The defining attribute of a free-market economy is to create a level playing field in which investors compete fairly. Under such conditions, diverse economic players are differentiated by the quality of their goods and services. This is the principle that guides regulators in advanced economies like the European Union and US. For instance, this philosophy informs their anti-trust decisions when they take on dominant market players such as Google and Amazon which, if left to their own devices, have the capacity to cannibalise smaller competitors to the detriment of consumers.
In countries like America, where private power can be as pervasive as that vested in public institutions, policy makers routinely apply brakes on unchecked expansion, first to protect government’s monopoly of power and second to protect public interest. This is what is currently happening with Facebook, which has been seen to allow third parties to influence the thinking and choices made by different segments of American population by leveraging on data in its possession.
The whole point is that there are inherent risks in allowing conglomerates to wield power and influence that rivals that of government institutions. Left unchecked, this can make public officials pliant to the whims of private companies. This is a real risk in today’s world, where some companies hold sufficient cash reserves to run governments for several years.
An appreciation of this principle should, ideally, guide the actions and decisions that policy makers and regulators take, even in developing countries like Kenya. The endgame should be to mitigate risk to public good particularly in sensitive sectors like telecommunications and finance. America learned this the hard way during President Barack Obama’s tenure when its Treasury had to step in to save banks that were, until then, considered too big to fail. Public resources had to be mobilised to bail out banks and prevent a financial meltdown. Aftershocks from that financial crisis are still being felt to this day.
The core responsibility of regulatory authorities has always been to create an environment in which all businesses thrive and where competition is healthy and public interest is safeguarded. This is achieved through a combination of policies and interventions that mitigate against risks. That is why here in Kenya we created institutions like the Communication Authority and Central Bank of Kenya among others. Their work is to be custodians of public interest even when political actors close their eyes for expediency.
The work done by such institutions is critical in sectors that impact a large cross-section of price-sensitive consumers and whose products go beyond basic consumption of goods and services. In sectors like banking and telecommunications, products have implications for financial security of consumers. This, then, highlights the need for a more robust regulatory framework, which, unfortunately, has not been felt in these and other sectors. As a result, Parliament has in recent weeks had to step in to ask what is going on, by summoning various public officials to shed light on these critical matters.
Lack of robust regulation leaves room for corporate practices that stifle fair competition and create the impression that well-to-do players are blue-eyed boys of policy makers and government.
One risk posed by lackadaisical regulation is that consumers are left at the mercies of dominant players. It also means that in the event of unforeseen risks, such as outages, large swathes of consumers would have their economic activities paralysed until such challenges are addressed. This is not an enviable position to be in as a country.
It also goes without saying that investments in expansion of infrastructure made by smaller players are likely to be frustrated or underappreciated especially when viewed against overall sectoral financial volumes. For instance, a small firm investing in a new product that creates 10 new jobs might not attract attention if a dominant player in that sector creates 100 jobs. That is why fair regulation is critical. It is not about slowing down successful companies; rather, it is meant to make it possible for smaller ones to thrive and benefit the economy. Such growth is good for everyone.
However, lack of robust regulation leaves room for corporate practices that stifle fair competition and create the impression among discerning citizens that well-to-do players are the blue-eyed boys of policy makers and government mandarins, yet all players have capacity to grow their reach and impact in a fair regulatory regime.
Chinua Achebe famously observed that where one thing stands, another can stand by it. In Kenya, however, this observation of natural phenomena is adhered to more in the breach than in observance, particularly in sensitive sectors like telecommunications and banking.