Poverty Impeding Development

In the 1980s, the advent of some newly-industrializing countries (NICs) in east Asia, such as Taiwan and South Korea, was generating excitement around the world that the gap between the least developed countries (LDCs) and the developed countries (DCs) then had a viable bridge through foreign direct-investment; that is, what had been a dichotomy was becoming a spectrum. The hope that globally-circulating capital might raise even the LDCs out of poverty. Of course, there was scarce any thought that the combined pollution of an economically developing world would raise global air and sea temperatures above 1.5C. Human beings are too near-sighted for that, and, of course, there is the allure of profits and higher salaries and wages. Also, the sheer inexorability, or stubborn persistence, of poverty in scaring off rather than being lifted up from foreign-direct investment may have been minimized by the hope. Roughly forty years later, Oriana Bandiera of the London School of Economics spoke on the theory that economic opportunities are impacted by how much wealth a person has at the outset—the alternative theory being that the opportunities are just as good for the poor as for the rich because differences are due to exogenous (i.e., outside) factors. The micro-level condition of a country’s poor impacts the attractiveness of a country to foreign direct-investment.

Poor people are more likely to be doing casual, self-employed work than running a small business or raising livestock, according to Bandiera. Wage-labor tends not to go to the poor. Sustenance-level casual work, which is not as regular as wage-labor, is typically not enough to accumulate savings, which could be spent on training or education, or to buy livestock or equipment to increase production of crafts such that economies of scale might be realized. A bimodal structure thus emerges with equilibria being at subsistence level and middle-class, but not in between them. In terms of public policy, craft-oriented small-business loans can perhaps increase the number of poor people who can enter the interim space between the two equilibria. Only governments would be willing to take the risk, and should be willing to make sure that the loans are not spent on consumption, for pressing consumption needs are part of the reason why the poor do not save money on an ongoing basis.

Similarly on the macro level, the Asian NICs were distinguished from the LDCs in Latin America in the 1980s because only the former group had governments strong enough to withstand the political pressure from the people for increased government spending for consumption. Strong states, even if they are authoritarian rather than democratic, can resist popular pressure to exhaust government coffers by expanding entitlement programs. That by 2025 several E.U. states had deficits and debts greater than the limits prescribed by the Stability and Growth Pact and those governments faced no real accountability from the E.U.’s federal government adds support to the argument that democracy may be at odds with sustained and balanced fiscal policy unless, as the U.S.’s Thomas Jefferson and John Adams agreed, the citizenry who vote (i.e., the electorate) are educated and virtuous.  

In terms of business, enterprises in LDC’s tend to be smaller than those in developed countries (and NICs). Smaller organizations are less competitive in trade because they cannot realize the benefits of economies of scale. Such organizations also have less job-specialization and job variety. Bandiera even referred to the labor of such companies as a “disassociated group of self-employed.” Additionally, the CEOs of those enterprises tend to be managers more so than leaders, meaning that those CEOs spend more of their time oriented to functions inside the organizations and less time oriented to external stakeholders and even society as a whole. Visionary leadership is something that the head of a small business in a developing country cannot afford.

Even in business schools in developed countries, the business field of business environment has a place similar to that of Pluto in the solar system. Situating the field of business ethics within business environment is logically and conceptually dubious—but not to worry; few “scholars” of business ethics have actually studied philosophy, of which ethics is a subfield. One business ethics “scholar” at MIT told me in 2024 that ethics is actually situated in sociology rather than philosophy. Being in the humanities, I only smiled and wished her well. Rather than copy the business systems of developed countries, perhaps LDCs should grow their own varieties. The question is perhaps whether the governments should first not only invest in infrastructure, but also underwrite small-business loans to a sufficient portion of poor households before enticing foreign direct-investment. After all, forests develop in stages.

Democracy and Over-Population in India: Foreign Direct Investment

How well can the democratic form of governance serve as a means by which a society is circumscribed, or restricted in some way? In other words, can self-government be used to enact self-discipline on the body politic itself? Adding another level to this question, can elected representatives be expected to go beyond fixes that are perceived societally as sufficient to redress the underlying causes of governmental, economic, or societal problems? Far from urging or implying the supremacy of non-democratic forms of government, such questions invite improvement in democracy itself. In this essay, I reflect on these questions using India’s industrial policy as a case study.

