Economics

Introduction
Although it is famed as the cradle of mankind, Africa has guarded, and continues to guard, its place as the world poorest continent. Poverty, disease, famines, unemployment and uncontrolled population growth are still prominent elements for which the continent is most known. Amid the poverty and problems is however a hope and realization that Africa is finally headed in the right direction and pessimism is gradually giving way to hope. Most subsaharan countries gained their independence from their European colonial masters in the 1950s and 1960s, with a few becoming independent in the following decades. Since they started recovering from the initial shock of the departure of the colonialists, African countries have been going through periods of economic development. Although the development process has been interrupted by civil conflicts and other mishappenings in many Sub-Saharan countries, the overall economic and political development trend has been positive. Sub-Saharan Africa is today a much improved place than it was in the 1960s. This paper examines development trends in Sub-Saharan Africa and the different arguments advanced to explain the trends.

Development in post-colonial Sub-Saharan Africa
The end of colonial rule in Sub-Saharan Africa was accompanied by much hope on the part of Africans who saw the colonial masters as robbers of Africas wealth of natural resources. The colonialists had not only relocated resources to their industries in Europe but had also denied indigenous African communities access to the resources. The exit of the former would therefore give African communities the opportunity to exploit the resources and build their economies.

The hope that came with independence however waned rapidly as Africans realized that the colonial rulers had been replaced by ruthless dictators who had no place for democracy and who were greedy to grab what was left behind by the colonialists. According to Miguel, Sub-Saharan Africa was thus among the most undemocratic regions in the 1970s and 80s. Dictatorship, civil strife and corruption reigned supreme during these decades, thoroughly slowing down economic development. Sub-Saharan economies grew significantly during the 1960s and 1970s, growth which however declined from the mid-1970s. The political tides started changing in the 1990s when democracy started establishing roots in much of Sub-Saharan Africa.

Political freedom grew significantly in the 1990s and Africans were freer to express their political opinions openly. Kenya offered a good example of this political change. After a tyrannical rule under the independent countrys first and second presidents who tolerated no dissent, agitation for more political freedom intensified, forcing President Moi to allow multi-partyism in the early 1990s. Civil strife in many African countries had subsided by the 1980s and the continent was witnessing positive economic growth. There were exceptions in some countries including the Sudan, Congo, and Somalia where civil strife stands in the way of economic progress to this day. Liberia, Sierra Leone, Angola and others have gotten over years of civil war and their economies have been growing gradually. South Africa finally ended its apartheid system and like the rest of the continent, it has been going through a period of positive economic development since the early 1990s. The gross domestic product per capita of Sub-Saharan Africa rose sharply from the year 2000.

Africa is nowhere near China or India. Sub-Saharas pace of development is much slower that Indias or Chinas. Sub-Saharan Africa is still associated with corruption, poverty, over-population and over-dependence on foreign aid. This association must however not mask the fact that the continent has braved many challenges and has made big economic and political gains since the 1960s.

Explaining the African experience with economic development
Bloom, Sachs, Collier  Udry argue that any serious analysis of the economic progress or stagnation experienced in Sub-Saharan Africa must take into account the regions geography. While denying possible accusations of propagating geographical determinism, Bloom et al argue that Sub-Saharas climate, topography and the natural ecology have a significant impact on public nutrition, health, rate and nature of technological penetration, demographics and international trade. The larger part of Sub-Saharan Africa lies within the tropics, with only a part of South Africa falling into the temperate region. The tropical Sub-Saharan Africa has for decades depended heavily on agriculture and has performed poorly for as long as it has pursued agriculture. To explain the poor performance on the part of Sub-Saharan Africa, Bloom et al observe that most of the resources spent on research and development into agriculture are spent on the mid-latitude economies. Sub-Saharan Africa however is quick and willing to borrow from the technologies developed from the research and developmentof the temperate north. Unfortunately, many agricultual technologies are not transferable across ecological regions. The widespread importation of technologies which are irrelevant in Africa have much to contribute to the slow economic development common of Sub-Saharan Africa.

Jense and Wantchekon have established a strong relationship between Sub-Saharan Africas wealth of natural resources, and its history of economic development since the 1960s. This relationship has been particularly applicable in rentier states or states whose economies are supported by income from the sale of minerals and other natural resources. Examples of such states include Angola, Sudan, Libya, the Congos, Sierra Leone, Gabon and Nigeria whose economies have gravitated around oil exports, South Africa and Botswana (diamond), and Zambia and its copper. According to Jensen and Wantchekon, the wide availability of these natural resources and the dependence on these resources tend to have a negative effect on the level of democracy in these states. A casual glance at the history of civil strife in Sub-Saharan Africa reveals that civil unrests have been most intensified in natural-resource dependent states.The politics of these states tend to revolve around, not ideology or economic policy but, distributing the revenue earned from these rents. With a seemingly stable source of revenue available, there is little incentive to invest in research and development or to diversify from the natural resources on whose exports these economies are built. The majority of these states tend to be autocratic, with incumbents using the revenue to enrich themselves and buy, intimidate or crush opposition. Natural-resource dependent states are therefore among the poorest democracy-wise and are strongly associated with poor governance and uncontrolled government spending. Jensen and Wantchekon therefore argue that the availability of natural-resources in Sub-Saharan states has shaped the regions history of economic development since the 1960s.

While this argument holds for most resource-rich states, other Sub-Saharan states have been through years of autocracy, political violence, poor governance, and wild government expenditures yet they have do not have much in the way of natural resources. These states include Kenya, Uganda, Ethiopia and Somalia which have shared a history of autocracy and internal strife with the resource-rich states yet they earn very little if anything- from exporting natural resources.

Miguel, Satyanath  Sergenti argue that Sus-Saharan Africas history of civil conflict has contributed much to the economic development trends since most of the states gained independence from their European colonial masters. Unlike Jensen and Wantchekon who blame such strife on the greed for revenue earned from exports of natural resources, Miguel et al associate the unrest with weather shocks. With the majority of Sub-Saharan Africans depending directly on the environment for food and income, it follows that weather shocks, mostly taking the shape of droughts, can be devastating on the people and their economies. Acute shortage of precipitation spells disaster to the largely rain-fed agriculture. It also occasions much damage to pastoralists livestock. When this happens, the economies take a hit while the possibility of conflicts inceases significantly.Weather shocks have contributed much to economic stagnation in Sub-Saharan Africa, a situation which increases the likelihood of citizens rising against the government and against other members of their society.

