Category: Economic Growth

Is There “a Fortune to Be Made” in Selling to the Poor?

(p. B1) For years, multinational companies had little interest in lower-end consumers, figuring no money was to be made. Now, they are increasingly attractive to all types of industries, from consumer product makers to technology businesses. Google just announced plans to sell a stripped-down, cheaper version of its Android phone in India.
A decade ago, C. K. Prahalad, a University of Michigan business professor, in his book “The Fortune at the Bottom of the Pyramid,” detailed the potential, contending that such households were every bit as discriminating and aspirational as their counterparts at the other end of the income spectrum.
Mr. Prahalad, now dead, estimated there were four billion such consumers in a market worth $13 trillion. “People were saying, ‘There’s a fortune to be made. Let’s go,’ ” said Mark B. Milstein, director of the Cen-(p. B6)ter for Sustainable Global Enterprise at Cornell University.
But many of the first efforts failed. “There was not much thinking about what those consumers needed or wanted or how they might be different from consumers with more disposable income,” Mr. Milstein said.

For the full story, see:
STEPHANIE STROM. “Billions of Buyers.” The New York Times (Thurs., Sept. 18, 2014): B1 & B6.
(Note: the online version of the story has the date SEPT. 17, 2014, and has the title “Multinational Companies Court Lower-Income Consumers.”)

The book highlighted in the passage quoted is:
Prahalad, C. K. Fortune at the Bottom of the Pyramid Eradicating Poverty through Profits. Revised ed. Philadelphia, PA: Wharton School Publishing, 2009.

Moral Progress Accelerated in the 18th Century

(p. A11) For hundreds of years, people flocked to public hangings as a form of entertainment. Onlookers crowded into town squares and brought their families, reveling in the carnival atmosphere. Today most people are sickened at the idea of merriment at an execution. (Many are disturbed that executions take place at all.) We recoil from other once-common practices, too: slavery, the mistreatment of children, animal cruelty. Such shifts in attitude or belief surely constitute a form of moral progress and suggest, for once, that civilization is advancing and not receding.
. . .
Mr. Shermer defines moral progress as an “increase in the survival and flourishing of sentient beings,” which he illustrates with graphs and charts that reveal, among other things, a decline in war-related deaths, the expansion of the food supply, the reduction in major epidemics, the growth of world GDP and the spread of democracy.
Humanitarian achievements in the West, Mr. Shermer notes, began in earnest [in] the 18th century. Yet the ability to reason ethically is not a product of the Enlightenment. A moral instinct seems to be present at birth: Even infants possess innate intuitions about fairness and reciprocity, as Mr. Shermer explains. All societies punish free riders. The Golden Rule and Babylon’s Code of Hammurabi (advocating proportionate punishment) predate the ancient Greeks. So why did we need an Enlightenment to jump-start our moral progress?

For the full review, see:
SALLY SATEL. “BOOKSHELF; Getting Better All the Time; Crowds once flocked to watch executions. Now we recoil at the idea. What causes such transformations of ethical standards?” The Wall Street Journal (Tues., Jan. 20, 2015): A11.
(Note: ellipsis, and bracketed word, added.)
(Note: the online version of the review has the date Jan. 19, 2015.)

The book under review is:
Shermer, Michael. The Moral Arc: How Science and Reason Lead Humanity toward Truth, Justice, and Freedom. New York: Henry Holt and Co., 2015.