Faced with economic growth below 6 percent, a budget deficit expected to breach 6 percent of India’s GDP, a possible downgrade in the country’s credit rating to junk status, and the rupee hitting record lows, Sonia Gandhi, the head of the Congress Party, spoke for the first time in late 2012 in support of allowing foreign companies such as Wal-Mart into India. Prime Minister Manmohan Singh and others had been urging her to embrace the reform. Appealing to Sonia Gandhi’s passion for social welfare programs, the prime minister told her that more foreign direct investment would be necessary to expand them. Most notably, the Congress Party boss was pushing a $5.6-billion food-security bill and a rural employment-guarantee program. According to the Wall Street Journal, there was already “high spending on subsidies” at the expense of “growth-generating capital projects.” In effect, the latter get “sub-contracted” in foreign direct investment.  Relatedly, the finance minister, P. Chidambaram, issued a plan to reduce the federal government’s deficit and sell stakes the government has in state-owned companies.

 

Singh and Gandhi at a rally. It is clear who's the boss.   AP

 

Lest Sonia Gandhi’s support be viewed as a panacea, other reforms, such as making it easier to acquire land, remained “stuck in the bureaucracy,” according to the Wall Street Journal. The government’s “mind-set is I will not fix the cause of the issue, I will put a Band-Aid on it,” Rahul Bahsin of Baring Private Equity Partners India said. Indeed, although Walmart would doubtless hire local labor both in the construction and retail-operations of the stores, that foreign-direct-investment alone would not be large enough to make a dent in the social welfare needs of India’s poor. Additionally, the company’s aversion to workers’ rights (not to mention unions) and the related low compensation and benefits for in-store employees could mean additional troubles for Sonia Gandhi as worker groups seek protection from the federal government.

 Moreover, with over a billion people at the time the policy was being considered, the prospect of employing all able-bodied people of working-age in India was undoubtedly a daunting task in the midst of a global recession following the financial crisis of 2008. It was not as though the Indian government could simply invite hundreds of millions of Indians into computer-science and engineering classes and then into high-tech ready-made jobs. Over-population could have been the long-standing underlying problem, or cause of the unemployment and related subsidies.

 The bureaucracy and coalition in-fighting, as well as the “Band-Aid” approach oriented to incremental additions in employment through FDI could be a reflection of India’s over-population—a more basic problem that eludes mere policy prescriptions increasing foreign-direct-investment. Especially if a given  over-populated area has a disproportionate number of unemployed people, tackling the underlying problem could be expected to relieve the pressure on policies such as foreign direct investment to make up the difference. Meanwhile, other symptoms, like global warming and food prices, would be redressed. The question may therefore be whether a democracy is a feasible venue for such “cause-oriented” legislation to be enacted.

 Whereas government officials in China did not have to worry about a democratic backlash from the government’s one-child policy in the late twentieth century, the case of India raises the question of whether a self-governed people can regulate their own society by democratic means. A democracy may be hard-pressed in putting into effect painful legislation to curb excesses such as over-population—literally to restrict rather than promote a basic sort of growth. The value put on that value alone since the mercantile days could give legislators an implicit mandate to foster rather than retard population growth.  Furthermore, the “Band-Aid” approach might be more in line with the workings of a democracy if apparent measures are sufficient to get one re-elected. One could point to the perennial “fixes” in the U.S. regarding entitlement programs and deficit-cutting as other examples, and to the efforts of the E.U. to bail-out heavily indebted states as yet another example. Elected representatives seem to prefer to take little bites, incrementally, rather than enact fundamental laws that are oriented to causes rather than symptoms.
In contrast to these questions, an uncritical approach to the spread of democracy around the world, such as potentially in the “Arab Spring,” could actually exacerbate global problems. If the species continues “un-self-regulated,” meaning more and more over-populated, nature will undoubtedly step in at some point and impose restraint (e.g., famine, climate, war, disease). It may be an open question whether we as a species can stave off such a verdict from Mother Nature. Ironically, our consensus form of government may lessen the odds.

 

Source:

Romit Guha and Rajesh Roy, “India’s Gandhi Now Backs Overhauls,” The Wall Street Journal, November 9, 2012.

