped countries.  I t i s more accurate to  acknowledge that most forms of contact between western countries and underdeveloped 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 s o c i a l i n f r a s t r u c t u r e , contacts between western  and non-western s o c i e t i e s have probably served to promote new ideas,  attitudes, methods and wants,, one r e s u l t of which seems to have been to encourage production for the market.  In other words, one result of these con-  tacts appears to have been the transformation of economic performance through l i n k i n g the acquisition of desired goods to a d i f f e r e n t type of productive exchange. The benefits of t h i s novel productive exchange system appear to have been readily appreciated by countless members of the l o c a l 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 s o c i a l order.  This u n o f f i c i a l development sector  represents spontaneous, creative, or "informal" development. Informal development i s the antithesis of planned or formal development. Indeed, i n their underlying l o g i c , the two types of development are incompatible.  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 i n the state and partly on the i n a b i l i t y  or r e l u c -  tance of state o f f i c i a l s to enforce the r i g i d prerequisites of comprehensive planning.  Informal development i s "development by s t e a l t h " i n 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. that i t i s the unintended  I t i s creative development i n the sense  result of countless voluntary i n d i v i d u a l 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 l e a s t deny that i t makes any worthwhile contribution to several of the dilemmas facing less developed countries. hostility. may  There are numerous grounds for t h i s  Thus, for formal sector businessmen, informal sector enterprises  represent  "unfair" competition.  That i s , informal business may  hinder  formal enterprise from securing the income that would otherwise be possible as a r e s u l t of preventing  or r e s t r i c t i n g entry into any given a c t i v i t y .  Informal  enterprises also seem to offend the aesthetic s e n s i t i v i e s of such p r i v i l e g e d groups. As well, many of the believers i n the necessity of comprehensive state planning may  be h o s t i l e to the concept and r e a l i t y of the informal economy.  The existence of this sector may  exemplify  the motivations,  a t t i t u d e s , capaci-  t i e s 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 e n t i r e l y  rep-  utable or e t h i c a l reasons, revolutionary upheaval i n less developed countries. Their arguments are t y p i c a l l y founded on the alleged immiseration l a t i o n under " c a p i t a l i s t " development.  of.the popu-  As well, proponents of revolution seem  to derive some strength from the frequent assertion that unemployment has reached a " c r i s i s " l e v e l i n less developed countries. case, which I will.attempt  now  Even i f t h i s i s the  to show i s doubtful, there i s c e r t a i n l y no neces-  sary relationship between high unemployment and f e r t i l e ground for revolutionary a c t i v i t y .  Nor i s i t l i k e l y that a " r a d i c a l " government i s any  better  equipped to i n i t i a t e and carry out p o l i c i e s the r e s u l t of which would be an improvement i n general  welfare.  On the other hand, for a l l those who  believe i n the creative p o t e n t i a l  of unrestricted i n d i v i d u a l actions, the awareness of an informal development sector may  giveisome basis for a redirection of development studies and thus  ultimately of state p o l i c i e s .  I f t h e two t e s t s o f development a r e  rising  s t a n d a r d s o f l i v i n g and i n c r e a s i n g p e r s o n a l c h o i c e , then t h e e x i s t e n c e o f a 9 "spontaneously-formed"  i n f o r m a l economy may  s e r v e t o r e t a r d the deepening  gloom and sense o f f r u s t r a t i o n r e v i d e n t among these s t u d e n t s o f development. B.  Order o f P r e s e n t a t i o n T h i s t h e s i s i s p a r t l y an attempt  t o examine some o f t h e most w i d e l y  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 t h e f i e l d o f development.  These p o l i c i e s  appear t o be e i t h e r l a r g e l y u n t e n a b l e o r s i m p l y i n c o m p a t i b l e w i t h one w h i l e o f t e n h a v i n g a c u m u l a t i v e , a l t h o u g h perhaps u n i n t e n d e d , ening economic freedom i n l e s s developed p a r t l y concerned  countries.  e f f e c t o f weak-  As w e l l , t h i s t h e s i s i s  w i t h some o f the complex problems o f methodology, e s p e c i a l l y  t h e meaning and measurement o f s e v e r a l o f t h e s t a n d a r d concepts opment s t u d i e s . undertaken  another  used i n d e v e l -  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  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 b e a r i n g i n  p a r t i c u l a r on t h e t h e s i s t h a t development i s p r o b a b l y dependent on t h e  apti-  t u d e s , 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 population. No comprehensive t h e o r y o f t h e p o l i t i c a l economy o f development i s advanced i n t h i s work.  I t i s l i k e l y t h e case t h a t development, as p a r t o f t h e  h i s t o r i c a l change o f e n t i r e s o c i e t i e s , i s not amenable t o g e n e r a l t h e o r y .  At  t h e same t i m e , development appears t o be m a i n l y dependent on f a c t o r s about which we know very l i t t l e and which a t any r a t e cannot be r e a d i l y accommodated in  a general theory.  N e v e r t h e l e s s , s y s t e m a t i c r e s e a r c h 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 t o the s u b j e c t , not the l e a s t o f which i s a c h a l l e n g e t o p o l i c i e s adverse t o the a t t a i n m e n t o f h i g h e r m a t e r i a l s t a n d a r d s life.  To be s k e p t i c a l about the p o s s i b i l i t y o f a g e n e r a l t h e o r y o f t h e  of  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, i n t h i s thesis an  attempt i s made to discern uniformities, p a r t i c u l a r l y i n the r e l a t i o n between the state and development and i n 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 i n a better position to o f f e r guidance on what not to do rather than on what to do to promote the development of less developed countries. eschew such " p o s i t i v e " policy a r t i c u l a t i o n i s j u s t another way  To  of admitting  our i n e v i t a b l e ignorance of (and therefore our i n a b i l i t y to control or d i r e c t ) 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 determine the precise pattern of relationships among a l l the elements concerned or the e x p l i c i t directions i n which each element w i l l arrange i t s e l f i n r e l a tion to the  others.  In Part One,  beginning with Chapter I, there i s a discussion of some of  the probable l i n k s between economic freedom and the attainment of higher livA. ing standards as well as an appraisal of selected aspects of current t h e o r i s ing i n the f i e l d of development studies.  This i s followed i n Chapter II by an  analysis of development theory and the structure.of the urban economy i n l e s s developed countries.  The model presented';in  Chapter II i s perhaps an 1  improvement on the usual dual-economy models i n that i t stresses the v i t a l relationships between the state ( i t s p o l i c i e s and actions) and the structure and i n s t i t u t i o n a l d i r e c t i o n of development. urban informal or u n o f f i c i a l economy may presented i n Chapter I.  As well, the analysis of the  o f f e r further support for arguments  9 In Part Two, beginning with Chapter I I I , 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 A f r i c a ' s more stable and prosperous nations.  The analysis presented  i s based on primary documentary mat-  e r i a l that was available i n Nairobi as well as d i r e c t observations and i n t e r views i n Nairobi's informal economy.  While Chapters III-VI o f f e r a detailed  factualland technical interpretation of some s a l i e n t features of Kenya's development, an attempt i s made to place each chapter within the more general framework of development studies.  Thus, i n Chapter I I I , on national income  and employment i n Kenya, not only i s the Kenyan case examined but also general methodological  issues are raised which may be applicable to the study of  other less developed countries.  This i s followed i n Chapter IV by an analysis  of population and labour force growth i n Kenya.  Again, the issues discussed  and the general conclusions that are reached may have application to other less developed countries. in Kenya.  Chapter V deals with public p o l i c y and urbanisation  I t i s important not only for the i n t e r p r e t i v e analysis presented  but also as an i l 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 f i n a l substantive discussion, Chapter VI, o f f e r s an analysis of a preliminary investigation of the awareness, motivations, expectations,  atti-  tudes and desires of a small group of i n d i v i d u a l s i n Nairobi's informal economy.  One of the aims of t h i s chapter i s to link development theory, and  Kenya's p o l i t i c a l economy, to i n d i v i d u a l s on the f r o n t i e r of development i t self.  I t 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 s t a b i l i t y of explosive urban growth.  i n Kenya. .ih.-=the context  In concluding t h i s introductory chapter, i t i s acknowledged that de- :. spite some grave misgivings about Kenya's development that are discussed i n the thesis, the Kenya government ought perhaps to be congratulated for maintaining one of A f r i c a ' s least coercive s o c i e t i e s .  P a r t i c u l a r l y at t h i s time  in A f r i c a ' s long history, Kenya's experience with s t a b i l i t y and r e l a t i v e economic freedom i s a p r i c e l e s s 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 A.  DEVELOPMENT THEORY  Introduction This chapter attempts to place v o l u n t a r i l y undertaken i n d i v i d u a l a c ^ i ;  tions within the framework of development studies.  The purpose i s neither to  present a detailed theory nor to o f f e r a detailed c r i t i q u e of the main:;approaches to development.  Rather the aimiis to highlight some probable aspects  of the process of development.  While the discussion inevitably runs i n gener-  a l i t i e s , the specialised chapters which follow hopefully compensate by o f f e r ing a more detailed analysis of s p e c i f i c issues. The primary thesis i s that the essence and appropriate  taskoof governi-  ing i n less developed countries should be the creation of a suitable environment for the maximum u t i l i s a t i o n 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 i s required by general rules or p r i n c i p l e s , equally applicable to a l l .  While t h i s i s admittedly  an i d e a l , i t  i s perhaps the type of i d e a l which can be progressively r e a l i z e d through consciously guided p o l i c i e s . Extensive  state a c t i v i t y i s not incompatible with t h i s goal insofar as  arbitrary coercion i s used as l i t t l e as possible.  Indeed, appropriate  state  p o l i c i e s and actions are necessary for the establishment of a framework condusive to the pursuit of creative i n d i v i d u a l actions.  The state, for example,  has a r e s p o n s i b i l i t y to provide the basic i n f r a s t r u c t u r e of roads and communication,, health and educational  services, an appropriate  i n s t i t u t i o n a l frame-  work, an e f f e c t i v e l y managed monetary system, and the maintenance of law order.  Thus the goal i s not l a i s s e z - f a i r e . 12  and  Rather the hope i s that the state  13 w i l l e f f e c t i v e l y discharge i t s essential duties and thereby f a c i l i t a t e the general pursuit of higher l i v i n g standards.  Currently, the governments of  some less developed countries appear to be already over-burdened i n 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 i n a broad manner the probable l i n k s 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. -  F i n a l l y , 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 e x i s t between freely undertaken eco-  nomic a c t i v i t i e s and the attainment of higher standards of l i v i n g . for  One reason  emphasising t h i s l i n k i s indicated i n the following passage:  We want the i n d i v i d u a l to have l i b e r t y because only i f he can decide '"..what to do can he:.talso.usela'lli'his.Lunique;;c6mbihation 6 , f f i n f o r m a t i o n , s k i l l s and capacities which nobody else can f u l l y appreciate. To enable the i n d i v i d u a l 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 p r o b a b i l i t i e s . Since we do not know what he knows, we cannot decide whether his decisions were j u s t i f i e d ; nor can we know whether his success or f a i l ure was due to his e f f o r t s and foresignt, or'.to good luck. In other words, we must look at r e s u l t s , 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 w i l l i n g 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 i n which we hold him as a person. In other words, this passage suggests that creative development, or development as a r e s u l t of countless i n d i v i d u a l actions, i s incompatible coercion, comprehensive planning and reward based on p r i v i l e g e . extension  with  However,  and elaboration of the formal...sector, the ostensible aim of much of  development theory and p o l i c y , appears to be largely dependent on coercion and privilege. Since the concepts of "free" (or "freedom") and  "developmenfcarennoto?:  riously vague and are frequently given s h i f t i n g and c o n f l i c t i n g content, perhaps some general comments w i l l be h e l p f u l .  F i r s t , i t should be pointed out .  that development should not merely be concerned with growth of output as conventionally measured i n national accounts data.  Rather, changes i n general  l i v i n g standards and what Lewis has termed "increases i n the range of human choice"*^ ought to be the p r i n c i p a l and appropriate c r i t e r i a of development. Other scholars have emphasised d i f f e r e n t c r i t e r i a , for example, the size of the public sector, the volume of manufacturing industry, c a p i t a l formation, or the performance  of p a r t i c u l a r sectors of the economy.  However, p o l i c i e s which  are based on these c r i t e r i a may c o n f l i c t with the ostensible goal of r a i s i n g l i v i n g standards.  For one thing, growth of output, unless i t i s desired out-  put, need bear l i t t l e r e l a t i o n to general l i v i n g standards. evaluating and measuring  The chief way of  desired output i s to link output to consumer demand.  I f supply of output i s to r e f l e c t consumer demand, then the a b i l i t y to engage in economic a c t i v i t i e s freely and to exchange goods and services freely should be permitted.  The r e c o n c i l i a t i o n of this supply and demand i s accomplished  through free or market determined p r i c e s .  Proponents of comprehensive state  planning frequently appear to disregard the problems of determining the type, quantity and price of the heterogeneous under "output."  c o l l e c t i o n of commodities subsumed  Even when these issues are not ignored, the determination of  type, quantity and price of goods and services seems to depend on the a r b i trary decisions of a select group of administrators. Furthermore, to equate t o t a l output with what i s currently measured by the o f f i c i a l data c o l l e c t i n g agency has tended to r e s u l t i n a general bias,  15 both scholarly and p o l i t i c a l , i n favour of one r e l a t i v e l y small sector of the economy for which s t a t i s t i c s (however unreliable) are a v a i l a b l e .  This sector  i s t y p i c a l l y termed i n development theory the "modern" or monetary sector. Development i s then conventionally defined as increasing the output (or the s i z e ) r e f t h i s sector. •ne result of i d e n t i f y i n g development with the growth of recorded output i s the rather unwarranted b e l i e f that, for example, investment or c a p i t a l formation i n the "modern" sector i s the key to developing less developed countries. countries  Since savings and investment appear to be low i n less developed i t i s then commonly held that the state must act as the prime mover  i f low l e v e l s of income are to be eradicated.  Besides ignoring the experience  of countries already considered "developed," t h i s misses the point that a low l e v e l of income may  be compatible with even rapid rates of change."' Neverthe-?  l e s s , to generate investment funds, governments are exhorted to "squeeze" the peasantry and to c u r t a i l current consumption.  Indeed, prominent s o c i a l i s t  observers of development have been among the most i n s i s t e n t and vociferous proponents of the view that current low l i v i n g standards of the vast bulk of the population must be f o r c i b l y depressed to provide "development funds. The resources secured i n t h i s manner w i l l then apparently be allocated to more "productive" and " e f f i c i e n t " uses.  Often t h i s i s even considered to be a net  addition to c a p i t a l formation. It i s apparent that great harm may be done to the aim of promoting general l i v i n g standards when i t i s alleged that current consumption must be depressed or "squeezed" i n order to raise some t y p i c a l l y distant l i v i n g 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 l i k e l y to imply less jam."^ Indeed, exhortations to save and to channel resources into the hands of state planners have often created an i l l u s i o n of development without r a i s i n g standards of l i f e .  really  Elkan has argued that:  Widespread gains i n current incomes w i l l do more than forced saving to enhance meaningful development, because a r i s i n g 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 c a p i t a l i s t s , 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 consumpt i o n , for reasons already given, t h i s relationship i s far from automatic. Indeed, i t may be broken by i l l - c o n c e i v e d state p o l i c i e s .  The primary r e s u l t of  development should not be the aggrandizement of the state but rather the improvement of general l i v i n g standards.  One method of securing t h i s r e s u l t i s  to increase the range of human choice.  This appears to be inextricably linked  to economic freedom for the i n d i v i d u a l .  Indeed, when men are able to use  their i n d i v i d u a l knowledge for their own purposes, restrained only by general rules of universal a p p l i c a t i o n , the best conditions w i l l l i k e l y be produced 9  for  achieving t h e i r aims.  This, of course, implies that detailed controls  and coercion should be l i m i t e d . The preference for state-centred development has, to some extent, sidetracked development studies. primarily i n the s t a t e .  C r e a t i v i t y i s unlikely to reside solely or even  Indeed, i t i s improbable that governments, planning  agencies or central directorates know as much about the i n t r i c a t e web of economic a c t i v i t i e s engaged i n by countless i n d i v i d u a l s as those i n d i v i d u a l s know themselves.  Yet the state i s frequently given the r e s p o n s i b i l i t y for making  extensive and detailed decisions and regulations.  Given the immense variety .  17 of human a c t i v i t i e s , i f comprehensive planning i s to accommodate, reconcile and " r a t i o n a l i s e " them then extensive and e f f e c t i v e coercion w i l l probably be required.  One result of t h i s coercion would l i k e l y be not only the control or  " d i r e c t i o n " of individuals but also the r e s t r i c t i o n of the number and variety of economic a c t 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 i n d i v i d u a l s were permit-  ted and encouraged by sensitive state p o l i c i e s to pursue t h e i r knowledge v f r e e l y , guided by their unique combination  of i n t e r e s t s , motivations, ambi-  tions, f a c u l t i e s , aptitudes and s k i l l s , then one l i k e l y result would be marked growth i n the range and type of economic a c t i v i t i e s .  This, i n turn, would  probably be reflected i n r i s i n g standards of l i v i n g . It i s precisely the human factors which are frequently claimed to be deficient i n 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. the opposite:  However, the actual situation i s probably  c r e a t i v i t y might be either s t i f l e d or directed into s o c i a l l y  harmful channels when state d i r e c t i o n , 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 t h e i r government would possesscthemiin s u f f i c i e n t abundance to i n i t i a t e , d i r e c t and execute a l l economic a c t i v i t y .  Indeed, the  very meaning of development for these individuals remains unclear. T y p i c a l l y , creative human actions are derived from assessments made concerning options or choices available to the i n d i v i d u a l .  These assessments  may then be incorporated into a voluntarily undertaken plan or program of  18 behaviour.. To the extent that development i s dependent on these i n d i v i d u a l plans i t can be a process of continuous change.  It i s helpful to elucidate,  at least tentatively, the genesis of t h i s process and the mechanisms which may  10 keep i t i n 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 i n d i v i d ual's plan. sult.  I f these conditions are not f u l f i l l e d , stagnation w i l l l i k e l y re-  For example, i f a group of people l i v e s i n complete i s o l a t i o n from  others there i s l i t t l e likelihood, of any unexpected change and hence l i t t l e stimulation to undertake novel a c t i v i t i e s or experiment with d i f f e r e n t techniques.  Consequently,  the range of options within the society i s r e s t r i c t e d .  As a r e s u l t , i n d i v i d u a l plans may  gradually become more consistent i n t e r n a l l y  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 s u f f i c i e n t condition to generate ar.continuous process.  Without  inconsistency between and within i n d i v i d u a l plans - an inconsistency derived from d i f f e r i n g 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 e s s e n t i a l l y the same.  This l a t t e r 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 s o c i e t i e s whose members do not have their expectations altered by unexpected change. Nevertheless, even i n the more usual case, the process of continuous change may  be hampered or thwarted.  For one thing, expectations, as the ba-  s i s for human action and derived from d i f f e r i n g motivations, aptitudes, facu l t i e s , s k i l l s and capacities, are often not f u l f i l l e d . several factors, some of which include the following:  Failure may  be due to  f i r s t , the state may  19 neglect to provide the basic framework or i n f r a s t r u c t u r e necessary for success of i n d i v i d u a l 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  an appropriate  the promotion of  i n s t i t u t i o n a l framework for a c t i v i t i e s of i n d i v i d u a l s . 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, f a i l u r e may r e s u l t from the i n -  a b i l i t y to engage i n economic a c t i v i t i e s freely subject only to certain general and universal constraints  or, from the deliberate imposition of state  authority which systematically seeks to prevent the r e a l i s a t i o n of creative individual plans.  Therefore,  to stimulate continuous creative development,  there should be at l e a s t some provision of c o l l e c t i v e goods i n the form of bas i c s o c i a l and economic i n f r a s t r u c t u r e and a general permission to pursue /„freely inconsistent human plans, the derivation of which i s divergent expectations. In summary, the r e l a t i o n between free i n d i v i d u a l actions and development rests on the view that human a c t i v i t y consists i n i n i t i a t i n g , and revising innumerable i n d i v i d u a l assessments or plans.  executing  I t i s improbable  that comprehensive planners are i n a more knowledgeable position to d i r e c t and control the a c t i v i t i e s of the countless dispersed i n d i v i d u a l s over whom they rule than those i n d i v i d u a l s are themselves.  G.  !  "Effects of External Contacts on Acquired Human Q u a l i t i e s It would seem that i f students of development wish to explain the pro-  cess of development then much of t h e i r attention should be directed to the study of the actions of countless i n d i v i d u a l s , performing independently or i n cooperation  with others, to obtain t h e i r 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 i n the development l i t e r a t u r e . necessity of reducing current consumption.  For example, the alleged  At the same time, t h i s allegation  11 has been used as an i m p l i c i t argument for r e s t r i c t i n g external contacts. The argument i s that individuals i n poor countries have t h e i r demands for consumer goods stimulated by being made aware of how people l i v e i n richer count r i e s and that this reduces the potential savings that might be used to i n crease the stock of c a p i t a l . On the other hand, the c l a s s i c a l p o l i t i c a l economists, p a r t i c u l a r l y Adam Smith and John Stuart M i l l , emphasised the p o s i t i v e benefits of an "international demonstration e f f e c t . "  Although concerned with trade as an "engine  of growth," M i 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 i n d u s t r i a l revolution i n a country whose resources were previously underdeveloped. Further, M i l l emphasised the "educative e f f e c t " of trade: . . . placing human beings i n contact with persons d i s s i m i l a r 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 u n r e a l i s t i c to i s o l a t e want-creation as a sole or even p r i n c i p a l legacy of external contacts.  Nevertheless, i t s i m p o r t  tance probably should be stressed since the contribution made by want-creation does not appear to be appreciated i n development studies, p a r t i c u l a r l y by those who take a c r i t i c a l or skeptical view of the importance of i n d i v i d u a l actions.  For example, t h i s may  account  i n part for p o l i c i e s which either  13 harass or eradicate middle-men due to their alleged " p a r a s i t i c " a c t i v i t i e s . These p o l i c i e s seem to be rather short-sighted. Indeed, they may be a n t i developmental.  Middle-men play a v i t a l role i n making available consumer (or  "incentive") goods which suggest both new wants and, much more importantly,  21 new  methods of s a t i s f y i n g those wants.  14  In less developed  economies, where  large groups of people remain outside the exchange and cash nexus, i t i s reasonable to speculate that expectations of a higher and more varied l e v e l of consumption have been and w i l l be instrumental i n e l i c i t i n g greater e f f o r t and more productive saving and investment.  This i s i n addition to the effects of  external contacts i n weakening a range of attitudes adverse to material advance while leading to b e n e f i c i a l improvements i n the methods of accepted 15 pursuits.  Perhaps middlemen may  be considered the precursors of the pro-  fessional "community development" o f f i c e r s .  Middlemen, however, cannot rely  on coercion to secure r e s u l t s . Measures that c u r t a i l external contacts i n order to r e s t r i c t consumption 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 l e v e l of consumption; and, external contacts a f f e c t only the consumption patterns of the l o c a l population and have ho b e n e f i c i a l effects on either ideas, attitudes., s k i l l s , saving and investment  patterns, or methods and types of production.  In other words, i n models which abstract from human actions i t may  be possible  to maintain the d e s i r a b i l i t y of f o r c i b l y r e s t r i c t i n g human interchange i n order to prevent new ging.  comsumption patterns (and thus, other patterns) from emer-  However, t h i s seems to r e f l e c t a s i m p l i s t i c conception of the process  of development. D.  Macro-Concepts and Development The preference for detailed state planning of development over freedom  to engage i n economic a c t i v i t i e s i s reflected i n the choice of concepts, l e v e l of abstraction and the p r o l i f e r a t i o n of sophisticated (or at least  the  s t a t i s t i c a l ) models i n much of the current theorising on the development process.  Thus, the fashionable view appears to be that the economies,of  less  developed countries have been stagnant and that their growth should be stimulated, 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 l e d to the r e l a t i v e neglect of 16  the micro-foundations of a l l economic a c t i v i t y .  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 a t t r a c t i v e to many development theorists i s perhaps the ease with which these aggregates may be manipulated in a perfect or " s i m p l i f i e d " environment.  In p a r t i c u l a r , i n d i v i d u a l s can be  ignored, especially the differences between individuals and the general i n 18 equality of men.  Thus the core o f the complexity surrounding the process o  development tends to be brushed aside i n an attempt to control some preselected "key" variables.  This i s beginning to assume the appearance of  avoiding some of the real issues of development. 19 Another result of t h i s i n t e r e s t in,macro "growthmanship"  has been th  p r o l i f e r a t i n g concern with such concepts as the big push, take-off, leap f o r ward, unbalanced growth, linkages, disguised unemployment and so forth, with considerably less i n t e r e s t i n integrated r u r a l development, a g r i c u l t u r a l i n t e n s i f i c a t i o n , intermediate technology, appropriate education, labour force explosion, small industries and the whole range of issues subsumed under 20 s o c i a l and human resource development. At the same time, l i t t l e room appears to exist for i n d i v i d u a l actions in models which deal largely i n categories l i k e "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 i n d i v i d u a l aptitudes, attitudes, f a c u l t i e s ,  s k i l l s , ambitions and motivations, p a r t i c u l a r l y the d i f f e r e n t i a l a l l o c a t i o n of these-attributes, tends to wither under the crushing weight of these conceptual  aggregates. While a l e v e l of abstraction i s certainly necessary i n s o c i a l science,  economic events seldom appear to be the result of a c o l l e c t i v e process of decision-making - rather explanation can t y p i c a l l y be found i n 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  v a r i a b i l i t y of human preference, shaped by experience and guided by the d i f f u sion of knowledge from one i n d i v i d u a l to another, i s often not considered. There i s l l i t t l e acknowledgement that macro-variables are i n r e a l i t y the cumul a t i v e results of millions of past i n d i v i d u a l actions.  