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  • R H
  • Chicago, IL
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Why do we NOT invest effectively in the poor and marginalized so they can participate in the global economy?

Nearly half of the world's population cannot effectively participate or contribute to the global economy. Basic economic theory holds that each 'participant' in the economy is a 'unit of productivity' providing a return on investment. In other words, it's more profitable to have people working and consuming than not. Yet nations continue to allow and accept that the poor and marginalized are - to borrow from another popular phrase - 'too big to succeed'.

In my view, the (relatively) small investment in infrastructure, education, and basic healthcare in the poor and marginalized will be more than made up by their increased productivity and spending. The rich think they're rich now, just imagine the wealth created by having 3 billion more people buying their stuff? I know there are obvious problems with this: corruption, unified effort, immediate ROI, etc. - but why is this such a 'tough sell' to national leadership? They're always looking for ways to increase the tax base.

3+ billion people now contribute to the world gross productivity. What if that were doubled? To me, this is the next threshold of economic growth -bringing in those who have been left out. Yet, we don't even talk about it. What do you think?

Topics: economics society

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  • Oct 25 2012: I think the answer to your primary question is simply - ignorance.

    As Fritzie pointed out below, there are efforts to help bring the poor and marginalised into economic participation, in fact on a very large scale. Untold billions of dollars are given to Africa in direct aid every year. However it is quite clear from the level of poverty still prevalent in Africa that this money has not been effectively invested, hence my answer to your question.

    There is, however, a growing understanding that this is the case. There are now increasing efforts to encourage business into and within poorer regions. For example, http://www.aecfafrica.org/, this largely government funded organisation is encouraging, or rather investing in, companies that are looking to invest in Africa in a manner that will be profitable but also help the community. A great example of such a company is http://www.kickstart.org/.

    I think one of the factors holding people back from this approach for so long has been the idea that making money from these people is somehow wrong. This story gives a great example of why this is not so: http://www.admittingfailure.com/failure/anthony/. However, if governments were* seen to be funding businesses that profit from such poor communities they would have* received very bad press.
    * perhaps, sadly, these should be in the present tense.

    I say that there is a growing understanding that what you propose is true but i do appreciate it is still a tiny minority and, at this point, smart investment is very far from adequate.
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      R H 30+

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      Oct 25 2012: I think that's my point. As I replied to Fritzie below, the tactics used to date have been more of a 'repair' to an imbalanced economic structure - with dismal return results. As you refer to, the professional 'spin' demonizing the efforts by gov'ts to provide incentives to invest in the poor and marginalized (yes, there are those who would seek to take advantage in a destructive way) only thwarts progressive efforts. These efforts are extremely delicate, need close oversight, and require a certain amount of finesse. We're very good with finesse and oversight with technology - following ever step of progress with precision, adjustment, acceptance of failure, and re-investment. But when it comes to social investing, the first sign of "suspected" diminished returns we abandon the effort - I'm referring to macro scale efforts, not the efforts of individual programs. I believe that if we begin to use the language of long-term and massive returns we may get better buy-in from the various participants in the effort. Thank you very much for your response Qab.
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        Oct 25 2012: Are you wanting to look more closely at why businesses are not seeing things the way you are seeing them, or are you suggesting that a change in language would garner more popular support?

        I can think of a few ideas connected to the first of those questions. One is that the claim that "at the first sign of suspected diminishing returns we abandon the effort" may need real empirical verification. Qab writes about untold billions in aid to Africa over a long period. I think many who have studied this not very short-lived effort have concluded that such money has had a way of getting siphoned off into unintended uses. [Feyisayo, who was born in Africa and continues to live there, described this in another thread]. So from an investment standpoint, investors might after a point decide that they haven't enough control over where the money goes for them to continue to think of that use of money as an investment. They may still contribute money for other reasons but not as an economic investment of the kind I think you have in mind.

        Another possible factor when we think of investment is that businesses aim to invest in things that allow them to capture the return. You mentioned that business could think of investing in people so that those people will "buy their stuff." But who is to say that they would buy THEIR stuff? Why wouldn't they buy someone else's stuff?

        This explains also why businesses are sometimes reluctant to train people in expensive ways. A business could incur the training cost only to see the employee once trained hired away by another firm.

        All that said, I thought I read that Microsoft in the last month made a commitment to train hundreds of thousands of young people to be computer engineers, because jobs in that field are so hard to fill. Typically the return on investment will be highest if they train people who already have the math and science background to hit the ground running. I don't know the details of their plan.

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