A quarterly magazine of urban affairs, published by the Manhattan Institute, edited by Brian C. Anderson.
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Philip Auerswald argues that entrepreneurs will spark growth worldwide.
3 April 2012
The Coming Prosperity: How Entrepreneurs Are Transforming the Global Economy, by Philip E. Auerswald (Oxford University Press, 280 pp., $29.95)
In 1977, Govindappa Venkataswamy founded the Aravind Eye Hospital, based in the Indian city of Madura. Using an assembly-line approach for cataract surgery, he offered treatment to millions of poor Indians who would otherwise have gone blind. In Venkataswamys business model, the fees paid by one-third of his patients allowed him to provide free eye care to the remaining two-thirds. About ten years later, Seema Aziz used two borrowed embroidery machines to start a modest basement business across the border in Pakistan. Her shop would become Pakistans leading textile brand, Bareeze, with retail outlets in London, Dubai, and Malaysia. Soon after Aziz opened the business, Pakistan was inundated by a severe flood, and Aziz decided to help the recovery effort by building schools. Today, her foundation runs 200 schools educating 145,000 children—one in every 200 Pakistanis in school today.
From stories of entrepreneurs like Aziz and Venkataswamy, Philip Auerswald, an economist at George Mason University, builds a compelling narrative of economic optimism. The Coming Prosperity: How Entrepreneurs Are Transforming the Global Economy offers a sharp counter-argument to many of todays economic doomsayers. As Auerswald sees it, the global economys best days are ahead, fueled by entrepreneurial energies bringing growth and even prosperity to long-impoverished regions, which at last are joining a worldwide market.
Economic development isnt only about access to drinking water, health care, and food, says Auerswald; its also about empowerment. Take mobile banking, which has liberated hundreds of millions of poor people, often living in dangerous places, from having to carry cash for their daily transactions. Today, the total volume of banking transfers in the developing world exceeds $440 billion annually—more than all of the foreign aid provided to governments of those countries. Technology has also made dictators lives more difficult. For example, more than 40 percent of the Tunisian population is now online, mainly through mobile phones. As the events of the Arab Spring unfolded, camera-phone photojournalism was a key source of information about what was happening in Tahrir Square and Misrata.
The economic rise of poorer nations has benefited the West with cheap imports. In 1984, the average American household spent about $250 on clothing per month (in todays dollars); a quarter-century later, it spends only $150. This decline is almost entirely due to inexpensive imports from countries like China and Vietnam. But arent these benefits outweighed by all the Western jobs that have fled to China or India? Auerswald argues that we shouldnt blame the developing world for such job losses. Contrary to what many suspect, most jobs havent been outsourced to China. Theyve been made redundant through technological progress, just as mathematician Norbert Wiener predicted in 1949 when he warned the president of the United Auto Workers that the adoption of automatic car-assembly lines would lead to disastrous job losses.
As economic activity accelerates around the world, so does the demand for scarce commodities like coal, oil, and iron. Indeed, the upward trend in commodity prices—especially oil—is mostly the result of once-destitute countries now bidding for these resources alongside the West. But even the cost of higher commodity prices is outweighed by the benefits of access to inexpensive imports. In 1984, a typical American household spent $200 per month on gasoline; by 2010, the amount had risen to $225. A $25 monthly increase in living costs is not negligible, but it is much smaller than the $100 per month that the same household has saved on clothing over that period. Simultaneously, the rise of commodity prices provides an incentive to develop economically viable, low-carbon fossil-fuel alternatives.
Ideas drive much of the worlds economic progress, and one effective way of facilitating ideas cross-fertilization, Auerswald shows, is migration. Auerswald—himself the son of a Tunisian immigrant who held a degree from the Sorbonne—tells the story of Ibrahim Abouleish, a pharmacologist who returned from Austria to his native Egypt to start an organic garden near the Ismaili Canal, a three-hour drive from Cairo. Using advanced biodynamic methods that he learned in the West, Abouleish improved cotton yields over those obtained with the use of pesticides and convinced Egypts agricultural minister to cancel contracts with chemical companies.
Migrating entrepreneurs like Abouleish, with their social networks and cultural connections, are essential players in lifting the developing world out of poverty, Auerswald maintains. While a century ago, a clear division existed between wealthy, globally mobile elites and the local poor, that division is slowly eroding, making individual success less contingent on the accident of birth. Auerswald doesnt offer a simple recipe for the coming prosperity—anyone who claims to have one is making it up, he says—but he would probably agree that our future hinges upon whether we continue to build a more open global marketplace for goods and ideas.