Conflicting Business Models at Singapore’s Airport

Singapore’s Changi may have been “the world’s most fabulous airport” in 2011, according to Scott McCartney of the Wall Street Journal. To be sure, the airport’s amenities were amazing. How they are were being operated, however, detracted in certain respects with the goal. “We wanted to transform the way travel is done and create a stress-free experience,” Foo Sek Min of the airport’s management said. This goal dovetailed with the airport being “a key economic development element” for Singapore. Accordingly, the state-owned company that ran the airport received “plenty of government support.” In line with these goals was there a business model that was long-term oriented? Rather than trying to “nickel and dime” customers so as to minimize the funding from airlines and the government while maximizing revenue on a daily basis, resisting such urges in order to provide a truly stress-free experience would, I contend, be more consistent with the goals. 

I contend that a stress-free experience in a pure (and realistic) sense does not include feeling manipulated or pressured to do or buy something. More concretely, paying for X and Y during one’s stay brings with it stress. Even the thought of one’s credit card or cash balance brings with it some stress. To be stress-free, an experience should not include even the thought of money—much less using it. This is where Changi fell short of its own mission: to attract more flyers to the airport and ultimately to (indirectly) add positively to Singapore’s economic development.

Not charging for the local bus tour that for immigration purposes was considered within the airport is perhaps the epitome of how the stress-free and economic development objectives dovetail with a business model. The lack of stress that comes with not having to do anything but get on the bus and take in the sights could have led to interest in investing in Singapore in some way. Indeed, potential business deals may even have been negotiated during the tour as tourists chatted. The lack of stress (i.e., lack of demands) on the people using the airport could thus have benefitted Singapore down the line, whereas charging for the tour, collecting the fare, and having the passengers go through immigration would hardly have been conducive to a mood to invest or even visit Singapore.

Generally speaking, charging for each service in order to (ideally) cover the airport’s operating costs on a daily basis is eons away from the business model that is oriented to long term investment even with regard to particular services. Having the roof-top pool free to customers who stayed in one of the airport’s in-transit hotels while costing people going through the airport $11 not only added to stress monetarily, but also insinuates an insider/outsider exclusivism that was not going to endear the travelling public to Singapore, whether to visit or invest in economically. Similarly, having a four-story amusement-park type slide “tied into retail” at the airport by requiring users to show a receipt from an airport merchant showing roughly $8 or more in purchases or else only the bottom one and a half stories of the slide could be ridden evinces a pettiness that even in itself could be expected to have given rise to stress in others—not to mention the stress involved making sure your receipt is “enough” as your kids pull at you demanding a FULL ride. Feeling manipulated to buy something at the airport’s “mall” just added to the stress. Considering the limited cost of the slide and how eliminating the financial “rules” and price itself would make a huge difference in terms of stress (both for the employees and the public), one might wonder if the stated goals were authentic, or even known by the managers themselves. 

My favorite example of Changi’s management working at cross-purposes with its own mission unnecessarily would have to be the $17 for 20 minutes—are you ready for this?—“to put your feet in a tank with tiny fish that eat dead skin.” Similarly, charging $23 for three hours in a nap room could paradoxically add to wallet-stress for people already under stress en transit. 

Thank goodness the bus tour of Singapore was free—people could finally relax after having their dead skin eaten off and being woken up by some noise or demand for more money after having had to deal with a child not terribly convinced by the need for only a $7.50 receipt. Lest the butterfly garden seem like an alternative escape (it was free), it was also apparently a smoking garden. There were, however, two (smoke-free) complimentary movie theaters. 

In short, while the innovative approach at Changi airport does warrant some praise (e.g., free wifi and movies, and in general for the extent of amenities), the major inconsistencies within this business model demonstrate how difficult it is to shift from the dominant model in business to one characterized more for its long-term investment orientation to eventual pay-offs. Given the government’s involvement in the state-owned corporation, the airport’s management company should have had enough cushion from competitive pressures to be able to go all-out with the new model. Either amenities like the pool and nap rooms would have been free, or else perhaps everyone passing through the airport could have paid a general airport fee that would cover all of the perks (other than in the merchants’ stores, of course). The fee would either have been low enough that it was not stressful and inconvenient (given the sheer volume) or, more ideally in terms of the new model, money would have been “recouped” in future tourism and foreign investment instead of any fee on air travelers. The government’s involvement in the operating company could effectively support the longer-term and less direct financial loop, as well as buffer any “pressures” from the old model for specific charges to be added during customers’ “experience.”

