[p2p-research] The link between poverty, (de)centralisation and (non)connectivity

[Ryan]

  Sent to you by Ryan via Google Reader: The link between poverty,
(de)centralisation and (non)connectivity via P2P Foundation by Michel
Bauwens on 7/8/10

A talk by Iqbal Quadir , “Technology Empowers the Poorest”, summarized
by Kevin Kelly:

“In Quadir’s view, it’s not that centralization per se creates poverty.
Poverty is the natural beginning state of all societies, east or west.
Rather, decentralization is the engine which removes poverty and brings
wealth. To the degree that infrastructure, education, and trade can be
decentralized, wealth will rise in proportion. To the degree that
infrastructure, education and trade are centralized, poverty will
remain.

Whereas many of us in the west, particularly the digital west, agree
with this intuitively, we act contrary to this observation when we give
large-scale aid to poor countries. As Quadir’s colleague William
Easterly argues in his book The Elusive Quest for Growth, the billions
and billions of dollars spent on aid for developing countries has not
only *not* helped, it has set them back decades. Aid, as we know it,
kills development. This harm occurs because almost all previous aid has
funneled through a central government or semi-governmental
organizations and that official route tightens centrality. Even if the
governments were saintly, and they are definitely not, the scale of
money flowing through these centralizing nodes prohibits the
distribution of resources, infrastructure, trade, and education. The
more aid that arrives, the less development can actually happen.

Technology is the escape from this quandary. Quadir came to see that
“technologies that connect” could liberate productivity. He matched his
experience in Bangladesh as a 13-year-old boy having to walk 10
kilometers to get medicine, only to find out the medicine man he sought
was not home, and then walking back empty handed, having wasted a day —
all because there was no connection between his home and the
pharmacist. Many years later in New York he wasted a day at work when
there was no electricity to run phones or computers. Productivity
required connectivity. If connectivity could be decentralized then it
would lead to increased wealth.

Quadir settled on the cell phone as a way to decentralized
connectivity. In the early 1990s cell phones were big, dumb, and very
expensive. Calls were $3 per minute. Only the rich could afford them.
But he wanted the poorest people in the world to get them. How would
this be possible?

First, he believed in Moore’s Law: that the phones would decrease in
price and increase in power every year. That seemed inevitable to him.
He said he could see “micro-chips marching toward the poor.” He was
right about that. Second, he piggybacked his hopes on a remarkable
invention of another Bangladeshi, Mohammad Yunus, who developed
micro-financing (and later won a Nobel prize for this invention). In
Yunus’ scheme a woman who owned virtually nothing could get a loan of
$200 to purchase a cow. She would then sell the surplus milk of the cow
to pay back the loan, earn both milk and an income for her family, and
maybe buy another cow. Ordinarily, no bank would have lent her this
trifling amount because she had no collateral, no education, and the
costs of overseeing such a small loan with small gains, would have been
prohibitive. Grameen Bank, Yunus’ creation, discovered that these
illiterate peasants were actually more likely to repay these small
loans, and were very happy to pay good interest rates, and so that in
aggregate, these micro-loans were more profitable than loaning to large
industrial players.

Quadir proceeded to ask, what if the women could rent a cell phone
instead of a cow? Grameen Bank could make a micro-loan to the poor for
the purchase a cell phone, which they then could sell/rent minutes to
the rest of the village. The enterprising phone-renter would benefit
and more importantly, the entire village would benefit from the
connectivity. It did not really matter if the minutes were expensive,
because when you have no connection, you are willing to pay dearly for
it. Quadir started off his GrameenPhone with 5 cell towers, and
eventually GrameenPhone erected 5,000 towers.

In 1993 when Quadir began, Bangladesh had one of the lowest
penetrations of telephones on the planet — only one phone for every 500
people. GrameenPhone project unleashed 25 million phones. Today there
are 100 times as many phones, or one per 5 people. Just as Quadir had
envisioned, this decentralized connectivity has increased productivity.
Without connectivity people waste a lot more time on economic errands.
With cell connectivity farmers maximize their profits by getting
real-time prices at distant markets; shepherds can call a vet, or order
medicine. One study concluded that the total lifetime cost of an
additional phone (including the cell tower and switching gear) was
about $2,000, but that each phone enabled $50,000 of increased
productivity. And surprisingly, the poorer the country to begin with,
the greater the increase in wealth from connectivity.

A lot of myths cloud the good intentions of developmental aid, Quadir
says. Myths such as: poor countries have no resources, or that the poor
don’t have discretionary spending, or aren’t concerned with brands,or
aren’t good credit risks, and so on. All these assumptions have been
proven untrue over and over again, and especially so with GrameenPhone.
The chief myth it dispelled was that government needs to subsidize
technological development, when in fact there is good money to be made
enabling the productivity of the poor. As Quadir says, “You don’t make
money on the poor, but with the poor.” At dinner I asked Iqbal what he
would have done differently with GrameenPhone. He replied, “Kept more
shares.”

Quadir is now searching for other technologies to decentralize, and
thereby become a tool to erase poverty. He is director of the Legatum
Center for Development and Entrepreneurship at MIT, which has been
funded with $50 million. He is investigating whether energy can also be
dethroned from its current mode of extremely centralized generation.
Only 10% of the electricity produced at its source remains at the end
of the wires as they reach homes and factories. Perhaps there are ways
to decentralize its generation, which would trigger connections at the
local level, and in his scheme, elevate wealth and democracy. If it
worked, decentralized energy might also work in rich countries,
increasing wealth and democracy in our part of the world as well.”

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