AN EXAMINATION OF THE RELATIONSHIP BETWEEN ECONOMIC GROWTH AND POLITICAL STABILITY OF KENYA

CHAPTER ONE:

INTRODUCTION

1.1 Background of the study

Political instability refers to the propensity for governmental breakdown resulting from civil unrest or inter-party rivalries (Ibrahim, 2016). Political stability is closely linked to a range of economic factors, including inflation, unemployment rates, and GDP per capita growth. According to Ibrahim (2016), the presence of unstable political circumstances introduces a level of uncertainty that has the potential to diminish investment activities, thus resulting in a deceleration of economic growth.

Certain nations exhibit a dearth of revenue, although it is insufficient to attribute the very low levels of gross domestic product (GDP) just to economic policies. For a nation to experience economic growth, the implementation of effective policies is vital. However, the attainment of sustainable improvements in income levels is unattainable in the absence of sound political and economic institutions. The primary factors contributing to the occurrence of high-risk violent conflicts in nations are a recent past characterised by violent wars, the presence of unstable political institutions, and low levels of gross domestic product per capita, which often manifest as poverty. Additional characteristics that have been shown to contribute to the heightened likelihood of violent conflicts include the presence of ethnic domination, the existence of regional conflict zones, and the presence of inter-group inequality. However, it is worth noting that poverty does really have a direct influence on the likelihood of conflict (Onoh & Okore, 2016). Various factors contribute to the occurrence of economic decline and stagnation. The presence of a preexisting low income level has a direct impact on the government's capacity to generate tax revenue, hence hindering its ability to allocate funds towards infrastructure development, healthcare provisions, and educational initiatives.

There exists a significant correlation between economic stagnation and the political stability of a nation, leading economists to see poor political stability as detrimental to economic success. The presence of inadequate political stability within nations may lead to frequent alterations in economic policies, thereby exerting a detrimental impact on economic performance (Lin & Benjamin, 2017). According to Ahmed (2016), there exists a correlation between poor political stability and greater inflation. The presence of political instability has a detrimental impact on the capacity of governments to implement and sustain long-term economic policies, hence hindering the overall economic performance of nations. However, it is important to note that the link between political stability and economic development is reciprocal. Political instability may be identified as a contributing factor to subpar economic growth, while simultaneously being a result thereof.  This study aims to examine the impact of political stability on key economic indicators, including inflation, GDP per capita growth, and unemployment rates. Furthermore, an examination will be conducted to assess the reciprocal impact of the aforementioned economic factors on political stability.

The field of institutional and economic development research has mostly concentrated on examining the extent to which institutions possess the ability to facilitate economic progress. Since the publication of Onanuga's seminal work in 2016, there has been a notable establishment of an efficient institutional framework that fosters the development of economic transactions while simultaneously reducing uncertainty. The primary focal points of examination include institutional elements that may have an impact on the manifestation of uncertainty. Regarding the relationship between the political system and development, the hypothesis posits that there may exist either a negative connection, suggesting that democracy may impede progress, or a positive correlation, suggesting that democracy could serve as a catalyst for development. However, the direction of this relationship is not immediately apparent. Regarding the correlation between political regime stability and development, several research investigations have yielded compelling findings, but without establishing a deterministic political or economic framework. The issue of endogeneity, which is often encountered in the analysis of political and economic factors, is closely associated with the process of analysis (Ibrahim & Alagidede, 2017). While it may appear that there is a correlation between economic performance and political regimes and stability, it is important to consider an alternative perspective that suggests a reverse causality. This is supported by the endogeneity problem encountered in cross-sectional analyses, which highlights the interdependence of political and economic variables. Various reasons, sometimes conflicting, are presented to elucidate the influence of the political system on growth. The promotion of individual freedom, while fostering entrepreneurial activities and economic progress, also has the unintended consequence of growing income and wealth disparities, leading to disputes in their distribution. The presence of a multiparty system that exhibits clientelism tendencies is shown by the emergence of calls for redistribution (Ashraf, 2018). The findings on the impact of political instability on economic development exhibit a higher degree of certainty compared to those concerning the relationship between democracy and economic growth. While instability may be present throughout the development process, it has detrimental impacts on the dynamics of economic progress. Therefore, the study examines the relationship between economic growth and political stability of Kenya.

1.2 Statement of the problem

The link between political instability and economic development is inherently interwoven. In the context of a nation characterised by political instability, governments tend to exercise more prudence in their investment decisions, resulting in a deceleration of economic progress. Taking an alternative perspective into consideration, it may be argued that when a nation exhibits subpar performance, it can result in political upheaval, social discontent, and the collapse of governmental structures. A research conducted in 1996 examined the correlation between political instability and economic development (Redmond & Nasir, 2020). To yet, the relationship between stability, the characteristics of political regimes, and economic development has remained puzzling. Mercado (2019) posits that the attainment of economic takeoff necessitates the presence of a robust governing system or political stability, as a fundamental need for fostering economic expansion. Nevertheless, it has been shown that the existence of political instability and inadequate governance gives rise to adverse circumstances with regards to economic sustainability. Hence, the study seeks to examine  the relationship between economic growth and political stability of Kenya.

1.3       Objective of the study

The broad objective of the study is to examine the relationship between economic growth and political stability of Kenya. The specific objectives is as follows

i.                    Examine the factors that contributes to economic growth in Kenya.

ii.                  Determine the impact of  economic growth on political stability in Kenya.

iii.                Analyze the relationship between  economic growth and political stability of Kenya.

1.4       Research Questions

The following questions have been prepared for the study

i.          What are the factors that contributes to economic growth in Kenya?

ii.        What are the impact of  economic growth on political stability in Kenya?

iii.      What is the relationship between  economic growth and political stability of Kenya?

1.5       Significance of the study

The findings of the study will be significant to policy makers as the policymakers can improve economic growth by checking the outflows of capital. Also, the findings of the study will be significant to  political parties, especially the ones running the affairs of the country as it will reveal that political stability is connected to the economic growth of the country.

The findings of the study is significant to the academic community as it will contribute to the existing literature.

1.6       Scope of the study

The focus of the study is to  examine the relationship between economic growth and political stability of Kenya. Hence, the study will examine the factors that contributes to economic growth in Kenya, determine the impact of  economic growth on political stability in Kenya and analyze the relationship between  economic growth and political stability of Kenya.

1.7       Limitation of the study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection (internet, questionnaire, and interview), which is why the researcher resorted to a moderate choice of sample size. More so, the researcher will simultaneously engage in this study with other academic work. As a result, the amount of time spent on research will be reduced

1.8       Definition of terms

Economic growth:  an increase in the production of goods and services in an economy

Political stability: possesses the capacity to prevent its own forced non-survival.

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