Imagine the stress-relief among the flying public just in knowing that for a few hours nobody would demand money for something or other. Business managements seem blind to the benefit to a business from such an approach. In knowing that you don't have to worry about money—even from being reminded of it in being manipulated into using it—you could spend a few hours in an oasis of sorts where “real life” is put on hold. Is this not part of the allure of going to a movie theater, where you can sit for a couple of hours without any demands or pressures?  

So my verdict on the most fabulous airport in the world—which, admittedly, I have not seen in person—is: so close and yet so far. The sad thing is that the airport’s management need not have been so far from it's own objectives. Given the gravity of the “maximize daily revenue” business model that assumes that a constant focus on getting and an uncompromising rigidity are necessary in dealing with customers, a rocket—rather than merely a jet—is undoubtedly necessary to travel to the sort of business model that I have in mind, and not just for airports. If I am correct in this, then business schools are perpetuating the problem in their training rather than teaching alternative business paradigms. That dog is chasing its own tail.

Behind the new model hinted at (but not achieved) by the example of Changi airport is the basic feeling that life doesn’t have to be as hard as we make it. We don’t have to check receipt totals before letting a kid slide down a slide. It is as though managers set up jungle-gym bars right in front of themselves (and their customers) and then convince themselves (and others!) that the equipment must be navigated in order to get to the other side. Moreover, managers seem to have great difficulty simply in relaxing enough to play and enjoy other’s playing. Beyond the greed and urge to manipulate others (i.e., selfishness), the modern managerial mentality is too constricted, even as it paradoxically assumes that societal rules do not apply to it. So, for example, we have managers redefining words such as “guest” to suit a business interest; the rest of us are somehow obliged to recognize the validity of the misuse as a legitimate use, as in “customers are guests” (who must pay nonetheless). It is as though managers as so fixated on manipulating others without any limit or external constraint that the too-serious creatures cannot let themselves or other people simply enjoy something without required procedures and an immediate monetary exchange. The new model rejects the typical managerial mentality as too petty—too small.

I suspect that many elderly people on their death-beds shake their heads as if in achieving distance from us they have suddenly been freed in the awareness that the world is much more petty in what it takes as important and necessary that it knows. We moderns, complicit stewards of the hegemonic business model, micromanage ourselves right out of life experience itself, and we even impose our modern sickness on others. Then we act surprised when they get annoyed at us!

It is like the steward on the Titanic who (in Cameron’s film at least) shouts (little men do that), “You’ll have to pay for that!” to the young couple just after they have broken through a wall to escape the rapidly rising water. Everything must be paid for. No free ride, even on the Titanic on its way down to the darkness. This is the modern dogma that has been instilled in all of us, and we are utterly ignorant of the fact that it is exceedingly petty and narrow-minded even in its ideal. In the movie, the steward gets hit (justifiably) by the hero.  In cheering this, we, the audience, feel the hero’s natural reaction is our own, vicariously. We regard it as a valid verdict on the extant business model that stood for modernity itself back in 1912. A century later, that model had become the default—“the way the world is.” Even so, this need not have been so. Modernity could have developed differently than it did. The example of Changi airport hints at a better alternative in terms of business models. So in advertising a “stress-free experience” only to undercut it by demanding money for various “amenities” and making explicit (or creating) different classes of customers (which is also a theme in Titanic), the managers running Changi airport deserve annoyed customers and charges of insufficiency and even outright hypocrisy. Even so, we can take the Changi example as at least pointing to a different alternative.

Source:

Scott McCartney, “The World’s Best Airport?” The Wall Street Journal, December 1, 2011. 