Trade is always at the core of economic growth. Not much economic growth occurs if there is no trade going on among the residents of one country, across countries or both. However, trade relations betweeen parties necessitate a level of trust in the absence of which trade relations between the parties are interfered with. Trust is at the centre of Nunn  Wantchekons argument which relates Sub-Saharan Africas economic development experience with the continents history of slave trade. Slave trade had profound effects on the social fabric of the African communities, affecting relations even among members of the same family. Cases were common of people selling into slavery members of their own families. Years since slavery was abolished in Europe and the Americas, the effects of slave trade on the level of trust among members of communities most affected by slave trade still plague their economies. Slavery created in the affected communities a culture of mistrust which still adversely affects trade relations among Africans and with other continents.

Slave trade had devastating impact on the social fabric of the affected African communities. There is truth in the argument that slavery could have led to the birth of a culture of suspicion and mistrust, which could have long-term effects on the way Sub-Saharan states interacted with Europe and the Americas, particularly in trade matters. However, slave trade was more widespread in countries which had a coastline and which entertained relations with the foreign merchants. One finds an exception in Ethiopia which remained hostile to foreign interference to the extent that it was never colonized. Although European states did attack and try to take control of the country, Ethiopia fought back. One would therefore expect that slave-trade had a shallow effect on the countrys social fabric. Ethiopias economic development history is however not much different from the history of other African economies. This suggests that no one single factor can account for the continents experience of economic development.

Tradable rights to pollution refer to being able to buy and sell the right to pollution. Some economists prefer this approach, instead of the command-and-control strategy that will be more costly for the government (Hoffman, 40). The American government already employs tradable rights approach to manage some of its pollution problems. Michael Sandel opposes tradable rights, because even if they can improve market efficiency, they greatly undercut environmental ethics, which are issues that cannot be overlooked. Michael Sandels main concerns about the assignment of tradable rights to pollution are that 1) richer countries can avoid their obligations to reduce emissions by buying credits from less-pollution-producing nations, 2) tradable rights turn pollution into a commodity, and so this removes its social stigma and makes it easier for companies and countries to treat pollution as just another cost of doing business, and 3) tradable rights weaken opportunities for shared responsibility and global cooperation (450). I agree with Sandel because I believe that companies should not just be compelled to cut pollution outputs, merely because they have traded rights, but because they know their moral obligation to communities that are affected by their pollution, and tradable rights in the U.S. have not been entirely successful in making the industries more efficient in responding to environmental concerns.

Companies should not just be compelled to cut pollution outputs, just because they have traded rights, but because they know their moral obligation to communities that are affected by their pollution. Companies and governments have an ethical imperative to protect people from the immediate and long-term consequences of pollution. There are already many examples of people who have died or have been sick because of the pollution that affected their waters, land, and atmosphere. These people could either not find jobs or keep jobs, because of their disabilities that they got from being exposed to pollution. Are the companies who led them to this situation paying for their loss of economic productivity Are they paying their medical bills Perhaps more importantly, do these communities even know that they are being poisoned by pollution and do they know who the culprits are Are these companies also suffering the way these affected people have had, for them to fully understand why it is immoral to treat pollution as just a way of doing business For many developing countries, these questions can be hardly answered because of lack of environmental laws or poor implementation of laws. Yet, they economically suffer and the local economy has been worse off in the long run because of pollution. I believe that companies should not act as if they have no conscience and not consider, at least, the economic impact of their pollution on the lives of families and individuals.

I will now be discussing my second point. Tradable rights in the U.S. have not been entirely successful in making the industries more efficient in responding to environmental concerns. An example is the SO2 allowance trading (Boyd et al., 57). The allowance trading reduced program costs by 30 to 50 percent (Boyd et al., 57). However, it has not been greatly market efficient, because firms tended to rely on their facilities and use the market only as a back-up (Boyd et al., 57). The risk-aversive behavior signifies that the market is not attaining an optimal amount of efficiency, especially if firms know that they can choose to ignore the market anyway (Boyd et al., 57). As a result, the state is even providing incentives for compliance, which only increases costs (Boyd et al., 57). This is only one example of why it is important for companies to develop an ethical approach also to pollution, because market opportunities are not enough for them to comply.

Sandel presents persuasive arguments. With a global environmental ethic, companies and governments will treat pollution with all its social stigma and work collectively to curb and eliminate it, simply because it is IMMORAL. With tradable rights, pollution becomes something like taxes only. But do taxes lead to direct and irreparable health and life damages like pollution can Thus, trading rights are not efficient and they are immoral.

Chapter 7 Classical Analysis and Policy

Macroeconomics analysis gives insight on the economys current institutional structure and hence classical macroeconomics aptly forms the basis that M  V remain indifferent to any varying changes in interest rates, which keep the ASF vertical as it greatly impacts the macroeconomic coordination process. In the scenario where the APE shows a rightward shift, increasing APE, it will exceed ASF.

The above diagram explains the correlation between GDP, APE, ASF and interest rates.

ASF will remain unchanged as M  V are indifferent to any change in the interest rate. However if APE falls or a leftward shift occurs than interest rates will fall and excessive funding will take place which will surpass ASF as compared to APE. Fund holders will have excess funds and will have difficulty finding borrowers and therefore interest rates will drop. Decrease in interest rate do not affect ASF, but will give rise to interest sensitive demand while interest rate will continue to decline until APE is back to its original point where ASF and GDP are constant.

Classical economy and economist underlying notion believed that interest rates are elastic enough to repel any significant changes that occur in APE and restore it equilibrium with ASF and GDP.  In cases where APE experiences a leftward or rightward shift, funds will be in excess and will not be needed. Funds holders or banks that will hold these excess funds will offer it on lowest interest rates. While interest rates will fall, APE will rise until it equals ASF and exceed GDP where funds demanded surpasses output.  As a result, businesses experiencing increase in demand will increase their prices.

The diagram illustrates the shift in APE. When APE increases, interest rates rise to i1. Also ASF increases funds, which in turn depresses interest rates and it falls, subsequently funds demands exceed GDP and prices increases which restore the ASF line back to its original point.