Thus, l i t t l e time i s  spent i n explaining how markets develop, how consumer demand i s met or how policy decisions are determined.  E.  Human actions tend to be simply neglected.  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 r e l a t i o n s h i p s .  A suitable beginning might be to  investigate the c h a r a c t e r i s t i c s 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.  I t may be the case that the p o l i t i c a l " i n d i s c i p l i n e " often noted i n  less developed countries has had the unintended and b e n e f i c i a l effect of permitting each i n d i v i d u a l to pursue his own unique combination of knowledge, motivations, aptitudes, s k i l l s , f a c u l t i e s and capacities, the r e s u l t of which  2S has been not stagnation or retrogression but a general though largely unmeasured improvement in.Hiving conditions. This suggests that one probableeresult of permitting i n d i v i d u a l s to pursue their knowledge for their own  purposes i s improvements i n the range of  choice i n less developed countries.  However, there are much more s i g n i f i c a n t  effects than even current improvements i n material conditions. pursue one's own  i n t e r e s t s may  The a b i l i t y to  encourage the s p i r i t of discovery, experimenta-  t i o n , and r i s k - t a k i n g ; the i n t e r e s t i n securing higher incomes;  determination  in the face of poverty; 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 for one's own  economic fortune; and as well, the b e l i e f that wealth;:.is the r e -  s u l t of hard work.  A l l of these factors may  operate i n a.:6ircular and cumula-  t i v e fashion to further development. What creative development o f f e r s i s , i n 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 merely symbolic) comprehensive plans.  (and often  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 i n d i v i d u a l actions, and an a l t e r a t i o n in the role of the state so that i t may  subsequently discharge  effectively  those complex and extensive duties which are essential i n any order based on economic "freedom. Development which has i t s basis i n creative i n d i v i d u a l actions - actions a r i s i n g from the d i f f e r e n t i a l a l l o c a t i o n 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 not intended  are enterprising.  This i s  to suggest that any p a r t i c u l a r group of i n d i v i d u a l s i n any  country i s incapable of achieving material progress.  given  Each i n d i v i d u a l has a  2-5 creative p o t e n t i a l , the expression of which i s partly shaped but not deter.--.::: mined by the resource endowment of his l o c a l i t y .  The immense variety of i n d i -  vidual expectations, of i n d i v i d u a l plans, precludes change at the same rate for everyone.  However, t h i s rate of change and the direction i t takes can be  guided i n general terms by appropriate state p o l i c i e s and a c t i v i t i e s (which i s one reason that s t r i c t l a i s s e z - f a i r e i s probably unsuitable f o r less developed countries).  I f appropriate human actions occur - and they are not dislocated  by i n i m i c a l state p o l i c i e s - even resource poor countries might experience substantial progress.  Conversely, without them,Aeven richly-endowed countries  might remain at subsistence l e v e l s . This chapter has sought to highlight the importance of incorporating i n d i v i d u a l expectations i n theorising about development.  I t has a l s o d i s e : '  cussed some aspects of the type of analysis currently i n vogue i n development studies.  The following chapter continues t h i s concern with development theory,  examining  more closely the remarkable growth of urban centres i n less devel-  oped countries.  This establishes a firmer foundation for an analysis, i n sub-  sequent chapters, of s p e c i f i c features of Kenya's development.  II DEVELOPMENT THEORY AND THE URBAN ECONOMY IN LESS DEVELOPED COUNTRIES  A.  Introduction The theme of t h i s chapter i s complex, as complex as the structure and  l i f e of an urban centre.  To gain an appreciation of the d i v e r s i t y of relai:.-..'.  tionships and the myriad of d e t a i l i t i s necessary to simplify and to generalise.  While t h i s may elevate analysis i t i s not without costs.  Different  countries are at d i f f e r e n t stages of urbanisation, at d i f f e r e n t l e v e l s of i n d u s t r i a l i s a t i o n , with d i f f e r e n t 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 i n one country may  be deplored  or impossible  i n the next.  C l e a r l y , a universal theory of the  p o 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 i n d i v i d u a l actions i n changing circumstances, do appear i n t h i s chapter.  The primary aims  are to present an overview of some aspects of the theory of urbanisation i n less developed countries, to examine several i n f l u e n t i a l models of urban development and, to a r t i c u l a t e the types of relationships that may exist between state p o l i c i e s and the structure of the urban economy. ends, l o c a l variations must be s a c r i f i c e d .  To accomplish,, these  In l a t e r chapters, an attempt i s  made to r e l a t e these general perspectives to the p a r t i c u l a r case of Kenya.  B.  Urbanisation  i n 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 i n the 1950's and 1960's - models which seemed to hold the promise of successfully absorbing 26  27 "surplus" a g r i c u l t u r a l labour:if the state concentrated i t s investment  deci^ 1  sions on the creation of a "modern," that i s , urban and i n d u s t r i a l sector. One consequence of the attempt to create an urban i n d u s t r i a l sector has been the extremely world.  rapid growth of urban populations throughout the less  developed  As Table 1 demonstrates, urban populations are t y p i c a l l y growing i n  excess of twice the rate of the r u r a l populations.  Nevertheless, the r u r a l  population w i l l evidently continue to grow i n absolute terms for the foreseeable future. Table 1.  Urban-Rural Population of Developing  Countries 1920  Urban Population (millions) - Per Cent of Total Population Rural and Small-town Population (millions) - Per Cent of Total Population  1940  1960  1980  2000  69 6  128 9  7-310 15  693 22  1436 31  1118 94  1346 91  1705 85  2431 78  3235 69  Annual Rate of Increase (per cent) - i n Urban Population - i n Rural Population  3.1 0.9  4.5 1.2  4.1 1.8  3.7 1.4  g Urban i s defined as greater than 20,000 persons. Source:  World Bank, Urbanization: Table 2, derived from U.N.  Sector Working Paper (Washington, 1972). estimates.  As the table indicates, the United Nations has projected an annual rate of urban growth i n the less developed  world of 4.1 per cent between 1960  and  1980, with a corresponding increase i n the r u r a l population of 1.8 per cent. This rate of urban growth i s greater than that experienced by any  developed 2  region with the exception of North America between 1850 and 1920. indicate that the less developed in contrast to 15 per cent i n  The  trends  world w i l l be 22 per cent urbanised i n 1980, :•  1960.  At present, A f r i c a i s the least urbanised of the continents.  Of the  1970 estimated population of 242 m i l l i o n (in t h i r t y - f i v e countries), only 26  28 m i l l i o n , or 11 per cent, l i v e d i n urban centres of 20,000 or more inhabitants.^ Nevertheless, A f r i c a has probably the highest rate of urban growth i n the 4 world. Table 2.  The data i n Table 2 compare the projected growth of the urban and Projected Growth of the Total and Urban Population 1970-1980 Selected Countries i n Tropical A f r i c a Total Population Uiihi-.Millions  Urban Population in Millions Per Cent Increase  1970  1980  Increasi  208.7  32.0  18.8  32.7  73.9  66.1  87.6  32.5  10.1  17.7  75.3  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  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  1970'!/ 1980 Totals  158.1  Per Cen  Country Nigeria Ghana  Uganda  :  Note:  These figures are based on estimates prepared by the Demography and Social S t a t i s t i c s Section, Economic Commission for A f r i c a . They i n elude, for i n d i v i d u a l countries, estimates of population growth through migration across national borders, an important factor i n many African countries.  Source:  Colin Rosser, Urbanization i n Tropical A f r i c a : A Demographic Introduction (International Urbanization Survey, the Ford Foundation, 1972) Table 2.  t o t a l populations i n nine sub-Saharan countries.  Between 1970 and 1980  the  population of these countries w i l l increase by about 50 m i l l i o n 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 f a s t , adding about 14 m i l l i o n to i t s t o t a l , at an average annual growth rate of 7.4 per cent.  29  One consequence of such rapid urban growth i s the p r o l i f e r a t i o n of uncontrolled settlements and shanty towns. Addis Ababa  90?o  Grimes c i t e s data indicating that i n  of the population l i v e s i n "slums and uncontrolled settlements."  The corresponding figures for other major urban areas i n A f r i c a are: 80?o;  Mogadishu, 11%; O'uaga-dougou,  Accra,  53?o;  Dar-es-Salaam,  these large percentages  50?o;  70?o;  Douala,  Abidjan, 60%; Dakar, 60%-, Kinshasa, 60%;  and Monrovia,  50?o.  5  While perhaps alarming,  of slum and squatter housing may overdramatise the de-  velopment problems i n some less developed countries.  Many residents of these  settlements apparently have steady jobs and own several consumer goods - for example radios, b i c y c l e s , motorcycles - which indicate that personal l i v i n g conditions may not necessarily be characterised by severe deprivation. Nevertheless, for western observers, conditions i n many African c i t i e s appear deplorable.  For example i n Kano, Nigeria, which I v i s i t e d recently,  t r a f f i c conditions were chaotic; roads were often i n an advanced state of d i s repair; the water supply was unhygienic and often unavailable to parts of the c i t y ; cuts i n e l e c t r i c power were frequent and of indetefminant duration; streets were l i t t e r e d with various types of refuse; public transportation was v i r t u a l l y unavailable.  In essence, the state was not providing the r e q u i s i t e  infrastructure and services to meet the demands of a growing population. Despite the pressure of population on available urban services, the data i n Tables 1 and 2 indicate a continuing massive movement of people from the rural areas to the urban centres.  This tremendous s h i f t i n population, a  s h i f t which has been termed "the largest migratory movement i n human history,"^ has been the focus of considerable model-building i n development studies. C.  Rural-Urban  Migration  Given the widely varying conditions of the Third World, attempts at explaining internal migration have generated some debate i n development studies.  30 Overall, i t i s generally accepted that migration accounted  for 30 to 60 per  7 cent of urban population growth i n the decade 1960-1970.  Both case studies  8  9 and econometric work  on the determinants  of migration provide strong empirical  support for the importance of economic incentives i n the decision to migrate. Migrants appear to be less attracted by the "bright l i g h t s " of the c i t y or by the a v a i l a b i l i t y of urban services and amenities than by the prospect of securing employment at wage l e v e l s i n excess of the remuneration  received for r u r a l  activities. Of the many studies on rural-urban migration i n less developed countries perhaps the most i n f l u e n t i a l have been those undertaken by Todaro and his c o l 10 leagues.  In the Todaro model, potential urban in-migrants are conceived to  base t h e i r decisions to migrate on the urban-rural r e a l income d i f f e r e n t i a l discounted by the probability of obtaining a job i n 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 migrant must wait before actually obtaining a job.  Todaro argues that although  the prevailing real urban wage rate may be s i g n i f i c a n t l y higher than the expected rural income, i f the " p r o b a b i l i t y " of obtaining a "modern" sector job i s very low then t h i s should influence the individual's decision to migrate. As Todaro observes, "A 70 per cent urban r e a l 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 i n f i f t y . " The time dimension  i s also important i n discounting future earnings to  the present time since the probability of obtaining a job presumablyc.ihcreases 12 with the lengthoof stay of the migrant i n the urban centre.  In other words,  i f the migrant has a r e l a t i v e l y long time horizon and i f the wage d i f f e r e n t i a l  31 i s s u f f i c i e n t l y large then rural-urban migration may be a:;rational economic choice despite the low i n i t i a l p r o b a b i l i t y of securing a "modern" sector job. Todaro has argued that a r e l a t i v e l y 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 f e r e n t i a l i s of the order of 300-400.per cent, African countries, and c e r t a i n l y i n Kenya.  which i s usually the case i n  Even i f the expected urban r e a l i n -  come (the p r e v a i l i n g urban wage rate discounted  by the p r o b a b i l i t y of obtaining  an urban job) i s lower than the r u r a l r e a l income i n the period following migration i t could s t i l l be economically  r a t i o n a l for the i n d i v i d u a l to migrate.  Although the chance of obtaining a modern sector job may be low, the migrant could s t i l l secure a l i v e l i h o o d i n what Todaro terms "the urban t r a d i t i o n a l sector." Todaro endorses the view (popular at l e a s t since the i n f l u e n t i a l Lewis ; 14 a r t i c l e i n 1954)  that the "urban t r a d i t i o n a l sector" encompasses " a l l those  workers not regularly employed i n the urban modern sector, i . e . the overtly unemployed, the underemployed or sporadically employed, and those who grind out a meagre existence i n petty r e t a i l trades and services."  He f e e l s 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 s e l f appointed (and tippable) parking d i r e c t o r s , or who becomes an extra, redundant, salesman i n the yyard goods s t a l l of the cousin who, accordto custom, i s going to ;have to provide him with bed and board anyway.15 In other words, he assumes that the "urban t r a d i t i o n a l sector" consists of unproductive, unrewarding, labour-intensive, fringe a c t i v i t i e s into which unlucky migrants must descend. ',, By viewing the "urban t r a d i t i o n a l sector" i n t h i s 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 i n the "modern" sector; and, second, i n the "long run," the  32 urban unemployment rate w i l l act as an e q u i l i b r a t i n g factor on additional migration to'.the extent that, for any given urban-rural real income d i f f e r e n t i a l , the higher the urban unemployment rate, the lower w i l l be the expected income differential. ing  When the urban unemployment rate f a i l s to act as an e q u i l i b r a t -  factor slowing down in-migration t h i s i s held to be a consequence of the  widening urban-rural income d i f f e r e n t i a l . The policy implications of these propositions suggest that Todaro views  16 urbanisation with some alarm.  I m p l i c i t l y there i s a concern with reducing  the congestion of urban services that has occurred i n the Third World as a r e s u l t of rapid migration.  The intent of policy might be, presumably, to r e -  s t r i c t the perceived advantages of urban l i f e to those presently residing i n the c i t i e s . complish  Two policy instruments  are suggested by the Todaro model to ac-  t h i s aim: f i r s t , a reduction i n the urban-rural wage d i f f e r e n t i a l ;  17 and, second, a reduction i n the creation of urban employment opportunities. In terms of the model, these two p o l i c i e s would reduce the expected income consequent 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 r e s t r i c t e d does not appear to be j u s t i f i e d on the basis of a v a i l a b l e evidence.  On aisimple - but v i t a l l y important  - l e v e l , the data  presented  e a r l i e r indicate that the urban centres continue to be the preference for many r u r a l 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. for  Despite the lack of adequate services,  many migrants the urban centre may be considered a rewarding place, par-  t i c u l a r l y i n r e l a t i o n to the r u r a l areas.  Why else would they move?  Given  the fact that few less developed countries have succeeded i n generating wage  33 employment at rates of increase greater than 1/3 of the growth of GNP,  18  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 a f t e r year.  Aggregate  models of. .migration seem to be neglecting some very important aspects of urbanisation. For t h i s reason, caution must be exercised before p o l i c i e s are enacted to r e s t r i c t the mobility of individuals from r u r a l to urban areas.  At a very  fundamental l e v e l , migration.may be a key component of an individual's plan i n which he may l i n k an imagined  future to an active present.  cess of t h i s plan i s not guaranteed.  Of course the suc-  I f 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 r e s u l t diverges from expectations (and leads to disappointments) w i l l probably result i n the revision of the plan.  However, i t i s not possible  to determine what new expectations the i n d i v i d u a l 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 l a t e r , t h i s expectation w i l l probably remain u n f u l f i l l e d .  He  w i l l then have to devise an alternative plan, some of the options of which may be either to remain i n theiiurban area supported by friends or r e l a t i v e s , re4i„\ turn to the r u r a l area, or seize any opportunities to create his own type of employment.  What plan he devises depends on his new expectations - t h i s i s  something about which we know very l i t t l e . Since the cumulative t o t a l of these i n d i v i d u a l plans and their revis sions number i n the m i l l i o n s , 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 p r i n c i p a l merit of the Todaro formulation of migration i s not  i t s policy implications but i t s r e i t e r a t i o n of the importance of expectations.  34 The problems arise when these expectations are incorporated i n an alleged explanatory theory.  Expectations can, and most often w i l l , change i n an unpre-  dictable manner.  To incorporate a time dimension neglects t h i s unpredictabil-  ity.-, by treating migration as a "response" to the "stimulus" of discounted expected values.  But since migration i s the r e s u l t of i n d i v i d u a l decision-  making, probably l i n k i n g an anticipated future to an active present, i t should not be considered a "response" i n t h i s 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, a f t e r a l l , so few individuals i n the t o t a l population migrate?  In f a c t , 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 i n 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 i n observed migration flows.  To select one f  factor - expected income - and elevate i t as the stimulus i s not very satis-' factory.  I t i s a s i m p l i s t i c method of avoiding the problem of how plans are  made while i m p l i c i t l y denying that migration i s the r e s u l t 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 r u r a l wages.  An equally decisive c r i t i c i s m however,  i s i t s complete disregard of the "urban t r a d i t i o n a l sector" as a focus of migrant behaviour.  Very l i k e l y this i s due to a common view that the urban l a -  bour market i n 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 unemployment.  This tends to misrepresent the urban labour market by ignoring the  35 a v a i l a b i l i t y o f d i f f e r e n t types o f i n c o m e - e a r n i n g 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 d e f i n e d as the f o r m a l tors.  ( 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-  In o t h e r words, the Todaro model i s too s i m p l i s t i c i n i t s c o n c e p t u a l l y  z a t i o n o f the urban economy.  There seem t o e x i s t a v a r i e t y o f d i f f e r e n t j o b  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 v a r i o u s t y p e s o f w o r k e r s . Moreover, the e x i s t e n c e o f 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 o f an e q u i l i b r i u m unemployment r a t e Given the e n t e r p r i s i n g behaviour  untenable.  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  i m p o s s i b l e ) lt«.o argue t h a t a r e d u c t i o n o f "modern s e c t o r " employment would a p p r e c i a b l y slow r u r a l - u r b a n m i g r a t i o n . r e a l i s t i c t o assume t h a t a l l m i g r a n t s s e c u r i n g f o r m a l employment.  I t does not appear e i t h e r v a l i d  or  from r u r a l a r e a s a r e i n t e r e s t e d o n l y i n  This suggests that policy-makers,  planners  development s p e c i a l i s t s s h o u l d f o c u s more a t t e n t i o n on the t e c h n i q u e s  and  that i n -  d i v i d u a l s have e v o l v e d t o cope (and perhaps f o r some, t o p r o s p e r ) o u t s i d e o f f i c i a l economy.  By s t u d y i n g the a c t i o n s o f 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 processes  the  obtain a wealth of i n s i g h t s i n t o  the  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 g e n e r a t e d .  C o n c i s e but s i m p l i s t i c models  o f the emigration p r o c e s s and the urban economy do not do j u s t i c e t o the range o f 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 r u r a l s e c t o r s o f l e s s developed c o u n t r i e s , perpetuate  misleading conceptions  and  At the same t i m e these models  may  o f the n a t u r e and e x t e n t o f 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 w h i l e p r o l o n g i n g 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 t o have w i t h t o measure urban unemployment r a t e s .  attempting  36 D.  Development Theory and Urban employment The l i t e r a t u r e of development studies has become increasingly  concerned  20 with the "urban unemployment problem."  This concern has been stimulated by  the rapid increases i n the rate of urban unemployment alleged to characterise many less developed countries i n 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 s t a b i l i t y of the regimes i n power. It i s not uncommon to find unemployment estimated at 25-30 per cent of 22 the urban labour force i n 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 i n employment and  un-  employment for a l l less developed countries i s presented i n Table 3. As the table indicates, estimated unemployment increased from 36.5 l i o n i n 1960 to 54 m i l l i o n i n 1973.  mil-  This averages out to a 3 per cent rate of  increase per year which i s higher than the annual growth of recorded employment.  As a r e s u l t , the estimated unemployment rate increased from 6.7 per . 24  cent to 7.6 per cent.  I f unemployment and underemployment  are considered  together, then the combined ratelreaches 29 per cent for a l l less developed countries.  Among the three continents, A f r i c a experiences the highest rate of  labour u n d e r u t i l i s a t i o n , 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 m i l l i o n by 1990.  Although  Asia w i l l have the largest absolute number of unemployed, A f r i c a 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 i n d u s t r i a l output i n many less developed countries,  37 Table 3.  Population, Labour Force, Employment and Unemployment, 1960-1990  Indicator  1960  1970  1973';  1980  1990  2,379,839 838,730 773,110 65,-620  3,103,262 1,080,293 991,600 88,693  3  A l l Developing Countries Population (000) Labour Force (000) Employment (000) Unemployment (000)  .1,384,198 543,880 507,416 36,466  D  b  Unemployment rate (?o) Combined Unemployment and Underemployment.. I rate (%) Africa Asia Latin America g  6.7  25 31 24 18  1,899,590 666,042 617,244 48,798 7.4  1,956,250 712,130 658,000 54,130 7.6  27 39 26 20  7.8  8.2  29 38 28 25  A l l Africa Employment (000) Unemployment (000) b  Unemployment rate (%) All Asia  100,412 8,416  119,633 12,831  127,490 13,890  149,390 15,973  191,180 21,105  7.7  9.6  9.8  9.8  9.9  340,211 24,792  413,991 31,440  441,330 34,420  516,800 43,029  660,300 59,485  6.8  7.1  7.2  7.7  8.3  106,920 6,6.18  140,120 8,103  5.8  5.5  3  Employment (000) Unemployment (000) b  Unemployment rate (?o) A l l Latin America Employment (000) Unemployment (000)  66,793 3,258  b  Unemployment rate (.%) Notes::: in.Excluding  4.7  83,620 4,527 5.1  89,180 5,820 6.1  China  b  l  :•:;>•.!•:-IricludinglUnderemployment  V!T. ; . : . Not .calculated f o r 1980 and 1990 Source: Yves Sabolo, "Employment and Underemployment, 1960-1990, Internat i o n a l Labour Review, CXII,';N6. 6- (December 1975), Table 3 and Appen^ dix. ;  q  i n d u s t r i a l i s a t i o n has brought disappointing  r e s u l t s i n 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 a v a i l a b l e .  The  v a l i d i t y of t h i s view i s demonstrated  by reference to Table 4 which underlines  the considerable lag i n recorded employment growth r e l a t i v e to that of output. Table 4.  I n d u s t r i a l i z a t i o n and Employment i n Developing Countries  - far! • rWanufaetu.fcing-. f Region/Countries  Ethiopia Kenya  s  i  Manufacturing Employment Growth 1963-1969  s  , m  Latin America Brazil Colombia Costa Rica Dominican Republic Ecuador Panama  >  3  ^ 0.7  Z  a  I Pakistan Philippines Thailand  4  'I -  1 1  n d i a  Source:  : :>.'c,ii:::  12.8 ^.4  Nigeria Egypt A  Annual Output Growth 1963-1969  g 2  '  3  5.3 2.6 _  4  >  8  1 2 > Q  /  6.5 5.9 8.9 1.7 11.4 12.9  1.1 2.8 2.8 -3.3 6.0 7.4  David Morawetz, "Employment Implications of I n d u s t r i a l i z a t i o n i n Developing Countries," Economic Journal, LXXXIV, No. 335 (September, 1974), Table 1.  As the table shows, i n seven of the fourteen countries the rate of growth of recorded employment i n manufacturing was substantially less than one-third the rate of growth of manufacturing output.  Only i n the cases of India,  Philippines, Ecuador, Panama and Kenya did the rate of job creation even exceed one-half of the output growth rate.  In Egypt despite an impressive  growth of output there was v i r t u a l l y no job creation while i n Thailand and the Dominican Republic, recorded employment i n manufacturing actually declined. Many observers are thus i n c l i n e d to agree with Reynolds that unemployment seems to be growing as fast as output and often appears to be associated with rapidly r i s i n g  investment.^  }  39 Policy-makers expected that rapid growth would be adequate to ensure the creation of s u f f i c i e n t employment opportunities to accommodate the rapidly 26 expanding number of job-seekers.  This was based on the h i s t o r i c a l  of the i n d u s t r i a l i s a t i o n process i n the developed countries.  evidence  In western coun-  t r i e s the generation of employment opportunities matched the growth of the l a bour force.  However, i n the less developed countries the interdependencies of  the r u r a l and urban labour markets have consistently frustrated policy measures to deal with t h i s growing employment gap.  Since the i n d u s t r i a l sector stands  as a highly v i s i b l e enclave i n the midst of an overwhelmingly  larger r u r a l \.~z 27  periphery the inflow of job-seekers has become an endless stream. No conceivable rate of i n d u s t r i a l job-creation would be s u f f i c i e n t to absorb a l l of the aspiring job-seekers.  One reason i s that i n most less de-  veloped countries the urban i n d u s t r i a l sector i s very small, employing to 20 per cent of the t o t a l labour force.  only 10  For example, i f the manufacturing  sector employs 15 per cent of the country's labour force, i t would need to expand employment by 20 per cent per year just to absorb the increase i n a t o t a l labour force growing at 3 per cent per year (that i s , 0.15  x 0.20  = 0.03).  In  other words, no l i k e l y rate of i n d u s t r i a l job creation i s s u f f i c i e n t to absorb a l l of the aspiring job-seekers.  Early models of economic development based  on western experience tended to neglect t h i s s t r u c t u r a l imbalance between the labour requirements of c a p i t a l - i n t e n s i v e , labour-conserving i n d u s t r i a l technology and the abundant labour supply of less developed countries. On the basis of the data i n Tables 1, 2, and 4, one would expect that a t y p i c a l result of rapid urban population growth i n contrast to slow or stagnant growth of urban wage employment would be high and escalating urban unemployment.  However, assessments of the magnitude of urban unemployment i n less  developed countries have been exceedingly rare.  The available evidence, as  40 summarized by Turnham i n Table 5, seems to suggest that l e v e l s of urban unemployment are a s i g n i f i c a n t and pervasive phenomenon i n less developed countries.  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  21.9  11.6  Bogota, Colombia, 1968  23.1  13.6  6.3  4.2  Chile, 1968, Urban Areas  12.0  6.0  Caracas, 1966  37.7  18.8  Guyana, 1965, Mainly Urban Areas  40.4  21.0  Panama, 1963/64, Urban Areas  Malaya, 1965, Urban Areas  17.9  10.4  Philippines, 1965,  Uruguay, 1963, Mainly Urban  18.5  11.8  Buenos Aires, Argentina, 1965  155and. Over  14.8  7.9  7.7  3.4  39.0  15.0  8.0  3.2  23.6  12.6  21.0  9.8  20.6  11.6  /Venezuela,11969, .'UrbanAAreas Bangkok, Thailand, 1966 Ceylon, 1968, Urban Areas India, 1961/62, Urban Areas Korea, 1966, Non-farm Households  Urban Areas Singapore, 1966 Tehran City, Iran, 1966  Source:  15-24  15.7:  9.2  9.4  4.6  David Turnham, assisted by Ingelies Jaeger, The Employment Problem i n Less Developed Countries (Paris: 0ECD, 1971), Table III.2. For one thing, economists have f a i l e d to derive unambiguous d e f i n i t i o n s  and measures of "employment," "unemployment," and "underemployment."  