The Kenya’s Vice President William Samoei Ruto, a presidential candidate for the August 8 General Elections in Kenya, is popularly known for driving a narrative of bottom-up development. So what does the bottom-up approach mean from an economics perspective?
Here’s a primer description of what the model entails and how it works to promote economic growth in a country.
With a growing desire around the globe for a trickle-down economic policy, it is necessary to articulate a theory that underpins such development. An economic theory is needed to provide the framework through which governments can achieve sustainable development in society.
A bottom up economic theory suggests that decision makers should focus on specific attributes and micro behaviors of individuals and small groups. It is based on the idea that the economy grows faster if development begins from below moving upwards. It promotes grassroots development as a way of building a vibrant economy with a stock of individual or micro assets.
The aim of economic planners in a bottom-up approach is to provide more funding to smaller groups of businesses and individuals, helping them to grow simultaneously. This economic model has created a massive appeal across the world because the traditional top-down approach has failed to live up to its expectations.
The top-down economic model requires centralized authorities to develop policies and make decisions from the top going downwards. This would mean that the largest amount of resources are concentrated in big firms, mostly state-owned enterprises, which are expected to provide employment and income to those at the bottom of the economic pyramid.
According to bottom up economists and theorists, this conventional system has failed because the institutions that are required to provide the trickle-down effect have instead blundered the economy through profiteering and self-seeking decisions. Thus, those who were required to foster development have become a hindrance to the same economy they were tasked to build.
In Kenya, for example, previous regimes have been accused of massive corruption and bribery, with President Uhuru Kenyatta stating that the country loses 2 billion shillings through corruption every day.
To resolve the issue, there is need for the government to devolve more power and resources to those who are most affected by public policy, including citizens, households, and small businesses. In the bottom-up economic model, development starts with those at the bottom of the pyramid.
The top-down economic model focuses on large scale and state-sponsored industrialization and economic growth. On the other hand, the bottom-up approach encourages small-scale bottom-up projects, rural development, and equal distribution of resources.
As shown in the figure below, the largest proportion of the pyramid at the bottom hold the largest among of resources.
The bottom-up approach targets small-sized families and individuals that were traditionally locked out of the resource-sharing process. These families are given access to credit to start small businesses; hence helping communities to generate employment in their own localities and stimulate growth.
The advantage of the bottom up approach is that it eliminates the need for intermediaries; it eliminates hierarchies that often cause mismanagement and loss of public resources. The model also leads to the empowerment of poor populations to become more self-reliant.
Individuals and families may also organize themselves into groups such as cooperatives, self-help groups, business partnerships, etc. The groups can then break away from middlemen, landlords and moneylenders that often exploit them.
These groups then provide the mechanisms through which government can broaden its tax base, while at the same time relieving itself from the pressure of job creation because communities are already self-reliant and generate their own income.