Jason Hibner's Weblog

 

Jun 11 2009

Local Tastes Better

“Challenges help us more than they hurt us.” My grandfather would say such a thing whenever I found myself without a solution to my current problem. I am reminded of such a problem when I think of the complexity of third-world development. When I was around twelve, I found a relatively inexpensive computer case for sale. Without thinking, I spent my little saving on this worthless item. Of all the parts that make up a computer, the case is usually one of the cheapest. Yet, over the next year of my life I slowly built up my own computer piece by piece, problem by problem, through side-jobs, gifts from my family, and bargaining. I fixed so many little problems along the way and built up the institutional knowledge of computer hardware while expanding my social capital in order to acquire more parts. When I was done, I had something truly my own. Far from perfect, the computer was still one of the most reliable I have ever owned and the knowledge has served me far beyond my wildest expectations.

If someone where to ask me what I learned in “Networks and Development,” I would point them to Jane Jacobs. Her explanation of cities as nodes of economic development and currency as the primary feed-back system of economies (albeit now flawed feed-back system) perfectly sums up the challenges of complexity in development. Her case-studies also illuminate the benefits of a complex system. One decision can have externalities completely outside of all expectations. Yesterday I was remembering an incident my freshman year of high school. I had gone to audition for a play and I was practicing my audition piece minutes before I was to be called on stage. I distinctly remember how I wanted to just go home and forget about it. No one would have cared and my family would have understood. There would always have been another play or club to occupy my time. But for whatever reason, I stuck it out. I was cast as the lead in that play which led me befriend a teacher who became a mentor for me in competitive speech contests. Those contests paid for much of my first year of college and may have been the deciding factor for why I was accepted at Georgetown. Because I went to undergrad at Georgetown (and because of my computer knowledge from a rash decision as a twelve year old) I worked at UIS and attend CCT. And because of that, I am now learning about complex systems and the challenges of development and writing this blog post. The externalities of life, much like economies, can seem completely random.

What does my life lessons have to do with development? Economic development is much like personal development. It doesn’t come cheap. One doesn’t expect to give their children strong characters; we all know those must be earned. Just as I had to sweat through the difficulty of building my first computer, developing nations will face my challenges of their own on the road to strong economies. Putnam and Narayan explain how the networks of cooperation are fundamental to success. Without using every resource at my disposal, my computer would never have been built. It was a combination of work, charity, and trade that led me to acquire all the pieces of the puzzles. Developing nations will need all the same avenues of support. North shows that agglomeration makes everything easier (and cheaper) than going after everything as individuals. I could have ended up here in CCT through other paths, but by working with my personal resources instead of others expectations, I succeeded. And Rogers says that diffusion can be used to spread positive behaviors through social norms. My personal journey may have inspired others just as others inspired me. All of these lessons were present in my own life and in the economic life I hope to work for in the developing world.

“Local” is the new buzz word in the food industry. Just a few years ago, “local” might have sounded cheap and unappealing. Why not “foreign” and “exotic” foods? Recently my sister and some of her college friends went to Nicaragua to work on houses. I computed that they had spent around fifty dollars per man-hour when costs of travel were included. This did not incorporate the lost wages for local workers. The lesson is that we cannot expect gestures of support to be good enough. We have to analyze the true costs and benefits whenever we deal with economies that are not functioning well on their own. My sister’s group failed to take this into account.

“Theories are like clothes. Try them on and see how they fit.” Professor Garcia’s advice is a sound method of interacting with theory. I hope to follow this as I work on my paper concerning the digital divide. My story of building my first computer reminds me of the lofty aspirations of the OLPC (One Laptop Per Child) Project. The thought was that the children of the third world will learn from each other in their own networks and dramatically alter the knowledge divide that technology creates between the wealthy and poor. Yet it has failed. Private interests have taken over the “market” for computers to the poor. The lesson of this class have shown why OLPC was destined for failure. It failed to act locally for global change. Sustainability was never considered. And wishing that the project would be immune to market forces was naive. The question now is how to apply the lessons of agglomeration, externalities, and networks. I think no single theory will be the key for success.

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Jun 10 2009

Jane Jacobs v. Qatar

“Money don’t buy class…” were the words whispered to me when my mother saw what was being served to us by our wealthy hosts–stouffer’s lasagna. I think that Jane Jacobs might feel a similar sentiment about the Arab emirate of Qatar, second highest GDP per capita nation in the world.

