Guest blog by Moses Sitati
When I received a work email asking for my interest in taking the Leading Economic Growth course, I quickly had a look and was not entirely sure that it was the one for me. I did some quick mental calculation to check whether it made sense for me to devote scarce extra hours from my heavily stretched bandwidth for a 10 week period – I am so glad that it did.
Applying to the program required sharing an economic growth challenge that you intended to work during the program. This was very practical for me as I had just been co-leading a multi-disciplinary team at USAID/Kenya and East Africa in developing a five-year strategy to address youth unemployment. We had set ourselves a purpose to increase economically productive opportunities for young women and young men in Kenya and to empower them to actively engage in these opportunities. I reasoned that the course could be useful in providing new ways to analyze this challenge, and potentially offer solutions for me to think about. I would soon to find out that application of the theory and ideas taught in the course was designed as the primary learning arena for the program.
Right from the start, Professors Matt Andrews and Ricardo Hausmann offered powerful precepts and concepts to dispel any lingering uncertainties I may have had. This included a useful framing of the course objective to lead economic growth i.e. analyzing the process by which the economic system generates, distributes, and trades value. I was able to situate my challenge as one of value distribution (inequality and lack of inclusion relating to jobs for young people). Other types of challenges may have to do with value creation (low income/GDP), value trading (exports), or value generation (productivity). The framing also required a reflection on the economic system’s participants, its beneficiaries, and effectiveness. I observed that addressing of any of these growth challenge calls for systemic change which requires a unique and differentiated leadership approach that is suited to complex challenges (think disrupting the auto industry) rather than complicated problems (think fixing a car).
Problem deconstruction and construction
To begin, the Ishakawa Diagram (fishbone analysis) below was one of the tools I used in deconstructing the youth unemployment problem I had identified. Over several weeks, I undertook further diagnostic work through coursework and assignments to investigate deeper causes of youth unemployment problem in Kenya and the relevant entry points to consider. This included identifying binding constraints to my growth challenge building on the idea that growth acceleration does not require a large laundry list of reforms but happens when specific binding constraints are removed. The theory posits that if distortions to a market are removed then the market performance will improve. A review of the literature showed that in 6 percent of total employment in Kenya is in the formal non-agricultural sector, 49 percent in informal non-agricultural employment, while the remaining 45 percent of workers are employed in agriculture. I focused on the non-agriculture sector given the likelihood of young people to be participants in it.
A key tenet of the course was around in-depth and rigorous problem construction and avoidance of solution-led (leads to poor/no diagnosis and use of ineffective strategies). Towards the end of the course, I had revised my growth challenge to ‘insufficient generation of good quality jobs for young men and young women in Kenya’ and the entry points that I identified for policy action were: 1) Catalyzing formal sector job creation, and 2) Addressing persistent informality in Kenya’s private sector. This was given the industrial sector’s role to play in supporting economic diversification and formal job creation and the fact that informal firms make up the majority (95 percent) of enterprises in Kenya. The Kenya National Bureau of Statistics indicates that about 700,000 new jobs were created by the informal sector in 2015. Higher formalization and productivity in this sector are essential for improving livelihoods.
Selection of the two areas above from my fishbone was also based on a ‘Triple A’ analysis; exploring areas where I assessed that my organization had the: Authority – to engage in addressing the problem, Acceptance – from the people who need to implement and live with the solution, and Ability – the ideas, capacity, information and organizational skills to engage. This analysis helped me to map out entry points for immediate policy action in the search for results. I discuss action 1 (catalyzing manufacturing) further below.
From fishbones to trees and monkeys
While getting elbows-deep in fishbones, Professor Ricardo Hausmann challenged our thinking with the ‘Scrabble Theory of Economic Development’. Based on the concept of economic complexity, we explored how economic growth is driven by countries’ diversification into new products that are incrementally more complex (Atlas of Economic Complexity). The Atlas helped me to see that Kenya had only added 11 new export products between 2003 and 2018, which contributed only $5 in income per capita in 2018. Catalyzing growth for Kenya would mean supporting interventions to help the country produce a broader, and more complex set of goods and services.
The theory introduced the product space, a visual map showing the spatial interrelationships between 800 goods based on real world data. The Atlas shows that countries diversify by morning into nearby or related products, those that require similar knowhow to produce. In his delivery, Professor Hausmann likened the expansion of firms expanding into new product categories to monkeys jumping to nearby trees. If you think of think of the product space as a forest, the ability to jump to other trees increases where the tree density is highest, closer to the middle.
An exploration of Kenya’s product space using 2018 data showed that Kenya’s $6.04B export basket is moderately diversified with 10 major product categories. The chart showed a declining trend in exports for Kenya over the past decade. The predominant clusters are in textiles and agriculture, through there has been impressive growth in the machinery and electronics segments. Overall, Kenya has a sufficient number of products with a high relative complexity and which are relatively well connected to new opportunities for growth. The Atlas further recommended a light touch strategic approach a relaxed industrial policy that leverages the existing successes to move into more complex production. I had anticipated expected the country to have fewer strategic opportunities than were shown by the Atlas due to the predominance of agriculture in the economy, discussed in the employment figures above.
This analysis complemented the thinking in my fishbone analysis by highlighting opportunities to increase growth of formal sector jobs in manufacturing. Noting that agriculture products in Kenya’s export basket had not yielded significant growth over time, this yielded an insight that Kenya should consider increasing the contribution of the other fast-growing product sectors to exports especially as demonstrated by chemicals, machinery, and electronics – either by increasing production of current products or developing new products in these segments.
Multi-agent leadership for complex problems
Thinking about the leadership required to address this problem led us to identify and map out specific people or organizations that I could assign to work on my identified entry points. The coursework required initial thoughts on a strategy that this team could use to start learning more about the problem causes as well as a plan for convening the group. Although not required for the course, I planned and held an initial meeting with the Kenya Association of manufacturers where we probed for their insights on export performance, obstacles facing Kenyan manufacturers, development of new product areas, key partners and stakeholders, and the kind of support required to catalyze exports.
The course offered useful insights on crawling the design space with such a group, working together to find solutions from examples in external best practice, current practice, latent practice, and positive deviance.
What next?
After 10 weeks, I find the words from week 1 to hold very true – the application of the theory and ideas taught in the course have been the rich learning arena for the program. I have much more clarity and valuable tools to use in thinking about Kenya’s economic system, the true nature of the challenge, and the leadership approach required to bring the people who care deeply about this problem together. Will it work? We will only know by trying.
The course closes by not only teaching but seeking to impart a sense of us. We learn that societies grow and know more because individuals know different. Those contexts that allow diverse individuals to connect with others to exchange their specific skills and abilities result in a richer, more productive society. Inclusion breeds collective success. As principals/agents in the system, we are also called to remove the constraints on ourselves and to connect and share our own knowhow with all those that are around us.
This is a blog series written by the alumni of the Leading Economic Growth Executive Education Program at the Harvard Kennedy School. 65 Participants successfully completed this 10-week online course in May 2021. These are their learning journey stories.
To learn more about Leading Economic Growth (LEG) watch the faculty video, and visit the course website.