Somebody Get This Guy a Computer
Among the many reasons I’m not excited about either of the Democratic candidates for president is that they have caved on free trade. Governor Richardson was prepared to take the political risk of standing strong on trade in a Democratic way — the only way to create a win-win for American workers, developing countries, the environment, etc. But that’s a story for another day.
Believing in free trade does not mean accepting it as perfect, taking a laissez faire approach and letting the chips fall where they may. There is much that governments, companies and non-profits can do to build trust and minimize dislocation. In the U.S., one example is retraining workers whose jobs go overseas. An article about Guatemalan farmers supplying Wal-Mart in today’s LA Times brought to mind another proactive tool to make free trade work: technology.
The article, written by Marla Dickenson, describes some of the problems involved with reconciling high-tech supply chain magic and rural farmers in poor countries:
Among the biggest challenges is building trust. Nearly four decades of civil war ended in 1996, but it left Guatemala’s countryside bristling with social tension. Land disputes are common. Farmers are accustomed to contentious relationships with produce wholesalers, who buy their harvests.
Known here as coyotes, these middlemen often take advantage of farmers’ need for quick cash by paying them a fraction of the true market price, said Douglas Ovalle, who is coordinating [the Inclusive Market Alliance for Rural Entrepreneurs project]. The result is that farmers have no experience with binding commitments and feel little loyalty.
“If someone offers them 5 quetzales [about 65 cents] more, they’ll sell to them,” Ovalle said. “It’s going to be a challenge to change that mind-set.”
That passage brought to mind a story from C.K. Prahalad, author of The Fortune at the Bottom of the Pyramid. In it, he describes subsistence soybean farmers in Madhya Pradesh, India, being completely at the mercy of the mandi, the equivalent of Dickenson’s coyotes. Farmers had little choice but to bring their harvest to the nearest mandi and sell for whatever the mandi would give. The farmer, Prahalad writes, “was for all practical purposes a semi-indentured supplier to the mandi close by.” In order to ensure a steady supply of high-quality soybeans to its processing plants in India, a British company (ITC) installed a network of computers (”e-Choupal”) across the region, one in each farming village. A successful farmer in the region was trained to use the computer, by which he could share the going rate for soybeans at all the mandis in the area with his neighbors. Armed with this information, local farmers could decide when and where to sell their crops. Since the mandi created inefficiencies for ITC as well as the farmers, both the British company and the Indian farmers came out ahead.
Just as technology helps Walmart cut costs, it can help farmers in developing countries make a better living. Prahalad writes:
ITC’s e-Choupal takes the idea of explicit contracting and transaction governance capacity a big step forward. By providing access to information that the farmers can independently obtain, the system changes the inequities that the extralegal and the quasi-legal systems impose on BOP consumers and producers in developing countries. ITC still pays the taxes due to the government as if the trade did take place in the mandi. The government is happy with revenues. The traders are likely to be unhappy, as their ability to coerce farmers into selling at the price that they decided in the auction is getting eroded. The most telling comment was from a farmer on video by the researchers:
“I did not even know how to hold a mouse.”
Four months later:
“Even if they take the computer away, we will buy one. We need net connectivity.”
That summarizes is all.
It also summarizes the kind of forward-looking thinking we need from Democrats. Not “dump NAFTA.”