The classical economist point of view states that businesses are happy with their current levels of output of production and sales, that is selling at constant profit maximizing output levels. However the increase in prices will make the ASF line shift leftwards and in turn will increase the interest rates which make APE fall showing a downward movement along the APE line.

Prices continue to increase until interest rates, ASF and APE return to their original point. Rise in ASF only indicates an increase in price and has no affect on output and employment while interest rates drop initially but eventually restore to their original levels. However if ASF drops, prices decrease, and interest rates will again rise but will decrease to their initial levels. A drop in ASF also indicates shortage of funds, which in turn increase interest rates, while dropping APE. Drop in ASF will result in businesses cutting prices, which will increase ASF, decrease interest rates and will enable APE to restore to its initial point. Hence businesses will adjust that product prices according to demand and variation in sales.

If GDP drops, prices will increase, and will make ASF drop to the GDP level, simultaneously interest rates will raise enabling APE to drop to ASF and GDP level. Similarly if GDP rises, businesses will give prices cuts and will lower costs to increase ASF up to GDPs level, in turn interest rates will fall to bring APE back to ASF and GDP levels. All scenarios indicate that ASF, GDP, APE, interest rates and prices are correlated, as interest rates fluctuations keep APEASF, flexible prices keeps ASFGDP and GDP indicates the economys full employment cycle.

Until great depression there had been no changes in employment and output levels to have doubt on the market abilitys to continue operating at high output levels. Interest rates do not fall until businesses cut prices and output. Leaning ASF line, indicating shifts in demand brought into view changes in output and price elasticity which was earlier unheard in classical economy. Macroeconomists were hopeful that businesses should only rely on price changes to adjust sales fluctuations, so as to restore demand ASF and APE to its original levels of GDP. Hence implying that equilibrium point ASFAPEGDP does not necessarily requires full employment level of output.

Chapter 8 Monetary Policy
There are twelve Federal Reserve Banks and each is privately-owned corporation having stock owners who are members of the Federal Reserve System that are banks in their respective districts. Federal Reserve Banks are created by the federal government and operate under their jurisdiction. Monetary policy is regulated by Federal Reserve Act to purposely have open market operations, adjustments in reserve requirements, and changes in interest rates to apply intended control on interest rates levels, prices, employment and levels of outputs through a three step process.

First the Federal Reserve systems use its either of its three policy tools i.e. open market operations, changes in bank reserve requirements and changes in discount rates to bring about a change in nations money supply M and interest rates. This alters the scale of ASF, which in turn affects employment, output, interest rates and prices as per the macroeconomic coordination process.

Money supply is expressed as M  CC  CA. r is the average of dollars that banks must keep on reserve per dollar of each checking deposits (CA), and r represent reserves per dollar of time deposits (TD). r x CA measures the total of required reserves of nations banks corresponding to checking deposits. While w x CA indicates total working reserves which are voluntarily held by banks in excess and addition of legally required reserves. The total reserves of banks are given by R  (r x CA)  (r x TD)  (w x CA). B indicates the coins and currency portion of money supply and all reserves of the banks and hence is given by B  CC  R.

Feds direct monetary control variables are B, r, and r. If banks have negative working reserves it implies they have lesser reserves than the current requirement. Fed can increase ASF by asking banks to decrease w, increasing B and decreasing r, and r. Any reverse changes will decline ASF.  Fed uses three tools to control monetary policy, open market operations require the alteration in B which is the monetary base and affect the level of M and ASF. Open market purchases boost B by the extent of purchases, and open market sales lessens B by amount of sales. Any cash withdrawals will increase CC and reduce R, while any cash deposits will have the reverse affect.

Second tool is through reserve requirement adjustment. To keep higher level of reserves while unchanging the working reserves, banks reduce their outstanding loans. Every dollar of bank deposit that is used to pay off bank loans in turn frees the reserve that was holding that dollar, and is used to increase reserves being held on deposits. If feds cut r or r, w will involuntarily increase until banks release loans to absorb required reserves that were accumulated to fill the reduction in reserve requirements.  Furthermore any resulting increase in money supply must be utilized in lending and not become part of the working reserves.

Thirdly feds use the discount rate adjustments to control monetary regulations. Whenever a dollar is deposited in a bank, its reserves increase by that dollar, and its withdrawal diffuses its reserves. Banks are required to maintain a certain percent of reserves against its account balances. Hence voluntarily keeping working reserves ensures that the bank does not have insufficient reserves in the event of net withdrawals.

Working reserves also can be used in interest based income yielding loans. If working reserves are low, it will enable banks to have lower interest penalties on borrowed reserves, however higher reserves will limit the scope of banks earnings on consumer loans. If the discount rate level rises relative to bank lending rates it will increase the penalty on borrowed reserves as compared to its interest income that was being sacrificed while keeping this working reserve. In addition it also encourages banks to keep higher working reserves.

Hence Fed maneuvers the situation to its advantage to pressurize the money supply of the nation and changes B by altering (r and r) and the level of discount rate in relation to banks lending interest rates, in response to which banks change and alter their working reserves. An open market purchase increase B, lower required reserves, and hence lowers the discount rates in relation to bank lending interest rates. This triggers the money multiplier, and in turn increases ASF.  B decreases as a result of open market sales.  A higher reserve requirement and higher discount rate in relation to bank lending of interest rates will decrease the money multiplier and in turn decreases the ASF.

The diagram above illustrates the use of monetary policy to bring GDP to the desired output level expansion. It reduces interest rates for more borrowing of funds by businesses, increasing demand and facilitates in increasing output.

Monetary policy is used to restrain the logic of managing the growth of money supply and ASF.  And hence the Federal Reserve uses two policies to either ease or tighten the money supply restraint. To bring about an increase in M i.e. money supply, fed may use one or more open market purchases, slash in reserve requirements and a cutback in discount rates. Ease of monetary policy can be used to offset the significant drop in APE, as it creates more funding chances, lowering the interest rate levels.

A steep ASF line indicates ASFs weak response to any changes in the levels of interest rates and supports the likely impact of monetary policy. The influence of easing of monetary policy depends largely on banks sensitivity to their rise in excess reserves and subsequent expansion in lending. Furthermore this will lower interest rates and APE demand response will reflect how effective easing policy has been.