Fishing with Mosquito Nets, Where Food Is the Binding Constraint

(p. 1) BANGWEULU WETLANDS, Zambia — Out here on the endless swamps, a harsh truth has been passed down from generation to generation: There is no fear but the fear of hunger.
With that always weighing on his mind, Mwewa Ndefi gets up at dawn, just as the first orange rays of sun are beginning to spear through the papyrus reeds, and starts to unclump a mosquito net.
Nets like his are widely considered a magic bullet against malaria — one of the cheapest and most effective ways to stop a disease that kills at least half a million Africans each year. But Mr. Ndefi and countless others are not using their mosquito nets as global health experts have intended.
Nobody in his hut, including his seven children, sleeps under a net at night. Instead, Mr. Ndefi has taken his family’s supply of anti-malaria nets and sewn them together into a gigantic sieve that he uses to drag the bottom of the swamp ponds, sweeping up all sorts of life: baby catfish, banded tilapia, tiny mouthbrooders, orange fish eggs, water bugs and the occasional green frog.
“I know it’s not right,” Mr. Ndefi said, “but without these nets, we wouldn’t eat.”
Across Africa, from the mud flats of Nigeria to the coral reefs off Mozambique, mosquito-net fishing is a growing problem, an unintended consequence of one of the biggest and most celebrated public health campaigns in recent years.
The nets have helped save millions of lives, but scientists worry about the collateral damage: Africa’s fish.
. . .
“The nets go straight out of the bag into the sea,” said Isabel Marques da Silva, a marine biologist at Universidade Lúrio in Mozambique. “That’s why the inci-(p. 10)dence for malaria here is so high. The people don’t use the mosquito nets for mosquitoes. They use them to fish.”
But the unsparing mesh, with holes smaller than mosquitoes, traps much more life than traditional fishing nets do. Scientists say that could imperil already stressed fish populations, a critical food source for millions of the world’s poorest people.
. . .
In many places, fish are dried for hours in direct sunlight on treated mosquito nets. Direct sunlight can break down the insecticide coating. Anthony Hay, an associate professor of environmental toxicology at Cornell University, said fish could absorb some of the toxins, leaving people to ingest them when they eat the fish.
“It’s just another one of these ‘white man’s burdens,’ ” Mr. Hay said, referring to William Easterly’s well-known book critical of foreign aid by the West. “We think we have a solution to everybody’s problems, and here’s an example of where we’re creating a new problem.”
. . .
For Mr. Ndefi, it is a simple, if painful, matter of choice. He knows all too well the dangers of malaria. His own toddler son, Junior, died of the disease four years ago. Junior used to always be there, standing outside his hut, when Mr. Ndefi came home from fishing.
Mr. Ndefi hopes his family can survive future bouts of the disease. But he knows his loved ones will not last long without food.

For the full story, see:
JEFFREY GETTLEMAN. “Meant to Keep Mosquitos Out, Nets Are Used to Haul Fish In.” The New York Times, First Section (Sun., JAN. 25, 2015): 1 & 10.
(Note: ellipses are added.)
(Note: the online version of the story has the date JAN. 24, 2015, and has the title “Meant to Keep Malaria Out, Mosquito Nets Are Used to Haul Fish In.”)

The book referenced by Professor Hay, is:
Easterly, William. The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. New York: The Penguin Press, 2006.

Progress Depends on Removing Barriers to Innovation

In the quotation below, Bill Gates is referring to the late, and way-under-appreciated, economist Julian Simon.

(p. A3) “. . . Simon’s view was that humans would have to change to innovate,” Mr. Gates said. Innovation, in other words, is not preordained. Indeed, it’s happened much more in some societies than in others. And it has happened, Mr. Gates was arguing, because people and institutions took steps to remove the barriers to progress.
. . .
. . . , much of the world is enjoying one of history’s most rapid increases in prosperity. Life expectancy has risen more than six years just since 1990. The world, to quote the title of a book by the economist Charles Kenny, is “Getting Better.” As Mr. Gates says: “The world is actually improving a lot. We’re trying to deliver both the good news on the progress and the possibility to do more.”

For the full commentary, see:
David Leonhardt. “Africa’s Economy Is Rising, and Focus Turns to Food.” The New York Times (Thurs., JAN. 22, 2015): A3.
(Note: ellipses added.)
(Note: the online version of the commentary has the title “Africa’s Economy Is Rising. Now What Happens to Its Food?”)

The book mentioned by Charles Kenny is:
Kenny, Charles. Getting Better: Why Global Development Is Succeeding–and How We Can Improve the World Even More. Philadelphia, PA: Basic Books, 2011.

One of the great books by Julian Simon is:
Moore, Stephen, and Julian L. Simon. It’s Getting Better All the Time: 100 Greatest Trends of the Last 100 Years. Washington, D.C.: Cato Institute, 2000.

The “Miracle Machines” of Farming

(p. 75) Nobody had washing machines, vacuum cleaners, or incandescent light bulbs. But the farmers did have their miracle machines. In fifteen years, the Lucas family had gone from a walking plow pulled along behind a mule, to a riding plow, in which horses carried the blade through the soil, to a fine-tuned internal combustion plow.
“Machinery is the new Messiah,” said Henry Ford, and though that sounded blasphemous to a devout sodbuster, there was something to it. Every ten seconds a new car came off Ford’s factory line, and some of them were now parked next to dugouts in No Man’s Land.

