"Why not capitalism for developing countries?"

GrameenPhone architect Iqbal Quadir saw potential for success–from both a business and humanitarian perspective–in his idea of introducing mobile telephones to the remote villages of Bangladesh. He was born in Bangladesh and is now a fellow at Harvard’s Center for Business and Government, where he mainly focuses on the impact of technology on politics and the economies of developing countries. We talked with Quadir about business as a social tool and the failure of development aid.


Marco Visscher | April 2005 issue

Do you see GrameenPhone as a revolutionary new model for helping develop a poor country?
Iqbal Quadir: “Not at all. Rather, it’s a very old one: the business model. What’s relatively new, is that it’s being applied in an area and for the purpose in which this doesn’t happen too often. We know from history that capitalism—an environment for competitive businesses—has solved many problems in Europe and North America, so why should we be hesitant to apply it in developing countries?”

Do you think businesses could play a larger role in helping people out of poverty?
“A business might sell wrong things like sodas and cigarettes that do not necessarily advance people’s lives. But if it sells phones, power generators or eye glasses, it offers opportunities and advances peoples’ lives. That’s a good thing.”

Don’t you think capitalism leaves the poor and the weak behind?
“Statism leaves the poor and weak behind; inequality is greatest where statist policies have been pursued. This is because the powerful pulls the levers of the state which capitalism can shake up and eventually disperse power. A competitive business environment cannot keep privileges confined to a few. Businesses try to expand and citizens progressively benefit through products and services, employment and investment opportunities, and education and training. Power disperses and democracies emerge. “

GrameenPhone charges a good price on its calls. Is this good for villagers who might be poor?
“If you think this is a problem, try no service. No service is very costly. If a fisherman had to walk a day to pass on an important message, he would lose a day catching fish and earn less money.”

Telenor, a Norwegian phone company, owns 62% GrameenPhone. The remaining 38% is held by Grameen Telecom, a Bangladeshi non-profit. This means 62% of the profit leaves Bangladesh. Don’t you think this is a problem?
“Not at all. Whether capital flows into or out of Bangladesh depends on the business climate which GrameenPhone is helping to improve. If an investor sees that any part of Bangladesh can be reached by phone, he will be attracted to the country. So would be the case if these phones empower a wide range of citizens and strengthen the country’s democracy. Moreover, I could easily argue that our 2.5 million phones are boosting the country’s GNP by at least a billion dollars, if not two or three billions a year. The country gains profoundly even if some profits go out.”

What would have happened if the idea of bringing mobile phones to rural areas in a poor country was left to a non-profit venture, or to the government?
“If we didn’t have to be profitable, we may not have arrived at a creative solution. In order to make things economically viable and attractive to investors, we were forced to look at the problem carefully and find the most cost-effective ways. This drive to efficiency only exists in business, and not as much in non-profits and certainly not in governments. Such drive to efficiency makes the economy efficient and saves resource for the country. Non-government organizations may not have as much drive for efficiency, but still have to prove themselves to get more funding. In other words, businesses and non-government organizations have the pressure to perform. Governments, on the other hand, can get away being inefficient. They don’t have to prove themselves, especially not in a weak democracy. They may face complaints from donor countries but can continue their inefficient ways, especially when they are backed by aid from foreign countries. ”

Are you opposed to development aid?
“I’m very much in favour of aiding poor people. However, direct aid to governments is harmful, because it creates a disincentive for governments to promote economic development. A government that gets its revenues from taxes, has the incentive to enlarge that tax-base and help entrepreneurs create their own businesses. With aid, you’re turning this logic upside down.”

Your next entrepreneurial project is helping rural entrepreneurs build mini power plants. Does this meet your criteria for social businesses helping the poor?
“Of course. Electricity is a good thing, enabling people in rural areas to work or read at night, which makes them more productive or educated. The state-owned power company in Bangladesh has been trying to bring electricity for several decades and only 30% of villages have gotten it. It would be better to have technologies that help citizens make their own power. This way, they not only get the economic benefits of electricity but also someone among them makes a living by producing it.”