Tight monetary policy is used by the Federal Reserve to attain its goal of price stability. It is used to curb inflation and has short-term effect on prices and interest rates. Tightening of monetary policy helps in increasing the interest rates and decreases demand. This cost push price increases will shift the ASF line to left, which in turn will lower GDP and APE also shifting the APE line to left. In this scenario easing monetary policy will help in restoring the ASF line to its initial point.

Hence tight monetary policy is not an effective tool to control money supply, as it requires banks to reduce their lending forcing a decrease in M and ASF, which in turn leaves the bank with reserves lower than the minimum requirement. Subsequently this reduction in lending will require banks to offer a higher rate of interest on lending, which will deject borrowers. The impact of tight monetary policy will strongly reflect on how APE demand responds to higher interest rates.

Chapter 9 Fiscal Policy
Following are equations from preceding chapters
GDP a GDY 1-1
GDY a HY  BY  GY  TF 1-2
APE a C  I  G  X   F

Hence it can be implied that APEGDP in the case when (HY-C) gauges increase in income relative to output demanded and reflects the household s surplus income. In the same way businesses budget surplus is given by (BY-I) and governments by (GY-G). Sum of sector budget surplus will equal zero only when APEGDP, and any sector budget surplus will be counteract other sectors deficits to retain the equilibrium.

Congress formulates the fiscal policy and can have two basic forms of automatic stabilization or discretionary fiscal policy. Automatic stabilization policy refers to progressive net tax structure and welfare and employment reforms, which are applied to lessen the sensitivity of APE to GDP changes. They are beneficial to gauge the degree of likely changes in employment and output during the macroeconomic coordination cycle. Discretionary fiscal policy helps in maneuvering the net federal tax revenues and controlling federal government requirement of current domestic output. It influences the nations cumulative demand for domestic output (APE) as per the intended objective of demanding the preferred levels of interest rates, employment, prices and output through macroeconomic coordination process operations.

Governments exploitation of progressive income taxes can greatly contribute to automatic stabilization if it does not change the current national output while tax receipts fluctuate. When GDP is on the rise, a progressive income tax takes new income away from the tax payers, and hence limits their after-tax income levels and in turn minimizes any likely increase in their purchases. However if the government reacts slowly to decline in tax receipts and takes no action what so ever it will result in a decrease of APE in reaction to this change in GDY. Tax receipts greatly impact GDY and it may rise or fall respectively, however it has no influence on benefits of these programs. Under proportional tax reform, no change is visible on the households tax rate however it falls under the progressive tax reform if income falls.

Discretionary fiscal policy is applied in a two step process. First the federal government modifies its current output purchases which change G, bring a change in tax receipts from household altering C and from business altering I. this will in turn change APE likely to affect output, employment, prices and interest rates as per the macroeconomic coordination process. Hence from this scenario one can easily infer the fiscal policy formula that reflects the how APE enhances or lowers when any changes are made to the federal taxes and federal purchases of current domestic output.
HT is the change in government tax receipts and HT denotes household s taxes
BT is the change in government tax receipts and BT denotes business taxes
G is the change in government demand for current domestic output

Hence the fiscal policy formula can be given by APE  G - 0.65HT - 0.35BT. if the government is able to set a targeted GDP level, where GDP reflects highest employment level in absence of inflation then fiscal policy s objective is to keep APE  GDP. APE  (GDP - APE) where APE reflects the existing cumulative demand. If (GDP - APE)  0 it will require the use of expansionary fiscal policy. (GDP - APE)  0 it will require the use of restrictive fiscal policy.

Fiscal policy helps government to take calculated steps to bring variation in the APE line simultaneously changing the levels of government purchases and tax revenues. If tax revenues decrease as compared to government purchases, APE will increase experiencing a rightward shift. Subsequently if tax revenues increase in relation to government purchases, it will decrease APE, resulting in a leftward shift.

The diagram below shows the use of expansionary fiscal policy by usage of automatic stabilizers.  Though the fiscal policy helps in increasing APE, the steeper IS line indicates less effectiveness of the policy and possibility of better GDP if GDP lines shifts to the right.

Use of automatic stabilizers results in a steeper IS line, and lessens the impact of expansionary fiscal policy effectiveness. In the same way steeper APE indicates the cumulative demand reaction and their relative impact on interest rates. Hence to lessen APE the government requires good use of variables changes in G, HT, and BT.

Kenya is located in Eastern African region and borders Ethiopia, Somalia, Uganda, Sudan and Tanzania. It has a total population of 39 million people and an area of 580,367 square kilometres.It is a semi-presidential republic and is recognized as the regional hub for trade and finance in East Africa. The Kenyan agricultural and industrial sectors  contribute a large proportion of the countrys total GDP.Some of Kenyas major trade markets include Tanzania,Uganda,United Kingdom, United States, Pakistan and Netherlands. Gatheru states that poor governance, corruption, poor planning and ineffective implementation of development strategies have all contributed to Kenyas slow economic and social development. Kenya adopted the Millennium Declaration in 2000 which required the government to put into place measures and strategies that can  increase social and economic development by achieving  Millennium development goals(MDGs).The Kenyan government has made some progress in the achievement of these goals although several challenges may hinder the achievement of some goals  by 2015.For Kenya to increase  economic and social development, the government needs to put into place strategies that will promote economic growth. Income levels and Gross Domestic Product (GDP) in Kenya as compared to other developing countries and the developed countries indicate that Kenya is lagging behind. Statistics on economic growth show that there is positive correlation between GDP (PPP) and life expectancy in countries. For instance, in 1998, Kenya had a GDP (m) of 11083 and GDP (m PPP) of 32,770.The life expectancy was estimated to be 51 years. In India, which had a GDP of 384429 and a GDP (m PPP) of 1666000, life expectancy was 63 years. Egypt which has managed to make positive economic progress in the same year had a GDP (m) of 78097, a GDP (m PPP) of 190930 and life expectancy at 67 years. Life expectancy in United Kingdom which had a GDP (PPP) of 1217760 was 77 years. In addition, economic growth has positive impact on industrial production. For example, in 1998, Kenyas industrial production accounted for 16 per cent of the countys GDP while in India which has a much higher GDP than Kenya, industrial exports accounted for 30 per cent of the GDP. Investment in India and Kenya contributes to 23 per cent and 18 per cent of the total GDP respectively, implying that economic growth attracts investment. Developed countries have a large percentage of their population living in urban areas. In 1998, urban population in the United Kingdom was 89 per cent of the total population while only 26 per cent of the population in Kenya and India was lived in urban areas.