The Saudi Crackdown: A Cause for Market Confidence

The Saudi government sought to confiscate cash and other assets worth as much as $800 billion in ostensibly cracking down on corruption in late 2017. More than 60 princes, officials, and business practitioners were initially detained. Both the figure and the number of arrests reflect merely “the initial stages” of asset seizures and arrests, according to a Saudi spokesman.[1] It was not long before 500 had been detained.[2] I submit that both the swiftness and scope left international investors and foreign businesses in Saudi Arabia unnecessarily rattled. Doubtless uncertainty as to the real reason for the crackdown unnerved the business elite. Corruption was endemic in the Saudi political economy, so the sudden need to crack down on it understandably left people to wonder as to the real reason, which, as it turns out, was nothing for business to fear.

The first point to make regards the spuriousness of the prime facie anti-corruption motive. At the time, Saudi laws “included little or no regulation of the sprawling royal family and its closest clients.”[3] For example, a major Saudi investment firm founded by one of King Salmon’s sons and then chaired by another owned “a significant stake in a conglomerate” that did “extensive government business.”[4] Indeed, princes “were known for borrowing money and simply never paying it back, which nearly led to the collapse of the National Commercial Bank.”[5] Prince Alwaleed bin Talal, curiously one of the detainees, told the American ambassador in 1996 that a handful of senior princes controlled billions of dollars in off-budget programs.”[6] Bringing about accountability in princely self-aggrandizement at the expense of the government can only be an oxymoron when said government belongs to the royal family. To apply democratic accountability would only be to demonstrate a foreigner’s base ignorance of the Saudi political economy.

The New York Times observed at the time that “if corruption is defined as private profit at the public expense, the practice is so pervasive that any measures short of revolutionary change may appear to be selective prosecution.”[7] Such change was clearly not in the cards. Doubtless the Crown Prince, who headed the anti-corruption force, shielded his allies and supporters and took advantage of the opportunity to take some detractors out of play, but his motive likely went beyond merely consolidating power, given the precariousness of the economy’s oil-dependency in the twenty-first century amid global calls for lower use of fossil fuels. Indeed, being dependent on any industry is not sound economic practice for any government or ruling family.

Crown Prince Mohammed bin Salman said that going after corruption at the highest level would be necessary to moving the Saudi economy off its dependence on oil, but the pervasiveness of “unlawful gain”—as if the law touched the royal family—undermines the claim. Were the Crown Prince determined to rid the political economy of corruption, an entirely new system would be needed; such a prospect would indeed legitimately raise caution-flags among investors and businesses, but they needn’t have worried as corruption itself was still safe in Saudi Arabia given the continuance of the royal family as the economic and political sovereign.

The riddle as to the actual motive is solved once it is realized that the assets seized would go to the state, and thus be available for investment to diversify the economy. The prolonged period of low oil prices had “forced the government to borrow money on the international bond market and to draw extensively from foreign reserves, which dropped from $730 billion at their peak in 2014 to $487.6 billion in August” 2017.[8] Eurasia Group, a political risk advisory firm, claimed that the crown prince needed “cash to fund the government’s investment plans.”[9] Like other countries in the Middle East, Saudi Arabia was facing time pressure to diversity economically while oil-money could still make it possible. The low oil prices simply meant that more than on-going oil revenue would be needed. So rather than being spooked by the uncertainty unleashed in the dramatic crackdown, investors and business practitioners having an interest in the Saudi economy should have felt more secure, for a diversified economy enhances stability for the long term.

---

[1]Margherita Stancati, “Saudis Target Up to $800 Billion in Assets,” The Wall Street Journal, November 8, 2017.

[2] Nicholas Kulish and David Kirkpatrick, “Arrests Reveal Blending of Kin and Kingdom,” The New York Times, November 8, 2017.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Ibid.

[7] Ibid.

[8]Margherita Stancati, “Saudis Target Up to $800 Billion in Assets,” The Wall Street Journal, November 8, 2017.

[9] Ibid.

