New approach to an old problem

[Karl]

New approach to an old problem
HENLEY MORGAN


Wednesday, December 08, 2010

The late Michael Manley used the analogy of the cost of a tractor produced by developed countries and the price of a ton of sugar produced and sold on the world market by developing countries such as Jamaica, to good effect in showing why the latter (developing countries) had no hope of extricating themselves from poverty by exporting raw sugar to the rich world without major change to the world economic order. Manley's remonstration may have sounded like socialist dogma to those afraid of his politics, but the passage of time has proved the validity of the basic equation.

There is a dynamic similar to the one used by Manley that is at the root of Jamaica's failure to produce consistent growth and development. It relates to the notorious unequal distribution of wealth in the local economy. This is amply illustrated by looking at the retail grocery sector. The trade turns over approximately $140 billion in sales per annum. About $112 billion or 80 per cent of this amount is bought and consumed by the richest 20 per cent of the populace, leaving the balance, $28 billion, for the bottom 80 per cent, most of whom live in the over 700 informal communities located near to urban centres, but scattered across the island. By my estimation, only about 1/3 of this amount (that is $9-11 billion) is sold by establishments located in the communities where the mass of consumers who are poor reside. This results in continuous disinvestment and impoverishment of these communities.

On a world scale, the extractive behaviour of profit-seeking conglomerates in relation to the environment and society is becoming a major concern. Stuart L Hart, author of Capitalism at the Crossroads, Third Edition, in lurid language describes the catastrophe that awaits future generations if action is not taken now to tame capitalism's appetite for more and more of Mother Earth's finite resources and its use of harmful processes to get at it. But it is not only the physical environment that is being damaged. The practices of corporations, generally in their relationship toward those they describe as the mass market and the communities where they reside, are synonymous to cane being fed into a mill; juice is extracted and the trash left behind.

We should have known it would come to this. Milton Friedman, the recognised father of capitalism, said something very foolish that has contributed in no small measure to us being in the mess we are. "The only social responsibility business has is to make a profit". Years later, calypso great the Mighty Sparrow, seeing the damage caused by exploitative business practices and government indifference, crooned: "Capitalism gone mad". Is there a more enlightened approach to development open to us?

Following any of a number of successful models of urban renewal that exist elsewhere, government should be leading the charge in providing the incentives and making the public investments that would convert destitute communities into investment zones. That, unfortunately, is unlikely to happen any time soon in Jamaica where politicians traditionally look at these communities only in terms of their value as sources of sure votes in an electoral contest.

Acting in their own self-interest, businesses must take the lead, moving next to and into inner-city communities to be closer to the mass market and to access lower-cost shelf space (in the example of the grocery retail trade). Such consideration is not only socially expedient but commercially pragmatic. Both the Observer (November 12) and the Gleaner (November 15) editorialised about the decay in the once proud commercial Mecca of downtown Kingston and commended Digicel for the decision to locate its corporate headquarters there, and for investing in excess of $200 million to restore the Coronation Market located within shouting distance of Tivoli. GraceKennedy Limited and the ICD Group have remained committed to the hardened downtown commercial district and the surrounding communities of Southside, Dunkirk and Rae Town even as government departments take their flight uptown.

We are fortunate to have as new head of the Planning Institute of Jamaica Professor Gladstone Hutchinson who, from years of applied research and practice as a social entrepreneur, understands the importance and urgency of bringing inner-city communities into the mainstream of economic development. In a scholarly inaugural address to the Private Sector Organisation Chairman's Club, he listed establishing business incubators and greenhouse farms in proximity to inner-city communities among his prescriptions for addressing what he terms the "social bads" confronting the nation.

In a keynote address at a Young Entrepreneurs Association of Jamaica black-tie event, Hutchinson expanded on the general thesis: "I am satisfied that market entrepreneurism with heightened humanness and social justice is the only way to build a sustainable market economy in the new world economic paradigm. There is, in the words of CK Prahalad, too much fortune at the bottom of the pyramid for us as a country not to mobilise our investment and entrepreneurial capacities to create profitable products. Youth entrepreneurialism as a public good must meet the public capital your activities create for the private gains of market profits that are humane and nation-building, and the inner cities must be transformed in the process".

As is the case with the world economy, so it is with the local economy. There needs to be a new economic order; a shift away from trickle-down economics based on clientelism and patrimony to one of investment in human and social infrastructure based on respectful acknowledgement that people at the base of the pyramid are not preordained to be just consumers but producers and wealth creators too.
hmorgan@cwjamaica.com

Read more: http://www.jamaicaobserver.com/colum...#ixzz17X6GVVQH

[Willi]

The PRIME directive of bizniz is to make more money, now and in the future to meet social obligations.

Enlightened capitalists realize that the vision and goals are different. The goal is to make money, the vision is to make a difference. it is the vision that supports the goal ultimately and vice versa. If there is no vision, the enterprise will eventually perish, goals notwithstanding.