Indeed  the very meaning of "unemployment" i n non-industrialised s o c i e t i e s i s r e l a t i v e and a r b i t r a r y , i f "employment" i s taken to mean "wage employment" i n the  "mod-  28 ern" sector.  More to the point, the severity, both economic and s o c i a l , of  unemployment i s probably ameliorated given the wide range of a l t e r n a t i v e , uno 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, i n A f r i c a (except i n Egypt and the Republic of South A f r i c a ) there are no r e l i a b l e 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 i n unemployment 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 i n employment also register as "unemployed" i n the hope of securing better jobs. At the same time there i s a strong p o s s i b i l i t y that when registered job-.v<.\  :  seekers are successfully matched with job-openings t h e i r 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 r e s u l t s .  The s t r i k i n g feature of his data  i s not that they record unemployment rates i n 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 i n v i r t u -  a l l y a l l instances unemployment rates i n the 15-and-6ver category were less than 20 per cent, and i n several urban centres the unemployment rates were actually quite modest. It could be that these surveys have consistently biased downward the unemployment r e s u l t s , either because the relevant d e f i n i t i o n s are too narrow or because a large amount of underemployment has been ignored (underemployment which, i f converted to equivalent unemployment, would y i e l d rates i n excess of 29 20 per cent).  However by the same token i t could be said that they overes-  timate unemployment because they have i n fact largely measured "underemployment."  At the same time, neither surveys nor census data separated temporally  can be considered to measure "trends," since d i f f e r e n t things may have been measured at d i f f e r e n t 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 p a r t i c i p a t i o n rate and indeed even the t o t a l number of those i n 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 l e n t ' rate of unemployment i s misleading and n o n - s c i e n t i f i c . " for  For another,  the concepts of "unemployment and "underemployment" to have u t i l i t y , they  must mean d i f f e r e n t things.  Presumably the impact of "unemployment" on i n d i -  viduals i s d i f f e r e n t from that of "underemployment" as well as there being a d i f f e r e n t i a l impact of either phenomenon on society. 32 d i f f e r e n t policy options must be considered, j ing  This would indicate that  Very l i t t l e i s gained by treat-  unemployment and underemployment i n 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 "unemployment.""^  .  s t a t i s t i c of  At least with respect to A f r i c a , there i s l i t t l e convincing  empirical evidence of unemployment i n excess of 20 per cent."^ Thus, i t seems that development s p e c i a l i s t s have been perhaps excessi v e l y preoccupied with "unemployment."  This i s r e f l e c t e d i n the r e l a t i v e ne-  glect of the types of a c t i v i t i e s engaged i n 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 l i 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 tive a c t i v i t i e s .  of t h i s chapter i s largely concerned with these alterna-  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 f l o u r i s h among those too often considered part of a " p r e - c a p i t a l i s t i c t r a d i t i o n a l sector."  To begin to gain an under^,  standing of t h i s complex phenomenon, i t i s worthwhile of  to examine b r i e f l y  one  the primary t h e o r e t i c a l constructs i n development studies, the "dual eco-  nomy."  Onohevlevel it'seems that the early dual economy theorists have l e f t  an unfortunate legacy of s i m p l i s t i c - indeed misleading -r assumptions :..:  concerning  i n d i v i d u a l behaviour i n less developed countries.  On another l e v e l ,  t h e i r 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 J u l i u s Boeke i n  1910  and subsequently became the c h i e f t h e o r e t i c a l tool i n 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 d i s t i n c -  tions he f e l t existed between s o c i a l and economic needs. nate, "East-West" c u l t u r a l differences which precluded economic motives i n "Eastern" man, applicable i n non-western areas.  He referred to i n -  normal ("Western")  thus making t r a d i t i o n a l economic theory i n I h i t h i s respect, he stated that one of the  d i s t i n c t i v e features of the d u a l i s t i c economy i s "limited needs" i n contrast to the "unlimited needs" of western society.  Therefore Boeke declared,  . . . anyone expecting western reactions w i l l meet with frequent surp r i s e s . 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 r i s k s that less work w i l l be done; i f three acres are enough to supply the needs of the household a c u l t i v a t o r w i l l l n o t t i l l s i x ; when rubber prices f a l l the owner of a grove may decide to tap more i n t e n s i v e l y , whereas high prices may mean that he leaves a larger of smaller portion of his tappable trees untapped.37 Since needs i n Eastern s o c i e t i e s are " s o c i a l " rather than "economic," Boeke held that there i s an almost complete absence of p r o f i t seeking i n the Eastern economy.  While speculative p r o f i t s are a t t r a c t i v e "these p r o f i t s lack  every element of the regularity and continuity which characterize the idea of 38 income."  Eastern industry i s t y p i f i e d by an "aversion to c a p i t a l " i n the  sense of "conscious d i s l i k e of investing c a p i t a l and the r i s k s attending this.!' In further contrast to the Western c a p i t a l i s t i c sector, Boeke f e l t that  44 Eastern industry lacks organization,, d i s c i p l i n e and accuracy. sense" rules Western industry, Eastern society was  apparently  While "common shaped by " f a t  39 talism and resignation." The proposition that i n d i v i d u a l s i n "Eastern s o c i e t i e s " (that i s , the " t r a d i t i o n a l sector") are not responsive  to p r o f i t or income maximising oppor-  t u n i t i e s has been given the technical term "backward sloping supply of la-, r bour."^  In e f f e c t , i t states that non-western s o c i e t i e s w i l l not develop  due  to the alleged absence of the a t t i t u d i n a l c h a r a c t e r i s t i c s associated with capitalism. achieved  The b e l i e f that non-westerners are not responsive  to incentives has  a certain persistence i n writings and thinking on African labour.  For example, the c o l o n i a l authorities adopted the view that the wants of  . Vi:,  African labourers were l i m i t e d , therefore, increases i n wages would simply re41 s u i t i n i n d i v i d u a l s working fewer hours. Thus the c o l o n i a l i s t s were " j u s t i 42 f i e d " i n pursuing  a low-wage p o l i c y .  Despite the i m p l i c i t and e x p l i c i t 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, i n the aggregate, labour w i l l work less i f paid 43 more.  The persistence of the b e l i e f that i n d i v i d u a l s i n less developed coun-  t r i e s are not responsive  to economic incentives (the "conservative peasantry")  i s e s s e n t i a l l y part of the corpus of ideology that the state must 44  transform  Third World countries i f they are to achieve economic: advance. S i r 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 p o l i c i e s .  In t h i s respect, his dual-economy model has ';  been extremely i n f l u e n t i a l . ^ The Lewis model d i f f e r e n t i a t e s production,  d i s t r i b u t i o n and employment 46 into two-distinct sectors, one " c a p i t a l i s t , " the other "subsistence." P.WF-  Analysts u t i l i s i n g the Lewis framework have further d i f f e r e n t i a t e d the two • sectors as either (a) agriculture and industry, (b) t r a d i t i o n a l and modern,oor (c) r u r a l and urban. Agriculture, invariably the largest sector i n a l e s s developed country, i s predominantly " t r a d i t i o n a l . "  Small-holder  methods i n "subsistence" production output i s marketed for cash:sale. course conceived  farmers employ " t r a d i t i o n a l "  although possibly a growing percentage of A l l non-agricultural a c t i v i t y i s not of  as s t r i c t l y " i n d u s t r i a l . "  Rather i t includes " t r a d i t i o n a l "  c r a f t s , "cottage" industry, "petty" commerce and "small-scale" construction. Nevertheless  the thrust of the Lewis-type models conveys an impression  that  these a c t i v i t i e s are unproductive, stagnant, and make only a marginal c o n t r i 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 t h e i r number can be halved without reducing output i n t h i s sector. Petty r e t a i l trading i s also exactly of t h i s type; i t i s enormously expanded i n 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 o f f - they might be better o f f , since r e t a i l margins might f a l 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 r u r a l and predominantly a g r i c u l t u r a l " s u b s i s t e n c e " sector per se i s characterized by a lack of c a p i t a l , poverty growth or stagnation.  l e v e l s of income and slow  By contrast, the " c a p i t a l i s t " sector i s "modern," .\.:±-r"  mainly urban and i n d u s t r i a l .  It i s market-oriented with "modern" commercial,  f i n a n c i a l and transport f a c i l i t i e s .  Using c a p i t a l - i n t e n s i v e methods of pro-  duction i t grows rapidly; labour productivity and wages are s u b s t a n t i a l l y higher than i n the subsistence sector.  Development then becomes a process of  expanding t h i s "modern" sector, penetrating  the "subsistence" sector and  46 transferring labour from " t r a d i t i o n a l " to "modern" employment as rapidly as available resources i n the "modern" sector w i l l permit. 48 Early Lewis-type dual economy theories were thus e q u i l i b r a t i n g  given  the condition of "unlimited" supplies of labour, i n d u s t r i a l expansion was constrained by a shortage of manpower.  not  Indeed, since these theories assumed  that the marginal product of a g r i c u l t u r a l labour was n e g l i g i b l e , zero or even negative i t was  f e l t that surplus r u r a l workers could be absorbed  into indus-  t r i a l employment without reducing t o t a l a g r i c u l t u r a l output and with the^in^ d u s t r i a l wage rate constant at or near the subsistence l e v e l .  Lewis, for ex-  ample, assumed that constancy of wages would lead to high and possibly r i s i n g rates of p r o f i t s as a result of technological progress.  This would increase  c a p i t a l formation and continuing re-investment thus raising the demand for l a bour and f i n a l l y exhausting the labour surplus i n a g r i c u l t u r e .  The period of  constant wages would then be superceded by one of r i s i n g wages; and the whole process would be accompanied by increasing productivity, increasing c a p i t a l formationn and modernization of technology, that i s , "development."  Moreover,  in a p r a c t i c a l sense, wages would not be at a subsistence l e v e l but would i n 49 elude a d i f f e r e n t i a l over and above a g r i c u l t u r a l income of, say, 30 per cent* In terms of the model, inequality i n income i s essential for economic development.^  However, mere inequality of income i s not enough to ensure a  high l e v e l 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 p r o f i t s that favours c a p i t a l formation, and not the inequality which goes with rents. The Lewis model suffers from the same defect as Boeke's conceptualization.  Fundamentally, the d i s t i n c t i o n between the two sectors i s too sharp.  The subsistence sector i s apparently characterised by a complete lack of i n vestment; the supply of productive e f f o r t i s not responsive to new wants; the  47 opportunity costs of labour are n e g l i g i b l e ; and, there i s no apparent movement toward an exchange economy.  These notions have had a profound influence on dev  velopment thinking u n t i l the very recent past.  They have contributed to the  formulation of development strategies that have been consistently biased .. against both a g r i c u l t u r a l development and small-scale business.  :  As well, the  b e l i e f i n the existence of unresponsive peasants i n a stagnant subsistence secsector appears to be linked to state p o l i c i e s that r e s t r i c t consumption i n order to generate savings for state-directed investment  i n the " c a p i t a l i s t "  sector. Indeed, Lewis has said that the . . . central problem i n the theory of economic development i s to understand the process by which a community which was previously saving and investing':^ or 5 per cent of i t s national income or l e s s , converts i t s e l f 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 i n agriculture or rents retard c a p i t a l accumulation, they must be r e s i s t e d .  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 t h i s model l i e s i n the tenacity of the mechanical  approach  to development - an approach so r a r 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 i n the "modern" sector i s proportional to the rate of c a p i t a l accumulation.  In other words, the proportion of the labour force i n  industry should increase, and the rate of growth of i n d u s t r i a l employment ; should equal the rate of growth of i n d u s t r i a l output. Table 4, throughout  However, as was shown i n  the Third World, i n d u s t r i a l output and employment have not  48 increased at the same rate.  More important, there are countries i n which the  proportion of the labour force employed i n manufacturing  has increased much  less than the model would predict (for example, Ethiopia, Nigeria), others i n which the r e l a t i v e size of the i n d u s t r i a l labour force has remained v i r t u a l l y constant (for example, Egypt, B r a z i l ) , and s t i l l others in which the absolute number i n i n d u s t r i a l employment has declined (for example, Thailand) despite impressive output growth rates.  Moreover, even though the proportion of those  engaged i n ''modern"iiridustryMay increase i n r e l a t i o n to other i'lrnddern^esector a c t i v i t i e s and even though t h e absolute number of those engaged i n a l l i"mddem" sector a c t i v i t i e s may  increase, the proportion of the labour force engaged i n  "modern"ssedtor a c t i v i t i e s may  decrease.  Indeed, t h i s i s most l i k e l y to occur,  bearing i n mind the d i f f e r e n t i a l growth rates of the urban and rural populations and the very small size offthetv-'modern'" sector i n a t y p i c a l less  developed  country. Second, there i s l i t t l e evidence to substantiate the existence of ex52 tensive "surplus" labour i n t h e r u r a l areas.  While there may be some sea-  sonal unemployment, rates i n excess of 5 per cent are now very rafe.^^  considered to be  Indeed, at peak periods i n the a g r i c u l t u r a l cycle there may  an acute shortage of labour."^  be  This suggests that i f the same organization i  and techniques of a g r i c u l t u r a l production are retained, then transferring l a bour to the urban i n d u s t r i a l sector must lead to f a l l i n g a g r i c u l t u r a l output. Third, at the same time, a most important finding i s that seasonally available rural manpower appears to be f u l l y engaged i n self-created  non-  a g r i c u l t u r a l a c t i v i t i e s - for example, furniture making, saw m i l l s , b i c y c l e repair, charcoal burning, t a i l o r i n g , and l i g h t manufacturing."^  This suggests  that voluntary saving from consumption i s probably occurring i n the "subsistence"i.sector and the resources thus secured are probably being invested i n  49 d i f f e r e n t 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 unresponsive and unenterprising i n the face of possible income maximising opportunities . Fourth, with respect to a g r i c u l t u r a l a c t i v i t i e s the assumption  that  farmers i n 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 c a p i t a l formation i n order to in-?::?; crease output for sale i n domestic and foreign markets.  The quantitative s i g -  nificance of this a c t i v i t y can be inferred from the notable and rapid expansion of smallholder cash crops such as the kola nut i n Nigeria, cocoa i n Ghana, rubber i n Malaysia and tea and coffee i n Kenya. While the Lewis model was a s i g n i f i c a n t advance i n welding some observations to theory, i t s misleading assumptions  about i n d i v i d u a l behaviour seem to  have had an unfortunate effect on the study of the developmenttprocess.  The  focus on " c a p i t a l 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 question "why should c a p i t a l i s t s invest and re-invest?" p a r t i c u l a r l y when there are no apparent consumers for any goods that are to be produced. Unlike the Lewis formulation, l a t e r 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 " t r a d i t i o n a l " sector p r i n c i p a l l y through adverse terms of t r a d e . S i n c e urban wages, subject to the combined pressure o f government minimum wage laws and trade union a c t i v i t y , grow much faster than r u r a l incomes, a mass exodus from the r u r a l areas occurs.  As well, the pattern of urban i n d u s t r i a l i z a t i o n fv.  emphasises product types and production techniques at variance with the factor  50 endowment o f the c o u n t r y .  C a p i t a l - i n t e n s i v e advanced t e c h n o l o g y  t h e p r o d u c t i o n o f e l i t e - o r i e n t e d consumer goods m i n i m i s e s  utilised in  the l a b o u r  absorp-  t i o n c a p a c i t y o f t h e "modern" s e c t o r w h i l e f a i l i n g t o meet t h e " 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 . W h i l e these l a t e r d u a l 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 o f the symptoms o f misguided  development, t h e d u a l economy approach so  permeates r e s e a r c h t h a t some very i m p o r t a n t a s p e c t s o f t h e p r o c e s s development i n poor c o u n t r i e s a r e perhaps b e i n g o v e r l o o k e d .  of  Between t h e  d i t i o n a l " economy o f peasant a g r i c u l t u r e and t h e "modern s e c t o r " o f a  "tra-  few  d e n s e l y p o p u l a t e d c i t i e s , t h e r e appears t o be an u n r e g u l a t e d s e c t o r o f entrepreneurial a c t i v i t y .  S i n c e 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 o r economic s u r v e y s 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 t o t h e g e n e r a t i o n o f employment, t h e d i s t r i b u t i o n o f income and t h e p r o v i s i o n o f goods and s e r v i c e s .  In o t h e r words, d u a l economy models, by  p r e s e n t i n g an o v e r s i m p l i f i e d c o n c e p t i o n o f t h e development p r o c e s s have d i v e r t e d a t t e n t i o n from some o f t h e main a s p e c t s o f economic advance. A t the same t i m e , 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 de59  velopment t h e o r y t o t h e e x t e n t t h a t i t r e p r e s e n t s a "spontaneous o r d e r , "  an  o r d e r a r i s i n g not from anyone's p a r t i c u l a r d e s i g n o r p l a n but r a t h e r t h e .sum of countless voluntary i n d i v i d u a l plans.  The e x i s t e n c e o f a s e l f - g e n e r a t i n g  endogenous c o m p e t i t i v e o r d e r would f u r t h e r c h a l l e n g e models o f development t h a t s t i l l d i s t i n g u i s h between t h e dynamic r e s p o n s i v e "modern" s e c t o r and 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  t h e 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 t h a t development caneohly  help to r e f u t e  occur  comprehensive s t a t e p l a n n i n g , i n c r e a s e d " d i s c i p l i n e , " and f o r c i b l y consumption.  the  through reduced  '  51 Rather than inquiring into the o r i g i n of t h i s spontaneously evolving  order, the remainder  of this chapter i s concerned with the apparent  result of countless individual plans and their revisions.  structural  It seems that the  pursuit of these plans has helped to fashion a d i s t i n c t l y complex urban economy i n the less developed  F.  world.  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 ( l e t alone the significance) of a novel development sector i n t h e i r midst.  On the other hand, s p a t i a l geo-  graphers and s o c i a l anthropologists can be credited with highlighting the presence of a range of a c t i v i t i e s 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 c a p i t a l i s t forms of production, the other from the peasant system of production."^  Milton Santos has recently described these two systems of produc61  tion as " c i r c u i t s , "  a concept which e f f e c t i v e l y portrays the dynamic aspect 62  of a c t i v i t y and flow within and between these sub-systems. A similar concern with moving away from the s t a t i c d u a l i s t i c approach i s FriedmanntanrJSullivan's e f f o r t to construct a "heuristic model" of the urban economy.^  Their model i s p a r t i c u l a r l y interesting as i t i s concerned 64  with rural-urban migration  and hints at the complexities t h i s 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 i n t o t a l 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 t y p i c a l of  African countries.  Since the model indicates the i n t r i c a t e pattern of the  urban economy i t i s worthwhile examining i t i n some d e t a i l . The model i t s e l f consists of three urban sectors distinguished according  to the forms of a c t i v i t i e s within each s e c t o r ^ (see Figure 1).  The  "individual-enterprise sector" (I) i s the least c a p i t a l 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 c i t y and workers l a i d o f f from jobs i i n any of the subsectors; second, t h e l i n d i v i d u a l enterprise subsector ( I ) . The authors give an indication of the range of a c t i v i t i e s i n the I-subsector: handicraft workers (seamstresses, rope makers, s i l v e r s m i t h s ) , street traders and service workers (peddlars, shoeshine boys, parking l o t attendants, messengers, food vendors, repairmen), casual construction workers (carpenters,.; bricklayers, plumbers, e l e c t r i c i a n s ) and "underground ^ occupations 1  (prosti-  tutes, professional beggars, p o l i c e spies, pickpockets, dope smugglers). While the I-subsector i s strongly competitive, there i s a good deal of l a t e r a l 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 v e r s a t i l e urban experience" of many I-sector workers which "may  f a c i l i t a t e upward job-mobility l a t e r o n . " ^  I f 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 phantom-survival  be considered part of the o f f i c i a l l y i n v i s i b l e or • b'^.r*  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) a c t i v i t y , workers i n t h i s sector are often harassed by p o l i c e and  53 Figure 1:  Structure of Urban Employment i n a Developing  Economy  subsector designation  ?o urban labor force ./  I ' 1 University f; 1 Free 1 Professors \ 1 Professionals . r I 1  P/M  -p  c  CD CD cn E f-l CD C co -P t-i i—1 CO CD p >  >,  -P •H  CO  - o o c O CL P cn  •HO -P O  CO  ~ -P *H  P --o O CD CD Q. CO P P -H O O P O P C  c  CD 4->  CO CD  co o CU 1 CD  i  <3  CD O  O  P-  i-i  CD > CD  •H CL  . P  co  Cs  Owner-entrepreneurs, middle-level o f f i c i a l s , supervisors  2-5  -C cn •H  Cp  Office Workers, Officials & Teachers  1030  .c  Trade & Service Workers  Factory Workers  Skilled Construction Workers  CL  CO  E  CO i—I CO  O E  - c  3  CO O -P f-l CO -H  rf O  CL  •a  H  p' 3 CD  CD  CD  ti  o CD  CD  •H "O  CD  TJ  CD f-l O  E  CL C  >,|  F  Trade & Service Workers  Workmen  -P •H  3545  PO  o CD np-  Z3  >  rt  O  O H  rf O  >-i  C  D  C -H  co  C|-  >  Handicraft Workers  Domestic  I Street I Traders & I Service I Workers  o c  CD  -P C  <-  —-> A  I  O  Servants  rf CD  I Casual I Construction I Workers I '  <——>  "Underground" Occupations  2025  <——>  P-  M  I")  o 3  CD 3  P-  • 3 P- CD  rf rf CD =3 rf  r f CD CD C L i-i  CD  515  nCD  i-i  C  O  CD •< r f pO D  Z3  O  P-  CO C  i-J  < P<  CD h-" CO CD O  rf  O: i-i  D  O O  3 CD  C  a. c  CL  O  Unemployed Workers -P  CD "O D IS  P- .  V  o — II  o rf  CL  co co 2  1 x;  CD  CD 4->  •H -P D.-H  O  C CO CO •H C|— CO  CD  CO Z3 CD O  O  O  -H  •a E  E  CO CD  P- P-  CO C ID CD ** •a co •H ^ cn > i-H C •H -H -H  n  rf CD  CD  i—I  CO -p  O  rf CD CL  s CD  ZJ  CO  CO  CD f-i Ci_ CD C  CD  i-i  O  \  E -P •H C f-l f-l _ Q. O  C  o  O  nO  rf  -P •H  CL  CO CD  CO TD CD ti  co CD 3  co  -P  CD  CL  o  CL C  i—I  CD  rf  y  P  CD I—' CL PCO CO rt CD O CD rt" D O CL  rf  ZZ  rf  P- CD  CD CD rt i-J P- CO  <<_.- L> 1  >  "O P-  O i-l  co co Ci_ CO  CD CD C Q. CD f-i Q_ CD PCD CO  i-i  r-H CO -P  C  P M C CD -H -H > E >  D  f—CD  C  D P<  CL C  1  c •H  - CD CO 4-> -P _Q C C CD CD » E CO C >s Oi  o Cn  Senior 1 Business Government 1 Leaders & O f f i c i a l s , 1 Corporate including 1 1 Military Officers «j_-j—> <—J —  /  CD  O D E  Note:  Structure of urban employment i n a developing economy. A g r i c u l t u r a l labor force residing i n urban areas i s excluded from this model. Unemployed workers belonging to the educated e l i t e (P/M- and Cs-sectors) are not formally included i n t h i s model.  So urce:  John Friedmann and Flora Sullivan, "The Absorption of Labor i n 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], l i v i n g within the i n t e r s t i c e s of urban society, has therefore no legal existence at a l l . This, surely, i s one of the most i n c r e d i b l e facts of c i t y l i f e i n the developing countries.68 It should be remembered that "having no legal existence" means this whole stratum of a c t i v i t i e s 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 i n small trade and service establishments less than 10 workers.  and manufacturing workshops employing  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 c a p i t a l per worker.  It produces " t r a d i t i o n a l " commodities for a low-income mass market,  and uses indigenous raw materials. tremely competitive, the family.  Product p r i c i n g i n the F-sector i s ex-  the lower l i m i t being related to the subsistence l e v e l of  Firms i n t h i s sector are often i n i t i a t e d by the pooling of  resources by a clan or extended family.  Like the I-sector, s t a t i s t i c s are  t y p i c a l l y not available on the number of urban workers i n the  F-sector,  although Friedmann and Sullivan estimate that 35-45 per cent of the urban labour force may  be i n the "family enterprise sector."  I f t h i s i s the case  then the I- and F-sectors together act as remarkable absorbers of urban jobseekers i n employment a c t i v i t i e s , again, for the most part, unrecorded i n of-' f i c i a l s t a t i s t i c s and therefore ignored i n most academic analyses of  " .'  development. The t h i r d sector i s the "corporate sector" (C) containing the production  subsector  (Cp), the corporate supervisory subsector  professional-managerial  e l i t e (P/M).  refer to as the "modern" sector.  corporate  (Cs) and  the  This i s the sector that most economists  It i s that part of the economy which i s  55 d i r e c t l y affected by labour l e g i s l a t i o n i n the form of working conditions, minimum wages and other forms of state regulation.  :i  Workers i n t h i s sector,  perhaps as few as 10 per.cent of the urban labour force, are the "labour a r i s tocracy" enjoying l e g a l rights and incomes far i n excess of those i n the other sectors.  As the chief beneficiary of development p o l i c y , and partly due to  i t s enumeration i n 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 r e s u l t of i t s high c a p i t a l  i n t e n s i t y , the a b i l i t y of t h i s sector to expand employment i s exceedingly restricted. From t h i s model, Friedmann and Sullivan suggest three hypotheses.  :  F i 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 i n the I-sector does not depress wages i n the "high ranking" sectors because: (1) the Todaro-derived expectat i o n a l attraction for migrants controls the rate of migrant a c t i v i t y ;eahd( ('2) the t o t a l surplus over subsistence (coming primarily from F- and Cp-subsectors) establishes an upper l i m i t to the absorption of labour by the urban economy. They appear to endorse the Todaro view that a s i g n i f i c a n t improvement i n 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 r e d i s t r i b u t e their earnings among members of the extended family. urban size i s then at subsistence l e v e l s .  The maximum  Again, they argue that i f more  urban services are provided, for example, low-income housing, t h i s increases the income i n kind available for sharing and w i l l result i n greater in-, :. ;  migration from rural areas.  The t h i r d hypothesis i s " p r o l e t a r i a n i s a t i o n " caused by accelerated i n d u s t r i a l i s a t i o n i n the corporate sector.  Incomes increase i n Cs and P/M over  time while the expansion of corporate production destroys F-sector businesses, driving labour back into the I-sector.  Despite t h i s , in-migration s t i l l i n -  creases due to r i s i n g expectations of employment i n the C-sector.  They pre-  d i c t that increased i n d u s t r i a l i s a t i o n w i l l r e s u l t i n higher unemployment and lower aggregate labour productivity, creating impoverishment i n the i - and Fsectors. The Friedmann-Sullivan model has been presented i n some d e t a i l since i t portrays something of the complexity of the urban labour market i n a manner not indicated by the usual dual analysis. made e a r l i e r :  Also i t reinforces the contention  to equate rapid urban growth and slow, growth of recorded em-  ployment with increasing rates of unemployment i s s i m p l i s t i c and misleading. Through work and income sharing the I- and F-sectors may be capable of absorbing  great amounts of labour, although this i s not registered i n o f f i c i a l s t a -  tistics.  This must certainly weaken those analyses of unemployment and income  d i s t r i b u t i o n which depend on available s t a t i s t i c s of the labour force, employment and earnings.  