Solution News Source

"Why not capitalism for developing countries?"

GrameenPhone architect Iqbal Quadir saw potential for success–from both a business and humanitarian perspective–in his idea of introducing mobile telephones to the remote villages of Bangladesh. He was born in Bangladesh and is now a fellow at Harvard’s Center for Business and Government, where he mainly focuses on the impact of technology on politics and the economies of developing countries. We talked with Quadir about business as a social tool and the failure of development aid.


Marco Visscher | April 2005 issue

Do you see GrameenPhone as a revolutionary new model for helping develop a poor country?
Iqbal Quadir: “Not at all. Rather, it’s a very old one: the business model. What’s relatively new, is that it’s being applied in an area and for the purpose in which this doesn’t happen too often. We know from history that capitalism—an environment for competitive businesses—has solved many problems in Europe and North America, so why should we be hesitant to apply it in developing countries?”

Do you think businesses could play a larger role in helping people out of poverty?
“A business might sell wrong things like sodas and cigarettes that do not necessarily advance people’s lives. But if it sells phones, power generators or eye glasses, it offers opportunities and advances peoples’ lives. That’s a good thing.”

Don’t you think capitalism leaves the poor and the weak behind?
“Statism leaves the poor and weak behind; inequality is greatest where statist policies have been pursued. This is because the powerful pulls the levers of the state which capitalism can shake up and eventually disperse power. A competitive business environment cannot keep privileges confined to a few. Businesses try to expand and citizens progressively benefit through products and services, employment and investment opportunities, and education and training. Power disperses and democracies emerge. “

GrameenPhone charges a good price on its calls. Is this good for villagers who might be poor?
“If you think this is a problem, try no service. No service is very costly. If a fisherman had to walk a day to pass on an important message, he would lose a day catching fish and earn less money.”

Telenor, a Norwegian phone company, owns 62% GrameenPhone. The remaining 38% is held by Grameen Telecom, a Bangladeshi non-profit. This means 62% of the profit leaves Bangladesh. Don’t you think this is a problem?
“Not at all. Whether capital flows into or out of Bangladesh depends on the business climate which GrameenPhone is helping to improve. If an investor sees that any part of Bangladesh can be reached by phone, he will be attracted to the country. So would be the case if these phones empower a wide range of citizens and strengthen the country’s democracy. Moreover, I could easily argue that our 2.5 million phones are boosting the country’s GNP by at least a billion dollars, if not two or three billions a year. The country gains profoundly even if some profits go out.”

What would have happened if the idea of bringing mobile phones to rural areas in a poor country was left to a non-profit venture, or to the government?
“If we didn’t have to be profitable, we may not have arrived at a creative solution. In order to make things economically viable and attractive to investors, we were forced to look at the problem carefully and find the most cost-effective ways. This drive to efficiency only exists in business, and not as much in non-profits and certainly not in governments. Such drive to efficiency makes the economy efficient and saves resource for the country. Non-government organizations may not have as much drive for efficiency, but still have to prove themselves to get more funding. In other words, businesses and non-government organizations have the pressure to perform. Governments, on the other hand, can get away being inefficient. They don’t have to prove themselves, especially not in a weak democracy. They may face complaints from donor countries but can continue their inefficient ways, especially when they are backed by aid from foreign countries. ”

Are you opposed to development aid?
“I’m very much in favour of aiding poor people. However, direct aid to governments is harmful, because it creates a disincentive for governments to promote economic development. A government that gets its revenues from taxes, has the incentive to enlarge that tax-base and help entrepreneurs create their own businesses. With aid, you’re turning this logic upside down.”

Your next entrepreneurial project is helping rural entrepreneurs build mini power plants. Does this meet your criteria for social businesses helping the poor?
“Of course. Electricity is a good thing, enabling people in rural areas to work or read at night, which makes them more productive or educated. The state-owned power company in Bangladesh has been trying to bring electricity for several decades and only 30% of villages have gotten it. It would be better to have technologies that help citizens make their own power. This way, they not only get the economic benefits of electricity but also someone among them makes a living by producing it.”

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