Russia's Putin and Big Tobacco

In political economy theory, democracy is said to have the drawback of excessive consumption of public revenues at the expense of investment, such as in infrastructure relevant to foreign direct investment. Latin American countries were contrasted negatively with the Asian newly industrialized economies, whose relatively strong states could buffer popular calls for more in entitlements so that more could be invested in infrastructure attractive to foreign multinational companies. The implication is that a trade-off exists between democracy and economic development.
Apart from the economic aspects, the question may be whether a representative government can resist popular calls for more money to be spent by the government on popular consumption. In the U.S. case, it can be asked whether the fiscal stresses on Social Security and Medicare are due more to demographic factors (i.e., an aging population) or democracy itself. The ability of representative democracy to maintain a viable economy and republic in the long term is at issue.
Accordingly, Putin’s less than democratic approach to ruling Russia may have a bright side. Even though nearly 40% of the population smoked in 2012 and the world’s four big tobacco companies controlled 90% of the Russian market, the Kremlin was pushing strong anti-smoking legislation through the legislature. Besides the question of whether such legislation should be at that level in an empire-level federal system (there had been legislation at the republic level), the fact that the government was standing up to big business and 40 percent of its population (60% of Russian men) can be attributed to a strong state resisting popular pressure literally for consumption. This is not necessarily bad, as people do not always know what is best for them.

Even in democracies, checks exist against “excessive democracy.” The Electoral College and the U.S. Senate are two such institutional checks at the federal level in the United States. The electors in the College were to check popular pressure to elect someone who is not in the best interest of the people. In the wake of an attack, for instance, the people might want a president who will invade the offending country (or another). The electors may say, “hold on, that’s not in your own best interest so we are going to elect someone else—someone who will resist that momentary urge.”

Popular passion can also have considerable sway in the U.S. House of Representatives because each member is up for re-election in two-year intervals. It was to be annual, but in the eighteenth century travel time made that unrealistic at the empire level (whereas annual elections suffered no such obstacle for state legislatures). The six-year term in the U.S. Senate was meant to check the influence of the passions of the moment that can sway the House. So, too, the appointment of U.S. Senators by the state governments rather than directly elected by the people was so designed. The subsequent popular election of the senators has thus weakened this check.

In short, if it seems that elected representatives, including the American president, cannot say no to additional entitlement programs or to Wall Street, the relatively-undemocratic federal government of Russia might be found to have a few pluses even though putting down the democratic impulse of protest is hardly laudable. Perhaps the ideal is a government that is democratic yet of a strong enough state to withstand or at least check the passions of the people to consume more. Smoking is indeed a case of consumption that is not in a person’s or society’s best interest. Putin can indeed be credited if history will show that his government did indeed stand up to big tobacco and the large minority of smokers in Russia.

Source:

Lukas Alpert, “Kremlin Cracks Down on Big Tobacco,” The Wall Street Journal, October 16, 2012.

A U.S. Visa Fast-Track For Rich Investors

The New York Times reported in December 2011 that affluent foreigners had been rushing to take advantage of a U.S. immigration program. The foreign applicants must invest at least $500,000 in construction projects within the United States. The number of applicants had nearly doubled since the end of 2008 to more than 3,800 in the 2011 fiscal year. The intent of the program is to spur economic development at a time of high unemployment. Yet the program has also been characterized as a cash-for-visas scheme. Besides the question of whether the program’s rules have been stretched in New York City to qualify projects in prosperous areas for special concessions, an ethical question can be raised concerning who should get a visa.
Obviously, the program’s designers must have known that only wealthy people could qualify. A public-interest ethical argument could be made that they deserve a green card because they contribute to economic development out of which jobs for Americans can ensue. Indeed, to the extent that the additional investment results in more economic activity, the visitors making the investment in 2011 could have been helping to forestall a double-dip recession. This was a distinct possibility at the time, given the E.U. debt crisis.
The ethical issue is in the exclusion of people who are not wealthy. The principle of fairness would seem to mandate that just as many non-rich foreigners be granted green cards above the ordinary limit. However, this would seem to be rather artificial—a sort of tit for tat—as in “we’ll accept your tax cut if you accept ours.” Moreover, in the context of high unemployment, any such increase in visas should not add to the supply of labor.
John Rawls suggested that in designing such a system as applying for a green card, a veil of ignorance as to whether one will be rich or poor should be utilized. Rawls’ thinking was that if the designers cannot know whether they or their friends will be rich or poor, then the proposed system design will be fair (i.e., there would be the chance that one’s friends are poor foreigners unable to get a green card). While fair in itself, this ethical device may not adequately take into account the public interest that could be satisfied by only one segment (e.g., the rich). Should the U.S. renounce the possibility of more economic development, particularly at a time of high unemployment, just because poor and middle-class foreigners cannot participate?
Related to the matter of income and wealth, it can be asked from both the public interest and ethical standpoints whether capital investment is more valuable economically than highly skilled and educated foreigners. To be sure, the latter ought not crowd out citizens and existing residents who have comparable skills and knowledge, and it is presumably possible to further train and educate existing citizens and residents.
For example, the very same issue of the New York Times containing the story of the green cards for foreign investors reported that M.I.T. was announcing an expanded program that would still allow anyone anywhere to take M.I.T. courses online free of charge, but would add online labs, self-assessments and student-to-student discussion. Also, for a small charge, a certificate can be obtained. At the time, the university’s free OpenCourseWare included nearly 2,100 courses and had been used by more than 100 million people. Rafael Reif, the provost, gave the following as the operating assumption: “There are many people who would love to augment their education by having access to M.I.T. content, people who are very capable to earn a certificate from M.I.T.” To be sure, a certificate would not be a degree, but in terms of non-professional jobs the former may be sufficient. “The most important thing is that it’ll be a certificate that will clearly state that a body sanctioned by M.I.T. says you have gained mastery,” Reif added. The notion that cost (and debt) ought not be an obstacle to a natural drive to learn more, whether in terms of skills or knowledge, is foreign in the United States (and increasingly in Europe as well).
Yet from the standpoint of economic development as well as jobs, viewing education as an investment rather than as a purchased product would likely pay substantial dividends. Where such an approach to vocational training and higher education falls short for citizens and residents, welcoming the best and the brightest from abroad—even training and educating them at online programs such as M.I.T’s—may be an investment policy even more beneficial than that of attracting additional capital investment in construction projects.