Indeed, given the range of a c t i v i t i e s - many of which  could not possibly be considered "unproductive" i n the Lewis sense - the valuation given i n o f f i c i a l s t a t i s t i c s for such standard concepts as " c a p i t a l formation" and "Gross Domestic Product" must be treated with some s k e p t i c i s m . ^ 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 d e f i n i t i o n s of "employment,"  "unemployment," "productive," and "unproductive" are e s s e n t i a l l y 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 i n the s o c i a l and economic structure of the country. Despite the value of the Friedmann-Sullivan model i n delineating the s a l i e n t features of the urban economy i n less developed countries, the i n t e r actions posited by the authors raise several other issues that deserve comment. F i r s t , they have r e l i e d on the slippery concept of a "subsistence l e v e l " of income i n establishing a link between the employment of labour and of labour.  remuneration  The notion of a subsistence l e v e l 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 t h e i r products with reference to the subsistence l e v e l .  Conditions i n their market are uncertain and the subsistence  l e v e l i t s e l f i s probably unknown.^ Second, under the f i r s t hypothesis the authors c l e a r l y f e l t that "unemployment" i n the I-sector ought to depress wages i n the other sectors. discount this on the basis of the Todaro expectational framework.  They  Yet they  also noted that C-sector workers have greater l e g a l protection through such measures as o f f i c i a l minimum wage laws.  It has become standard i n the eco-  nomic l i t e r a t u r e 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 r i g i d i t y thus insulates the C-sector from the free  play of supply and demand of labour i n the urban economy.  Hence the C-sector  wage rate cannot function to clear the market; that role belongs to the unemployment rate.  However, the concept of "unemployment" c e r t a i n l y 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 neglect of i n t e r s e c t o r a l dynamics, p a r t i c u l a r l y the role of the state v i s - a - v i s 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 t h i s , marked by extreme and steadily increasing forms of inequality, governments have e s s e n t i a l l y two options: either to side with those who wield theiinstrument of economic power and use repressive measures against the poor and t h e i r advocates i n 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 i n the d i s t r i b u t i o n of the product.74 Friedmann and Sullivan argue that to achieve such an economic  system^  the state must simply s h i f t i t s p o l i c i e s : 1. from maximising growth i n GNP to maximising "human p o t e n t i a l " ; 2. from a system based on inequality to one of greater equality and s o c i a l justice; 3. from foreign dependence to greater national autonomy and s e l f - r e l i a n c e ; 4. from import substitution to an e x p l i c i t policy of i n d u s t r i a l dualism; 5. from urban primacy to balanced rural-urban  development;  6. from high rates of population increase to s t a b i l i s a t i o n . Some of these policy s h i f t s seem vague and mutually incompatible as obj e c t s of p o l i c y .  For example, what i s the meaning of " i n d u s t r i a l i s a t i o n " ?  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 manufacturing?  I f the l a t t e r , from whom i s the state to receive the necessary r e -  sources, p a r t i c u l a r l y i f foreign involvement i s to be eschewed i n 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 t e r n a l l y .  Presumably a s h i f t  from "foreign dependence" to "national autonomy" rules out the l a s t method.  59 Therefore, resources must come either from f o r c i b l y reducing consumption or improved performance.  But i s the f i r s t compatible with "maximising human po-  t e n t i a l " (however defined) and "equality"? s h i f t from maximising growth?  Is the second compatible with a  S i m i l a r l y , given the d i f f e r e n t i a l a l l o c a t i o n of  attitudes, aptitudes, motivations and s k i l l s within any population, i s "maximising human p o t e n t i a l " compatible with "greater equality" or " s o c i a l j u s t i c e " ? Nor i s i t clear that maximising growth i n GNP i s incompatible with long run improvement i n the d i s t r i b u t i o n of the product, especially i f the composition of the GNP r e f l e c t s desired goods and services. Although some of these policy i n i t i a t i v e s may be laudable (few i n d i v i d uals are against " s o c i a l " j u s t i c e - 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 obj e c t s of p o l i c y .  In effect the authors have ignored the role of p o l i t i e s i n  fashioning a development strategy, the r e s u l t of which may be a tiny protected sector of affluence i n the face of mass p o v e r t y . ^ What seems to be required i n model building i n development studies i s the avoidance of what one observer has termed "the abstraction from poli^Y.: ,, c  tics."^  One approach, derived from studies i n West and East A f r i c a , and used  here, appears to o f f e r some promise for incorporating p o l i t i c a l factors into development models.  On one l e v e l , t h i s approach may help to focus on the  state's role as regulator i n terms of access to opportunities and resources i n the economy.  Thus, i t may serve to demonstrate that access i s unequal, and  hence that inequality i s inherent i n the p o l i t i c a l structure of less developed countries.  On another l e v e l , this approach emphasises the wide-ranging ingen-  uity of individuals i n meeting t h e i r basic needs, one r e s u l t 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 abstraction as prominent i n much of the development l i t e r a t u r e 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 " t r a d i t i o n a l " sector and a "modern" sector i s i l l - s u i t e d to an analysis of the urban economy i n a less developed country.  For one thing, i n terms of the dual economy model, individuals who  are not engaged i n either agriculture or industry are t y p i c a l l y assumed to be unemployed. However, with Hart's pathbreaking analysis of the "informal" urban eco78 nomy i n Ghana,  emphasis has s h i f t e d to the variety of hew income-generating  activities, a c t i v i t i e s that have heretofore remained r e l a t i v e l y obscure. His d i s t i n c t i o n between formal and informal opportunities i s based on that between wage-employment and self-employment. By their nature, informal a c t i v i t i e s are concentrated ated sector of the urban economy.  i n the unenumer-  Since they are not counted by the o f f i c i a l  data c o l l e c t i o n machinery, public o f f i c i a l s , planners and other interested i n 79 development do not include them as part of the monetary or "modern" sector. Hart, on the other hand, indicated i n h i s typology  of informal sector a c t i v i -  t i e s , numerous legitimate and i l l e g i t i m a t e income opportunities i n the urban economy,, (see Table 6). Friedmann-Sullivan  of the  model of the urban economy except that Hart emphasized the  u n o f f i c i a l production t h i s typology  The wide range of a c t i v i t i e s i s reminiscent  and d i s t r i b u t i o n of goods and services.  The value of  i s that i t dispels the view that unenumerated a c t i v i t i e s consist  largely of boot-blacks and street-hawkers.  61 T a b l e 6:  Types o f Income E a r n i n g O p p o r t u n i t i e s i n t h e Urban Economies o f Less Developed C o u n t r i e s  Formal Income O p p o r t u n i t i e s (a) (b) (c)  P u b l i c s e c t o r wages. P r i v a t e s e c t o r wages. T r a n s f e r payments - p e n s i o n s , unemployment b e n e f i t s .  I n f o r m a l Income O p p o r t u n i t i e s :  Legitimate  (a)  P r i m a r y and secondary a c t i v i t i e s - f a r m i n g , market g a r d e n i n g , b u i l d i n g c o n t r a c t o r s and a s s o c i a t e d a c t i v i t i e s , s e l f - e m p l o y e d a r t i s a n s , shoemakers, t a i l o r s , m a n u f a c t u r e r s o f b e e r s 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 inputs - 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 hawke r s , c a t e r e r s i n food and d r i n k , b a r a t t e n d a n t s , c a r r i e r s ( k a y a k a y a ) , commission agents,.and d e a l e r s .  (d)  Other s e r v i c e s - m u s i c i a n s , l a u n d e r e r s , s h o e s h i n e r s , b a r b e r s , n i g h t - s o i l removers, p h o t o g r a p h e r s , v e h i c l e r e p a i r and o t h e r maintenance w o r k e r s ; b r o k e r a g e and middlemanship ( t h e m a i g i d a system i n m a r k e t s , 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 m e d i c i n e .  (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 f l o w s o f money and goods o between p e r s o n s ; b o r r o w i n g ; b e g g i n g .  I n f o r m a l Income O p p o r t u n i t i e s :  Illegitimate  (a)  S e r v i c e s - h u s t l e r s and s p i v s i n g e n e r a l ; r e c e i v e r s o f s t o l e n goods; u s u r y , and pawnbroking ( a t i l l e g a l i n t e r e s t r a t e s ) ; drug p u s h i n g , p r o s t i t u t i o n , poncing ( ' p i l o t b o y ' ) , s m u g g l i n g , 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)  T r a n s f e r s - p e t t y t h e f t ( e . g . p i c k p o c k e t s ) , l a r c e n y ( e . g . b u r g l a r y and armed r o b b e r y ) , p e c u l a t i o n and embezzlement, c o n f i d e n c e 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 H a r t , " I n f o r m a l Income O p p o r t u n i t i e s and Urban Employment i n Ghana," J o u r n a l o f Modern A f r i c a n S t u d i e s , X I , No. 1 (1973), p. 69. The  ILO m i s s i o n t o Kenya i n c o r p o r a t e d t h e " i n f o r m a l " s e c t o r as a p a r t 80  of i t s a n a l y s i s .  That r e p o r t d e f i n e d i n f o r m a l a c t i v i t i e s as ways o f d o i n g  t h i n g s , c h a r a c t e r i s e d by: ease o f e n t r y ; r e l i a n c e o f i n d i g e n o u s  resources;  f a m i l y ownership o f e n t e r p r i s e s ; s m a l l - s c a l e o f o p e r a t i o n ; l a b o u r - i n t e n s i v e and adapted t e c h n o l o g y ;  s k i l l s a c q u i r e d o u t s i d e t h e f o r m a l s c h o o l system; and  unregulated and competitive  markets.  are the obverse of the above.  The c h a r a c t e r i s t i c s of the formal  Thus, entry by new  sector  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, c a p i t a l - i n t e n s i v e and often use imported technology; s k i l l s are formally acquired and often expatriate; and,  formal  enterprises  81 operate i n protected markets. These r e l a t i v e l y crude i n i t i a l studies performed a useful service for development theory by i n d i c a t i n g some neglected or at l e a s t relegated  areas.  Thus i t becomes more apparent that the manner and ways i n which i n d i v i d u a l s cope with rapid s o c i a l and economic change might have an important bearing the genesis and d i r e c t i o n of that change.  on  In other words, the existence of  the "informal sector" provides an entry into development theory  for an appre-  c i a t i o n of the micro foundations of the process of development. Nevertheless, backs.  the concept of the "informal sector" i s not without draw-  The c r i t i c i s m s which may  formal-informal  be l e v e l l e d against i t , indeed against  dichotomy, indicate that problems exist with t h i s attempt at  bifurcating the?economy into units useful for development p o l i c y . c r i t i c i s m s which occupy the next section of this H.  the  It i s these  chapter.  Weaknesses i n the Formal-Informal Dichotomy The main drawbacks of. the "formal-informal"  from the following perspectives:  d i s t i n c t i o n can be viewed  l e v e l of aggregation;  linkages between the  sectors; and the determinants of inter-^and i n t r a - s e c t o r a l change. An examination of Hart's typology  of formal and informal  opportunities  indicates the presence of an astonishingly varied range of a c t i v i t i e s within the urban economy.  While t h i s opens up exciting and new  v i s t a s 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 p o l i c i e s .  In  62 other words, while useful as a h e u r i s t i c device i n development studies the  :  "formal" and "informal" elements are presently too broadly conceived to be helpful i n policy formulation. It i s apparent from both Hart's formulation and the ILO l i s t of defining c h a r a c t e r i s t i c s that a s i g n i f i c a n t degree of s t r u c t u r a l heterogeneity within the informal sector. geneous.  Indeed, the formal sector i s scarcely more homo-  This c e r t a i n l y tends to weaken the appropriateness  i c a l categories.  exists  of single analyt-  More to the point, the vast multitude of a c t i v i t i e s raises  the disturbing thought that, as presently conceived,  these a c t i v i t i e s may  be  s u f f i c i e n t l y disparate as to i n v a l i d a t e using the concept of a "sector," except at a very high l e v e l of generalisation. I m p l i c i t l y recognising the d i f f i c u l t i e s associated with highly aggregat i v e concepts, Souza and Tokman refer to "layers" of formal and informal a c t i 82 v i t i e s within a s t r u c t u r a l l y d i f f e r e n t i a t e d urban economy.  However they  f a i l e d to elucidate the distinguishing features of the "layers" or the processes which encourage or prevent enterprises from alternating between the "layers."  S i m i l a r l y , Standing  has proposed d i v i d i n g the urban economy into  three categories on the basis of employment. model:  Thus, he suggests the following  the formal sector, sub-differentiated into "core" and "periphery";  the  informal sector; and the i r r e g u l a r sector ("which includes the s c u f f l i n g unem83 ployed and various fringe groups ... „. .")„ •)  Disregarding problems i n determin-  ing the d i s t i n c t i o n s between "core," "periphery" and " f r i n g e " a c t i v i t i e s (for example should the d i s t i n c t i o n s be made on the a r b i t r a r y c r i t e r i a of income or "productive" employment, or hours worked?)  t h i s model i s based on a disag-  gregation of urban labour markets rather than urban enterprises. simultaneously  s i m p l i f i e s and complicates  5  Thus, i t  the formal-informal analysis.  Rienefeld has also taken issue with the high l e v e l of aggregation formal-informal  distinction.  i n the  He favours an analysis " i n terms of an i n t e r a c 84  tion between d i f f e r e n t modes of production"  i n the urban economy.  At the  same time, S i n c l a i r urges the recognition of "gradations" i n 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 various 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-  t o r . They state: The picture that emerges for the informal sector i n 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 l e v e l we have the well-established enterprises carrying out the bulk of r e t a i l trade. At i t s middle l e v e l , where the majority of establishments e x i s t , we have the multitude of small manufacturing, service and commercial establishments employing a large number of people who are making a reasonable l i v i n g and who are there to stay. F i n a l l y we have the t r a d i t i o n a l petty vendors who are i n t r a n s i t i o n to and from formal-sector jobs and who at the moment do not seem to constitute a s i g n i f i c a n t portion of the Sudanese informal sector.^7 Thus the f i r s t c r i t i c a l problem i n using the formal-informal dichotomy i s the apparent homogeneity i t confers on a wide range of a c t i v i t i e s .  Without 88  disaggregation, t h i s 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 p o l i c y .  A less encompassing and more enlightening approach might  begin by focussing on the micro a c t i v i t i e s per se i n a manner s i m i l a r 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 i n t e r a c t i o n or linkages between "informal" and "formal" a c t i v i t i e s .  Preoccupation  with r e f i n i n g d e f i n i -  tions and assigning c h a r a c t e r i s t i c s has obscured theppremise that, to some  65 extent, i t may  be the interactions or r e l a t i o n s between these sub-systems that  give r i s e to the defining c h a r a c t e r i s t i c s .  Moreover, i t i s unclear whether  the formal-informal d i s t i n c t i o n represents a pattern of continuous or an actual dichotomy.  variation  This might bevinv.estigated through an analysis of the  types of connections between the various elements i n the urban economy. the ILO report on Kenya, by c a l l i n g for linkages between thejformal and  Thus, infor-  89 mal sectors through such devices as subcontracting, discontinuity into the model which may example, indicates that linkages may  seems to have b u i l t a  i n fact not e x i s t .  King's research for  already be present i n terms of materials, 90  products, services and the mobility of i n d i v i d u a l s . Indeed, i t may  be that the structure of relationships between informal  and formal enterprises has a d i r e c t bearing on the c h a r a c t e r i s t i c s of informal activities.  In other words, there may  be few inherent obstacles to the expan-  sion i n s i z e , scope and p r 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 s t r u c t u r a l advantages bestowed on the f o r -  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 r e s u l t i n the demise, or at  least " e x p l o i t a t i o n " of the l a t t e r as a r e s u l t of the o l i g o p o l i s t power of the 91 former.  On the basis of available research, however, i t i s too soon to gen-  e r a l i s e about the extent and manner i n which linkages may  be occurring between  the two portions of the economy. This leads to the t h i r d major c r i t i c i s m of the formal-informal dichotomy.  The fact that enterprises i n the informal part of the economy may  be  marked by small scale, low incomes and high labour i n t e n s i t y while formal terprises may which may  en-  t y p i c a l l y be the opposite, does not reveal the dynamic processes  give r i s e to these features.  Analysis conducted largely through  d e f i n i t i o n begs the central issues raised i n t h i s thesis - what factors largely determine the process of development and what factors largely condi-fik tion the d i r e c t i o n of development. Thus, these are three of the main drawbacks of the dichotomy.  F i r s t , heterogeneity  "formal-informal"  within each of the categories renders a high  l e v e l of aggregation inappropriate.  Second, the dichotomous mould obscures  the types of relationships between the two parts that may ascribed c h a r a c t e r i s t i c s . Third, the formal-informal  give r i s e to the  d i s t i n c t i o n does not  readily encompass the mechanism for creative of destructive change over time. Thus, even i f there i s agreement on standard  terminology t h i s i s unlikely to  overcome what seem to be weaknesses i n the t h e o r e t i c a l basis of the model. However, the model does avoid the negative bias against what i s t y p i c a l l y termed the " t r a d i t i o n a l " sector in development studies.  Indeed, i t em-  phasises that not a l l the a c t i v i t i e s excluded from the "modern" sector designation are ipso facto i n the " t r a d i t i o n a l " or "subsistence" sector.  Rather,  i t implies that an u n o f f i c i a l s h i f t may  individ-  be occurring among countless  uals from subsistence to an exchange economy based on cash income. facture, production  The manu-  and d i s t r i b u t i o n of goods and services for sale to unknown  others, to others whose p r i n c i p a l c h a r a c t e r i s t i c i s not ethnic, clan or b a l " i d e n t i f i c a t i o n but the possession of value  "tri-  and willingness to exchange something  (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 i n t e r e s t from the broad p o l i t i c a l economy perspective.  Since i t empha-  sises substantial unrecorded economic a c t i v i t y , t h i s model may  be useful i n  highlighting several of the mechanisms that seem to generate some types of i n equality among s o c i a l and economic groups as well as the mechanisms that may.,-  hold promise for higher o v e r a l l standards of l i v i n g .  Refinement of the model  to accommodate these purposes might help to a l l e v i a t e some of the drawbacks mentioned e a r l i e r .  In t h i s respect i t i s necessary to place informal  and  formal a c t i v i t i e s within the context of their relationship with the. state.  I.  The  State and  Economic A c t i v i t i e s  Within development studies there seems to be an increasing  disenchant-  ment with the economic achievements.of governments i n Third World This disillusionment  countries.  with ruling e l i t e s has tended to fasten on the subject of  income i n e q u a l i t i e s , culminating i n a c a l l for a thorough r e - d i s t r i b u t i o n  of  92  income i n less developed countries.  However, before h a s t i l y advocating  the  re-allocation of wealth i t i s v i t a l to know the extent to which the observed i n e q u a l i t i e s of income are the result of p r e f e r e n t i a l access to state resources or the result of d i f f e r e n t i a l a l l o c a t i o n of attitudes, aptitudes, s k i l l s motivations in the population.  There are important a n a l y t i c a l and  and  practical  d i s t i n c t i o n s to be made concerning the o r i g i n of income inequality, d i s t i n c tions which may  have vastly d i f f e r e n t policy  implications.  Income inequality per se i s neither unusual, nor easily r e c t i f i a b l e nor even necessarily  deplorable.  I f i t results from d i s c o n t i n u i t i e s in the d i s -  t r i b u t i o n of i n d i v i d u a l attributes in the population then income inequality of no more special interest than any  is  of the other i n e q u a l i t i e s between i n d i -  divuals that have given r i s e to i t . However, i f income inequality  i s the  s u l t of unequal p o l i t i c a l access - or arbitrary favouritism  allocation  of state benefits  in the  re-  to o f f i c i a l economic a c t i v i t i e s such that some individuals  are considerably better o f f than their talents and  contributions  c l e a r l y the cause rather than the symptom deserves to be tackled.  merit - then The  formal-  informal d i s t i n c t i o n can be useful in analysing the generation of t h i s l a t t e r type of income inequality.  Remedial actions against i t would not of course  68 93 eliminate income i n e q u a l i t y .  However, they might ensure that each i n d i v i d -  ual i n pursuing his own a c t i v i t i e s would not be a r t i f i c i a l l y handicapped i n 94 maximising his opportunities for material advance. In order to gain an appreciation of the state's r o l e , i t i s helpful to assume that the t o t a l i t y of economic a c t i v i t y covers a wide continuum of ent e r p r i s e s , ranging from the humblest subsistence farm or micro business to the large i n d u s t r i a l enterprise.  Just as the public manifestation of p o 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 t o t a l i t y of economic a c t i v i t i e s that'.happen to meet the c r i t e r i a of inclusion i n published data. While empirical v e r i f i c a t i o n i s necessary,  there does not seem to be  any technological point which demarcates formal a c t i v i t y from informal activi!. v i t y , only differences i n degree between l e v e l s 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 i n the continuum and discriminating p o l i c i e s are introduced to impedeothe development of smaller businesses.  This barrier may  subsequently  ibusiness  be entrenched i n the law and define the entry point for l e g a l .. 95 activity.  Mazumdar's work on the urban informal sector hints at the p i v o t a l role played by the state i n perpetuating the d i f f e r e n t i a t i o n between types of eco96 nomic a c t i v i t y .  He argues that the formal-informal d i s t i n c t i o n turns on the  idea that employment i n the formal sector i s i n some sense or senses "protected" so that the wage l e v e l and working conditions i n that sector are not available, i n general, to job-seekers i n the market unless they somehow manage 97 to cross the b a r r i e r to entry.  This protection may a r i s e from the action of  trade unions ( t y p i c a l l y protected and regulated by p o l i t i c a l a u t h o r i t i e s ) , and of governments, or of both acting together.  The notion of protection and the importance of state regulation i s im98  p l i c i t i n the report of the ILO employment mission to Kenya. i s t i c s ascribed therein to the formal and informal sectors may  The  character-  stem largely  99  from the "lopsided"  relationship the state has with the formal  sector.  Thus, the state fosters, nurtures and regulates formal a c t i v i t y . i s done through a variety of policy instruments:  This  t a r i f f and quota protection  for import-substitution industries; import tax rebates on c a p i t a l and  inter-  mediate goods; tax holidays; low i n t e r e s t rates; s e l e c t i v e monetary controls; and, l i c e n s i n g of  operations.  At the same time, the "burdens" of state regulatory powers, such as r e s t r i c t i o n s on the import of competitive  goods, probably helps to preserve the  internal market for favoured enterprises.  License fees and an u n c r i t i c a l pub-  l i c policy of "appropriate"  (that i s developed country) standards of b u i l d i n g ,  equipment, and sanitation are s i m i l a r l y unlikely to be major constraints for large-scale c a p i t a l - i n t e n s i v e formal enterprises which t y p i c a l l y 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 e f f e c t of t h i s favoured access to the state i s the p o l i t e i c i s a t i o n of formal a c t i v i t y .  Formal enterprises often pursue economic goals  through p o l i t i c a l means. As one astute observer has commented: P r o f i t a b i l i t y , expansion and corporate s u r v i v a l i n the new environment become not only questions of c o s t - e f f i c i e n c y and marketing, but problems which can be partly or t o t a l l y resolved through p e t i t i o n i n g the State for additional or more extravagant economic favours. Thus the consequence of formalization i s to make i t impossible to separate out the economics and p o l i t i c s of enterprise behaviour. This suggests that the terms "public" and "private" enterprise can have rather d i f f e r e n t 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 r e s u l t of state p o l i c i e s which have sought to encourage, ,; •  nurture and protect certain types of a c t i v i t i e s . volved r e s t r i c t i o n on entry to selected f i e l d s .  These have t y p i c a l l y i n In t h i s way,  however, what i s  conventionally termed "public" sector or "public" enterprise i s actually p r i vate since the a c t i v i t i e s so designated  are not open to the p u b l i c .  This also  a f f e c t s what i s conventionally termed the "private" sector or "private" enterprise.  In the context of many less developed countries, the p o l i t i c i s a t i o n 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, i n a very r e a l 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 s u r v i v a l and growth no longer necessarily i n d i cate economic usefulness.  To the degree that competitive advantages a r i s e ":..TJ  from the a l l o c a t i o n of state controlled p r i v i l e g e s rather than as a result of e f f i c i e n c y or the a b i l i t y to s a t i s f y 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 e a r l i e r are not-surprising given the wide range of benefits conferred on  formal  enterprise. Development of the formal sector t y p i c a l l y involves s t a t e - i n i t i a t e d  102 p o l i c i e s of import s u b s t i t u t i o n .  In countries with highly unequal income  d i s t r i b u t i o n s some of the imported goods for which protected domestic products are substituted w i l l l i k e l y be inconsistent with the demand structure of the vast majority of the people.  The existing set of imports, largely r e f l e c t i n g  the import-intensive demands for goods by upper income groups, determines the goods for domestic s u b s t i t u t i o n .  T y p i c a l l y , t a r i f f s aimed at l i m i t i n g growth  of imports are imposed on consumer goods, and are higher, the less e s s e n t i a l  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 t h e most p a r t t h e p a t t e r n o f 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 t h e d i s t r i b u t i o n o f income) t h e i m p o r t - i n t e n s i v e demands for  goods by upper-income groups may  t h i s way  thus become p o l i t i c a l l y  the p r o d u c t - s p e c i f i c technology  protected.  In  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 t o c o n f i r m and s t r e n g t h e n 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 t h e low l e v e l s o f income c h a r a c t e r i s t i c o f what t h e ILO has termed poor."^^  and  thej?A!wog?king  At the same t i m e , the f r e q u e n t l y m o n o p o l i s t i c n a t u r e o f t h e f o r m a l  105 sector,  encouraged by s t a t e p o l i c i e s o f 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  c e n s i n g and q u o t a s , tends t o r e s u l t i n h i g h e r p r i c e s and h i g h e r p r o f i t s  li-  than  might o t h e r w i s e be t h e case thus f u r t h e r c o n t r i b u t i n g t o t h e c o n c e n t r a t i o n o f w e a l t h i n one s e c t o r o f t h e economy. As w e l l , t h e p o l i t i c i s a t i o n o f the f o r m a l s e c t o r may  d i r e c t the  g i e s and r e s o u r c e f u l n e s s o f i n d i v i d u a l s away from economic l i f e and political may  activity..  ener-  towards  Success o r even s u r v i v a l i n f o r m a l i n d u s t r y and commerce  come t o depend on o f f i c i a l f a v o u r s and thus on p o l i t i c a l  c o n n e c t i o n s r a t h e r than on economic performance.  astuteness  and  Thus, another p r o b a b l e e f - .:  f e e t o f f o r m a l development i s the c r e a t i o n o f a s u b s t a n t i a l b l o c o f v e s t e d i n t e r e s t s dependent upon, and perhaps i n some c a s e s mere c l i e n t s o f , t h e 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 t h e s t u n t e d growth o f o r g a n i s e d \/:  i n t e r e s t s which m i g h t , i n the normal c o u r s e c o f e v e n t s , have r i s e n t o c h a l l e n g e 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 t h e same t i m e , ;a?t i l s T r e a s o n a b l e r o l e o f t h e s t a t e i n promoting  t o s p e c u l a t e t h a t t h e predominant  development o f f o r m a l 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 t o what i s n o r m a l l y c o n s i d e r e d " c o r r u p t i o n " i n l e s s veloped c o u n t r i e s .  