Kenyas economy has been growing at a very slow rate .It is ranked as the 17th poorest nation in the world and since independence, Kenya has had a mixed economic perfomance.Although slow and stagnant economic rate has characterized Kenyas economy, economic growth improved slightly after 2002.For instance, Kenyas Gross National income (GNI) per capita in 2005 was estimated to be 523.1 and by 2007 reached 771.1. The GDP per capita (US ) in 2005 was 537.4 and 786.1 in 2007.By 2009, an improvement in the economy had the GDP per capita at 1,600.The global financial crisis together with the  post-election violence experienced in the country after the 2007 general elections  has slowed down economic growth. In relation to the economic structure, Kenya has a market-driven and commercial based economy. The economy has a liberalized external trade system and state-owned enterprise infrastructure. The economy relies heavily on the agricultural and tourism sectors. For instance, the agricultural sector plays a major role in the economy because they generate great revenue in the economy. An increase in investment has promoted growth in industries, an issue that has had a vital role in economic and social development. The need to increase economic and social development in the country will depend on how successful Kenya will be in achieving the MDGs.

Discussion
Kenyas Millennium Development Goals
The first millennium development goal is the eradication of extreme poverty and hunger.  The government intends to reduce by a half the population of people who earn less than one dollar a day by 2015.As asserted in the Millennium Development Goals in Kenya article (Millennium Development Goals in Kenya, 2010), the country has in the recent past been experiencing positive development, but poverty is still a problem and hunger continues to be experienced from time to time. It is estimated that a large proportion of Kenyas rural population lives below the poverty line. The rural population relies on subsistence farming which generates little income. Currently, agricultural extension programs are yet to make great impact in the sector. Agricultural production accounts for 28 per cent of Kenyas GDP, industries 13 per cent and exports 65 per cent. Major crops that are exported include horticultural crops, tea and coffee. A Kenya Export Commodity graph (Kenya Export Commodity, 2010) shows Kenyas imports and exports from 1984 to 2005

The second millennium development goal is to achieve universal primary education whereby all children who require primary education should go to school by 2015.  Before the free primary education program was introduced, many children did not go to school while others dropped out of school due to poverty and lack of government funds to support education. The government provides free primary education but corruption and embezzlement of school funds are undermining the governments efforts to provide all children with basic education. In 2006, about 7.8 million adults and young people were illiterate and the age cohort of between 15-19 years had a literacy rate of 69.1 per cent.   Making basic education accessible to all children by 2015 is a millennium goal that needs to be achieved. The following graph shows Kenyas population percentage that reached the minimum mastery level as compared to the desired level in 2006

Kenyas third goal is to promote gender equality and empower women.  The major target is the education sector, where gender disparity in primary and secondary schools is evident. Haugerud (Haugerud, 1995) points out that gender inequality has been experienced in almost all societies where the roles of women and men are defined.  Due to traditional beliefs and culture, many young girls are denied education so that their brothers to go to school while others are married off when they reach the age of 13. The political system has contributed to the socio economic status of women by encouraging the election of a large number of men to take over political offices.

Reducing child mortality is another millennium development goal.  The government aims at having the child mortality between 1990 and 2015 reduced by two thirds.  Infant and child mortality is caused by poor health of mothers, diseases and lack of health facilities. Although the government has been trying to build health centers and to carry out public awareness campaigns to reduce child mortality, more needs to be done.  The fifth millennium goal is to improve maternal health by having the maternity mortality ration between 1990 and 2015 reduced by three quarters.  Ensuring that women get education and access health care services will go a long way in the achievement of this goal. Because malaria, HIVAIDS and other diseases are claiming many lives, the sixth millennium development goal aims at addressing this problem.  HIVAIDS claims hundreds of lives each day while malaria kills many infants and children every year. A high number of AIDS victims have increased the number of orphans in the country, making HIVAIDS problem a national disaster. According to Mwaura (Mwaura, 2005), government efforts to prevent the spread of AIDS include public awareness campaigns, education and provision of health care services.

The seventh millennium development goal is to ensure that there is environmental sustainability. The government intends to achieve this goal by integrating various principles of sustainable development into government policies. There is need for the implementation of policies and programs that can reverse the destruction of environmental resources. Increasing the land area covered by forest, ensuring there is protection of natural resources from exploitation, promoting efficient energy use and reducing carbon emissions are some of the measures that are being taken to promote environmental sustainability. Kenya recognizes the need to develop a global partnership for development with other nations.  This development goal can be achieved by comprehensively dealing with debts and increasing development through international and national measures as well as embracing new technology by co-operating with the private sector.

How Kenya has progressed in achieving the MDGS
Since 2000 when the Millennium development goals were set, the Kenyan government has geared up efforts that will ensure achievement of development goals. One of the ways through which the government has done this is by establishing millennium districts to acts as starting points in implementation of development strategies. About nine millennium districts were created and later increased into thirteen. These districts act as the. The government introduced Free Primary Education (FPE) program in 2003 to ensure that all children access basic primary education. According to an article on Millennium Development Goals in Kenya Needs and  Costs ( Millennium Development Goals in Kenya Needs and  Costs,2010),the Ministry of Planning in 2005 was involved in a needs assessment  exercise to identify the most urgent needs of the people so that projects of development initiated address the needs of the  people.

The government has also been increasing the proportion of funds put aside for the achievement of the MDGs.For example, the Constituency Development Fund (CDF) provided to each constituency funds projects such as improvement of infrastructure, construction of schools, building and equipping of health centers as well as providing funds to sponsor the education of orphans and children from poor families. Although the CDF has made positive impact in some constituencies, mismanagement of the funds due to corruption has   hindered development in some constituencies. In 2007,the government  began  working together  with the civil society,the media and Community based organization to create advocacy about the MDGs.Workshops in various districts have been conducted to increase public awareness about the MDGs as a way of engaging citizens in achievement of the goals.Pilot  development projects have been initiated and their success has been a boost to the achievement of the MDGs.For example, water projects in arid and semi-arid areas have been initiated to eradicate poverty and hunger by providing water for livestock rearing and crop production. Improvements in agriculture and fishing have been promoted by accessibility of farm inputs by farmers and agricultural extension services. To reduce child mortality and improve maternal health, health centers have been built and equipped to address the needs of the local people. To tackle the problem of HIVAIDS, the government has intensified public awareness campaigns and with assistance from the global fund provides anti-retroviral drugs to AIDS victims at an affordable cost. In order to develop global partnership for development, the government works together with non-governmental organizations, donors and international monetary funding bodies such as the IMF to initiate development.