Source:
Egan, Timothy. The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl. Boston: Houghton Mifflin, 2006.

Lower Cost LEDs Will Reduce Light Prices, and Increase Quantity Consumed (Yes, Virginia, There Really Is a Law of Demand)

(p. A29) The growing evidence that low-cost efficiency often leads to faster energy growth was recently considered by both the Intergovernmental Panel on Climate Change and the International Energy Agency. They concluded that energy savings associated with new, more energy efficient technologies were likely to result in significant “rebounds,” or increases, in energy consumption. This means that very significant percentages of energy savings will be lost to increased energy consumption.
. . .
That’s not a bad thing. Most people in the world, still struggling to achieve modern living standards, need to consume more energy, not less. Cheap LED and other more efficient energy technologies will be overwhelmingly positive for people and economies all over the world.

For the full commentary, see:
MICHAEL SHELLENBERGER and TED NORDHAUS. “The Problem With Energy Efficiency.” The New York Times (Thurs., OCT. 9, 2014): A29.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date OCT. 8, 2014.)

U.S. Patents and Start-Ups Fall When We Exclude Tech Immigrants

(p. A19) The process of bringing skilled immigrants to the U.S. via H-1B visas and putting them on the path to eventual citizenship has been a political football for at least a decade. It has long been bad news for those immigrants trapped in this callous process. Now the U.S. economy is beginning to suffer, too.
Every year, tens of thousands of disappointed tech workers and other professionals give up while waiting for a resident visa or green card, and go home–having learned enough to start companies that compete with their former U.S. employers. The recent historic success of China’s Alibaba IPO is a reminder that a new breed of companies is being founded, and important innovation taking place, in other parts of the world. More than a quarter of all patents filed today in the U.S. bear the name of at least one foreign national residing here.
The U.S. no longer has a monopoly on great startups. In the past, the best and brightest people would come to the U.S., but now they are staying home. In Silicon Valley, according to a 2012 survey by Duke and Stanford Universities and the University of California at Berkeley, the percentage of new companies started by foreign-born entrepreneurs has begun to slide for the first time–down to 43.9% during 2006-12, from 52.4% during 1995-2005.

For the full commentary, see:
MICHAEL S. MALONE. “OPINION; The Self-Inflicted U.S. Brain Drain; Up to 1.5 million skilled workers are stuck in immigration limbo. Many give up and go home.” The Wall Street Journal (Thurs., OCT. 16, 2014): A19.
(Note: the online version of the commentary has the date OCT. 15, 2014.)

The 2012 survey is discussed further in:
Wadhwa, Vivek, AnnaLee Saxenian, and F. Daniel Siciliano. “Then and Now: America’s New Immigrant Entrepreneurs, Part VII.” Ewing Marion Kauffman Foundation, October 2012.

An in-depth discussion of the issues raised by Malone can be found in:
Wadhwa, Vivek. The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent. pb ed. Philadelphia, PA: Wharton Digital Press, 2012.

The Washing Machine Is a Great Bulwark of Women’s Liberation

(p. C9) If the past is foreign country because they do things differently there, we’re lucky to have such a knowledgeable cicerone as Ruth Goodman.
. . .
“I like to put time and effort into studying the objects and tools that people made and used, and I like to try methods and approaches out for myself,” she writes in “How to Be a Victorian.” This sounds straightforward enough but hardly hints at the leaps of imaginative empathy the author is so good at: When she visits a museum to examine a Victorian farm worker’s wool coat, for example, she sees both the husband “who sweated and left stains on his clothes, who physically felt the cold” and the wife who “spent hours carefully and neatly sewing up the tear.”
Ms. Goodman observes that the wife’s technique for repair matches one taught in working-class textbooks, a fact that raises questions in her mind. “How widespread was such needlework education, and was it likely to have been women who carried out such repairs?” she wonders. “If it takes me over an hour to do the work, would my Victorian forebears have been quicker? When would they have fitted such a chore into their day?” That little rip in the man’s coat, it turns out, is like a tiny window into “the great sweeps of political and economic life” that in turn “bring us back to the personal.” Trade disruptions in textiles during the American Civil War, for instance, “pushed up the price of the labourer’s coat, making that repair more necessary.”
. . .
Many, many things about daily life are far better now: “My own historical laundry experiences have led me to see the powered washing machine as one of the great bulwarks of women’s liberation, an invention that can sit alongside contraception and the vote.”

