Saturday, October 14, 2006

Sometimes Capitalism Works

Cell phones are changing the dynamics of capitalism for at least some of the world's poor. Free marketeers always boast that competition and reward are the spur to economic growth that benefits all. Which is a nice theory. In reality many barriers distort that wonderful model. Chief among the barriers is information. Some players have none; they are at the mercy of others who have more. The Washington Post reports today that cell phones are evening the playing field for small entrepreneurs in India.

A convenience taken for granted in wealthy nations, the cellphone is putting cash in the pockets of people for whom a dollar is a good day's wage. And it has made market-savvy entrepreneurs out of sheep herders, rickshaw drivers and even the acrobatic men who shinny up palm trees to harvest coconuts here in Kerala state.

"This has changed the entire dynamics of communications and how they organize their lives," said C.K. Prahalad, an India-born business professor at the University of Michigan, who has written extensively about how commerce -- and cellphones -- are used to combat poverty.

"One element of poverty is the lack of information," Prahalad said. "The cellphone gives poor people as much information as the middleman."


For less than a penny a minute -- the world's cheapest cellphone call rates -- farmers in remote areas can check prices for their produce. They call around to local markets to find the best deal. They also track global trends using cellphone-based Internet services that show the price of pumpkins or bananas in London or Chicago.


[Fisherman]Rajan said the dealers don't necessarily like the new balance of power, but they are paying better prices to him and thousands of other fishermen who work this lush stretch of coastline. "They are forced to give us more money because there is competition," said Rajan, who estimated that his income has at least tripled to an average of $150 a month since 2000, when cellphones began booming in India. He said he is providing for his family in ways that his fisherman father never could, including a house with electricity and a television.

"When I was a kid we never had enough money for clothes and books, so we never really went to school," said Rajan, 50. "Now everything is different.

Cellphones won't totally eliminate the disparate advantages and disadvantages of capitalism but they make useful information available to more players. That is always good.


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