Jacobs uses the beautiful phrase, “Cathedrals in the Desert” to describe nations that purchase “development” (or so they think) by implanting foreign factories and business in an otherwise empty economy. Qatar’s overall strategic plan is more nuanced. Instead of placing “Cathedrals,” they wish to purchase intellectual superiority over their neighbors in the Middle East in order to become the center of education in a region that often bans learning for many of its citizens.

One thing that I love about reading Jane Jacobs is the confidence she permeates in her own theories and the way she dismisses attempts of economic development without resorting to condescension. She writes about nations making the same mistakes over and over again but always with the best intentions. However, her perspective on the hamlets outside Tokyo provides hope for Qatar’s economic strategy. This city accepted the overwhelming economic influences of Tokyo during its expansion and profited from changes beyond its control. This reminded me of an article in the New York Times on two-hundred year old municipal bonds the city still pays out because before 1900 a hamlet outside the city limits realized that New York would eventually swallow them up and they might as well take out as many loans as possible since someone else would have to pay them off. In the same manner, Qatar realizes that as the Middle East becomes more liberalized in education, someone will need to accept the increasing number of students and it might as well be them.

I do not know what specific advice Jacobs would give to such a small, oil-rich country as Qatar in today’s economic environment. Oil constantly appears to be on the verge of being replaced by green technology, but the economic reality appears to be that oil will be valuable until we either run out or the environment is in such ruin that a worldwide massive reduction (somehow with enforcements) can be organized. Neither seems to be happening soon. The tragedy is that when oil prices finally do collapse, the economies that have been relying on them will be even more backwards compared to the those who have built industry without huge natural resources. It seems that any plan is better than no plan.

Just as money can make people blind to reality, economic wealth nationally can make countries blind to their own precarious position. Qatar is doing everything it possibly can to become the center of education, including attracting Georgetown and many other universities, in the Middle East. However, it might be wise to consider the “exit strategies” of these Western Universities. When will it be possible to educate the Middle East without help from the West as today we educate the West without assistance from the Middle East. Collaboration for learning is not a bad thing, but intellectual reliance could be extremely damaging.

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Jun 09 2009

Greif’s Grief over the US Economy

Greif continually comes back to a simple phrase for economic development–”credible commitment.” These two words sum up what is necessary for any government to lead development. First, it must be a credible arrangement that all citizens and the world will recognize. Second, it must be a long-term and mutually beneficial relationship, much like a marriage. Today, in due part to the collapse of the financial sector of the US economy, we are continually threatened by the breakup of our “credible commitments.” US Treasury securities have been considered modern gold for decades, but will this last in perpetuity? History tells us that is unlikely.

Moody’s and Standard & Poor’s have as much global economic influence as the World Bank and the IMF combined. In our “consumer stock market” of late we tend to ignore bonds and focus the more exciting stocks because they allow us to bet on which companies will prosper and which will falter. However, Moody’s is continuously examining the bond ratings for cooperations, municipalities, state governments, and national governments. California is currently on a path to bankruptcy which will devastate their ability to borrow money at decent interest rates. Japan saw their government bonds downgraded and subsequently experienced the “lost decade” of economic stagnation. Is it possible the United States could be in for a similar debacle?

I believe this scenario is fascinating. It rather resembles the prisoner’s dilemma. Should the bond rating agencies destroy the very economy that they reside in? Are they breaking their own “credible commitments” by not fairly evaluating US treasury bonds? Could a worldwide consensus effectively overrule them if they keep denying anything is wrong?

To alleviate this threat, we must have a concrete and absolutely “credible” plan to attack deficits in the near future. I completely support the stimulus plan and, for the most part, the bailouts. However, unless we can agree to rock solid commitments for deficit reductions and debt repayment for the next decade the world market has little reason to believe in our credible commitment.

Greif’s arguments take economic stories from the past to explain why the work of development is so difficult in the present. We may argue about the role of “collectivist” versus “individualist” (the “American Way”) in society’s economic output, but both can cross the finish line to development in the correct economic environment. A society without credible commitments cannot even leave the gate. That is why I worry about our debt, even as I support President Obama’s ambitious stimulus package and bailouts. When I feel like our approach 10 trillion dollars cannot be compared, I take a look at this map. At least we’re not Italy, or Ethiopia…

Debt vs. GDP

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Jun 09 2009

A Little Tech Goes A Long Way

About six months ago I attended a forum on the use of technology in the developing world here at Georgetown. The buzz word of the afternoon was “sustainable technology.” Since I currently work for Georgetown’s IT department, I took these words to heart. Technology without a sustainable framework is as useless as building power plants in developing countries without industries in place to purchase electricity (as Jane Jacobs describes in “Cities and the Wealth of Nations”).