Kenyas Millennium Development goals that may be difficult to achieve.
One of the goals that may be difficult for Kenya to achieve is the eradication of extreme poverty and hunger by 2015. This is because, with only five years to go, very little has being done to reduce poverty and hunger in the country. Lack of financial resources to fund poverty eradication projects and proper government policy to provide effective solutions to the problem are a milestone to the achievement of this goal. According to Ndege (Ndege, 2001), poor infrastructure in some areas makes it impossible for farmers to take their goods to the market for sale. Food insecurity due to failed crop seasons and poor farming methods needs to be addressed and plans to eradicate poverty and hunger accelerated. In addition, policies that support a development strategy that improves the living standards of the people and reduces unemployment needs to be implemented fast. The Narc government objective to create about 500,000 jobs annually has not been achieved. The Ministry of Agriculture has made efforts to support farmers but corruptions by officials who head agriculture-related associations deny farmers good benefits.  To eradicate poverty and hunger in Kenya, the government needs to adopt agriculture-related policies that ensure that farm inputs are made available to farmers at affordable prices and irrigation schemes are supported. Based on statistics provided by the CIA Fact book website (Kenyas Economy 2010.CIA World Factbook, 2010), Kenyas GDP in 2009 was estimated to be US 30.21 billion while GDP purchasing power parity from 2007 to 2009 rose from 61.35 to 63.52. In 2008, the unemployment rate was at 40 per cent. Inflation in 2008 was estimated to be at 7.4 per cent while GDP per head was 640(PPP 1,640).Low industrial rate of growth has hindered the creation of employment opportunities. For instance, in 2009, industrial production growth rate was estimated to be 2 per cent. The following graph shows how various sectors have accounted for shares in the GDP from 1984 to 2005

 Malawi and South Africa are two developing countries that have managed to make great progress in poverty and hunger eradication by improving the living standards of the people. Malawi has become a success story due to its increased agricultural production after the implementation of fertilizer subsidy programs. This has increased food security, improved the living standards of the people and reduced poverty. As stated in the website Malawi Subsidizing Agriculture is not enough (Malawi Subsidizing Agriculture is not enough, 2010), the fertilizer subsidy program has made the country a regional exporter. This is an indication that empowering the farmers can make it easy for parents to finance education for their children. In 2007 and 2008, the Malawian government planned on spending 51 million and 78million respectively for seeds and fertilizer subsidies. This is a measure that the Kenyan government should support. Mwakikagile (Mwakikagile, 2008) states that South Africa has managed to increase the food security and become a major exporter by ensuring that farming focuses on both subsistence and commercial farming to eradicate poverty and hunger.  Well developed communications, transport, energy and financial sectors have boosted economic growth. If Kenya is to make such progress, reforms in the agricultural sector will be vital. South Africa has managed to increase its growth rate in GDP over the years and this has contributed to economic growth (South Africa Fast Facts, 2010).The following graph shows the growth rate in GDP in South Africa over the years.

Another goal that may be difficult to achieve is gender equality and empowerment of women. Initially, gender inequality in schools was high because parents who faced financial challenges chose to educate the boy child.  However, the introduction of free primary education enabled many girls to be enrolled into school. Gender disparity is still experienced in the education sector in rural areas where young girls are married off. A good example is the Maasai Community where adolescent girls are married off before they complete their primary education.  Kenyan women lack equal opportunities to compete with men for political leadership positions. In the past, women who have aspired to run for presidency have been criticized and intimidated. Only a small number of women are elected to become members of the national assembly. Robert (Robert, 2006) asserts that men leaders are to blame for failing to give their support to policies that increase gender equality. Due to these reasons, ensuring that there is gender equality in all the sectors of development will be a great challenge for Kenya.  Gender equality and empowerment of women can be accelerated through the implementation of government policies that demand all children be enrolled in schools and harsh penalties for parents who marry off their daughter at an early age. Ensuring that there is environmental sustainability may be another great challenge for the government.  Over-exploitation of natural resources, environmental pollution and emission of industrial wastes into the environment has led to environmental degradation and human encroachment in protected areas. Political interference in conservation matters leads to environmental degradation. Policies that ensure that environmental conservation go hand in hand with sustainable development need to be implemented urgently to accelerate the achievement of this goal.

The reduction of child mortality rate by 2015 may be difficult due to the slow social and economic growth experienced in the country.  Children require good living conditions and good health in order to combat killing diseases such as malaria and pneumonia.  Poverty and hunger eradication policies need to be implemented to improve child health. Because the issue of HIVAIDS is related to poverty and gender discrimination, addressing the problem requires the government to be engaged in efforts that tackle poverty and empower women to combat the spread of HIV. South Africa has made progress in fighting HIVAIDS despite the high rate of infection in the country. To address the problem, proper health care services are provided to AIDS patients and public awareness campaigns to support AIDS education have received great support. A strong legislature should be put into place to oversee the initiation and implementation of development policies. According to the CIA-The World Fact book about Germany (CIA-The World Factbook, 2010), Germany is one of the developed countries that has managed to become an economic powerhouse in Europe through social and economic development. Gender equity in Germany has been achieved since there is gender equality in education, employment and leadership. Maternal health has been improved by the countrys good health system and education is accessible to everyone.

Conclusion
Kenyas Millennium Development Goals (MDGs) aim at promoting development and sustainable management of resources the country. Although efforts to woo investors who create job opportunities have been made in developing countries such as Kenya, high levels of unemployment have pushed people to poverty. Developing countries experience great challenges that have become a milestone in efforts to development. While some countries have made progress in achieving the MDGs, others are still lagging behind. Kenya has made some progress in achieving some of the goals, but more needs to be done.  

A rentier state has been defined as a state reliant not on extraction of the domestic populations surplus production but on externally generated revenues, or rents, such as those derived from oil. Drawing on this foundation, a rentier state relies on a rentier economy in which income from rent dominates the distribution of national income, and thus where rentiers wield considerable political influence.

