How people gain when they exchange their products

By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

05 May 2019

A few weeks ago, I was roped into an online discussion about toothpicks. Specifically: why does Kenya import toothpicks from China? Many people were appalled by this state of affairs and the general feeling was that we should ban the importation of such simple products that can be easily produced locally.

Before proceeding any further, I need to correct some false impressions created in the discussion. Firstly, toothpicks are not easy to make. If doubt me, try making one and see what I mean.

Secondly, it is not true that Kenya does not manufacture toothpicks. We do; in fact, some of the best quality are made right here. For example, the ones that come individually wrapped with paper giving them high hygiene standards.

Now let’s turn to the meat of the discussion: can any benefit can come out of importing seemingly simply products? To illustrate, imagine the case of two people, Achieng’ and Wanjiku, whose main staple food is githeri (a mixture of maize and beans boiled together)

Suppose Achieng spends Sh50 to get maize and Sh40 for beans. That is, it costs her Sh90 to make her githeri. On the other side; imagine that it Wanjiku gets maize at Sh80 and beans at Sh100.

So, Wanjiku spends Sh180 to make her meal. This is double the amount spent by Achieng’ (Sh90). At first sight, Achieng is doing quite well and she really doesn’t even need any interaction with Wanjiku.

But a closer look reveals that while Achieng’ is better at getting beans (Sh40) than maize (Sh50), Wanjiku is more efficient in acquiring maize (Sh80) than beans (Sh100).

Suppose each one of them acquired two portions of what they are better at. That is, Achieng’ get two portions of beans (Sh80) and Wanjiku two portions of maize (Sh160). Since both have twice waht they need of each commodity, they can exchange the extra one and then go ahead to make their githeri.

The interesting out come from this exchange is that they both save money! Achieng’ saves Sh10 (from the initial cost of Sh90 to the new Sh80) and Wanjiku saves Sh20 (from Sh180 to Sh160).

With these savings, they can each buy some tomatoes to add flavour and enhance the nutritional value of their githeri. In other words, they can have a better standard of living if there are willing to focus on what they are good at and exchange for what they are not.

But it is likely that some one in Wanjiku’s family will complain that they are getting a raw deal when they exchange something that costs them Sh80 with something that costs Achieng’ “just Sh40”. They might accuse Achieng’ of damping “subsidised products” on them and then propose banning any further exchange in order “to protect local production” of beans.

The moral of this story is that, instead of banning the importation of toothpicks from China, we should ask ourselves what we can export to that country in order to offset the import cost.