Development Economics and Entrepreneurship
Walt Rostow’s work of the 1950s and
1960s and recent work by Hernando De Soto and others suggest that what is needed for economic take-off in LDCs
today includes:
Preconditions for
Economic Takeoff
- education
- health
- supply of and private ownership of housing (safe, affordable, privately owned)
- clear title to housing and accurate addressing and surveying
- mixed use and tolerance of and legalization of cottage industries
- effective legal system, respect for the rule of law
- moderate levels of taxation and avoidance of confiscatory levels of taxation
- re-integration of black and grey markets (deeding of lands and title in squatter settlements )
- active capital markets (borrowing circles and financial recycling of savings and investment, home mortgage availability)
- culture of and support for entrepreneurship and innovation
- wide spread Internet access and effective communications system
- sound public infrastructure
- extensive private ownership of economy
- respect for human rights
- protection of private property rights
- good, honest and transparent government
- social peace and harmony
- strong civic institutions
- civil defense
I added in point # 10 above—the need for a culture of and support for entreprenurship and innovation. I have become convinced that this is an important ingredient to unlocking development potential not only in LDCs but first world countries as well.
One day in the mid 1990s, I was walking around the
Carleton University Campus in
Later on, a few minutes of research uncovered an
interesting story—Canadian National Railways had needed a new cross-Ottawa line
and the only way that the then Chair of the National Capital Commission (NCC)
would agree to it was if the CNR would bury
it under the lake. The NCC apparently wanted to protect views in the National
Capital Region. Now I realize this is kind of frivolous when compared with the
enormous challenges that LDCs are facing but I was struck by the courage it
took on the part of the NCC to take this position. This got me to thinking
about an earlier trip to
If you have ever looked at the Rockies from the eastern side and thought about the idea of running a rail line over those mountains as Van Horne did beginning in January 1882 and completing the crossing just three years later in 1885… what courage these people had.
William Van Horne, 1843-1915
While it is true that Government concessions helped Van Horne, it was heroic efforts on his part that made this possible:
“Van Horne
worked himself harder than his crews, arranging steamship service to distribute
materials and supplies, seeing to the opening of stone quarries and three
dynamite factories, which supported the building of the transcontinental. … He
managed to continue the building of the railway when there was no money left
for payment. He himself went without pay for months. Directors used their
personal fortunes, businessmen advanced credit and supplies and construction
forces went without pay,” North
America
Railway Hall of Fame.
Courage and leadership. These are the things that governments can do as well as or even better than the private sector. They may not be as good as the private sector at the doing of a thing but they can provide the right conditions or environment for it to be accomplished. To my mind, this is the true mission of government—providing for the right conditions to allow the private sector to achieve desired social, economic and environmental goals.
Adam Smith’s ‘invisible hand’ is still the most fundamental motivator for human behaviour based on motivated self-interest. Smith realized that the basic morality of his position was that a citizen’s first duty to his or her society was to not become a burden on it. Private ownership of a ‘thing’ can be viewed as private stewardship of that thing.
As a former owner of a National Hockey league franchise, I never felt like I owned it and, frankly, I was always uncomfortable with the notion that hockey players under contract to the team were like indentured workers, albeit, highly paid ones, that could be traded like pork bellies. I always felt that I held the franchise in trust for the fans and the City.
When watching Star Trek, TNG, I was always struck by Captain Picard’s view of the Ferengi* as something of a sub species because of their clearly established commercial avarice. Starfleet and the Federation no longer felt the need to be guided by the individual pursuit of personal enrichment—I guess they are something like Commune-ists.
The Invisible Hand of the Ferengis
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* “I read your piece about commune-ism and Starfleet’s view about the Ferengis in ST - interesting, especially knowing how they ended up on Deep Space Nine, the spin-off series. Quark was a regular Ferengi character there, so they explored the culture more. It ended up that Quark's brother, a kind, caring (socialist) person was initiated as "Grand Nagus", leader of Ferenginar. Apparently the writers felt the need to show that even this pro-capitalism society was wrong and needed some socialism too - a weak way out that undermines the culture, in my opinion. Another thing about the Ferengis is that, originally, the powers that be planned for them to be the new nemesis of the Federation. With that in mind, it's interesting to note how capitalist they are. Of course, they flopped completely as an enemy, leaving the other big new threat, the (money-agnostic) Borg, to take that position,” Ryan North, Computer Scientist, February 2003. ______________________________________________________________________________
As someone who has lived in communes, I can tell you that communes are organized in a hierarchical manner, no matter what they may say. As Orwell said: “Everyone is equal, except some are more equal than others.”
What worries me is how to decide who is more equal than others without using the scorecard of dollars and achievement—after all, dollars are democrats. Are we better off with a benevolent dictatorship like Starfleet making decisions on who gets what rather than using money, which does not discriminate and is blind to gender, race, religion or any other form of segregating humans except merit? Perhaps it is the worst system, except for all the others.
I read today an interesting article in the Globe
and Mail (by Luke Harding of the Guardian News Service,
There, slum dwellers erected two latrines—one for
men and one for women and a third for children only. Charging just one cent per
use, they built a profitable business using just $900 USD in capital advanced
to them by
We Can Do Better Than This
Who would have thought that you could make a successful business out of a latrine but this is apparently what the women of this village did. I was intrigued so I sat down and did a spreadsheet on it this morning and here is what I conjectured:
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Development
Economics and Entrepreneurship-- Sanitation |
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Village
of Kalmandhai, India with assistance from WaterAid, UK |
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Cost
of Construction of New Latrine |
Men’s |
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$450 |
USD |
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Women’s |
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$450 |
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Children |
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$0 |
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Total |
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$900 |
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Revenues |
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Per Use |
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$0.01 |
USD |
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Daily Use |
Men |
300 |
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Women |
375 |
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Children |
400 |
free |
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Total Use |
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1,075 |
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Total
Paid Use |
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675 |
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Total
Daily Revenue |
$6.75 |
USD |
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Annual
Revenue |
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$2,463.75 |
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Maintenance |
10% |
$90 |
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Night
Watchman |
$450 |
$450 |
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Cleaning
Staff |
3 |
$1,350 |
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Net Revenues |
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$573.75 |
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Return
on Investment |
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64% |
p.a. |
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Other
Revenue Sources |
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Use of
excrement as fertilizer |
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New
Shower Block |
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6 cents
USD per use |
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Purchase
of red worms from State of |
Making
Compost for sale |
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Money
Lending to women in Neighboring Communities |
Other
revenue generating Latrines |
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DesignEconomics\HernandoDesoto\DevelopmentEconomicsLatrineConstruction |
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Wow, a (possible) 64% p.a. rate of return on this investment is impressive. Just as importantly, there are huge health benefits that accrue to these people from proper disposal of human wastes. Plus they have generated additional activity including:
- the construction of a shower block (and more fees);
- the use of their ‘product’ in their herb garden (for self use and third party sales);
- startup of a composting business;
- money lending to women in other villages to start similar enterprises.
Think about the number of jobs they have also created—from a latrine! Give a human a fishing rod, not a fish.
Copyright. Dr. Bruce M. Firestone,
Oher Writings by Dr. Firestone on related subjects:
Teamwork in the Tenth Millennia B.C.
Interview with Hernando De Soto
Entreprenurialist Culture—How to Bootstrap Yourself to
Success in the 21st Century
Ottawa—a Focus on Self Reliance
Address
to the Indo-Canada Chamber of Commerce—the Way Ahead
Ontario Mayors Overlook Solution to Affordable Housing
Crisis
Livable Cities and Neo-Urbanist Design
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