Sources:

Tamar Lewin, “M.I.T. Plans to Expand Its Free Online Courses,” The New York Times, December 19, 2011.

Patrick McGeehan and Kirk Semple, “Rules Stretched as Green Cards Go to Investors,” The New York Times, December 19, 2011. 

Government Employees and Manufacturing Jobs: Takers and Makers?

I contend that we need to expand our notion of “making” in the twenty-first century global economy. We also need to reduce our conception of “taking” when it comes to what government employees do and even in what the government does. Otherwise, even Steven Moore might be left with the unavoidable conclusion that the American corporations, even more so than the “welfare mothers,” are the “takers.”

In 2011, according to Stephen Moore, “there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government. . . . More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers.”[1] “Collecting a paycheck from the government” implies that people who work in government are somehow receiving an entitlement rather than compensation for their labor. Treating government employees, and, moreover, the receivers of government services, as “takers” reduces all the functions of government to welfare programs. Are the corporations in the private sector that receive defense contracts “takers” akin to the lazy “takers” that Stephen Moore has in mind in his opinion piece?  Is G.E. a “taker” in not having any tax due on 2010 earnings in the billions?  Presumably, the defense contractors and tax-minimizing companies benefitted from government-sponsored infrastructure, such as police protection and roads?  Furthermore, are citizens who benefit from security and transportation to be regarded as “takers”?  Are flyers “takers” when they rely on the FAA to keep flight control agents in control towers on the up and up?

Furthermore, Moore is ignoring non-governmental reasons for the reduction in factory jobs in the U.S. “Every state in America today except for two—Indiana and Wisconsin—has more government workers on the payroll than people manufacturing industrial goods. . . . Even Michigan, at one time the auto capital of the world, and Pennsylvania, once the steel capital, have more government bureaucrats than people making things.”[2] However, even though government payrolls have expanded as we have asked for more from our governments, such as in regulating banks too big to fail, the proliferation of capitalism in the world, such as via more foreign direct investment in developing countries (with the notable exception of Africa), has brought with it a spreading-out of manufacturing around the world.

Even so, the U.S. still has the most manufacturing jobs of any economy, but this does not mean we need not expand our skilled labor force in new fields such as computer technology. In focusing on manufacturing, Moore seems to reduce “making” to manufacturing.  Does not a CPA “make” something of value when investors and creditors rely on the certified financial statements of a company?  

1. Stephen Moore, "We've Become a Nation of Takers, Not Makers," The Wall Street Journal, April 1, 2011. 

2. Ibid.