For the full review, see:
ALEXANDRA KIMBALL. “Living Like a Queen; You might get used to using soot to brush your teeth. But steel corsets? Never.” The Wall Street Journal (Sat., Oct. 4, 2014): C9.
(Note: ellipses added.)
(Note: the online version of the review has the date Oct. 3, 2014, and has the title “Book Review: ‘How to Be a Victorian” by Ruth Goodman; You might get used to using soot to brush your teeth. But steel corsets? Never.”)

The book under review is:
Goodman, Ruth. How to Be a Victorian: A Dawn-to-Dusk Guide to Victorian Life. New York: Liveright Publishing Corporation, 2014.

Economic Hope Cures Terrorism

(p. C1) As the U.S. moves into a new theater of the war on terror, it will miss its best chance to beat back Islamic State and other radical groups in the Middle East if it doesn’t deploy a crucial but little-used weapon: an aggressive agenda for economic empowerment. Right now, all we hear about are airstrikes and military maneuvers–which is to be expected when facing down thugs bent on mayhem and destruction.
But if the goal is not only to degrade what President Barack Obama rightly calls Islamic State’s “network of death” but to make it impossible for radical leaders to recruit terrorists in the first place, the West must learn a simple lesson: Economic hope is the only way to win the battle for the constituencies on which terrorist groups feed.
I know something about this. A generation ago, much of Latin America was in turmoil. By 1990, a Marxist-Leninist terrorist organization called Sendero Luminoso, or Shining Path, had seized control of most of my home country, Peru, where I served as the president’s principal adviser. Fashionable opinion held that the people rebelling were the impoverished or underemployed wage slaves of Latin America, that capitalism couldn’t work outside the West and that Latin cultures didn’t really understand market economics.
The conventional wisdom proved to be wrong, however. Reforms in Peru gave indigenous entrepreneurs and farmers control over their assets and a new, more accessible legal framework in which to run businesses, make contracts and borrow–spurring an unprecedented rise in living standards.

For the full commentary, see:
HERNANDO DE SOTO. “The Capitalist Cure for Terrorism; Military might alone won’t defeat Islamic State and its ilk. The U.S. needs to promote economic empowerment and entrepreneurship to give the Arab world another path.” The Wall Street Journal (Sat., Oct. 11, 2014): C1-C2.
(Note: italics in original.)
(Note: the online version of the commentary has the date Oct. 10, 2014, and the title “The Capitalist Cure for Terrorism; Military might alone won’t defeat Islamic State and its ilk. The U.S. needs to promote economic empowerment.”)

Soto’s masterpiece is:
Soto, Hernando de. The Other Path: The Invisible Revolution in the Third World. New York: Basic Books, 1989.

Affordable Care Act Reduces GDP, Employment and Labor Income

(p. A17) Whether the Affordable Care Act lives up to its name depends on how, or whether, you consider its consequences for the wider economy.
. . .
I estimate that the ACA’s long-term impact will include about 3% less weekly employment, 3% fewer aggregate work hours, 2% less GDP and 2% less labor income. These effects will be visible and obvious by 2017, if not before. The employment and hours estimates are based on the combined amount of the law’s new taxes and disincentives and on historical research on the aggregate effects of each dollar of taxation. The GDP and income estimates reflect lower amounts of labor as well as the law’s effects on the productivity of each hour of labor.
. . .
The Affordable Care Act is weakening the economy. And for the large number of families and individuals who continue to pay for their own health care, health care is now less affordable.

For the full commentary, see:
CASEY B. MULLIGAN. “OPINION; The Myth of ObamaCare’s Affordability; The law’s perverse incentives will have the nation working fewer hours, and working those hours less productively.” The Wall Street Journal (Tues., SEPTEMBER 9, 2014): A17.
(Note: ellipses added.)
(Note: the online version of the commentary has the date SEPTEMBER 8, 2014.)

Mulligan’s research on the effects of Obamacare is detailed in his Kindle e-book:
Mulligan, Casey B. Side Effects: The Economic Consequences of the Health Reform. Flossmoor, IL: JMJ Economics, 2014.