T h i s may  s t a t e support i s v i t a l  o c c u r f o r a t l e a s t two r e a s o n s :  de-  f i r s t , when  f o r t h e s u r v i v a l o f f o r m a l e n t e r p r i s e s , i t may  become  most i m p o r t a n t t o use a l l a v a i l a b l e means t o s e c u r e , r e t a i n and i n c r e a s e t h a t  support.  Well-placed bribes may  t i c i p a t e d benefits.  be a small price to pay  for the enormous an-  Second, for the very small-scale enterprises, some of  which are probably teetering on the verge of s u r v i v a l , there may  be a pay-off  i n o f f e r i n g bribes for the non-enforcement of a r b i t r a r y state regulations. Excessive  state regulation of development may  therefore weaken the p o l i t i c a l  107 probity i n l e s s developed countries. Moreover, once i n i t i a t e d , the necessity of state support might become cumulative.  For example, i f d i f f i c u l t i e s a r i s e due to the alleged "unfair"  competition from imports, further protection can always be demanded from the government, protection which the government may  f e e l i t cannot refuse.  One  alleged j u s t i f i c a t i o n for further state support i s the claim that without i t unemployment w i l l r i s e due to reduced output and the forced redundancy of workers.  Governments are sensitive to t h i s argument, partly as a r e s u l t of 108 the " c r i s i s " nature of the l i t e r a t u r e on employment and unemployment. At the same time the r e c e p t i v i t y of public o f f i c i a l s to the p e t i t i o n s  of formal private business may  stem i n part from the desire to a t t r a c t p o l i t i -  cal support rather than the promotion of development a c t i v i t i e s or growth p o l 109 icies.  While mechanisms for increasing national income are problematic,  the a b i l i t y to a l l o c a t e or d i s t r i b u t e benefits to formal enterprise as a quid pro quo may  l i e more within the competence of state a u t h o r i t i e s . 110  time, those who  benefit from r e s t r i c t i o n s and  favours  and who  At the same would suffer  with t h e i r removal are probably very aware of these losses whereas those might benefit from the relaxation of a r b i t r a r y d i s c r e t i o n may how  who  be unaware of  t h e i r i n t e r e s t s are currently being hampered. In contrast to the close nexus of relationships binding formal activii;':  t i e s to the state, informal a c t i v i t i e s 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 c r e d i t s , the formal banking system or sources of foreign technology. Often informal a c t i v i t i e s are actively suppressed and discouraged by 111 the state.  To some extent i t seems that these negative and misguided state  p o l i c i e s are partly a result of the adoption of a l i e n 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 i n e f f e c t a normative rather than a technical assessment of what i s and i s not acceptable as "legitimate" economic a c t i v i t y . As well, harassment of informal enterprises as a r e s u l t of these standards may partly be due to the close t i e s between the state and the formal p r i vate sector.  For example, formal private employers i n Kenya demaridedstha't pub-  l i c o f f i c i a l s enforce labour l e g i s l a t i o n and wage regulations i n the informal 113 economy.  At the same time, i t i s reasonable to speculate that very high  building standards may have been l e g i s l a t e d i n the Third World i n response to demands made by formal sector contractors. These contractors might otherwise 114 face unwanted competition from their counterparts i n the informal economy. They would l i k e l y have been supported i n their demands for high building standards by construction unions which may not r e l i s h the a b i l i t y of informal contractors to secure labour at wages below union rates. Thus, this demand for "proper" standards i n labour, health, or building codes often seems to be a demand for protection of the r e l a t i v e position of individuals and enterprises i n 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-  n i a l to the majority of the opportunities and access available to the  few.  Indeed, favouritism shown for one sector or stratum of a c t i v i t i e s over another e n t a i l s at least an i m p l i c i t policy presumption of a general p r o h i b i tion on economic a c t i v i t i e s with s p e c i f i c exceptions, exceptions specified and s a n c t i f i e d by the state.  However, i f the primary goal of development i s to  increase the range of human choice then t h i s policy presumption should be replaced by one of general permission to engage i n economic a c t i v i t i e s with s p e c i f i c exceptions.  This alternative policy presumption may  have favourable  and cumulative yet largely unnoticed effects on the generation of new ideas, experimentation, changes i n 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 forms of corruption.  r e s t r i c t i o n s and controls through bribery and other  In general, discouragement and harassment of informal  a c t i v i t i e s 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 i n re-directing economic strategy i n 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 s o c i a l factors.  Ultimately,  i t i s perhaps a r e s u l t of unorganised and weakly a r t i c u l a t e d 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 r e l a t i v e l y 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 c o l l e c t i v e 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 spec i a l i s e d and organised categories of individuals engaged i n similar When, as may  pursuits.  be the case with informal a c t i v i t i e s , individuals are not e f f e c -  t i v e l y organised, t h e i r common needs are unlikely to be recognised.  When the  state cannot guarantee a right to formal employment, then the right to engage freely i n other economic a c t i v i t i e s i s certainly a worthwhile J.  substitute.  Informal A c t i v i t i e s : A Creative Response to State-Centred Development Informal a c t i v i t i e s are perhaps best considered as an indigenous  rep  sponse to, or symptom of, the r e l a t i v e f a i l u r e of state-centred development strategies.  They seem to originate partly from the demand for goods and s e r v i  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, u t e n s i l s and tools, to more s k i l l e d artisan craftsmanship i n the production of "machines to make maa-. , i r ; .  115 chines."  It i s not clear whether most of t h i s production i s carried out  116 within the household or by i n d i v i d u a l entrepreneurs.  As well, informal :y:r  contractors are responsible for much of the construction of low-cost housing ( a l l e v i a t i n g chronic housing shortages) while informal traders and transporters form the backbone of the i n t e r n a l d i s t r i b u t i o n system i n many African  . .  countries.  117  Informal a c t i v i t i e s may dustrialization.  also partly result i n d i r e c t l y from formal i n -  The migration of r u r a l labour to the urban centres probably  spreads an awareness of styles of l i v i n g and types of products d i f f e r e n t from those available i n the r u r a l areas.  At the same time, the capital-intensive  nature of formal industry assures an excess supply of urban labour r e l a t i v e to available formal employment.  Thus the creation of new wants i n economies  76 where formal employment i s scarce may result i n new ways of s a t i s f y i n g wants i n the informal economy.  those  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 t r a i n i n g and enough c a p i t a l to begin t  their own micro businesses immediately. to learn the s k i l l s necessary  Others may enter into apprenticeships  to s t a r t their own enterprises, or perhaps to 118  obtain a formal job i n the future.  In any event, one r e s u l t of the small-  scale nature of production, r e l a t i v e ease of entry, r a p i d i t y of s k i l l d i f f u - 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 a c t i v i t i e s of i n d i viduals i n the urban informal economy thesmarket mechanism i s penetrating groups and areas outside the cash economy.  Unfortunately we know very  little  concerning the progressive evolution of subsistence production into production for  an impersonal  exchange economy.  In t h i s respect, i t i s v i t a l to know the  extent to which the informal production of consumer goods i n the urban centres i s being marketed through an informal d i s t r i b u t i o n network to r u r a l areas. Possibly the provision of informally produced incentive goods i n the r u r a l areas i s providing strong inducements to leave subsistence production and en119  ter  into a money and exchange economy.  The importance of t h i s type of  transformation, a f t e r centuries of subsistence production, can hardly be overestimated.  I t would be a transformation that has been neither planned nor co-  erced but v o l u n t a r i l y undertaken i n the expectation of securing material gain. The informal sector may be making several other p o s i t i v e contributions to meeting the basic needs of  low income segments of the population.  It i s  l i k e l y 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 t i r e s , and scrapped automobiles.  This CH-  recycling of waste material encourages the e f f i c i e n t use of resources.  At the  same time, employment seems to be generated at a lower cost than i n the formal sector:  the capital/output r a t i o i s f e l t to be low; the return on c a p i t a l ,  with allowance for the low quality .of output, i s thought to be at least as 121 high as i n the formal sector. Indeed, there seems to be l i t t l e reason-— 122 i n t r i n s i c to the informal sector - why anyone entering these a c t i v i t i e s cannot make a p r o f i t , accumulate c a p i t a l and be a productive dynamic contribu^ 123 tor to national development. By the very nature of the a c t i v i t i e s 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 s o c i a l security or unemployment insurance benefits i n 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 i n urban areas i s presented i n Table 7. Even allowing for d i f f i c u l t i e s i n measurement, i f these figures represent merely informed guesses then at least some observers consider informal employment to be quite substantial. Indeed, i n a c r u c i a l sense, i n d i v i d u a l s i n the informal economy seem to be i n the f r o n t - l i n e of development.  The aptitudes, attitudes, motivations  and s k i l l s which give r i s e to informal a c t i v i t i e s are a nation's treasure to . be guarded, encouraged and nurtured i n the .pursuit of higher l i v i n g  standards.  Thus, i t i s a l l the more surprising and disturbing that while the state f a vours one type of a c t i v i t y i t neglects and even a c t i v e l y discourages  another.  Rather than being treated as a treasure, informal a c t i v i t i e s appear to embarrass the a u t h o r i t i e s .  78 Table 7:  The Informal Sector Share of Employment i n Selected Less Developed C o u n t r i e s • Per Cent Share of Employment  B r a z i l (1972), Belo Horizante  39  El Salvador (1974), San Salvador Ivory Coast ( t o t a l country, 1975) construction industry . Indonesia,, (1975), Jakarta  4'6  60 61  3  H.  Ghana (1976), Kumasi „ > Paraguay (1973), Asuncion  69  Chile (1968), all cities  Sources:  Per Cent Share of Employment 60-70  M n i 7  r*c>->n\  n  c  57  Peru (1970), a l l cities , , ,,< Sudan, (1976), Khartoum Venezuela (1974), Caracas ,, ., . ' a l l cities  60  in  50 40 . . 44  50  I.L0, Growth, Employment and Equity;, (Geneva: IL0, 1976); Heather Joshi, Harold Lubell, and Jean Manley, "Urban Development and Employment i n 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 Informal Sector i n A f r i c a , " International Labour Review, CXVI, No. 3 (November-December, 1977); Paulo R. Souza and Victor E. Tokman, "The Informal Urban Sector i n Latin America," International Labour Review, CXIV, No. 3 (November-December, 1976).  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 r e s t r i c t e d to  the small formal economy then the inevitable conclusion must be that unemployment i s a serious problem.  However i t i s unhelpful and inaccurate to define a  "job" or "productive employment" as only that available i n the formal sector. Defining i t i n t h i s way casts the earning of a l i v e l i h o o d i n a r e s t r i c t e d and  79 normative framework derived from the very d i f f e r e n t conditions p r e v a i l i n g i n materially advanced countries.  At the same time, i f formal employment i s con-  sidered to be "employment" then unemployment i n 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 a c t i v i t e s " are intimately related to the l e v e l 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 b e l i e f s . In addition, a narrow conception  of "employment" almost guarantees that  our understanding of the manner i n which the vast bulk of the population  earns  i t s l i v i n g and meets i t s basic material needs i s perpetually bounded and constrained by the brick wall erected around the "stagnant t r a d i t i o n a l sector" i n many models of development.  This helbsito enshrine the ostensible aim of re-  p l i c a t i n g the material success of the advanced countries while  simultaneously  ignoring the probably determinants of that success, acquired human q u a l i t i e s . At the same time, when conceived  at a high l e v e l of abstraction "devel-  opment" tends to be portrayed as a confrontation between "modernising e l i t e s " and a " t r a d i t i o n a l , " "conservative," t i o n , the a t t i t u d e s , expectations,  "immobile" peasantry.  s k i l l s , motivations  In t h i s  confronta-  and l i v e l i h o o d  patterns  of the l a t t e r 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, u n o f f i c i a l , development sector i n which i n d i v i d u a l s v o l u n t a r i l y cooperate to meet c o l l e c t i v e needs. t i c i p a n t s i n the informal sector may  Par-  have a more d i r e c t 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 a c t i v i t i e s  i s of some importance to the theory of development.  F i r s t , i t challenges  the  allegation that i n some sense of senses a market economy i s not evolving or cannot evolve i n l e s s developed countries.  Perhaps spurred by contact between  d i s s i m i l a r peoples, an u n o f f i c i a l market order may many less developed countries.  be spontaneously forming i n  Second, the emergence of the informal sector  b e l i e s the commonly held notion that a vicious c i r c l e of poverty and traps less developed countries.  stagnation  Third, the existence of informal a c t i v i t i e s  suggests that, a profound but subtle revolution may  be taking place i n the at4^:.  titudes, aptitudes, s k i l l s , motivations,  and expectations  of various people  formerly engaged i n subsistence l i v i n g .  This revolution has not required com-  pulsion, "mobilisation," a u s t e r i t y , compulsory saving, "Great Leaps," and simi l a r p o l i c i e s frequently alleged to be necessary for development.  Fourth i t  indicates the importance of incentives, p a r t i c u l a r l y the prospect of higher l e v e l s of l i v i n g , i n e l i c i t i n g greater e f f o r t , encouraging r i s k - t a k i n g , and suggesting  new  patterns of l i f e more conducive to the production  tion of material goods.  and  distribu-  F i n a l l y , the informal sector suggests that detailed  state controls and regulation of economic a c t i v i t i e s are not a necessary cond i t i o n for material advance i n poor countries.  At i t s current l e v e l , the i n -  formal sector has required neither state plans, planning nor planners.  Indeed,  the emergence and evolution of t h i s creative development sector suggests that much higher l i v i n g 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, l i c e n s i n g and public subsidies which may  r e s t r i c t the variety and volume of economic  81 a c t i v i t i e s , and more emphasis on exposure, forces.  s t r e n g t h e n i n g and use o f market  In o t h e r words, t h e g o a l o f h i g h e r l i v i n g s t a n d a r d s might be b e t t e r  s e r v e d i f the a t t r i b u t e s o f t h e i n f o r m a l s e c t o r s u p p l a n t e d t h o s e o f the f o r m a l s e c t o r r a t h e r than t h e o t h e r way  around.  PART TWO THE KENYAN CASE  Ill 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 p o l i c i e s has been to increase the rate of growth of output of that sector. Policy instruments u t i l i s e d for t h i s purpose include t a r i f f protection, quotas, r e s t r i c t i v e l i c e n s i n g , low i n t e r e s t rates, tax holidays, overvalued rates and exemption from import duties.  exchange  The ostensible aim of these p o l i c i e s  i s almost always to achieve a r i s e i n general l i v i n g standards.  For example,  in Sessional Paper No. 10 of 1965 on "African Socialism and i t s Application to Planning  i n Kenya," the Kenyan government defined i t s economic objectives to  include universal freedom from want, disease and exploitation; equal opportun i t i e s for advancement; and high and growing per capita incomes, equitably distributed among the population. The purpose of t h i s chapter i s to discuss some of the s a l i e n t  features  of Kenya's development since Independence i n 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 p o l icy makers to rely on t h i s one r e l a t i v e l y small sector to carry the burden of meeting Kenya's several economic goals. S p e c i f i c a l l y , the discussion relates to employment and national income, with a view to assessing the capacity of the Kenyan formal economy to generate employment.  The p r i n c i p a l thesis i s that despite what appear to be impressive  growth rates i n formal output p a r t i c i p a t i o n i n formal a c t i v i t i e s w i l l only be 83  84  available to a small and declining proportion of Kenya's population.  It  should be noted that s t a t i s t i c s on employment outside the Kenyan formal economy are far from adequate.  Even estimates on the size of the labour force  vary depending on d i f f e r i n g assumptions as to labour force p a r t i c i p a t i o n 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 t h i s chapter o f f i c i a l data w i l l be used to assess, f i r s t , the overa l l rate of growth i n output or national income and the overall extent and rate of growth of formal employment i n Kenya; and, second, the sectoral compos i t i o n of income and employment and i t s performance over the years.  In other  words, the primary focus of t h i s chapter i s on the demand for labour i n Kenya's formal economy. chapter.  The a v a i l a b i l i t y or supply of labour i s taken up in the next  Both chapters suggest the very limited potential of the formal sec-  tor - and by implication state directed development - i n transforming the ways of l i f e of Kenya's c i t i z e n s . Before analysing the data on Kenya i t i s important to recognise the l i m i t a t i o n s of measured national income as a concise statement  of material .  advance. B.  Problems with the S t a t i s t i c a l Measurement of National Income The c r i t e r i o n or measure most commonly used to indicate l i v i n g  standards  i s the valuation of the f i n a l goods and services the exchange of which has been recorded or documented during a given year for a country; i n other words, the gross domestic or gross national product.  Upward changes i n 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 developed 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 standards.  or GNP  as a measure of l i v i n g  More to the point, development may be occurring without any change  in economic growth as i t i s commonly measured.  For example, the transformation  of risk-avoiding people into innovating and experimenting without registering any growth i n GDP of l i v i n g of countless individuals may  or GNP.  achievers can occur  At the same time, the standard  be improving and improving dramatically,  without i t being recorded i n national accounts. For one thing, much of the production and consumption of goods and . services i n 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 d e f i n i t i o n , the value of "subsistence" production cannot be d i r e c t l y measured since the output i s consumed by the producers.  Therefore, the money-  values assigned by s t a t i s t i c i a n s to subsistence production i n national accounts data must be largely a r b i t r a r y .  Indeed, the evaluation of non-marketed pro-  duction i s 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 d i s t i n c t i o n drawn between formal and  informal a c t i v i t i e s 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 i n national accounts while other ( o f f i c i a l l y ) non^marketed production i s excluded, t h i s suggests that to some degree the constituents of national output are open to choice.  T y p i c a l l y , economic welfare i s said to depend on output; however, i t  could also be said that the t o t a l 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 r e s u l t of convention.  It appears to stem from the  86 i n a b i l i t y or unwillingness to incorporate the output of a c t i v i t i e s which are neither subsistence nor formal. The exclusion of informal output and the a r b i t r a r y evaluation of subsistence production imparts a serious downward d i s t o r t i o n to aggregate mates of national income.  esti-'  Thus, i t i s very l i k e l y that estimates of growth or  rate of change of aggregates l i k e GDP  or GNP  are seriously inaccurate.  Pub-  lished s t a t i s t i c s on economic growth, or the sectoral a l l o c a t i o n of a c t i v i t i e s , in fact refer primarily to the formal economy. formal economy are largely excluded, a statement  Since a c t i v i t i e s outside the such as "per capita incomes .:.  are growing by 2 per cent per year" must be used very cautiously as an i n d i c a tor of changes i n standards of l i v i n g . Besides the wide range of a c t i v i t i e s which may be excluded from the national accounts framework, the accuracy of the data, s t r i c t l y as measurements of what i s being measured may  be profoundly unreliable.  Probable  sources of error include those associated with the enumeration or sampling  of  economic a c t i v i t i e s and the degree of extrapolation and interpretation i n volved i n f i l l i n g i n gaps i n the data.  This suggests that the degree of pre-  c i s i o n implied b'y.y.for example, a change i n the rate of growth from 6.8 per cent i s unwarranted.  to 7.0  At the same time, there are often revisions of o f f i -  c i a l data, revisions which have for example occurred i n Kenya since independence.  These revised s t a t i s t i c s may  nal data.-  not be much more accurate than the o r i g i -  Thus, each revision i n 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 o r i g i n a l error has been eliminated, or even whether i t has been reduced. margin.of error was  Indeed, Rimmer has commented that i f the  "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 12.5 per cent."''  and  These considerations weaken the u t i l i t y of o f f i c i a l data i n  87 the formulation of p o l i c i e s , especially p o l i c i e s concerned with detailed state a l l o c a t i o n of resources. However, national income s t a t i s t i c s remain the p r i n c i p a l medium through which we "see" an economy.  Often, t h i s image may  be severely distorted as the  following passages i n d i c a t e : In Thailand I saw a people not prosperous by European standards but obviously enjoying a standard of l i v i n g well above the bare requirements of subsistence. Many v i l l a g e 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 s t a t i s t i c s 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 i n the way income s t a t i s t i c s 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 i n the United States for $40, then Ethiopians are so poor that they could not possibly survive, l e t alone increase their numbers. I f the $40 does not refer to the amount of goods and services that could be bought i n 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 e f f e c t on the provision of services. Rich count r i e s are r i c h , because they have more things, more cars, more radios, more clothing, more food.. Rich countries are r e l a t i v e l y less w e l l provided i n services, i n 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 i n t e r n a t i o n a l trade causes prices of goods to be more or less the same everywhere (this i s the rationale of the purchasing power p a r i t y doctrine), but services are r e l a t i v e l y cheap i n poor countries where they are abundant, and expensive in r i c h countries where they are scarce. Consequently national incomes of r i c h countries are high because r i c h countries consume more goods, and because r i c h countries put high prices on services. The f i r s t reason corresponds to a genuinely higher standard of l i v i n g ; the second does not. National income s t a t i s t i c s are the p r i n c i p a l medium through which we see the process of economic growth. We characterize countries as developed or underdeveloped according to their national incomes. Income s t a t i s t i c s are also components of measures of the productivity of indust r i e s and of the equality of the income d i s t r i b u t i o n . 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 s t a t i 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 r e f l e c t accepted canons of s t a t i s t i c a l method, but because we attribute to income s t a t i s t i c s a s o c i a l meaning that they do not necessa r i l y possess. Higher incomeiis supposed to mean better o f f ; higher  88 productivity i s supposed to mean contributing more to the economic welfare of the community. The theoretical, part of the book shows how t h i s association can f a i l . The empirical part of the book shows that there can be a very great discrepancy between conventional s t a t i s t i c s and revised s t a t i s t i c s designed to r e f l e c t more closely the appropriate s o c i a l f a c t s . Not only i s the discrepancy often large, but i t may vary considerably from problem to problem, time to time, or place to place. The consequence of the f a i l u r e of many income s t a t i s t i c s and comparisons among income s t a t i s t i c s to bear the desired s o c i a l 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 i n need of substantial revision.6 The distorted view which may  be conveyed by national income s t 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 c i t e d by Usher for Ethiopia.  I f 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 i n 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 s t a t i s t i c s i n 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 i n the remainder of this  C.  Kenya's Estimated  chapter.  National Income  Compared to much of the less developed world, Kenya seems to represent an emerging success story of economic growth. estimated  Gross Domestic Product (GDP)  values) i n 1974.  Table 8 indicates that Kenya's  was K£835 m i l l i o n (expressed  i n current  Deflating for p r i c e increases, the GDP i s about K£607 m i l g l i o n (based on 1964 constant values). Between 1964 and 197.4 the annual 7  " r e a l " increase i n GDP 7.1  may  have averaged a very respectable 6.2  per  9-cent."—-  per cent i n the monetary sector and 3.6 per cent i n the non-monetary sec10  tor.  This r e l a t i v e l y rapid economic growth may  per capita income of at least K£47 i n 1974.  be converted  into a measured  On the heroic assumption that  89 Table 8:  Gross Domestic Product by Sector, Kenya, 1964-74 (selected years) (K£ m i l l i o n at constant 1964 prices and percentage of t o t a l ) . 1964  Annual Growth Amount Amount Amount Amount Amount Amount Rate (%) (35) (SO (%) (%) (%) (%) 64 - 74 (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14)  Sector (1) Total non-monetary  89.0  1966  97.6 27.0  25.6  1968  105.5 24.7  1970  112.7 23.5  1972  119.9 21.9  1974  3  127.3 21.0  3.6  15.5  4.8  0.6  8.9  12.5  8.3  2.4  8.0  1.6  7.2  7.9  7.0  7.7  3.6  3.9  9.1  Monetary 1. Enterprise sector agriculture and related activities mining  55.8  62.0 16.9  •  1.5  16.2 1.4  0.4 manufacturing  34.2  4.8  2.2  1.5 24.5  trade  33.0  1.3 32.5  7.4 38.4 10.0  banking and financial institutions  9.9  ownership of dwellings  13.3  services  11.9  Total enterprises 2. Private households  14.2 3.0 13.4 4.0 14.7  17.1  21.7 4.1  23.6 4.0  17.9 3.7  19.6  20.3  26.6  21.6 3.6  4.0  4.3  4.9  59.3  227.7 59.7  255.2 59.8  288.9 60.3  331.4 60.6  195.7  2.9  3,4  3=7 0.9  52.7 12.9  3.6 0.9  62.8  3.8 0.7  73.8  3.6  4.9  34.2  3.9  3. Total general government 42.5  5.6  11.1  61.4  6.6  0.8  4.9  16.9  9.2  372.7  4.8 0.7  92.2  102.5  13.9  14.6  15.4  16.9  321.5 75.3  366.2 76.5  427.4 78.1  479.9  73.0  283.8 74.4  79.0  7.1  330.1 100.0  381.4 100.0  426.8 100.0  478.8 100.0  547.4 100.0  607.2 100.0  6.2  TOTAL PRODUCT Monetary economy 241.1  GDP PER CAPITA  3.3  47.0 7.8  3.6  0.9  TOTAL GDP at Factor cost  42.6  19.6  13.9  48.1 7.8  7.8  3.5  3.5  42.4  37.6  15.0  9.8 1.6  8.6  9.6  3.7  8.9  41.2  41.2  14.7 2.9  1.5  >8.9  10.1  15.7  7.1  38.1  76.1 11.6  2.5  1.4  8.5  0.5  11.0  2.8  3.4  63.6  12.1  6.0  16.0  0.5  10.4  94.3  2.5  52.2  11.8  4.9  transport, storage and communication  2.6  44.6  8.5  87.8 16.3  .0.5  9.9  2.1 utilities  2.2  37.8  6.8  78.0 15.3  0.4  10.4 construction  65.4  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 O f f i c e , 1975) Tables 2.1, 2.2, 2.4. Cols. 4, 5, derived from Republic of Kenya, Economic Survey 1969 (Nairobi: Government Printing O f f i c e , 1969) Tables 1.1, 1.3. Cols. 6, 7, derived from Republic of Kenya, S t a t i s t i c a l Abstract 1974 (Nairobi: Government Printing O f f i c e , 1976) Tables 47(b), 48.  errors i n measurement were constant over time, t h i s would:represent t i a l increase over the 1964 GDP  a substan-  of K£330 m i l l i o n and the estimated per c a p i t a l  11 income of K£36. As shown i n Table 8, the annual growth of product i n the formal enterprise sector was 6.6 per cent between 1964 and 1974.  Within t h i s category,  the fastest growing a c t i v i t i e s were rather small, namely, services, banking/ f i n a n c i a l i n s t i t u t i o n s , and mining.  Of the two major sectors, the fastest  growing was manufacturing which achieved an o v e r a l l rate of growth of 8.3 per cent per annum, compared to agriculture's 5.3 per cent. manufacturing's  As a r e s u l t , formal  share of recorded GDP grew from 10.4 per cent i n 1964 to  per cent i n 1974, while agriculture slipped from 16.9 per cent to 15.5  12.5  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 t i e s into the cash nexus, the proportion of GDP agricultural activities f a l l s .  