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Wednesday, July 31, 2013

African Productivity and Potential - Higher than you thought

This post follows a bit on the other one about African infrastructure. A study of the existing businesses finds that African ones do MUCH better than other areas, BUT FOR the debilitating effects of the lack of infrastructure. The researchers indicate that African entrepreneurs would outperform others IF their infrastructure were similar.

Worth a read: African Entrepreneurs great but for.

"A revised roster shows that Africa leads in total factor productivity (the gold standard for firm-level performance in academic research), sales growth, labor productivity and labor productivity growth, among other variables. They also added adjustments for regional conditions like bribery, tenacity of regimes to stay in power, predilection for armed conflict, ethnic fractionalization, difficulty firing unsuitable workers and a sizeable "informal" business sector that doesn't report bottom lines."

Which clearly goes along with the idea that the lack of supportive infrastructure has a tremendous negative impact on development and freedom. People in Africa have to work even harder to get anywhere. With the resources of that continent, they should be a dominant force on the planet. Their problems? How about this list:

  • Bribery at every step.
  • Ethnic and religious factions fighting - often with weapons.
  • Government control, trying to stay in power, remove threats.
  • "Protective" but restrictive tariffs and labor laws.
  • Courts and police that do not function.
  • The lack of titled ownership of real property.
  • No credit infrastructure.
  • Poor transportation infrastructure.
  • Poor communications infrastructure.
But, with all of that, the authors are hopeful. Cell phones are literally changing everything. That is why there are cell phones all over the Serengeti, even though there is no electrical service! A phone is extremely useful for business at every level, so the providers deliver service even with no local power source. And the ethnic differences may indeed be the source of greater creativity.

There is always hope. How do we help in that world? Or can we? At least we are not trying to change the way people think. That seems like a much more difficult process. Even so, the way they think, their "world view" can drive what is acceptable in terms of social change. I doubt that the Arab countries will actually embrace real democracy in any meaningful form any time soon. Hopefully the bulk of Africa is not stuck in that mold.

Why is this stuff so complicated?  People - what can you do with them? Heck, we can't get our government to do almost anything these days - good or bad. What's the likelihood we are going to come up with a better system?

Your thoughts?

The "Right" Kind of Development "Project" - Trash into Cash

If you have been following along here, I have been somewhat engaged in working with an "initiative" in Nicaragua to "help" a couple of communities there with their "development". Those words are in parenthesis because the "normal" meaning generally attached to them is sometimes less than helpful.

What I mean is, when people come from the First World to "help" in the developing world, they generally adopt a somewhat standard approach. The basic model, repeated thousands of times, is to bring resources like money and people from the developed country, and build, or make, or do something TO or FOR the residents in the other country. On occasion, people take another step and do things WITH the residents, which is a tad better. That is the normal mental model which we North Americans and Europeans typically carry around about "helping" the developing world.

And "development" normally means economic development. I would like to think that it can be any kind of development - cultural, artistic, education, wealth - all are included. And I think the ultimate development needed is really a world view change, which basically empowers all of human life and potential.

Not A Mission
People ask me all the time - is this a mission? "Mission" is problematic because it implies some religious motive or content. I generally travel under the auspices of my church, but we are not converting anyone. We are not trying to change anyone's religion, or even make it better. We really do not care if the people we are visiting with have any religion at all. I have found that they people in Nicaragua are, generally speaking, a lot more religious than I am.

Not a Project
So then they ask - what kind of "project" is it. Well - it is not really a project We are not building anything, teaching anything, serving anything, curing anything. The projects I have seen have generally been OK things - people build homes, they feed kids, they fix body parts - stuff like that. Good things to do - but they all come with a price. The price is that the recipients of this project learn a very profound lesson from these efforts. They learn that all good things - wealth and help and food and the like, seem to come from outside - from the North, from the rich people who are generous enough to share their stuff. They get some good things - a new building, some computers, etc. - but the people from the Noreth generally leave - after a short or long time - and things revert to normal.

My church actually used that model for a number of years. We did good things. We donated a roof for the local baseball stadium. We bought some cows so the kids could have more milk. We sent typewriters and helped set up a small commercial school to teach people to type, so they could apply for the few jobs that required this rare skill. Quite a few people benefited, but then that stopped, and the basic reality returned to normal. And the lesson was learned - good things come from outside, from those with "all the wealth."

Wealth As Limited
The "world view" underlying this approach is that "wealth" is somehow limited. We, the Northerners, have a lot, so we need to share it with those who do not have as much. We tend to think that way, and we have persuaded our friends in Nicaragua of the same world view. In fact, wealth of all kinds is something we create, and we can all create it, North, South, East and West. It comes from hard work, and creativity, and resources, supported by some basic infrastructure like courts and laws. The prevailing world view also generally thinks of "wealth" as being money or the equivalent. That is too limiting - important, but limiting.

Accompaniment Model
Our church has moved from that model to one of "accompaniment". We live with our friends, we love them, we spend time with them, we learn what their lives are like, and where they are going with things. We want to help them, but now we put the whole thing into much more of a partnership. What can WE do - all of us together? What do WE need? What can each of us contribute to this? Where are WE going?