The example given at this forum was a sustainable information line in rural India. Farmers would travel to a central “node” in their network, pay a fee (somewhat considerable for their income), and receive an answer to any agricultural question. If the answer could be found in a database, they received it immediately. If experts were required to deliberate, they received it in a few hours. The entire operation is run through telephone lines (with computers on the other end) to avoid user interface issues and illiteracy problems.

The genius of this program is three-fold: first, it is continually funded by the fees charged to the farmers; the farmers must actively seek this information and are therefore much more likely to use it and value it; and the program allows for increased efficiency of crop yields without abrupt technological change that can lead to displaced workers.

I appreciate this telephone system so much that I wonder if it could be expanded beyond the most basic of economic outputs–agriculture. Why not setup businesses in one country that give advice and technical support to a slightly less developed country? Instead of rich Indian cities answering phones lines for US companies, Indian companies can provide assistance to third-world with their problems related to manufacturing and networking. Sustainability comes from keeping these phone trees within the same level of economic development, but with enough differences in specific manufacturing or technical fields for one country to assist another.

Just as development cannot be bought through constructions of roads and electrical grids, neither can technological advancements be bought through networks without sustainable uses. And even as the rates of illiteracy are falling throughout the world, the jump to computers may be too much for many of the world’s poor. Telephones operating over VoIP (Voice Over IP) can provide the cheapest form of communication on already existing networks. Through Skype the information age may reach those who have been left behind and finally allow them to equate capital with information for modern economic development.

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Jun 01 2009

Prisoner’s Dilemma or Development’s Solution?

As I read Douglass North’s examination of Institutions (and ambitious reinvention of classical economics) I kept thinking over the prisoner’s dilemma. North does as well throughout the book, often critically, because of its simplistic nature–specifically, the game’s one-time nature. He explains, “”If we shift from a once and for all game to a repeated game or an irerated game, the the possibility of a cooperative solution becomes more evident” (North 56). So why not create repeated “games” in development to encourage increases in efficiency?

http://gautlab.bio.uci.edu/images/prison.jpg

What if the current global institutions of development (IMF and World Bank specifically) matched developing countries up and had them fight it out for development dollars and private contracts. The citizens of the two opposing countries would see the direct effects of poor governance and aid dollars went to their neighbor and would demand better leadership. We could subvert the fallacies of the prisoner’s dilemma (the so-called “Pareto inferior solution”) by recreating its fictional components in the real world.

1. Time delay – North writes, “if there is an end of the game or people believe that the game might end, then indeed the discount rate may enter in to determining whether it is worthwhile to continue to cooperate.” Therefore, we must not set an end-date for this experiment. Competition for best governance will continue indefinitely, forcing leaders to either shape up or continue to build anger in their populace.

2. Enforcement – The problems of enforcement in the Third World are vast. Bribes can be bought so easily because of the lack of consequences from an enforcement agency (policy, courts, etc). However, bribes do not work when the enforcement agency is a multinational governing body, like the World Bank. Instead of placing money into the corrupt system and then fighting for efficiency, we will withhold money from even entering the system until benchmarks can be achieved that exceed a similar situation in the opposing country.

This idea, recreating the prisoner’s dilemma in a sort of “Survivor” style match between developing countries can, at first, seem like cruel entertainment for the Western World. I hesitated to even write about it in a blog entry. However, I came to several conclusions that allowed me to proceed. First, there will always be a greater demand than supply of aid money to the developing world. Withholding from some countries will result in more misery in the short term, but continuing the cycle of non-enforcable agreements leads to endless misery. Second, national rivalry has been the engine of innovation countless times in human history. When expressed as war, these “rivalries” have been tragic, but when violence is removed, the competition can be mutually beneficial. Perhaps the prisoner’s dilemma can free us all from corruption in development.

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May 28 2009

E-Waste: A Scourge on the Third World

I would like to promote the tragic consequences of e-waste on developing countries. E-waste (defined as materials left over from our consumer electronic devices such as televisions, computers, cell phones, etc) has developed into a worldwide business, a sort of “reverse value added chain” where each component that has value must first be extracted through “recycling” processes that cause disease, contamination, environmental destruction to those who perform them. The problem is that properly recycling e-waste is an expensive alternative and promoting “re-use” of older computers in schools is often more of a loophole to get rid of truly broken and antiquated technology than a charitable act helping students.