Since the rent (i.e. the income derived from the gift of nature (Beblawi 1987, p.85.)) dominates a larger proportion of the GDP, a rentier state, in general, lacks a productive outlook. Other terms have also been used to defined a rentier state, such as allocation state (Luciani 1987) and distributive state, (Vandewalle 1998) are used interchangeably with rentier state. The use of these alternative terms emphasize the functions of state (allocation and distribution), instead of its source of revenue (the rent).

Rent and Rentier
The theory of rent dates to the classical eighteenth and nineteenth century economists Adam Smith and David Ricardo. Both defined rent as a distinct source of income. According to Smith (1974), .rent enters into the composition of the prices of commodities in a different way than wages and profit. High and low wages are the causes of high or low prices high or low rent is the effect of it. (p. 249). Ricardo (1960) observed that rent was a reward for, and not profit from, ownership of natural resources. In making this distinction, Ricardo stated, the laws which regulate the progress of profits and seldom operate in the same direction. (p. 270). To avoid misunderstanding, rent used in this context has nothing to do with rent, in the sense of rent for land or property. Rent strictly refers to financial income that is not matched by corresponding labor or investment. Rent-seeking behavior aims at avoiding competitive or market pressures to bring about distortions in ones own interest in the political sphere.

Balkan Rentier States
Rentierism provides a main challenge for the national economic development for many emerging economies especially Balkan states. Within the debates of resource curse, political and economic threats like Dutch disease, economic growth and a rent-seeking orientated domination of the resource sector are discussed.

In rentier states the economy is dominated by various external rents, e.g. through natural resources. This is the case in Azerbaijan and Kazakhstan. Both economies are highly resource-dependant (Auty 2006). The state as the main recipient of resource rents face their windfall profits from resource wealth which leads to an enormous rent-seeking potential for the involved political and economic elites. Moreover, like in most rentier states  these two countries also emphasize less of their fiscal and monetary tools to guide their economies.

Welfare Economics and RentierEconomies
Referred to as rentier or distributive states, Saudi Arabia, United Arab Emirates, Bahrain, Qatar, and Oman have created extensive cradle-to-grave welfare systems consisting of free education, subsidized housing, free medical care, and guaranteed public employment. Beblawi and Luciani (1987) were among the first economists to describe the negative effects of welfare capitalism on the social fabric of oil-rich Gulf nations. They noted the disdain for work and lack of interest in formal learning. They introduced the term rentier mentality to refer to the disjunction in the popular mind between work and education and between income and reward. Further research by Amuzegar (1999), El-Ghonemy (1998), and Mazawi (1999) reinforced the prevalence of the rentier mentality as a causal factor in the poor educational performance of Arab students. By no means, however, are the Gulf nations unique in this regard (Ross, 2001). With few exceptions, resource-driven economies, whether they are mineral-based or oil-based, tend to be governed by autocratic elites, have weak civil societies, demonstrate high rates of illiteracy, and are prone to inter-ethnic strife.

Oil-Rich Rentier States
Despite enormous rents derived from oil and gas exports, oil-rich rentier states have been unable to diversity economically and as a result, display a remarkably uniform developmental path (Gause III, 1994 Shafer, 1994). Analysts point to the following reasons. The steady flow of wealth prohibits the need for taxation on personal incomes. Oil revenues are owned by government. Thus the extraction of oil and gas is basically an isolated, capital-intensive enterprise dominated by expatriate workers. The relationship between the citizen and the state is therefore fundamentally different from that found in non-resource-based societies. By exercising dominance over the economy, governments vest a wide variety of private interests in its stability, privileging its allies and punishing its opponents.

In the Gulf, the national government is typically the principal recipient and dispenser of rents. Its responsibility is to manage the flow of rents and distribute them by means of outright grants, entitlements, contracts, licenses, or state employment. The political economy is, therefore, arranged as a hierarchy of rentiers with the state at the top of the pyramid, acting as the ultimate support of all other rentiers.

Other analysts have observed that rent seeking tends to produce an inverted pyramid of social classes (Noreng, 1997). In the oil-rich economies, a large non-productive, consumer-driven, middle class dominates the social structure in the absence of a producer class. High levels of affluence create insatiable demands for foreign goods and products. Thus from a development perspective, the modern Gulf state demands those skills that can be attained only by accessing Western-style training and education.

Social Polices and Political Independence
Despite the fact that governments in rentier states are relatively free from taxation and, therefore, fairly independent from society, it is still necessary for them to legitimize their power.  As one obvious instrument is strategic social policy. This is the case not only in post-Soviet rentier states, but can also be regarded in rentier states of Latin America and the Arab World.  Targeted instrumentalization of oil rents can be realized either through structural benefits, as part of a rent-based social policy (i.e. a free health and education system or specific types of addressed support for pensioners, etc.) or through selective benefits, such as ad-hoc benefit payments. Najam describe this strategy in rentier states as the cooptation instead of participation and alimentation instead of taxation.

European Rentier States and International Trade
The primordial observation is that the EU15 trade profiles differ with neighbors and with distant partners. The EU15 took advantage of its geographic location and was most successful in enhancing its exports to emerging and rentier countries located in Europe  Periphery (Denis, Mc Morrow,  Roger 2006). The EU enlargement and neighborhood policies have strengthened the effects of geography and have opened up new dynamic markets near at end (new member states and Mediterranean countries). The rentier states in the EU periphery have become major markets for the European exporters since the early 2000s.

The global economic crisis has hit all emerging countries since 2008 but the worst hit were the economies which were the EU15 most dynamic markets in the past ten years rentier states and emerging economies in Europe and its periphery. During the past ten years, the emerging economies, exporters of manufactured products or services, and the rentier states, exporters of primary products, have eroded the dominant position of the developed countries in world markets. The EU15 has lost less ground than the US or Japan. The EU15 has taken advantage of its geographical location to enhance its exports to the emerging and rentier countries located in Europe  Periphery.

Sgard (2008) has put forward a model which aimed at combining private interests and market economy with a strong public policy, profoundly differs from that of countries which can be considered as rentier states as their economic rise is based mainly on exports of natural resources. Sgard (2008) has further emphasized that the distinction between emerging economies and rentier states makes sense when analyzing international trade since their integration into the world economy follows different patterns. For developed countries, both emerging economies and rentier states offer new opportunities for exports and investment at the same time, emerging economies may be a source of increased competition challenging the position of developed countries in the world trade of manufactured goods and services they are also their partners in the new forms of division of labor.