Often enough, given the above paradigm, they ask us to build or do something for them. But we are both trying to learn another model. From the North, we have ideas and we want to encourage and teach and learn - all of the above. We are not the source of all wisdom, but we do have some experience and ideas, and we think we could help. But we do NOT want to be the ones running the show. We want to understand deeply that "we are all in this together", and it is up to all of us to contribute here. And we understand that they have ideas and resources and efforts, that we need to learn and understand.

As a good friend of mine pointed out to me, we are trying to adopt the Lao Tsu quote: "A leader is best when people barely know he exists, when his work is done, his aim fulfilled, they will say: we did it ourselves."  (http://www.brainyquote.com/quotes/authors/l/lao_tzu.html)

But How?
The problem is that it is somewhat difficult to get all the parts of this up and moving. It is much easier to send money, or to build a wall, set up a school - almost anything. We do not even have a good way to talk about this.

For example: this is not "empowerment". That word kind of implies that our friends in Nicaragua are dis-empowered, or unable to do things without help, or similar ideas. We know that is not true. They are very capable adults, who are living very successful personal lives, with a considerable amount of joy about their lives. Their income level may be 10% of ours, and they would clearly like it to improve it, but even that is not the ultimate goal.

And this is not a small loan program. We actually have funded a loan program, which they manage completely on their own. This is a good thing, and they own it and manage it well. It definitely helps, simply because the whole infrastructure of credit and loans does not exist in their world. Our sister community of 25,000 people does not have a single bank in town. They need to travel to the provincial capital to open a banking account. And they need to pay the bank for the privilege. If they want to make some capital investment, be it in a small business, or just to buy an appliance, they need to save the entire amount, in an economic situation that continually wants to drain all their resources. The small loan program works like an enforced savings account. They agree to pay it back, and with the support of their entire community, they do pay it back, so that the program can continue. This is a good thing to do - but it is definitely NOT an ultimate solution to the problem. They need a bank, they need a credit infrastructure so that they can get a loan at a reasonable rate in order to be able to create wealth themselves.

Wealth / Value is Something We Create
I am fundamentally persuaded that the key thing here is to persuade ourselves and our friends in Nicaragua, that wealth, or value is something we create. It is virtually unlimited. Sometimes we need an up front investment, or bright idea, or a push, or a lesson in how something works - but we can create wealth or value. I tend to say "wealth", which would push most of us to think "money" or "currency". But I really mean "value" or "benefit" - be it credit, joy, music, love, meaning, education - whatever gives a person fulfillment and joy in life.  We create that - it is not something limited.

Examples
Perhaps the best way to understand this is simply to find some good examples. A few years ago I did a bit of research on "projects" in Nicaragua. You can see that here:
   http://carlscheider.blogspot.com/2011/11/projects-and-sustainable-development.html
Those projects did produce real benefits, and sustainable ones the endured long after the initial investment was ended.

Trash to Wealth Example
There is another major example from India that I found very insightful. This was in the NY Times the other day, from a journalist who regularly contributes to a really fine blog they maintain on "fixing" things around the planet. And the article is full of details of the work required to make this work. Needless to say, it is not a quick fix.

The Times piece is here: http://opinionator.blogs.nytimes.com/2013/06/12/out-of-indias-trash-heaps-more-than-a-shred-of-dignity/?smid=fb-share. If this disappears, let me know and I can send you a copy of the article. The blog is here: http://opinionator.blogs.nytimes.com/category/fixes/. You can subscribe to it - use RSS and Feedly - it works slick.

The Problem - trash is valuable at some level.
The problem described in this article is one found around the world. There is a huge trash dump in Managua, Nicaragua - one of the largest in Central America. There are a lot of people who make their living by harvesting things from the dump that can be turned into cash in some way or other. It is a terrible job - dirty, dangerous, with very little real income. I have seen this dump and several others. And I have seen some attempts to ameliorate the problem in small ways - but nothing on a scale like the article cited.

For example, there is a small community of women in Tipitapa Nicaragua, who collect trash from the dump, and turn it into jewelry and fashion accessories. These are beautiful products, and I have purchased them for family and friends - but it feels like "make work". The products are nice and all - but they are from recycled trash, and the income level is not very good. AND - the dump is always there. Is there any other way to deal with this problem?

The Solution - organize the workers - make a deal with government.
The ultimate solution to this problem in India lay in organizing the workers themselves. It literally took years to get the workers to even attend meetings, and to think that they might be able to make a change. They ultimately formed a coop, and got a contract with the region's government. This coop contracted to handle ALL of the city's waste, at a considerable savings to the government, and to also recycle the more valuable parts of it as profit to the workers. Organic matter is composted, and non recyclable things are sent to the centralized incinerator. Interestingly enough, candy wrappers are considered non recyclable, while they are one of the primary components used for the jewelry in Tipitapa, cited above.