derived from subsistence  To some extent t h i s has occurred i n Kenya..  However, the combined non-monetary and formal agriculture sector contributed d i r e c t l y 37 per cent to t o t a l o f f i c i a l GDP  i n 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  i s l i k e l y that some of the increase i n monetary a g r i c u l t u r a l output recorded in published data actually represents a diversion of e f f o r t from nonmonetary output that has occurred quite some time before i t was measured i n o f f i c i a l statistics. Nevertheless, as Table 8 reveals, the non-monetary sector has not declined absolutely since independence; indeed, even the proportion of t o t a l agr i c u l t u r a l , forestry, and fishing GDP  taken by the subsistence sector has been  remarkably  stable:  i n 1964 i t accounted  for 61 per cent and.in 1974,  cent of this sector's contribution to GDP.  57 per  Overall, the data indicate that ..;  agriculture i s the backbone of the Kenyan economy decisively affecting the standards of l i v i n g of a l l Kenyans. Within agriculture, the responsiveness of i n d i v i d u a l Kenyans to economic incentives and their willingness to forsake subsistence ways of l i f e i f there i s a prospect of higher material l i v i n g 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 r e s u l t of this growth i s that the r e l a t i v e share of small  farms i n marketed production has been increasing.  It now  than one-half of gross marketed a g r i c u l t u r a l output.  accounts for more  This rapid switch to  cash-crop agriculture has probably provided the basis for the 51,000 very 14 smalltscale r u r a l non-agricultural enterprises enumerated i n 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 i n d i v i d u a l s into cash-crop a g r i c u l t u r e .  Unfortunately empirical evidence i s not available to  test this hypothesis. In general, one s t r i k i n g feature of recorded data on Kenya's GDP i s that they do not suggest any marked sectoral re-allocation of the economy despite the l a v i s h attention given formal enterprise. On the contrary, Kenya remains overwhelmingly dependent on the r u r a l sector and i n the r u r a l sector fundamental changes i n attitudes, aptitudes, motivations, s k i l l s and wants may well be occurring. nomy which may tion i n Kenya.  The importance of the r u r a l sector, and the informal eco-  service i t , i s suggested by anaanalysis of employment genera-  92 D.  Employment:  Growth and Structure  Despite a robust growth rate i n formal output, formal employment has been expanding at a r e l a t i v e l y slow rate.  Data i n Table 9 suggest that since  1964 t o t a l 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 Number Employed (thousands)  1974 Increase over Decade  Percentage  Annual Rate of Increase  1964  1974  1964  1974  202.1  231.7  35.1  25.9  5.7  0.7  2.3  3.1  0.4  0.4  34.8  4.1  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  Utilities  2.5  •  Private Sector Agriculture and forestry Mining and quarrying Manufacturing  and repair  a  0.4  •  Commerce  49.5  55.4  Transport and communication  11.1  17.6  Services  67.6  Total Private Sector  393.4  Public Sector  182.0  330.1  TOTAL FORMAL EMPLOYMENT  575.4  826.3  •  •  . .  8.6  6.7  11.9  0.8  1.9  2.1  58.6  4.9  "11.7  11.6  41.3  3.4  68.4  60.1  26.1  2.4  31.6  39.9  81.4  6.1  100.0  100.0  43.6  3.7  b  95.5° c 496.2  a  "Transferred to the public&sector:. Includes restaurants and hotels. To make comparisons with 1964, banking and f i n a n c i a l services (amounting to 18,700 persons) are combined with employment i n wholesale and r e t a i l trade. Sources:  Economic Survey 1975, Tables 5.5, 5.6 S t a t 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 r e l a t i v e l y low growth rates ap-  pear to be due to the sluggish performance of employment i n formal agriculture, which even i n 1974 accounted  for 46 per cent of private formal employment.  It  i s 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 r a t i o of incremental output to  ployment i t appears that the formal economy may  em-  simply be incapable of gener-  ating the vast number of jobs needed to cope with the burgeoning  ic labour force./  Thusj i n spite of rapidly growing output l e v e l s i n 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 p a r i passu.  This i s revealed by reference  to Table 10 which v i v i d l y underlines the considerable lag i n employment growth r e l a t i v e to that of output.  As the table indicates the rate of expansion  of  employment i n the formal sector i s only about one-half the rate of growth of r e a l GDP.  At the same time, even t h i s rate of growth of formal employment  should not obscure the small o v e r a l l size of the formal sector and the r e l a t i v e l y i n s i g n i f i c a n t contribution made by several of the a c t i v i t i e s with the fastest growing output  levels. 17  In this respect, estimates prepared by the World Bank mission to Kenya give an indication of the o v e r a l l order of magnitude of employment by sector 18 (see Table 11).  It i s evident that what the mission termed "informal r u r a l  agriculture" i s the prime employer accounting for 82 per cent of t o t a l employment.  Informal non-agricultural a c t i v i t i e s (both r u r a l and urban), however,  provide a substantial number of jobs.  Indeed, at a very minimum, 36 per cent  94 Table.10:  Year (10  Output.(K£.million), Recorded Employment (thousands) and Rates of Change i n Kenya 1964-1974  GDP (constant, GDP Real Rate -Total Employment Ratio of 1964 values): of Growth (?<0 Employment Growth Rate (%), Col 5 - Col 3 —-^27"'""^ " ^3-f— — — " ( 5 ) '(6)" '"~~ r  1  ?  j  r  1963 1964 1965  304.32 330.10 343.06  8.47 3.62 11.49  539.2 575.4 582.1  6.71 1.16 0.57  0.79 0.32 0.05  1966 1967 1968  381.36 396.70 426.79  4.02 7.59 6.80  585.4 597.5 606.4  2.07 1.49 3.43  0.51 0.20 0.50  1969 1970 1971  455.80 486.48 517.01  6.73 6.28 6.52  627.2 644.5 691.2  2.76 7.25 4.14  0.41 1.15 0.63.  1972 1973 1974  550.72 586.56 607.68  6.51 3.60 ..  719.8 761.4 826.3  5.78 8.52  0.89 2.37  • •  • •  . .  7.59  • •  3.96  0.52  1964-74 Source:  S t a t i s t i c a l Abstract 1 974, Tables 47(b) and 221 Economic Survey 1975, Tables  Table 1 1 : E s t i m a t e s of Employment by Sector, 1969 and 1971 (thousands) Formal Formal Informal .Informal Wage Wage Employment Employment Employr Employmeht Rural Urban Total Rural Urban Total ment 1 9 7 1  1 9 6 9  Sector Agriculture, forestry and f i s h i n g  196  4,168  •  •  4,364 i 211  4,436  •  •  4,647  3  1  •  •  4  3  1  •  •  4  "Manufacturing  75  30  15  120  93  32  16  141  Buildingiiarideconstruction  291?  1  11  41  35  1  12  48  •  •  5  5  •  5  f i n i n g ; -.aridQquarrying  .Electficityaand. .water  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  227  19  39  285  240  20  41  301  627  4,318  5,041  680  4,595  102  5,377  Services Total Source:  96  World Bank, Kenya Into the Second Decade, (Baltimore: Press, 1975), Table 5, p. 54.  Johns Hopkins  of a l l non-agricultural employment i s accounted for by the informal sector.  T  19 The ILO mission, i n what was  almost certainly an underestimate,  f e l t that  the informal sector i n Nairobi provided employment for 32,000 i n d i v i d u a l s , 44,000 i n Mombasa dnd 49,000 i n other urban areas.  Even i f t h i s estimate i s  accepted, i t means that informal employment accounted for 25 to 30 per cent of t o t a l urban employment i n 1969,  and 28-33 perrcent of African urban employment.  If small-scale r u r a l non-agricultural economic a c t i v i t i e s are included,  em-  ployment i n that sector accounted for 37 to 39 per cent of African adult  non-  a g r i c u l t u r a l 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. Table 12:  This i s presented i n Table 12. Persons Engaged: Activity  "Modern" establishments,  Recorded Totals, 1972-74 (thousands) i  urban and  1972;  719.8 50;0  urban areas only  Total Source:  1974  rural:  Wage employees Self-employed and unpaid family members "Informal" establishments,  1 1973  Republic of Kenya, Economic Survey 1975 ing O f f i c e , 1975), Table 5.1.  761.4 : 54.0 :  826.4 55.9  33.9  41.4  76.2  803.9  856.8  (Nairobi:  Government Printi.:  958.4  SI..-..::-  It i s d i f f i c u l t to interpret the figures for the informal sector.  F i r s t , the authorities maintain that the data were derived from a survey of :rs urban establishments  i n 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 l i k e l y since the data for  96  1 9 7 2 agree with those of the ILO report and the ILO appears to have r e s t r i c t e d 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 employment i n Nairobi since i t i s impossible to determine the extent of e f f e c t i v e coverage.  The figure f o r 1 9 7 4 i s l i k e l y the r e s u l t of better recording rather  than i n d i c a t i n g an increase of 8 4 per cent from the previous year. i s completely  unclear what the survey measured.  Second, i t  The discussion i n the ECOH  nomic Survey states that the survey recorded a t o t a l countrof 7 6 , 2 0 0 s e l f employed persons i n the urban informal sector and l a t e r refers to employees, thus obscuring what category of informal worker was counted. By examining the data contained i n the Development Plan 1 9 7 4 - 1 9 7 8 i t i s possible to analyze the projected growth rates of employment. projections are given i n Table 1 3 . Table 1 3 ;  Total Employment:  The o f f i c i a l  Data i n the Development Plan indicate thc-t  Actual 1 9 7 2 and Target 1 9 7 8 (thousands) Actual 1972  Target 1978  Formal sector  762  995  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  3,875  4,570  2.8  108  166  7.5  5,357  6,479  3.2  Sector  Self-employment and family workers Urban informal sector Total Source:  Annual Rate of Growth 1 9 7 4 - 1 9 7 8  Republic of Kenya, Development Plan 1 9 7 4 - 1 9 7 8 (Nairobi: Printing O f f i c e , 1 9 7 4 ) , Table 3 . 3 , p. 9 5 .  4.5?^  Government  that the Kenya government expects the t o t a l population to grow by nearly 2.3 m i l l i o n by the end of the current Plan period.  I f average household size r e -  mains at 5.6 persons, the provision of one income earner f o r each household would mean that over 4 0 0 , 0 0 0 income-earning opportunities would have to be  97 created during the Plan period j u s t to provide for the increase i n population. The government planners, however, appear to recognise that often more than income earner i s required.in a family.  one  They therefore consider instead, that 21  35 per cent of the population requires employment.  Based on t h i s , the num-  ber of new jobs necessary would appear to be i n excess of 800,000. It i s very unlikely that 400,000-800,000 new jobs can be created in.the formal sector i n the foreseeable future.  Indeed, the Development Plan rather  o p t i m i s t i c a l l y projected that 200,000 new  formal jobs would be created by the  end of the current Plan period i n 1978  (Table 13).  Even before the d e l e t e r i -  ous consequences of the world-wide i n f l a t i o n a r y s p i r a l of recent years, the creation of t h i s number of newjjbbs would have meant a s i g n i f i c a n t 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 i n 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 t h i s to occur i s surprising i n view of Kenya's performance i n the l a s t decade 24 and i s at variance with experience i n other underdeveloped countries. Harbison has concluded that for less developed countries the very lowest I0ER would be 1.5 to 1 and for many, p a r t i c u l a r l y those l i k e Kenya i n which the formal sector i s expanding with modern c a p i t a l - i n t e n s i v e technology, i t i s a l 25 most certain to be considerably higher than 2 to 1. Even i n the unlikely event that 200,000 additional formal sector jobs w i l l be created t h i s w i l l not s i g n i f i c a n t l y a l t e r the dilemma facing Kenya's planners.  For example, the projected output of Form IV and VI leavers i n 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 t o t a l projected increase i n formal employment opportunities, f u l l y .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, m i l l i o n s of Kenyans with education to. the Standard VII l e v e l , and m i l l i o n s 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 l i v e l i h o o d outside formal a c t i v i t i e s .  words, almost everyone may development.  In other  i n some ways.be excluded from o f f i c i a l l y - s a n c t i o n e d  It i s c e r t a i n l y peculiar that a p o l i t i c a l l y determined  develop-  ment strategy should e f f e c t i v e l y disenfranchise the bulk of the people. That t h i s 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. ployment increased by only 199,000.  In contrast, formal  em-  In other words, the formal development  sector i s barely absorbing 29 per cent of the growing labour force.  At t h i s  rate the proportion of employment provided by the formal sector w i l l decline quite r a p i d l y .  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 r e a l i t y of these comparisons should be-of great con-  cern to Kenya's planning authorities and should a l e r t them to the v i t a l  neces-  s i t y of harnessing rather than harassing, of l i b e r a t i n g rather than i n h i b i t i n g , the creative talent, energy and knowledge of the countless i n d i v i d u a l s i n the country interested i n material advance yet destined to remain outside the formal sector. Implicit i n Table 13 i s an acknowledgement by Kenya's planners that theinformal a c t i v i t i e s w i l l not only grow absolutely but w i l l provide an increasing 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 f a i l u r e of development. The truth i s more nearly the opposite.  What i s indicated i s the r e l a t i v e  f a i l u r e of a p a r t i c u l a r development strategy, that i s , state directed expansion of formal a c t i v i t i e s , i n 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 l i v i n g are probably being reached, but largely through the s e l f - r e l i a n t e f f o r t s of i n d i v i d u a l Kenyans. At the same time, i t should be acknowledged that the Kenyan authorities have expressed considerable d i s t r e s s at the lagging generation ployment opportunities. of which was E.  Two  of formal  em-  prominent policy i n i t i a t i v e s , the ostensible aim  to increase formal employment, merit some discussion.  The State and Employment Creation In Kenya, the government has often expressed the laudable hope that pro-  ductive, rewarding and s a t i s f y i n g employment will':be available for a l l Kenyans. I m p l i c i t l y t h i s has come to mean increasing the a v a i l a b i l i t y of formal When i t became apparent that the formal economy was  jobs.  not going to produce the  desired number of employment opportunities the government resorted to what i s perhaps i t s ultimate t o o l , coercive action. realms:  This i s evident i n two  formal commercial a c t i v i t i e s and the T r i p a r t i t e Agreements.  y s i s of state intervention i n these areas may  distinct An anal-  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, i n formal commerce, employment did not exceed i t s pre-independence 28 peak u n t i l 1974.  However, t h i s obscures s i g n i f i c a n t changes i n the r a c i a l  composition of owners and employees which has occurred as a r e s u l t of government intervention.  Through the Trade Licencing Act of 1968,  non-citizen  100 (mainly Asian) business a c t i v i t y was r e s t r i c t e d to the centre of urban areas, excluding completely non-citizen trading i n r u r a l 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 l e g a l l y 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 not i c e s " to non-citizen businessmen.  In June 1973, over one thousand non-citizen  traders were served with "quit notices," with President Kenyatta d i r e c t i n g t ' - t 31 that these traders were to leave Kenya immediately.  In A p r i l , 1975, 463 non32  c i t i z e n businesses were ordered to be transferred to c i t i z e n s .  These actions  are f e l t by policy-makers to be i n keeping with the government's aim of pro,^ moting A f r i c a n i s a t i o n i n commerce and industry.  However, i t i s most unlikely  that a p o l i c y of forcing non-citizens out of business i s a a r e l a t i v e l y 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 a r t i s a n and commercial expertise.  A sample  of names of eBusinesses affected i n 1975 indicates the types of s k i l l s that may be e n t i r e l y l o s t due to blunt action under the Trade Licensing Act: Nairobi: Nairobi Building Works'; Rehal E l e c t r i c a l Services; Nairobi Tin Works; Ideal Steel Works; Geerdial Engineering Works; Shah E l e c t r i c a l D i s t r i b u t o r s ; City Spray Painter; Excelsior Wood Works; Sira E l e c t r i c a l P r i n t i n g ; Highland Industrial Garage; Flora Garment Factory; Steel and Metal Works; Regal Joinery Furniture Works; K a i j i a 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 R i f t Valley: Kendil Chemists; Sira Engineering Works; Central Province: Services.33  Woodside A g r i c u l t u r a l Engineers; National  Electrical  101 The policy of promoting African commercial and i n d u s t r i a l enterprises would probably be Uetter served i f the s k i l l s available i n these small engi-r neering, metal, and wood workshops could be tapped before the artisans l e f t Kenya.  As i t i s 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 i n their places with l i t t l e or no harm to the operation of the enterp r i s e , employment creation, and consequently national development. this view i s belied by the constant  However  r e i t e r a t i o n i n Kenya of the need to t r a i n  Africans i n technical, a r t i s a n , and " p r a c t i c a l " 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 captured through s e n s i t i v e p o l i c i e s , are l o s t forever at what must be a heavy soc i a l and economic cost. As well, r e s t r i c t i n g non-citizen traders to the c i t i e s and the subsequent cancellation of many trading permits i n 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 . t h i s may  That  indeed be occurring i n Kenya i s suggested by comments made by Kenya's  then minister for Commerce and Industry, Dr. Kiano, when he noted the commerc i a l enterprises taken over from non-citizens featured much less variety i n types of products,  favouring instead a few "safe" commodities such as beer,  cigarettes, posho, sugar and s a l t . " ^ ume  Thus i t appears that the aggregate v o l -  of trade handled by African traders has been reduced rather than increased  by r e s t r i c t i o n s imposed under the Trade Licencing Act.  This would seem to  harm the economic i n t e r e s t s of the bulk of African producers, consumers and workers.  At the same time, the d i s t r i b u t i o n of a variety of low-cost incen-  t i v e or consumer goods may probably slowing  be less than i t would otherwise have been, thus  the spread of the exchange nexus.  In addition to using ithe Trade Licencing Act to "promote" Africanisa^:'.?.> t i o n , the government has established the Kenya National Trading  Corporation  102 (KNTC).  The ostensible purpose of the KNTC i s to secure;'a major l o c a l 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 i n d i v i d u a l Africans (as opposed to c i c i t i z e n s , who might be non-African).  Essentially the KNTC has a monopoly of  trade i n s p e c i f i c commodities (for example, sugar, s a l t , edible o i l , cement, wire, hardware, some types of cotton f a b r i c s ) .  Since the establishment of the  KNTC i n 1965, i t s African traders have consistently worked for a protected f, sinecure i n the market place.  Typical of what has been noted e a r l i e r as the  general thrust of formal sector development,  these traders wanted:  . . . fixed shares of s p e c i f i c markets, public loan funds, or publicly guaranteed commercial c r e d i t s , 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 p r o f i t s and begin to accumulate c a p i t a l was to bind them t i g h t l y to the established foreign suppliers and to the state, making them into highly dependent c l i e n t s , not entrepreneurs. . . . Above a l l , the implication was that African traders learned to make their p r o f i t through monopoly, adding no value whatever to the goods they han-^ died, or even reducing their value.35 At the very l e a s t , these types of policy measures betray an u n c r i t i c a l acceptance by Kenya's decision-makers of the notion that non-citizens ( p a r t i c u l a r l y Asians) have been able i n 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 i n expanding the exchange nexus by penetrating the r u r a l areas i n ways not undertaken by largescale formal enterprise.  By their want-creating a c t i v i t i e s Asian businessmen  may have been decisive i n accelerating the market mentality among subsistence, rural producers.  At the same time, the a c t i v i t i e s of Asian traders and a r t i -  sans may have had the unintended effect of stimulating informal African entrepreneurship through both demonstration effects and s k i l l d i f f u s i o n .  In t h i s  103 respect informal a c t i v i t i e s i n 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 expertise available for d i f f u s i o n to Africans from Asian workshops and trading establishments.  In e f f e c t , the authorities have responded i n a punitive nan.-:.-:.'  manner to the undeniable fact that many Asian businesses can e f f e c t i v e l y compete with large-scale formal concerns, concerns already favoured by l i c e n c i n g , commodity d i s t r i b u t i o n , and public loans.  It would seem that i f the non-  c i t i z e n entrepreneur were i n 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 penalise 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 represent a net gain to the economy.  Indeed, p r e f e r e n t i a l treatment i n the a l l o -  cation of licences or supplies or c r e d i t i s the a n t i t h e s i s of any spontaneous development of entrepreneurship and therefore may not encourage v i t a l r i s k taking a c t i v i t i e s 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 p r i v i l e g e i n protected formal trading may  eventually arouse antipathy among those excluded from the  system of b e n e f i t s . The government's distress at the lagging growth i n formal employment i s also indicated by the two " T r i p a r t i t e Agreements" concluded i n 1964 and between trade unions, private formal employers and the government.  1970  These -  ;  agreements indicate an attempt by the government to expand employment d i r e c t l y 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 i n return  for which private employers were to increase t h e i r 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 c l e a r l y had very l i t t l e long-term impact  on the creation of formal employment.  The government faced f i n a n c i a l con-  s t r a i n t s and could not honour i t s part of the Agreement. did take on additional workers but neglected  Private employers  to o f f s e t a t t r i t i o n by h i r i n g  new  employees so that i n a few months the working forces i n most of the private establishments  had dropped to their former l e v e l s .  that "the e f f o r t was  a colossal f a i l u r e . " " ^  the finding i n Table 10 that i n 1965  One  observer has remarked  This conclusion i s supported by  the economy experienced the lowest rate  of increase i n the number of people i n formal employment (0.57' per cent). A detailed examination of the 1970  Agreement was  c a r r i e d 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 s t a f f nor cut back on surplus labour, nor were there to be any lockouts during the Agreement. of some i n t e r e s t . was  Two  secondary provisions are  F i r s t , the Agreement stipulated that additional employment  to be created as far as possible i n r u r a l areas,  Second, employers were  given an option, i n certain areas, of making a f i n a n c i a l contribution to nan t i o n a l projects instead of expanding employment.  For their part, the unions  again agreed ifcotafcwagerfreeze and undertook not to s t r i k e . 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 to that i n 1964).  identical  Altogether 290,211 people registered or about 46.4 per cent  of the t o t a l employed i n the formal sector i n 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 r e s u l t of the low rate of placements r e l a t i v e  to registrants i s that government, by undertaking such a p o l i t i c a l l y r o l e , generated a great deal of i l l - w i l l towards public authority:  visible the Agree-  ment l i k e l y raised expectations for some individuals that could not conceivably be  fulfilled. During the term of the Agreement the urban areas attracted a dispropor-  tionate share of r e g i s t r a t i o n s , r e f l e c t i n g the b e l i e f , according to the IL0, that good jobs were more l i k e l y to be found i n the larger towns.  As i n 1964 ;<,-.  when, according to Harbison, the Agreement "acted l i k e a magnet a t t r a c t i n g  new  39 workers into the urban labour market," were concentrated i n the urban areas. secondary  registrations and placements i n 1970 The Agreement therefore f a i l e d i n i t s  goal of making r u r a l 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 pose.  pur-  Similar to the 1964 Agreement, the expansion of jobs i n 1970 cannot be  regarded as a net increase i n the volume of formal employment. have been created regardless of the Agreement.  Some jobs would  In addition, labour turnover :  and a t t r i t i o n might be expected to open up 15 per cent of the jobs i n a typical formal sector firm.  Furthermore, the IL0 has found evidence that some s u b s t i -  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 i n Table TO imply  that a certain amount of the growth i n employment i n 1970-71 pre-empted the growth that might have occurred i n 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 p a r t i c i p a t i o n i n economic a c t i v i t i e s indicate a preference for regulatory control and d i r e c t i o n .  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 t h i s discrepancy w i l l lead to sustained expansion of product f i v e , rewarding and s a t i s f y i n g employment and hence general improvements i n l i v i n g standards.  F.  Summary and Conclusions. The t y p i c a l accounting framework used i n 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 i d e n t i f y i n g the nature and r e l a t i o n of systematic changes i n the structure of a developing economy are accurate, even i f then, only for those a c t i v i t i e s which are sanctioned as part of the o f f i c i a l economy.  As the l e v e l and structure of an economy changes the  s o c i a l 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 i n a nation.  Indeed, without i t , i t would be d i f f i c u l t  to obtain even a p a r t i a l image of the t o t a l 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 i n o f f i c i a l national income occurred  in r e l a t i v e l y capital-intensive labour-conserving a c t i v i t i e s such as ;\,  107 manufacturing,  mining, and u t i l i t i e s .  slow growth i n formal employment.  This i s r e f l e c t e d i n the r e l a t i v e l y  During the decade 1964-1974 formal employ-  ment i n Kenya seems to have expanded at a rate of 3.7 per cent per annum. However employment i n the private formal sector expanded by only 2.4 per cent. About 43 per cent of the t o t a l private formal employment was s t i l l i n a g r i c u l ture and related a c t i v i t i e s by 1974, a sector where employment increased by only 0.7 per cent per annum.  In s i x 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 i n the f o r 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 s i g n i f i c a n t :•:-  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 r e s t r i c t i o n of non-citizen economic a c t i v i t i e s .  Both of these measures Hav-e had unimpressive  the l a t t e r i n fact probably adverse to economic advance. the general thrust of the formalisation of development:  results with  However they indicate the aversion to market  forces i n favour of p o l i t i c a l l y secured jobs, markets, supplies and p r i c e s . !•! In passing, i t can be noted that i f the talent, expertise and c a p i t a l of Kenya's Asian communities had been f u l l y tapped then the pattern of Kenya's Jo development might have been considerably d i f f e r e n t .  For example, at least one  probable outcome of discriminatory p o l i c i e s against Kenya's Asian communities 40 i s a potential c a p i t a l f l i g h t of K£250 m i l l i o n .  More important, however, i s  the loss of the s k i l l s and talents that might otherwise have been transmitted  108 t o Kenyans..  T h i s might have been a c c o m p l i s h e d 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 d e r i v e d from the premise t h a t c o n t a c t between d i s s i m i l a r peop l e s i s a l e a r n i n g and r e w a r d i n g , "exploitative , 1  r a t h e r than n e g a t i v e and i r r e m e d i a l l y  experience.  Moreover the a n a l y s i s o f employment c r e a t i o n i n t h i s c h a p t e r  suggests  t h a t the b e l i e f t h a t most o f the l o c a l p o p u l a t i o n can be accommodated i n the f o r m a l economy, the i n c o n c e i v a b l e a l t h o u g h o s t e n s i b l e g o a l o f much o f the  de-  velopment l i t e r a t u r e and the apparent aim o f development p l a n n i n g , ought p e r haps t o be r e p l a c e d by a concern w i t h p o l i c i e s t h a t 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 g e n e r a l i n t e r e s t i n m a t e r i a l advance. need t o promote and s t i m u l a t e e n t e r p r i s i n g b e h a v i o u r  The  i s even more apparent  when c o n s i d e r a t i o n i s g i v e n t o demographic v a r i a b l e s .  The  ':  f o l l o w i n g chapter  t u r n s t o the growth o f p o p u l a t i o n , examining some o f 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 o f p e o p l e and the p r o c e s s  o f development.  IV POPULATION AND A.  THE LABOUR FORCE  Introduction It was estimated that by mid-1978, the world's population had passed  4.25  billion.  According to projections by the United Nations t h i s 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 l i v e i n the less developed world.  