Monday, June 21, 2010

Actually Believing In Private Industry

The Atlantic's Sebastian Mallaby recently published an article - "The Politically Incorrect Guide to Ending Poverty" - about entrepreneur Paul Romer's ideas on how to end poverty in the developing world. The plan takes inspiration from Henry the Lion's development of L├╝beck in the 12th century, which he achieved by setting up a city with bare-bones regulation and fair laws that encouraged industry to come from all over. Romer suggests that nations wishing to provide aid should lease space in the developing nation of their choice and set up similar systems. I think his theory of development is sound, but the execution is problematic.


State-run economic development is difficult largely because state aid demands return on investment, and the preferred reimbursement is in political conformity and alliance. This makes the aid relationship more complex than just "giving money to help someone." Governments are fundamentally concerned with their domestic populations - and they should be. If they're going to pay out, they really should be getting something back. This dynamic, however, is not conducive to purely charitable development efforts. Given the delicacy of statecraft - and the magnitude of the consequences when it is not respected - nations can ill-afford to give aid in any other manner. Still, the domestic priorities of states point us towards the particular kind of aid we currently dispense. We assume that governments are best qualified to disperse aid, so we send it along state "frequencies." However, it only takes a brief moment of consideration to see that this is a silly concept. Not only do we have myriad historical examples of states not acting in the interest of their populations, and but we also must consider the fact that democracy is meant to draw its power from its citizens, and we often try to encourage fledgling democracies.


Romer is right to bank on industry to develop nations, because you need money to achieve your best life. The one thing I don't really understand is why he puts the onus on nations to develop industry. I think it's because the Henry the Lion example from which he draws inspiration included the institution of laws and political systems that must stem from established legal and political systems. For centuries, nations have been the peak of power and in that context it makes sense to focus on nations as the impetuses for development. However, in an increasingly globalized world, corporations have greater power and have less call to appear pure of motive. It seems more logical to me to encourage corporate development of these economic jumper cables, rather than other nations.


This would require a more intensive soft power approach than we currently use or have – I will complain all day, every day about the pathetic state of our diplomacy and the enormous opportunities we are letting fall by the wayside by not developing our diplomatic reach – but it is workable. Nations could encourage businesses based in their countries to develop spaces like the one Romer describes, with a clear message that behavior that would be illegal on domestic soil will be equally illegal and swiftly punished overseas, and then leave the economic development to corporations while the nations use their diplomatic corps to bolster political development and social progress.


If the goal of foreign aid is to encourage the development of liberal democracies and political stability – and if not, what’s the point? – then there must be additional support on top of economic development. Jack Snyder, in his book From Voting to Violence, distills the formation of potential liberal democracies down to four primary preconditions: state (or state-like) institutions, elections, malleable political elites, and an active and free press. The idea is that all of these things can be shaped into a democracy – even if the elections are corrupt, people must be in the habit of voting for people. Even if the state institutions are total machine-politicky messes, people must have a clear image of where political power happens. These factors, with the possible exception of the malleable political elite, will be of little interest to corporations.


It falls then to the nations of the world to shore up these institutions and push them towards democracy, as the corporations pour money into the fledgling democracies’ economies. It’s much easier to encourage leaders to give their citizens rights and freedoms and to convince said citizens to submit to political leadership when there is money coming in (ex. the decline of IRA violence as the Irish economy rose). With corporations involved in the money side of things and nations involved in the political development, motives are appropriately placed and political clarity more attainable. Any attached strings are clearly visible and beyond reproach, all actors are in roles that maximize on their knowledge and ability, and sovereignty can be preserved.


I can already hear the yelling about evil, nefarious corporations who will simply pillage these countries and leave. I’m the last one to say that corporations are entirely moral entities without exception, but I do think we need to accept the power that they currently hold in realistic terms and capitalize on it wherever possible. There’s a real problem in appreciating the fact that nothing is perfect and our acceptance of something comes with the bad as well as the good. Capitalism does a lot of great things, but it also grants a fair amount of political power to people and entities not elected by the people. Rather than condemning corporations because they have a perceived down side, why not find a way for that down side to be productive and positive? The same works for democratic (or any) governments – they have a down side, but why not capitalize on it? I understand that this is a somewhat radical change in thought (perception?) from today’s collective understanding of government and corporate images, but I think it’s a worthwhile and actually quite important one.


On one final note, it’s interesting that Mallaby should announce his piece as being politically incorrect. Of course, authors do not always have control of their headlines, but someone, somewhere at The Atlantic decided that Mallaby’s article was politically incorrect (which of course is often used interchangeably with “verbally daring” to everyone’s supreme detriment) and that speaks volumes about the way we see our place in the world. The guilt that consumes our political awareness is so…wasted, really. It seems that the prevailing sentiment is that we should give money and aid without ever admitting that it comes with strings attached, for the sake of looking philanthropically virtuous. This makes no sense. We’re a nation with very real economic, political and social concerns and costs – of course there are strings attached, and if there aren’t, then we are failing to protect ourselves. You must be clear on the obligations on both sides of any agreement (one of the literal thousands of things I have learned from the People’s Court), and if you are not, you can’t be surprised when the obligations you thought the other party had agreed to don’t get carried out. To be fair, I think the political incorrectness label may be attached to the idea of nations running these economic proving grounds within other sovereign nations, but I don’t think that this violation of sovereignty is in any way the most important lesson of this article nor the best way to proceed.


I think that “politically correct” may be the most damaging term to come out of the past few decades, because it is so imprecise and so problematic. It gets used for an incredibly broad array of uses and it really means less than nothing. Politically correct, taken at face value in the context of modern politics, basically comes down to “saying things in a way that won’t lose you votes/support” which is a pathetic way to conduct your business and your life. Admittedly, it’s stupid that the general public expects for their representatives to rigidly conform to a party platform and never display any kind of critical thinking, but unless people stand up for the fact that they are, you know, actual individual humans, then there’s no way of changing this and our politics will continue to decay.

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