In this Indian town of 6 million people, the trash pickers are actually recycling 50% of the plastics, as compared to the standard recycling rate in the US which is 8%. The waste pickers cost the city 6 cents per household, whereas the truck hauled waste costs were 40 to 50 cents. They save the city 2 to 3 million dollars per year. Their capital costs are lower - push carts vs trucks and gasoline. Combining the household fees and the resale of the trash, the waste pickers' income has increased two to three times.

This effort required 14 years, and the organization of 6,000 workers. There are not many social help agencies with that kind of long term perspective and resources!

Sustainable
This is clearly a sustainable solution for the near term. The trash pickers are earning a livable income, and they provide a valuable service to the community. For the moment.

Concerns
There are, of course, some concerns about this downstream. This is a service contract with the city - and can be canceled at any time, given a change in the city government. That is part of the nature of a competitive economic world. There are some examples cited in the article where trash pickers have had contracts for decades in Peru. That is a hopeful sign.

Longer Term?
The other concern, not cited in the article, is that this is a low tech solution which is working just fine at the moment. It uses the abundant cheap labor, organizing it to solve a real problem. As the level of the local economy changes, and as local entrepreneurs come to understand the opportunity here, I would predict that someone will eventually figure out a way to do this faster, better, cheaper, by combining large trucks and the recycling / resale opportunity. In the town where I live, recycling is mandatory, and it is big business. It may take longer in developing worlds, where the credit required to create such an enterprise is not as available as cheap labor. But that is likely a decade or more away.

Some might argue that it would be good government policy to restrict competition here to maintain opportunities for "entry level" work opportunities. I think that would be akin to trying to maintain the family farm in the face of the enormous productivity gains of agribusiness in the U.S. I know many people would argue in favor of that, but it is an expensive governmental policy that has little return in fact. It may feel good that we are maintaining the healthy family farms where people run their own lives, but that is an image of a time long past. We do not subsidize pin makers or button makers any more, although we did for a long time. Putting public resources, tax income, into maintaining a labor intensive mode of operation is ultimately pouring money down the drain. It does NOT create wealth - it destroys it. Economics 101.

Conclusion
I am excited by the prospect of an organized effort to raise the standard of living of trash pickers and similar folk. It is clearly limited to the world of developing economies. It also requires an enormous amount of effort, and the full participation of the local government entity - not an easy feat in any economy, but doubly perilous in one that has much more frequent problems of influence and corruption.

Ultimately, all labor intensive work will likely become noncompetitive - but that will take a few more decades in the best of worlds. This solution is fine for the moment. However, I cannot imagine many social help organizations with the will to undertake a 14 year effort of this nature.

Your thoughts?



Development in Africa - and infrastructure / "culture"

If you have been reading here at all, you should know that I am persuaded that the large difference between developed and developing nations lies at least part in the "cultural" or "world view" differences.

BUT - it is clearly a complex problem. In an article about Africa, the author is very clear that the legal infrastructure of land ownership is a major problem for African development. This is certainly for agriculture - which is pretty much the basis for any solid level of developed society.

You can find the article here:  Maximizing Africa's Agriculture.  Part of the problem is that most of Africa's farmers are women, and women cannot legally hold title to land in many societies. Another part is that only a 10 percent of African land is actually titled or registered in such a way that one can even claim ownership.

In one instance I am aware of, the government of Tanzania dedicated a part of the Serengeti, the historic home of the Maasai tribe, to an Arab hunting ground. Of course, some money changed hands in the course of this. The Maasai are barely farmers, but the little farming they do is severely restricted by the government, so as not to interfere with tourism and the like.

So, besides a favorable world view, it is also essential to development that the social infrastructure be consistent and supportive. As Amartya Sen has clearly shown, humans will prosper, provided we have some basic "freedoms" - a stable, supportive government infrastructure is one of them. And that depends largely on a world view that finds such an infrastructure important to create and maintain. Where the world view is top down - the top is in charge and the rest of us depend on it - that infrastructure is unlikely. Corruption, failure of the legal system, no land ownership system, all work against our innate ability to prosper.

Prior to the invention of agriculture, land was NOT owned by anyone. You used it, you moved on, no one complained. With agriculture, it became important to own that piece of dirt that you used to maintain your livelihood. And MOST of us were farmers - we fed ourselves and sold a bit for other things we could not make. We also settled down, and needed a place to call home. Now, in the U.S., less than one per cent of us actually farm. Yet our amazing agriculture productivity is one of the major sources of our wealth and prosperity.

And, once again, given that we know this, how the heck do we change it? My biggest fear is that the "world view" that underlies the amazing creativity and productivity of the U.S. is gradually being worn down by our individualistic, selfish approach to sharing the wealth. We are so divided now that we cannot do the simplest thing in our infrastructure to foster growth and freedom in our society.

One of the most recent efforts at a bi-partisan law was to restrict the ability of NSA to spy on all of us. Now, who would not support that?  Well, a bipartisan group supports it, and another opposes it. The opposition includes the Speaker of the House and the President. With those two agin it, it ain't going anywhere - ever. We are giving up freedoms for security - the same thing happened during the civil war and the World War II. But those wars ended and we got back to normal. The current war is never going to end.

Canadians do better. Scandinavians do better. Baah.

Your thoughts?