Classification of Rentier States
Although there are more than one classifications of rentier states, one of those classifications was done by Comptitivit des nations, Paris (1998). According to this classification, rentier states are countries which enlarged their share in world exports of primary goods (by more than 0.05 percentage point between 1995 and 2005) and which have more than 40 of their exports made of primary products. This group includes countries irrespectively of their level of income. In fact many rentier states have a level of income per capita comparable to that of rich countries. Among the 23 rentier states, fourteen are located in the Middle East and sub-Saharan Africa seven in the area Europe and its periphery, among which Russia and several countries which are part of the Commonwealth of Independent States (CIS) one in America and, one in Asia.

It must be underlined that, given the criteria used, the category as well as the definition of rentier states proposed here are relatively narrow compared to many other classifications. Moreover this classification is an evolving one and may change over time.

Rentier States and International Relations Theory
The concept of the rentier state offers interesting bridges in international relations (IR). In addition to this, the concept of the rentier state allows a broader conceptualization of the state in IR that links the internal form of the state to its foreign policy. Specifically in the case of  rentier states, this is the economic foundation of the state which allows in boom periods the allocation of welfare benefits to society at large and which in times of fiscal crises sees  a renegotiation of state-society relations and with it adjustments in foreign policies.

The IT theory of the rentier state also allows to analyze states that are both strong (in the area of security) and weak (in the area of representation and legitimacy) and to make predictions about their foreign policies. Since rentier states receive a substantial part of their revenues from the outside world, they show a remarkable different political dynamic than other states on the external side this means the primacy of foreign policy (and particularly foreign economic policy) and on the domestic side, the absence of democratic governance (Jackson 1990). Externally, the state becomes a rent-seeker in the international system and foreign economic actors receive particular importance as potential donors and rent providers, especially in times of fiscal crises.

In simple terms, wage is inversely related to quantity of labor demanded. As wage increases, the quantity of labor demanded decreases (measured in hours). Marginal product of labor increases, ceteris paribus (MPL is the change in output resulting from hiring one additional unit of labor). In the real world however, the market model of labor is rather sophisticated. Two considerations are taken into account in the prescribed model inflexibility of wages in the short-run and bargaining power of labor unions. The prescribed model is Ld  Ln (1-(wi-)), where Ld is the overall demand for labor, n is total number of firms, L is the available labor in the economy, (wi-) is the profit-wage differential.

An increase of wage in the short run will significantly decrease the quantity of labor demanded decreases. Suppose the economy overheats, overall output decreases. Because wages tend to be inflexible in the short-run, firms are forced to reduce the quantity of labor demanded (to maintain the wage level). Now, suppose the economy operates in the long-run. If the economy overheats, a decrease in wage levels leads to an increase in quantity of labor demanded. Note that it if often wage levels which determine Ld (the rate of unemployment is expressed as ui  wi - ). Other factors are partially insignificant.

Suppose there is a change in the bargaining power of unions. Suppose a labor union demands that prevailing wages increase by 40. If the bargaining power of the union is strong, then it can pressure the management to affect the wage increase. But this does not mean that the firm will exclusively handle the additional cost of maintaining extra laborers. The firm may opt to lay-off some workers to compensate for the increase in wage. The effect of this policy can only be observed in the long-run.

The intersection of the aggregate demand-aggregate supply curves represents the real domestic output of an economy. A rightward shift of the AD curve increases real domestic output. A leftward shift of the AS curve decreases overall output. Now, suppose that the government wants to increase government spending. In the short-run, an increase in G results to an increase in AD. A decrease in G results to a decrease in AD. Price levels increase in the medium run. Suppose that the government wants to implement a monetary policy (policies formulated to change the overall supply of money in an economy). An increase in money supply results to lower interest rates, higher investments (here investors are more willing to borrow from financial institutions), and to higher AD. A decrease in money supply increases interest rates, lowers investment schedules, and ultimately AD. Price levels fall.

The Phillips Curve. This defines the historical inverse relationship between the rate of unemployment and the rate of inflation in an economy. In short, the lower the unemployment in an economy, the higher the rate of increase in nominal wages. If inflation is high, then unemployment is low. From this relationship, one can argue that inflation is the independent variable (which depends on another dependent variable). A gradual increase in Y results to a gradual increase in P. It means that the economy is self-maintaining and therefore is capable of sustaining its labor force. As such economies with high inflation often have low unemployment rates. In the long-run, however, this is not observed.

The expectations-augmented Phillips curve is a modified version of the Phillipx

The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change, aimed at combating global warming. To achieve targets for green house emissions, market based mechanisms have been promoted. Emission trading one such an administrative approach used to control pollution by providing economic incentives for achieving reductions in emissions of pollutants... Drawbacks include Emissions trading does little to solve pollution problems overall, regulatory agencies run the risk of issuing too many emission credits...(Brohe), pollution still happens under this method and some countries have more pollutant industries than others yet the atmosphere affected affects them too. A major benefit of this mechanism is that effort has been made to reduce the carbon emissions. Another mechanism is the Clean Development Mechanism. This mechanism has the benefit of developing of communities in third world countries e.g. by rural electrification projects using solar panels... The mechanism offers industrialized countries some flexibility in how they meet their emission reduction...  The mechanism has its drawbacks, e.g. if a project is rejected because the criteria are set too high, there will be missed opportunities for emission reductions... NGOs also criticize the inclusion of large hydropower projects, considered unsustainable, thus raising the issue on what exactly counts as beneficial projects...

All mechanisms however, have their critics and advocates. One advocate of the emission mechanism is the European Union Emission Trading Scheme while critics include environmental justice non-governmental organizations, economists and labor organizations mainly because they reduce jobs and incomes plus their concern about energy supply and excessive taxation...

 Carbon tax and quota are methods that would help to internalize the costs of carbon emissions and subsequent climate change  but they have considerably different overall impacts and potential for achieving the required reductions. This tax method would be better than emission mechanism since somebody is responsible for their quota or share of carbon space. In the emission mechanism, the choice is up to the party on whether or not to take the incentives thus very little responsibility.