There are four principal actors involved in this issue. First, the consumers, who want to dispose of their decaying technology in the cheapest way possible and are willing to contribute little in order to do this humanely and in an environmentally-friendly manner. Second, the electronics manufacturers, who have primarily joined the fight to protect the third-world from e-waste as a marketing tool. Third, the networks of business that outsource e-waste recycling in order to profit from the individual components of value hidden inside consumer devices (things like gold and copper). And finally, fourth, the individuals, often children, who process e-waste in the Third World as a source of meager income and at the expense of their health and environment.

The structure of their relationship is very tangental. As Stiglitz discusses in “Development and Its Discontent,” time plays a very detrimental role in the promise of corroboration. Many years can pass between the sale of a consumer electronic device (transacting between the consumer and the manufacturer) and the time of “recycling” of the devices. Often, the company that produced the product may be out of business by the time of recycling. For example, Packard Bell, a very popular computer manufacturer in the early nineties, was nearly out of business in the late nineties when many of its devices began to enter the e-waste market. How can a company in a completely different economic stage deal with products made a decade before? The consumers are separated from the poor in the third world who process their waste by a corporation setup to find loopholes in environmental laws in order to profit. Consumers never see the face at the end of their laziness.

A strategy to start a reversal of this e-waste market is two-pronged. First, education of consumers is paramount for success. The government could mandate electronic companies to include the dangers of e-waste in their marketing material, much as the government mandates public service announcements from broadcast media companies. Second, we can incorporate the cost of proper recycling into the cost of the computers at time of purchase, to eliminate the time-delay that leads to e-waste. Companies could be forced to pickup all e-waste generated by them in exchange for this mandated fee during the purchase of the product. This is similar to the way airlines added a fee for the increase in security costs after 9/11.

The problems of e-waste cannot be solved without a thorough understanding of network that allows it to flourish. Just as Sturgeons acknowledged the complexity of the value chains in the global automotive industry, we must discover the incentives that drive our e-waste into the developing world. Without a strong understanding of this nexus, we cannot break apart current incentives while added alternative routes for profit. Until then, the third world will continue to be exposed to toxins all because of the first world’s laziness.

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May 26 2009

Nodes’ Codes

In “Nexus,” Buchanan explains how small-world networks are often created formally, with informal and random links providing the crucial extra connections. The global network of states, financial institutions, and NGOs share this same formal/informal structure. The world functions as a global network because of the varying degrees of formality offered by these nodes. Without each structure in place, we would cease to live in a “small” world. Even though these nodes bring a necessary level of randomness to the global network, they were not random in their creation. John Agnew writes in “The New Global Economy”: “Globalization, therefore, did not just happen and it is not synonymous with the neo-liberal policies instituted by many national governments in the 1980s. It required considerable political stimuation without which technology and economic stimuli to increased international economic interdependence could not have taken place. (Agnew 8).

States have a very formal networking structure that is largely based on trade (and therefore financial institutions). Long histories of alliances and trade routes have led us to an established social order. The G8, United Nations, NAFTA, NATO, and the European Union are all examples of the formalization of these networks. These are slow moving beasts of globalization that are often historical accidents as much as logical alliances. However, they are all based on the relationship among states and leave little room for informal networking connections, so crucial for small-world networks, to develop.

Here the financial institutions and NGOs hold so much promise. Their structures are inherently more random, even though they often develop from state relationships. For example, I worked with Sister Cities International over the last several years. Originally started by President Eisenhower to reunited Americans of German heritage with German citizens after World War II, the organization now works on “twinning” cities around the world in hundreds of combinations. Sometimes these cities are twinned because of heritage, sometimes because of trade opportunities, and sometimes because of past conflicts. Very recently, Sister Cities received a large grant from the Gates foundation to work on twinning more cities in Sub-Sahara Africa. This massive network is highly unorganized, yet was created because of a highly organized development at the state level–World War II. Financial institutions have given it a new goal that will result in many fantastic opportunities for the people brought together randomly thanks to the fortunes generated by a technology boom that largely missed their corner of the world.

Financial institutions are the pivotal connection between the formal state nodes and the random NGOs. They are regulated by laws, both national and international, but are working for the benefit of the private sector which is only interested in profit and will seek it anywhere. All the nodes of this global network expand in size and influence together because of their interconnections. NGOs will expand the breadth of financial networks, while new state-level agreements will allow more NGOs to find support. The opportunity for combining different nodes is nearly endless.

Sister Cities is an example of a network within a network. As the number of NGOs grow at an accelerating rate, combined with the power of the internet to find the connections between all of these organizations, the efficiency of the network will continue to be enhanced. I think this spells good things for the bottom billion, even though I believe our formal institutions have failed them in the past. Today, trade and therefore economic development can occur from the bottom up instead of from the top down. That’s a global network worth expanding.

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