It i s a formidable task  to accommodate t h i s number of people within e f f e c t i v e state-created s o c i a l and economic structures. lead to despair. growth may  However, the pressure of population need not necessarily  Given the complexity of the i n t e r r e l a t i o n s h i p s , population  have some i n d i r e c t and largely unnoticed b e n e f i c i a l effects on the  s e l f - r e l i a n t achievement of higher material standards of l i v i n g . to which t h i s may individuals  The extent  occur seems to depend on sensitive state p o l i c i e s and on the  concerned.  This chapter begins with a b r i e f analysis of some of the probable l i n k s between population growth and economic achievement.  The themes raised are .,  then more f u l l y explored i n the Kenyan context through a b r i e f account of the nature of the growth in population and labour force.  Subsequently, some of  the quantitative and q u a l i t a t i v e changes i n the population are assessed, part i c u l a r l y the implications they may mal economic order i n Kenya.  have for further strengthening the i n f o r -  The complications introduced by the rapid growth  of urban centres are assessed i n the next chapter.  109  110 B.  Some Probable Implications of Population Growth for Development Theory Much of the concern with population growth i n less developed countries  has centred on the issues of unemployment and income generation.  Numerous mod-  els have been constructed to indicate the impact of d i f f e r e n t i a l rates of population growth on such aggregate variables as size of the labour force, economic growth, per capita income, urbanisation and on the attainment of higher 1 standards of health, education and similar components of l i v i n g standards. Dharam Ghai has summarised some of the main results of projections made by •;!: these models as follows: i) The l e v e l of aggregate output over a given period as well as during the period, usually taken as 30 years from.the time the decline i n f e r t i l i t y begins, w i l l tend to be higher under the declining r e l a t i v e to the constant f e r t i l i t y case; ii) 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 f e r t i l i t y , as reflected i n the r e l a t i v e l y greater share of manufacturing, transportation, communications and r e l a t i v e l y smaller share of agriculture i n t o t a l output.2 However, with conditions varying enormously throughout the less developed 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 s i g n i f i c a n t independent standards of l i v i n g .  cause of low  For example, such densely populated areas as Japan, Hong  Kong, Singapore and Taiwan have achieved s i g n i f i c a n t material advance while many sparsely populated areas i n A f r i c a with stagnant population growth rates have remained desparately poor.? Even within a given country, the materially most advanced area may t r a l Province.  also be the most densely populated, as i n Kenya's Cen-  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. the' human actions that may  In other words, macro models abstract  determine the nature of the relationship between  population growth and economic expansion.  111 The examples c i t e d here suggest that the size of the population and i t s growth rate are not l i k e l y to be the main determinants of economic advance. Rather they may r e f l e c t the stage of material progress which i n turn i s probably determined by the aptitudes, attitudes, motivations, s k i l l s and knowledge of the population.^  I f these l a t t e r 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 contacts between diverse peoples, then b i r t h rates w i l l probably also change. In t h i s respect, the creation of and exposure to a competitive wantcreating economic order might be expected both to s i g n i f i c a n t l y improve standards and lower population growth rates. l a t t e r w i l l not be a cause of the former:  living  But i n these circumstances the  both w i l l r e f l e c t changes i n a t t i -  tudes, p a r t i c u l a r l y toward the d e s i r a b i l i t y of improved material conditions of l i f e and how these conditions can be obtained, i n other words, changes i n i n dividual expectations. At the same time, i t i s almost c e r t a i n l y the case that the very rapid increase i n population, and therefore the labour force i n many less developed countries (including Kenya) i s far i n excess of the capacity of the formal sector to generate employment.  Indeed, a frequent argument for the extension  of the formal economy, p a r t i c u l a r l y expansion of formal manufacturing, i s based on the necessity of r e l i e v i n g both population pressure and the widespread unemployment of labour alleged to exist i n most less developed coun^.. tries.  However, analysis of the population data for Kenya indicates the im-  p l a u s i b i l i t y of any conceivable growth rate of the formal sector generating opportunities of the magnitude necessary to transform the structure of employment i n any time period meaningful to human actors.  Less developed countries  l i k e Kenya may have few options other than relying on the i n i t i a t i v e , motivation, hard work and e f f o r t of i n d i v i d u a l s pursuing t h e i r own i n t e r e s t s within a framework of appropriate state p o l i c i e s and actions.  112 C.  Population and Labour Force Dynamics i n Kenya There are at least two s t r i k i n g features of the data on Kenya's popula-  tion.  F i r s t , i n 1969 (the year of the l a t e s t population census), 90 per cent  of Kenya's 10.9 m i l l i o n people l i v e d i n the r u r a l areas.  Although i t i s com-  monplace to indicate that agriculture i s the primary economic a c t i v i t y i n most less developed countries, i t i s seldom appreciated how stark the imbalance can be i n the rural-urban d i s t r i b u t i o n of the population.  Given the low urban  base, i t i s u n r e a l i s t i c to expect a r e l a t i v e l y straightforward transfer of l a bour from a g r i c u l t u r e to formal industry even i f there were a fast rate of growth i n formal employment. Second, there has been an acceleration i n 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 i n the shorter period between the 1948 and 1962 censuses the population grew by 59.8 per cent, r i s i n g from 5.4 m i l l i o n to 8.6 m i l l i o n .  By 1969 the population had further .it  increased by 2.3 m i l l i o n to reach 10.9 m i l l i o n . (1978) about 14*8 million.''  I t i s probably currently  In other words, the rate of increase i n popular  tion i s i t s e l f increasing and i s now approximately 3.5 per cent per year compared to 2.0 per cent estimated for e a r l i e r t h i s century.  At t h i s rate,  Kenya's population w i l l double i n 20 years or l e s s . Consistent with the trend i n the rest of the less developed world, the decline i n the crude death rate seems to have made a substantial contribution to the population increase i n Kenya.^  In t h i s respect, a rapid rate of popu-  l a t i o n growth may be considered a r e s u l t of s i g n i f i c a n t past improvements i n l i v i n g conditions, p a r t i c u l a r l y i n health and l i f e expectation.  Indeed, the  f a l l i n the crude death rate i s an instance of the b e n e f i c i a l 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 i n Table 14.  The table  gives two projections of growth of Kenya's population between 1970 and 2000. The high projection assumes a steady decline i n mortality with a corresponding r i s e i n l i f e expectancy from 49 years to 60 years and no change i n f e r t i l i t y rates.  The low projection also assumes a slow decrease i n mortality rates but  predicts a decline i n the average number of children per surviving adult f e 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 j e c t i o n  Year  Total Population (thousands)  1970  11,247  . .  1975  13,413  1980  Average Annual Growth {%)•  Total Labour Roree (thou? sands) c  Low Proj  a  Average Annual Growth (Si)'  3,818  . .  3.58  4,515  16,053  3.65  1985  19,310  1990  Total Population (thoua sands)  Average Annual Growth (?•)  11,247  . .  3.41  13,413  5,358  3.48  3.76  6,376  23,302  3.82  1995  28,213  2000  34,286  ...... b. ection Total Labour Force (thousands) 0  Average Annual Growth  3,818  .  3.58  4,515  3.41  15,752  3.27  5,357  3.48  3.57  18,186  2.92  6,376  3.57  7,667  3.70  20,521  2.44  7,667  3.70  3.90  9,258  3.85  22,626  1.97  9,060  3.85  3.98  11,215  3.91  24,249  1.35  10,473  2.99  ^Assumes (1) a slow but steady decline i n mortality and r i s e i n l i f e expectancy from 49 years in.1969 to 60 years i n the year 2000 and (2) no change in s p e c i f i c f e r t i l i t y rates. ^Assumes (1) slow decrease i n mortality ratesas above, and (2) a decline in " t o t a l f e r t i l i t y " - average number of children per surviving adult female from 7.6 i n 1969 to 2 i n 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, S t 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 within the range of the two projections. tion growth rate of 3.5 limit.  will  fall  A sustained and increasing popula-  per cent to 4 per cent would l i k e l y be an extreme li  Nevertheless the decline i n f e r t i l i t y of 62 per cent assumed in the  low projection i s quite o p t i m i s t i c . population  I f the high projection holds, Kenya's  w i l l t r i p l e by the year 2000 and be i n excess of 34 m i l l i o n .  with the lower rate of growth the population of the century. higher population  Even  w i l l more than double by the turn  S i g n i f i c a n t l y , the trend during the 1970's bears out  the  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 e f f e c t on the growth of the labour force. Table 14 indicates, even a very low population on the labour force for over two decades.  Indeed, as  growth rate w i l l have no e f f e c t  This paradox i s due to the fact t  that the labour force for the next f i f t e e n to twenty years i s e s s e n t i a l l y predetermined 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 e f f e c t i v e , wouldrhave no r e a l impact on 9 Kenya's labour force u n t i l at least the year 2000. magnitude of employment generation  Table 14 indicates the  needed in the Kenyan economy:  the  labour  force w i l l at least double in twenty years i r r e s p e c t i v e of which projection i s realised.  Even i f the b i r t h rate i s s u b s t a n t i a l l y lowered, the labour  w i l l almost t r i p l e i n s i z e between 1970 workers.  force  and 2000 reaching nearly 10.5 m i l l i o n  As well, given the b u i l t - i n momentum i n population  dynamics, even  under the low projection the rate of increase in the labour force w i l l be about three per cent at the turn of the next century.  still  11.5  In other words, even extensive adoption of b i r t h control would not bring about any appreciable change for decades to come i n the required number of job opportunities.  Nor for that matter, would an extensive population con-  t r o l programme appreciably a f f e c t per capita incomes i n the foreseeable future. Indeed, s i g n i f i c a n t changes i n l i v i n g standards are more l i k e l y to be brought about by changes i n motivations, a b i l i t i e s , attitudes and p o l i c i e s than by a reduction i n the population growth rate.  In t h i s respect i t i s worthwhile  noting Leibenstein's comments: In a broad sense human investment - the a c t i v i t i e s that create the essential changes i n the acquired economically valuable q u a l i t i e s of the work force - must be the c r i t i c a l element which determines whether or not population growth i n any p a r t i c u l a r case has adverse economic consequences. Even the process of c a p i t a l accumulation i s not a mechanical one. Obviously entrepreneurial q u a l i t i e s (which are for the most part acquired q u a l i t i e s ) are e s s e n t i a l elements i n the process. Economic growth requires more than the accumulation of c a p i t a l goods of the type already i n use. New types of productive instruments have to be created; new occupations learned, induced, generated, and f i l l e d i n new contexts and locations; new types of r i s k s have to be assumed; and, to some de-:-..: gree, new s o c i a l and economic relationships have to be forged. Hence, the c h a r a c t e r i s t i c s of the population that are transmitted from generation to generation through nurture and education become the v i t a l factors that determine the rate of growth. But the transmission of such c h a r a c t e r i s t i c s does not result i n a r e p l i c a of the previous generation's occupational s k i l l s , and a t t i t u d i n a l c h a r a c t e r i s t i c s . The trans^ mission process creates the p o t e n t i a l for change. In most instances, economies do not operate at t h e i r productive and technical upper bound. Developing countries do not have to invent new techniques. They can borrow techniques and types of c a p i t a l that a l ready e x i s t . (Of course, i n d e t a i l , some research and experimentation i s frequently necessary to adapt broadly known techniques to s p e c i f i c l o c a l conditions.) In view of these considerations, the findings that'; t r a d i t i o n a l inputs [land, labour and capital.], account for only a small proportion of the growth that takes place i s hardly s u r p r i s i n g . The old Malthusian argument that additions to the population come into the world with additional hands but without the a d d i t i o n a l c a p i t a l or land necessary to produce at the same l e v e l as t h e i r forebears i s not ent i r e l y true. The nurture and educational system can create to ;some degree the additional c a p i t a l necsesary. Whether t h i s "human c a p i t a l " 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 c a p i t a l into the population. (The word s k i l l i s used i n i t s broadest possible sense in t h i s context.) The rate of growth of physical c a p i t a l may be to some extent a function of the growth rate of human c a p i t a l . The basic argument i s neither pro-nor anti-Malthusian. Rather i t suggests that  116 the t r a d i t i o n a l approach misses to a considerable degree the fundamental processes which determine whether or not given rates of population growth are adverse to economic growth.1 n  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 i n the nomy; and the degree to which i n d i v i d u a l s respond to such incentives. point i s that the acquired q u a l i t i e s of the population that may velopment depend on motivations quantify i n any meaningful way.  and expectations  eco^ The  determine de-  and these are d i f f i c u l t to  D i f f e r e n t i a l rates of population growth per  se probably do not have an independent influence on these l i k e l y determinants 11 of economic development. It i s worth noting i n passing that Kenya was  the f i r s t African country  south of Sahara to declare i t s e l f i n 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 f e e l that Kenya's resources 12  are adequate to support a much larger population. that "family planning was  As well, others believe  a t r i c k by i m p e r i a l i s t s to keep African  populations  down, through economic suppression so that those countries could not r i s e up 13 to t h e i r strength." However, s t i l l other o f f i c i a l s urge s t r i c t b i r t h con14 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 b i r t h control could be successfully carried out when policy-makers themselves are divided over i t s merits. D.  Change i n Population  Structure, 1962-1969  S i g n i f i c a n t changes seemed to have occurred i n the r a c i a l composition and structure of Kenya's population.  Thus, as Table 15 indicates, the  African population has substantially declined.  non-  117 Table 15:  Population of Kenya by Race,1962 and 1969  (thousands)  1962 Race (1)  Males (2) '  African  4,134.6  Asian  1969 Females (3)  Males (4)  Females (5)  4,341.3  5,373.9  5,359.3  :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  1.9  2.0  1.0  1.0  Other Sources:  Cols. (2) and (3) S t a t i s t i c a l Abstract 1969, Cols. (4) and (5) S t a t i s t i c a l Abstract 1974,  Table 17: Table 17.  This change r e f l e c t s the r e s t r i c t i v e p o l i c i e s adopted by the Kenya government towards non-citizens i n the commercial and i n d u s t r i a l sectors.  As  discussed i n the l a s t chapter, Kenyanisation was seen by policy-makers as one method of expanding  formal employment opportunities. Indeed, the data suggest  that l o c a l i s a t i o n i n the;;public service and i n the formal private sector has been quite successful as a means of reducing non-citizen p a r t i c i p a t i o n i n the economy.  But, by the same token, the dwindling number of non-Africans i n  Kenya indicates that l o c a l i s a t i o n 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 p o l i t i c a l l y - c r e a t e d employment w i l l most l i k e l y find i t necessary to enter the self-help economy. Another s i g n i f i c a n t change i n Kenya's population pertains to age d i s tribution.  Table 16 presents the relevant data.  Although the t o t a l African  population increased by 28 per cent between 1962 and 1,969, there were d i f f e r e n t i a l rates of increase by age group.  Among males, the largest increase oc-  curred i n the 20-24 age group which, as the next chapter indicates, i s a prime age for those seeking employment i n urban areas.  Kenya's high rate of ; r ; , i ;  118 population growth i s also reflected i n 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 r e l a t i v e l y educated  compared to similar age-cohorts at e a r l i e r times and some of them w i l l probably be attracted to the urban economy i n the hope of securing formal employment. Table 16:  Age Structure of the African Population by Sex, 1962 and 1969 Males ?  Females  Numberi" (thousands,-), Percentage a Change  Age Group  Numbers:- (thousands") 1962  a  1969  Percentage Change  47.8  737.8  1 ,035.6  40.4  903.5  36^3  656.0  880.7  34.2  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  • •  • •  0- 4  708.1  1,046.6  5- 9  662.8  .1.0*14  Not  stated  Total  28.5 4,134.6  -:  5,373.9  29.9  26.2 4,231.3  •  •  5 ,359.3  •  ••  26.7  The figures f o r 1962 are those reported for the African and Somali popu l a t i o n . They are based on complete enumeration i n urban areas and 10 per cent sampl e census i n r u r a l areas. The sample figures hav e been rated up to give the sex t o t a l s obtained i n the general census. a  Sources:  S t a t i s t i c a l Abstract 1969, S t a t i s t i c a l Abstract 1974,  Table 17, for 1962; Table 17, for 1969  119 In. other words, just as the creation of formal opportunities through l o c a l i s a t i o n dwindles sharply, a surge c f young Kenyans w i l l enter the labour market seeking formal employment.  Since formal employment i s 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 agricultural activities.  s.:::'.  To the extent that entrants into these a c t i v i t i e s  are of higher quality (that i s , higher education, more s k i l l s , greater recept i v i t y to change) than those currently active i n these pursuits or those  who  leave^through retirement or death, marked q u a l i t a t i v e chanqesm ' may  occur.  In particular,:,new entrants may  -u  have a higher productive capacity  as r e f l e c t e d , for example, i n the willingness to experiment with new tech^.:. niques and equipment, an interest i n novel occupations and a desire for geographical mobility.  To the degree that these q u a l i t i e s are acquired through  contact between d i s s i m i l a r peoples, the p o l i t i c a l l y determined  exodus of non-  c i t i z e n s from Kenya weakens the transmission of c h a r a c t e r i s t i c s v i t a l for mat 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 p o l i c i e s advocated i n the l a s t chapter, then i t i s conceivable that imprqvemeihtscin tfchelqbaclityco f&  }  the laboufoforce^randiitherefore a r i s e i n standards of l i v i n g , might occur more rapidly with higher rathern than lower rates of-population growth.  This  i s i n contrast to most macro,models of population growth and economic development - 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 b i r t h 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 b i r t h rate and a declining death rate.  15  The data i n Table 1:6 indicate that  these two factors have been operating i n Kenya.  Indeed, a population pyramid  exists i n which close to 50 per cent of the t o t a l African population i s under 16 years of age.  It i s important, however, to separate the e f f e c t s of any  po-  t e n t i a l "dependency burden" on given individuals from the effects on Kenya as a whole.  I f the average e f f o r t , 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 present worker then the nation may benefit rather than suffer with population growth. S i m i l a r l y , 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 as16  sumed that productive output declines with age, i ; i t ;is conceivable and probable that t h i s i s mitigated by reduced material needs.  Thus the e f f e c t of  high b i r t h rates and declining death rates on Kenya's development may as clear cut as i t appears.  not be  As such, calculation of a nebulous "dependency  burden" i n order to strengthen the argument for population control does not seem p a r t i c u l a r l y  fruitful.  Indeed, for Kenya, other considerations should be taken into account before assuming the existence of a "dependency burden" on the working population.  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. bined enrolments  t o t a l l e d 2.5  By 1974,  the com-  million.  These tremendous increases i n enrolments are a c r e d i t to the Kenya government's s e n s i t i v i t y to the popular demand for education.  However, the :  121 demand i t s e l f i s i n d i c a t i v e of the probable changes i n motivations, aspirations and expectations of Kenya's young people.  These changes i n conjunction  with the reinforcement provided through the b e n e f i c i a l effects of education suggest a marked improvement i n 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 l i k e l y to be r i c h l y repaid through l i f e t i m e contributions to national advance. Nevertheless, despite accomplishments i n rapidly expanding educational opportunities and removing f a c i a l segregation i n the schools, the Kenyan educational system may  have had at least two adverse e f f e c t s on the labour  19 market.  F i r s t , most of the gains from state-directed economic growth have  tended to concentrate i n the formal sector.  This has drawn increasing numbers  of job-seekers into t h i s intensely competitive arena. has been easiest for those who  Entry into t h i s sector  have completed higher l e v e l s of education.  Second, the content and structure of the education.;system 20 suitable for formal employment,  has emphasised s k i l l s  while offering l i t t l e preparation for the  vast majority of school leavers who must seek employment i n the r u r a l 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 p o l i c i e s which have con21 centrated highly v i s i b l e opportunities i n Kenya's main towns. The school system, i n turn, has been shaped by t h i s urban bias, a bias which has given 22 Nairobi i n p a r t i c u l a r , economic, p o l i t i c a l and s o c i a l dominance i n Kenya. The interaction between c o n f l i c t i n g signals.from the formal labour market and the formal education system may  be cumulative and s e l f - r e i n f o r c i n g . .  Emil Rado has analysed t h i s i n terms of an "explosive model" of demand for ed23 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 o f i n c r e a s e o f t h e p o t e n t i a l l a b o u r f o r c e ; second,^employers f a c e d w i t h an excess o f a p p l i c a n t s s s e l e c t by l e v e l o f e d u c a t i o n . a f o r m a l employer knows t h e r e i s an excess o f secondary  F o r example, once  s c h o o l l e a v e r s , he w i l l  employ them f i r s t even i n j o b s " n o r m a l l y " performed by p r i m a r y s c h o o l l e a v e r s , who g e t t h e r e s i d u e .  The model i s e x p l o s i v e i n t h e sense t h a t :  As j o b o p p o r t u n i t i e s f o r t h e uneducated d e t e r i o r a t e , y o u n g s t e r s 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 p r i m a r y e d u c a t i o n . The demand f o r p r i m a r y e d u c a t i o n a l s o i n c r e a s e s , f o r some o f t h o s e p r e v i o u s l y c o n t e n t w i t h no e d u c a t i o n , a r e now b e i n g "squeezed." The more u n p r o f i t a b l e a g i v e n l e v e l o f e d u c a t i o n becomes - as - a t e r m i n a l p o i n t , t h e more t h e demand f o r i t i n c r e a s e s as an i n t e r m e d i a t e s t a g e , a p r e c o n d i t i o n f o r t h e next l e v e l o f e d u c a t i o n . 2 4 B a r r i n g t h e i n t r o d u c t i o n o f some p h y s i c a l r e s o u r c e c o n s t r a i n t , each worse n i n g o f t h e f o r m a l 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 s u p p l y o f ) more e d u c a t i o n a t a l l l e v e l s . p l u s " o f educated s u r p l u s educated  One p r o b a b l e r e s u l t o f t h e " s u r -  workers r e l a t i v e t o f o r m a l s k i l l e d j o b s i s t h a t some o f t h e persons move t o t h e f r o n t o f t h e f o r m a l j o b - s e e k i n g 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 f o r m a l j o b s might be f i r e d and r e p l a c e d i m m e d i a t e l y  or instead displaced  over time as educated  I f bumping o c c u r s ,  educated  workers r e p l a c e uneducated r e t i r e e s .  workers a r e o f f e r i n g t h e i r s e r v i c e s i n t h e u n s k i l l e d f o r m a l j o b market  and a r e h i r e d i n p r e f e r e n c e t o uneducated w o r k e r s . whatever u n s k i l l e d j o b s t h e educated  w i l l not take.  The l a t t e r a r e l e f t w i t h E d u c a t i o n may a l s o be de-  manded, t h e r e f o r e , i n o r d e r t o r e c e i v e t h e advantage o f a b e t t e r r e l a t i v e chance o f b e i n g h i r e d f o r an u n s k i l l e d f o r m a l j o b . t h e e d u c a t i o n system t h e r e may be so many educated  With c o n t i n u e d expansion o f persons  t h a t t h e uneducated  a r e e x c l u d e d from o b t a i n i n g even l o w - l e v e l f o r m a l employment thereby i n c r e a s e i n g t h e r e l a t i v e advantage o f b e i n g educated. unexploding  One r e s u l t may be t h a t i n an > i  f o r m a l j o b market t h e demand f o r e d u c a t i o n i s e x p l o s i v e .  123 The a p p l i c a b i l i t y of the model to Kenya i s evident i n the vicious c i r cular movement of more young people with higher pro forma q u a l i f i c a t i o n s chasing fewer jobs i n one small part of the economy.  By 1978,  2.5 m i l l i o n Kenyans  w i l l have a Standard VII education, compared to 800,000 i n 1969.  The corres-  ponding numbers for Form IV and Form VI leavers are 300,000 and 100,000.  But  as indicated e a r l i e r , even i f optimistic Plan projections are realised there w i l l be i n t o t a l only 995,000 formal jobs.  Since these jobs are mainly con-  centrated i n the urban areas, the interaction between the education system and the structure of formal employment i s probably one key factor i n the continuing and accelerating growth of Kenya's urban centres. Thus, given the limited a v a i l a b i l i t y of formal urban employment opport u n i t i e s , the quality of the^labour force i n the informal economy may  improve  dramatically as tens of thousands of "surplus" primary and even secondary school leavers j o i n those currently engaged i n informal a c t i v i t i e s . respect, as early as 1968,  In t h i s  the Tracer project of the I n s t i t u t e 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 i n 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 i n a variety of informal r u r a l and urban enterprises.  Two simple projections indicate the d e s i r a b i l i t y of Kenya's p o l i c y -  makers strengthening the informal r u r a l and urban.economic order.  First, 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 r e l a t i v e l y high sustained growth of 4.0 per cent per annum.  In an economy l i k e Kenya's with  90 per cent of i t s population i n agriculture, a f t e r 50 years, 87.5 per cent of the population w i l l a s t i l l be i n a g r i c u l t u r e .  The farm population i t s e l f  124 w i l l s t i l l be growing i n absolute terms. tion control measures are immediately  A l t e r n a t i v e l y , assume that popular!  introduced and stringently enforced.  As  indicated e a r l i e r , there w i l l be no change i n labour force growth for at least 15 years.  Thereafter, assume that the labour force increases by a r e l a t i v e l y  low 2 per cent per annum and non-agricultural formal employment expands on a sustained, r e l a t i v e l y 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 i n a g r i c u l t u r e .  Thus, neither s t r i n -  gent b i r t h control measures nor any conceivable rate of growth of formal  em-  ployment opportunities w i l l make any appreciable change i n the p o l i t i c a l economy of population d i s t r i b u t i o n i n countries l i k e Kenya for decades to come. Indeed, such s t r u c t u r a l 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 l i t e r a t u r e and much of the public rhetoric of de-  velopment planners.  Contrary to those who  advocate comprehensive development  planning, formal development i s unlikely to a l t e r the s t r u c t u r a l contours of countries l i k e Kenya i n any time period meaningful to human actors. luctance to face t h i s stark r e a l i t y may  The re-  have served to perpetuate i l l -  conceived, unrewarding and negative p o l i c i e s that have reduced current consumption and penalized and harassed hard work, s e l f - r e l i a n c e , and i n d i v i d u a l i n i tiative.  Widespread gains i n current l i v i n g standards as a r e s u l t of these  l a t t e r factors may  do more to enhance meaningful development than comprehenr-  sive planning and state directed b i r t h control programmes.  At the same time,  changes i n human actions and expectations favourable to material advance i n the short-run may run.  contribute s i g n i f i c a n t l y to population control i n the long  The l a t t e r i s unlikely to have a s i g n i f i c a n t independent effect on the  former.  125 E.  Summary and Conclusions The growth of t o t a l population i n Kenya has accelerated over the de-  cades, with the rate of growth now i n excess of 3.5 per cent per annum.  This  i s largely a r e f l e c t i o n of a decline i n mortality rates, that i s , of s i g n i f i cant past improvements i n the quality of l i f e .  