Kenya, Command and Control, and the Underdogs Winning the Plastic Race

Last year, the English plastic bag charge appeared to be another victory for Arthur Pigou’s tax to solve market externalities. One-use bags are a classic pollution example: under-valued and over-consumed because they cost us nothing, but the whole society pays for CO2 emissions from petrochemical production, and for the chemical and physical damage of environmental, especially oceanic,  plastic pollution. Transferring these social costs onto the consumer through a tax of 5p per bag has made Brits voluntarily reduce consumption of the damaging bags by 85%, without all the hassle and inefficiency of strict controls. Simple, right?  

  

Maybe. But in the global arena, yet another country has banned plastic bags altogether. And what's more surprising is the country in question; Kenya. An exporter of plastic bags, with GDP per capita 7.4% the size of the UK's, and 102 places lower on the Human Development Index. Surely, if efficient economic incentives are available, this is an unaffordable policy mistake?  

  

In a purely theoretical world, the ban is inefficient and unnecessary. A correctly-calculated tax on plastic bags should allow the market to choose the socially optimal level of plastic bag consumption; when costs to the environment equal the benefit of using bags, overall. Command and control, on the other hand, will achieve a guaranteed pre-decided level of plastic pollution, but is costly. Forcing firms to take higher costs reduces market efficiency, and restricting production causes unemployment, but implementation itself is also expensive. In a country like Kenya, enforcing regulation on production doesn't look like a wise government spending priority over building schools and hospitals.    

  

But assuming, for once, that Africans know what they're doing: why has Kenya chosen a ban over a tax? It's the difference between pure Economics Journal theory and practical reality. Firstly, the Kenyan government knows that in the real world information asymmetries will stop the market from correctly defining a social optimum. Consumers cannot really comprehend the cost of plastic bags to society- it's telling that the first woman to sail the world's oceans became the loudest campaigner about the 150 million tonnes of plastic in our seas. And whilst government might communicate social cost through the size of the tax, they are always constrained by what is politically viable. Moreover, why should the socially optimal number of plastic bags be more than zero? Packaging is 26% of global plastic production, and research just keeps finding new dangers of plastic waste (UNEP, 2014) but alternatives to one-use bags already exist. The overnight switch to cloth bags in Kenyan supermarkets suggests that a complete shift is cost-effective, too.   

  

The pure theory around implementation costs of command and control also doesn't hold in the real world. Rwanda (125th on the HDI) implemented a highly successful portfolio of policies, supplementing a ban with subsidies to cushion a sectoral shift from plastic bag production to plastic recycling. This is equivalent to the government investing in any new technology, but with reduced start-up costs in expertise and physical capital transferred directly from the plastic bag industry. The jobs that have been created in the enforcement of the policy, not to mention in the unsubsidized alternative bag industry, are not to be ignored either. And for consumers? The recent Guardian article on Kenya reports that Kenyan "officials say they want to target manufacturers and sellers first". In a country still coping with extreme poverty, prioritising production-side policy is very wise. 

  

So let's change the question- if it's possible in practice to implement pollution control that will have guaranteed, more substantial effects, why is the high-resource British government not putting a more varied policy portfolio in place? This difference is between two political economy environments. It's easy for the Kenyan government to convince its people that plastic pollution is a problem- cattle graze on piles of plastic rubbish throughout their towns, whereas an English citizen only sees the person already paid to remove plastic litter. But is that enough to account for a difference of 5p tax compared to a $40,000 fine?   

  

It could be that the Kenyan government is doing a better job of setting expectations in the market. (And before dismissing that as unethical and freedom-restricting let's consider the Central Bank's strong reliance on setting expectations of interest rates). The private sector, is diligently changing practice in Kenya, but only after losing the lobbying battle that is often won in Western economies. The Kenyan High Court unashamedly stated that "environmental concerns were more important than commercial interests" in response to lobbying by plastic importers (BBC, 2017). Whilst the UK government's policy is explicitly favouring voluntary private sector agreements, businesses do not expect disproportionate market power in Kenya. This, and reports of informal markets switching quickly to sack or newspaper packaging, suggests something radical: that Kenyans just don't mind a decrease in their convenience. Call it community-oriented culture, preference for the common good, or call it expectations of high social gains in the future in return for low social costs in the present; it is clearly a huge advantage of Kenyan markets which decreases policy implementation costs and increases policy options for decreasing plastic waste.  

  

Now, can Britain really "strengthen developing countries’ … capacities to move towards more sustainable patterns of consumption and production” (UN, 2015:8) when we are barely keeping up with the sub-Saharan African front-runners in plastic reduction? It seems we are finally realising the practical necessity of mixing incentives with command and control, but the Ellen MacArthur Foundation's policy portfolio (Ellen MacArthur Foundation, 2016) on plastic is strikingly similar to what has been in place in Rwanda for years; and while England is just getting its head around plastic bags, Guyana (89th on the HDI) is making plans to ban another plastic. It's quite clear that, at least in political economics, the "developed" world could do well from getting off its 15% plastic, peer-reviewed high-horse and recognising the social and institutional capital amongst those countries who really value our over-consumption.  

  

References: 

BBC World News, 2017: Kenya plastic bag ban comes into force after years of delays. Accessed 08/11/2017. http://www.bbc.co.uk/news/world-africa-41069853 

Ellen MacArthur Foundation, 2016: THE NEW PLASTICS ECONOMY 

RETHINKING THE FUTURE OF PLASTICS. Accessed 11/08/2017 https://www.ellenmacarthurfoundation.org/assets/downloads/EllenMacArthurFoundation_TheNewPlasticsEconomy_Pages.pdf  

Pigou, A.C., 2013. The economics of welfare. Palgrave Macmillan.  

The Guardian, 2014: Think you can't live without plastic bags? Consider this: Rwanda did it. Accessed 08/11/2017 https://www.theguardian.com/commentisfree/2014/feb/15/rwanda-banned-plastic-bags-so-can-we  

The Guardian, 2016: England's plastic bag usage drops 85% since 5p charge introduced. Accessed 08/11/2017. https://www.theguardian.com/environment/2016/jul/30/england-plastic-bag-usage-drops-85-per-cent-since-5p-charged-introduced  

The Guardian, 2017: Kenya brings in world's toughest plastic bag ban: four years jail or $40,000 fine. Accessed 08/11/2017: https://www.theguardian.com/environment/2017/aug/28/kenya-brings-in-worlds-toughest-plastic-bag-ban-four-years-jail-or-40000-fine  

UNEP Year Book 2014: Emerging issues in our Global Environment (2014), Chapter 8: Plastic Debris in the Ocean.  

United Nations General Assembly, 2015: Transforming our world: the 2030 Agenda for Sustainable Development: p8 

World Bank, 2016: Data Bank: World Development Indicators. Accesed 08/11/2017 http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators  

About me:

My name's Sarah and I study Sustainable Development with Economics. I love a good challenge; in general that means plenty of sea-swimming, hiking and running, but also my ideal work would be in international development in some of the most challenging areas of the world; in conflict zones or geographically remote areas. I was lucky enough to live in Eastern DRC for a few months, and since then I have been particularly interest in how international aid and development works in fragile areas, and I have also been fascinated with other languages and cultures. Although I am a proud Edinburgh lass at heart, I also love to travel; especially since I believe that we Westerners can learn so much from the "less developed" parts of the world!