Continuing high b i r t h 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 m i l - , l i o n and 34 m i l l i o n .  The higher estimate implies a r i s i n g average rate of  growth from 3.5 per cent during 1970-1978 to 3.9 per cent during 1995-2000. Should t o t a l f e r t i l i t y decline from 7.6 i n 1969 to 2.0 i n 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 s i z e , that i s , about 10.4 to 11.2 m i l l i o n i r r e s p e c t i v e of which of the two projections i s more accurate.  This substantial increase i s  beyond any conceivable employment generation i n 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 r e l a t i v e l y  well-educated  into formal employment. At the same time, the b u i l t - i n momentum of population and labour force dynamics indicates that even a stringent b i r t h control programme would have l i t t l e appreciable effect on measured per capita incomes for decades to come. Indeed, s i g n i f i c a n t changes i n l i v i n g standards are more l i k e l y to be brought about by changes i n motivations, aptitudes, attitudes, a b i l i t i e s and states p o l i c i e s favourable toward individual i n i t i a t i v e and s e l f - r e l i a n c e than by a reduction/, i n the population growth rate.  It i s unlikely that d i f f e r e n t i a l  rates of population growth per se have any independent influence on these  126  determinants  of economic advance.  I f appropriate acquired human q u a l i t i e s are  wide-spread then even a very rapid rate of increase i n the population and l a bour force growth rates, as evident i n Kenya, i s probably compatible higher o v e r a l l standards of l i v i n g .  with  The acquisition of these q u a l i t i e s , par-  t i c u l a r l y i n t e r e s t i n securing material advance and the adoption of new meiv.: thods for attaining that goal, are l i k e l y stimulated by contacts between d i s similar peoples. Kenya may  Thus the politically-determined exodus of non-Kenyans from  r e s u l t not only i n a reductionn i n the aggregate volume of economic  a c t i v i t i e s , but as well, i n a r e s t r a i n t on the transformation of s o c i a l and economic relationships i n 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 l i v e l i h o o d in the r u r a l and informal sectors for any projected time period meaningful for human actors.  Formal employment i s , and w i l l l i k e l y remain, of consequence  for only a very r e s t r i c t e d f r a c t i o n of Kenya's labour force.  Thus, one  impli-  cation for the thrust of development policy i s to stimulate spontaneous econ nomic a c t i v i t i e s through encouragement of i n d i v i d u a l 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 i n Kenya's economy.  The next chapter continues t h i s theme by  focussing;on the s t r i k i n g 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 c o l o n i a l 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 i n development studies, i t i s i n the c i t i e s of the less developed world that many observers f i r s t encounter the manifestations and perhaps intractable dilemmas associated with increasing numbers of people. r e s u l t has been a considerable debate among development s p e c i a l i s t s ing  the benefits and costs of urbanisation.  One  concern-  Entry into t h i s debate i s f a c i l -  i t a t e d by placing the growth of urban centres within the broader context of a country's development strategy.  In t h i s way, the focus becomes the degree to  which rapid urbariihgii^wthsemaymbeosyjh^  state  policies. In t h i s chapter an analysis i s presented of urbanisation i n 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 c o l o n i a l p o l i c i e s i n the post-colonial period, formal  opportu-  n i t i e s have been largely r e s t r i c t e d 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 q u a l i t y .  In turn, the concentration of r e -  sources i n the urban formal sector has attracted numerous individuals leading to rapid rates of urban growth.  B.  Urbanisation i n Kenya:  A B r i e f Outline  Kenya i s usually divided into f i v e main geographical regions:  the Lake  V i c t o r i a 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 d i s t r i b u t e d :  eighty per cent of the people l i v e i n the  southwestern parts of the country favoured by r e l i a b l e r a i n f a l l and  promising  y i e l d s , although the area comprises only about f i f t e e n per cent of the Kenyan land mass.^ For geographical, climatic and h i s t o r i c a l reasons, Kenya was the only African country north of the Zambezi r i v e r to a t t r a c t large numbers of white settlers.''  Patterns of urbanisation i n 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 c i t y 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 P l a i n s , controlled by the Masai. Early white travelers had noted the apparently deserted nature of the t e r r a i n and i t seemed that f r i c t i o n over the appropriation of land would be minimal. In fact, Nairobi appeared to be a natural s i t e for a camp i n the construction of the Uganda railway as i t lay between the r e l a t i v e l y easy t e r r a i n of the Athi Plains and the more foreboding slopes of the R i f t Valley escarpment. Building i n the s i t e did not begin u n t i l 1899 when the railhead from Mombasa actually reached Nairobi.'' By 1906, 12,000.  the population s t i l l numbered only about  6  Nairobi's population was always s t r a t i f i e d by race.  Although t y p i c a l l y  about eight or ten per cent of the population, Europeans dominated the government and the larger f i n a n c i a l i n s t i t u t i o n s . the Indian sub-continent  Asians, most of whom came from  .,  to work on the construction of the railway, were en-  gaged i n a l l ranges of commerce as well as v i r t u a l l y monopolising They accounted for about one-quarter of Nairobi's population.  artisan work.  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 c i t y ' s current r e s i d e n t i a l pattern dates from the actions of the early railway a u t h o r i t i e s :  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 l a t e r .importance to the development of the A.' rv :  African:inf6rmal;;sector , was^subsequentlyk'establishedrnear r  quarters.  thelrailway head-  7  Duality was b u i l t into the s p a t i a l organisation of the c i t y .  In the  European sections (areas l i k e Karen, Westlands and Ngong) no house was surrounded 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 l i v e d mainly i n high density housing though of a much i n f e r i o r quality.  From the e a r l i e s t years, scattered African v i l l a g e s of huts constructed  from paraffin tins and thatch surrounded g railway and administration.  the. more permanent dwellings of the  The largest part of the African squatter v i l i  lages was Pangani although other areas existed such as Kaburini, K a r i o r i k i , Maskini, Mombasa v i l l a g e and  Kileshwa.  When plague broke out i n 1902 i t occurred f i r s t i n 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 i n the African areas. European areas the authorities faced two a l t e r n a t i v e s :  Fearing a spread to ensure a supply of  clean water, garbage c o l l e c t i o n and sewage disposal; or, separate the area to be protected from contagion by s t r i c t r e s i d e n t i a l segregation, destroying squatter settlements and developing controlled urban African locations. Largely for reasons of cost, the c o l o n i a l municipal council chose the second  130 a l t e r n a t i v e , thereby establishing precedents for l a t e r actions undertaken by post-independence a u t h o r i t i e s . Nor i s t h i s surprising for the c o l o n i a l a u t h o r i t i e s conceived of an African;as?.a temporary urban residents whose home was not the town but the rubr a l areas.  Elkan and van Zwanenberg have observed that,  Africansiwere?wanted only as employees i n the towns, and a policy of segregation, coupled with a r e s t r i c t i o n of entry by special passes issued only to those who had "legitimate" employment, would ensure that "undesirables" were e f f e c t i v e l y 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 t h i s policy and foreshadowing s i m i l a r measures i n therpost-r-colbnial period, the v i l l a g e s of Mombasa, Kaburini, Kileshwa and Maskini were burned down i n 1923.  A new  v i l l a g e , Pumwani, was planned as a  model African location but i t was not u n t i l 1938 found to provide even minimal s e r v i c e s . tremely overcrowded.  that s u f f i c i e n t funds were  By that time Pumwani was  also ex-  Van Zwanenberg comments that  . . . as the African population of the c i t y had increased,tthe numbers of people who. had not the cash to find a bed, had also increased. It was estimated . . . that there were, i n p r i n c i p l e , bed spaces' i n 1937 for 22,000 Africans i n Nairobi but that there were actually 31,000 Africans i n the city.11 Since 1945, was  when the o f f i c i a l policy of segregation i n the urban areas  discontinued, the rapid growth of peripheral low-income settlements  maintained  the d u a l i s t i c structureoof the c i t y .  has  While independence has meant  that increasing numbers of Africans have moved into formerly Asian and Euro-:.<: pean areas the great disparity i n incomes between the races has informal segregation.  perpetuated  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 c i t y i s Mombasa on the Indian Ocean coast. Nairobi i s a new  and European-created  While  c i t y Mombasa was an established s e t t l e -  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 l i n k and focal point between the Middle-eastern and Indian Ocean trade and the African continent.  One r e s u l t i s that Mombasa was  repeatedly  devastated  in the campaigns of c o l o n i a l r i v a l s who wished to secure hegemony over the s t r a t e g i c a l l y 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 b u i l t a f t e r the a r r i v a l of the B r i t i s h . have two main c i t i e s :  Kenya i s fortunate to  being Kenya's major ocean port as well as the best  equipped of East A f r i c a ' s coastal terminals, Mombasa has not been t o t a l l y eclipsed by the subsequent development of Nairobi as the administrative, commercial and i n d u s t r i a l centre of Kenya, i f not East A f r i c a . C.  Urban Growth i n Kenya 13 Similar to other East African countries  two of the more s i g n i f i c a n t  features of Kenya's urbanisation during t h i s century are (1) that the population remains overwhelmingly r u r a l , 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 r e l a t i v e l y  few  and most are small i n s i z e , compared with urban centres i n other less devel14 oped countries i n Asia and Latin America. For example, i n 1948 there were 15 three urban centres with populations i n excess of 10,000; seven; by 1969 there were s t i l l only ten.  i n 1962 there were  Of the t o t a l population, the urban  areas represented 7.8 per cent i n 1962 and 10 per cent i n 1969. i s probably about 1.75  At present i t  m i l l i o n or 13 per cent of the t o t a l Kenyan population.  132 Despite Kenya's s t r i k i n g l y r u r a l population concentration, the urban centres o v e r a l l are growing s u b s t a n t i a l l y faster than the t o t a l population. According to the 1969  census the number of people i n towns with two thousand  or more inhabitants was t o t a l of 660,000.  1,079,908, an increase of 65 per cent over the  Between 1962 and 1969  1962  the average' growth of the urban popu-  l a t i o n was 7.3 per cent per year, a rate which would double the number of ur16 ban residents every ten years.  Indeed, the present annual increase i n the  urban population i s perhaps a minimum rate for future expansion.  Official  projections indicate that by the year 2000 about nine m i l l i o n people, or almost 17 six  times the present urban population, w i l l reside i n 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 s i z e of Kenya's o r i g i n a l urban  base, urban in-migration has been removing only a small portion of the t o t a l r u r a l population.  I t has been estimated that the net growth i n the Kenyan  African population i n urban areas between 1962 and 1969 represents only 18 per cent of the p o t e n t i a l migrants i n the r u r a l areas. ing  3.4  Indeed, even assum-  that a l l of the 344,000 urban migrants to Kenya's eleven main towns i n  this period were adults, this would represent only 23 per cent of the growth in the r u r a l African population between 1962  and 1969.  Although the projected  increase i n the urban population i s s i g n i f i c a n t , the impact on population increase i n the r u r a l areas w i l l s t i l l be small.  Thus the Development Plan  estimates that t o t a l r u r a l to urban migration w i l l probably amount to less ;.• ~ 19 than 15:per cent of the t o t a l r u r a l population increase. At the same time, the rapidly increasing urban population puts considerable stress on the available f a c i l i t i e s . for new  For example, the o f f i c i a l demand 20 housing i n Nairobi stands at a staggering 6,000 units per year. It  133 i s inconceivable that formal resources can meet even t h i s demand, a demand which must be considered an underestimate.  For example, i n Phase Two  of  Nairobi's Buru Buru Housing Estate, a j o i n t venture of the Commonwealth Development Corporation, the Nairobi City Council and the Kenya government, between 720 and 960 new  housing units w i l l be constructed.  The cost i s estimated  be K£4 m i l l i o n or between K£4,167 and K£5,556 per u n i t .  to  To construct 6,000  similar units each year to meet the o f f i c i a l housing demand would require between K£25 m i l l i o n and K£33 m i l l i o n .  I f allocated, t h i s expenditure  would be  s i g n i f i c a n t l y higher than t o t a l recurrent and development expenditure  for the  21 entire a g r i c u l t u r a l sector i n 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  ences between the main towns, as shown i n Table Table 17:  17.  Population of the Teh Largest Centres, 1962 Census Population  Annual Growth  C5S)  differ-  and 1969  % of Total  (thousands) % of Population  1969?  1962  1969  9.6  46;:-5 v 5556a  3.09  4.75  247.1  4.6  31122  26i9>y  2.08  2.26  >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  575.1  916.5  6.9  100.0  100.0  6.67  8.48  3.4  • •  • •  1962  1969  Nairobi  266.8  509.3  Mombasa  179.6  Nakuru  Town  Total largest towns Total nation Source:  8,636.3  10,942.7  1962;:  100.00  100.00  Population Censuses, 1962 and 1969 as derived by Lui g i Laurenti and John Gerhart, Urbanization i n 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, i n turn, was 4.7 l a t i o n was  2.1  times as large as Nakuru.  By 1969,  times as large as Mombasa, while Mombasa was  large as Nakuru.  Nairobi's popu-  5.25  times as  What seems to occurring i n Kenya i s not only rapid rates of  urban growth but an accelerating concentration of the urban population i n the two main towns.  In 1969,  Nairobi and Mombasa together accounted for 82.5  cent of the t o t a l population of the largest towns.  per  As for growth rates,  Nairobi's population i s increasing at nearly t r i p l e the rate of the t o t a l population and over double the rate of the second largest centre, Mombasa.  This  i s reflected i n the declining share of every other centre (with the exception of numerically small Malindi) i n the. t o t a l urban population between 1962 1969.  and  Five of the ten centres shown did not grow faster than the o v e r a l l rate  of population increase with one centre a c t u a l l y declining i n population.  This  i s perhaps i n d i c a t i v e 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 i n Kenya indicates that caution should be exercised before drawing analogies with western  D.  experience.  Pattern of Migration During the c o l o n i a l period migration to Kenya's towns mainly involved  young men  looking for employment.. Data for the t o t a l African formal sector  employment i n 1952 workers.  indicates the overwhelming predominance of adult male  Of the Africans i n formal employment (about 434,000) 81 per cent  were adult males.  This feature was even more marked i n the case of non-  a g r i c u l t u r a l (including public service) employment where approximately  97 per  22 cent of the African employees were adult males.  As l a t e as the mid-1950's  c o l o n i a l a u t h o r i t i e s s t i l l lamented the "enervating and retarding influences"  135 of  the r u r a l c u l t u r a l background on the urban labour force. "  For example,  the Carpenter Report suggested that: Of the t o t a l of some 350,000 adult male African workers i n employment outside the reserves, i t i s estimated that more than half are of the migrant or "target" type; that i s to say, they are workers who have l e f t the reserves for a s p e c i f i c purpose - for example, to earn s u f f i c i e n t 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 s i x months outside the reserves i n any one year and, for a l l p r a c t i c a l purposes, they may be regarded as temporary workers.24 Even among those migrants who were not considered to be target workers the c o l o n i a l authorities argued that there was l i t t l e permanency i n employment. Most of the Africans retained close t i e s with the r u r a l home area and the prev a i l i n g view was that "there are few who,  even a f t e r long periods of employ-  ment outside the reserves, are not l i 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 c o l o n i a l view of the "labour commitment problem" pointing out that low wages and appalling working conditions meant that migrants quite 26 r a t i o n a l l y may  have preferred r u r a l work to that,provided by Europeans.  Whatever the causes, the pattern of urbanisation that emerged i n coloni a l A f r i c a was one of " c i r c u l a r migration" or frequent r e c i p r o c a l movement be27 tween the rural: home and the towns.  Berg has argued that t h i s pattern of  seasonal and/or temporary migration best s a t i s f i e d the economic needs of the migrant and of the urban employer. of  At the same time i t permitted retention  the s o c i a l relationships of the r u r a l areas.  portance to the migrant's sense of security.  The l a t t e r was of c r u c i a l im-  M i t c h e l l describes the process  as follows: The set of s o c i a l relationships which, a person builds up i n a r u r a l area . . . possess a certain c e n t r i p e t a l influence; once the s o c i a l relationships are b u i l t up they are d i f f i c u l t to break. This c e n t r i p e t a l influence i s connected with the nature of the s o c i a l system. A person in a s o c i a l system, p a r t i c u l a r l y i n a well-integrated system as i n a t r i b e , occupies a position which l i n k s him to many other people around  136 him. These l i n k s serve to define for him exactly his rights and obligations towards those persons. . . . He l i v e s i n an ordered society where his behavior towards other's and others towards him i s known and r e l a M v s t i v e l y predictable. A person enmeshed i n such a system of s o c i a l r e l a tionships therefore has that sense of security and confidence which springs from the f a m i l i a r i t y of his role v i s - a - v i s his fellows around him. He does not l i g h t l y abandon t h i s security for the uncertainty and caprice of the polyglot aggregation of the labour centres.29 Yet the desire for higher material standards of l i v i n g probably  oper-  ated c e n t r i f u g a l l y drawing the migrant out of the r u r a l s o c i a l nexus and into the urban labour market. which may  have accounted  It was the tension between these two opposing forces for the d i s t i n c t i v e pattern of migration.  This c i r c u l a r pattern of migration has no':doubt been modified although perhaps not substantially changed i n 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 s t a r t of a permanent break with the r u r a l areas.  For one thing, the  family's base i s s t i l l securely rooted i n the r u r a l area-^and t h i s 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 i n d i v i d u a l s i n d i f f i c u l t times.  Rather, an encompassing  family-based s o c i a l security system probably provides assistance for i n d i v i d uals during periods of sickness, old age and unemployment.  I f an i n d i v i d u a l  severs t i e s with the r u r a l home area, he breaks his l i n k to t h i s naturallyevolving security mechanism. This has prompted Weisener to o f f e r what:he terms the "one family - two 32 household" model of African urbanisation.  Based on research on the Kisa  colony i n the Kariobangi housing development i n Nairobi, his data reveal a type of urbanisation characterised by strong rural-urban t i e s , r e l a t i v e l y i n secure employment i n the towns and constant interchange of men,  families and  t h e i r r u r a l kin between the r u r a l farm and the urban l o c a t i o n .  In short, they  137 were families with two households: t e n t i a l urban one.  a permanent r u r a l one and an actual or  He found that the urban and r u r a l households did not  po-  dif-  fer on (a) a series of variables designed to show rural-urban changes i n fami l i e s andi^household, or (b) a series of measures designed to tap differences in socio-economic status and " t r a d i t i o n a l i s m . "  This s i m i l a r i t y has led one  observed to remark that urban migrants should be regarded as partly-urban-based peasants rather than "proletarians.""^  Thus, mere s t a t i s t i c s on rapidly grow-  ing urban centres are therefore l i k e l y to be misleading. l i v e and support his family on the r u r a l land apparently  A man's r i g h t to s t i l l seems to depend  largely on his acceptance of membership i n the r u r a l ethnic group. Nevertheless some observers argue that a work force has emerged i n Nairobi wholly and permanently dependent upon formal employment and f u l l y  com-  34 mitted to urban l i f e .  ,; Often s h i f t s i n sex r a t i o s are used as proxy measures  of the extent of temporary migration.  Nelson has stated that:  . . . where men substantially outnumber women, as i n most of the c i t i e s of South Asia and sub-Saharan A f r i c a , much of the explanation usually l i e s i n 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 i n the c i t i e s for long or short periods but leavertheir families at home. Both patterns are associated with non-permanent m i g r a t i o n . ^ Analysis of census data indicates that the aggregate male:female r a t i o i n Nairobi i s indeed declinging over time. about 500 adult men the r a t i o was  there were  for every 100 women (almost the same as i n 1911); i n  about 250 to 100."^  ployment mission now  For example, i n 1948,  Data especially computed for the ILO  1962 em-  indicates that the gross sex r a t i o 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 i n the imbalance between men  and women i n the urban areas since more  mem;will bring their wives with them instead of leaving them i n the r u r a l home area.  Yet as Elkan points out, part of the improved sex r a t i o between  1962  138 and 1969 i s accounted for by those between 10 and 19 years o l d .  There has  been no change i n the sex r a t i o of young adults between 20 and 24 years. Among those 25 or over the balance has improved although s i g n i f i c a n t l y the disparity between men and women i s s t i l l very large; at no age above 30 i s the r a t i o lower than  3:1.  The pattern of c i r c u l a r migration has meant not only the predominance of younger men  i n the migratory stream but also the tendency of older men  leave:.-the urban area and r e t i r e to the r u r a l home.  to  As a r e s u l t the urban pop-  ulation i s more clustered by age than that of the t o t a l population.  For exam-  ple, Nairobi's population i s under-represented i n both the younger and older age groups and overrepresented i n the middle ages - the ages when people are most l i k e l y to migrate i n 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 i n 1969, 9.9 per cent of the t o t a l population exceeded t h i s age.  As well, 41.5 per cent were between  the ages of 20 and 39 years compared to 25 per cent of the t o t a l population. While 44.4 per cent of the c i t y ' s population were under 20 years of age,  58.5  38 per cent of the t o t a l Kenya population were i n t h i s age category.  Thus, the  age d i s t r i b u t i o n of the urban population, with i t s notable clustering i n the middle-ages i s also i n d i c a t i v e 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 d i r e c t relationship 39 exist between education and the propensity to migrate. to support t h i s t h e s i s .  may  Census results tend  The data presented i n Table 18, indicate that the  Nairobi population has considerably more education i n every age group than the t o t a l population or the population resident i n any given province.  The data  also r e f l e c t the marked though unequal expansion of the Kenyan educational - . M system since independence i n 1963:  theyashow conclusively that l e v e l s 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 i n Nairobi, p a r t i c u l a r l y i n the prime migrating age of 20-24 years. port stated that "the men who  The ILO re-  lack the most minimal educational q u a l i f i c a t i o n s  no longer migrate at a l l i n s i g n i f i c a n t numbers i n search of urban employ40 ment."  This i s not unexpected  since the educational q u a l i f i c a t i o n s for ob-  taining formal urban employment have risen tremendously  in recent years,  partly as a result of the higher urban wages c h a r a c t e r i s t i c 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 School Education  No School Education 3  Age Groups  Age Groups  3  Place of 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  R i f t 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  F o r each education group the two figures within th e same age group together with the figure not included for 1-4 years of education t o t a l 100 per cent. a  Source:  Derived from Republic of Kenya, S t a t i s t i c a l Abstract 1974, Government Printing O f f i c e , 1974) Tables 18(a) and 19(b).  (Nairobi:  140 E.  Urban-Rural Wage D i f f e r e n t i a l ' 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  d i s t r i b u t i o n are unavailable for Kenya there i s l i t t l e doubt that marked d i f f e r e n t i a l s exist between the r u r a l and urban areas and formal and  informal  activities. U n t i l the late 1950's urban wages i n Kenya were low and had not i n 41 creased much since the early post-war years.  Rural incomes, on the other  hand, increased r a p i d l y , p a r t i c u l a r l y a f t e r the outbreak of the Korean  war.  However, from the late 1950's onwards urban wages increased sharply r e l a t i v e to rural incomes.  Some evidence indicates that t h i s gap i s growing.  Dharam Ghai has calculated that between 1960  and 1966,  the average t o t a l i n -  come of farmers rose at h a l f the rate of unskilled urban workers.^ unavailable for wages i n small farms p r i o r to 1969,  Thus,  Data are  but i t i s estimated that  real incomes per capita have risen at a compound annual rate of approximately one per cent i n the a g r i c u l t u r a l sector as a whole.  Real wages i n 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 come r e d i s t r i b u t i o n grounds.  seem desirable on i n -  However, i n Kenya wage gaps between formal  informal, rural and urban sectors are t r u l y marked and indicate that  and  formal  sector wage earners, many of. whom are unionised, are a p r i v i l e g e d minority of 44 the labour force. for Kenya.  Table 19 presents  some data on average earnings by sector  As can be seen from the table, d i f f e r e n t i a l s between formal and  informal average earnings are considerable.  .  Average formal sector wages i n  the urban area are two to four times greater than average earnings i n the urban informal sector for the self-employed (and greater s t i l l for marginal  141 self-employed  and informal wage-earners).  also s t r i k i n g :  The gap within the formal sector i s  male wage-earners i n formal agriculture i n 1969 earned an  average of K£73 compared to KE250-471 for urban formal workers.  Table 19:  Data on Adult African Earnings i n Kenya 1969 (K£ per year)  Rural g Average large farm regular employee g Average small farm; regular employee Average small scale r. :• non-agricultural enterprise regular employee Self-employment - small holders  Males  Females  73  46  41  134  67  49  :  g  3  Self-employment - owners of non-agricultural enterprises'  3  113  • •  130  •  •  Urban a b Average employee formal sector ' Statutory minimum wage i n formal sector, Nairobi g "Unskilled" employee formal sector g Average self-employed  informal sector  Wage-earner i n informal sector a  Derived  185-297  105  84  120  90  120--  informal sector g  Marginal self-employed  250-471  100  60  50  40  36  d  from IL0-UNDP Report, Table 27.  F i r s t figure i s an independent estimate by M. Fg. Scott, Estimates of ShaWages i n Kenya; second figure i s for Nairobi derived from IL0/UNDP Report. b  dow  TThe minimum wage was raised to K£135 for men and K£117 for women i n Nairobi and Mombasa on September 1, 1973. In other urban areas and municipali 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 Determination of Individual Hourly Earnings i n Urban Kenya, Discussion Paper No. 115 (Nairobi: I n s t i t u t e of Development Studies, September 1971). Source:  World Bank, Kenya: Into the Second Decade (Baltimore: Johns Hopkins Press, 1975), s l i g h t l y modified by data i n IL0, Employment," Incomes and Equality (Geneva: International Labour Organization, 1972)  V:1  142  The table shows that statutory minimum wages i n urban area are considerably above the incomes of a l l groups i n the r u r a l 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 i n d i v i d u a l i n the urban informal sector are well above those of a l l wage employees i n the r u r a l sector, including those i n formal a g r i c u l t u r e . To assess whether these differences establish economic incentives to migrate, i t i s at least necessary to ascertain the change i n income which a migrant might expect to receive from re-locating, correcting for the d i f f e r e n ces i n cost of l i v i n g .  In other words, i t i s possible that the nominal d i f -  ferences shown i n Table 19 exaggerate the differences i n r e a l income between r u r a l and urban areas.  Although suitable data for determining whether t h i s i s  the case are not a v a i l a b l e , i t i s c e r t a i n l y the implication of Scott's  analy-  s i s