Demystifying the 'Wealth of Nations'
Tuesday, June 23, 2009 at 04:11 PM EDT
A case for how Developing Nations (especially African Nations) can create and grow wealth, and be key players in Global Growth and Prosperity.
Economists from time immemorial have questioned and researched why some nations have been able to grow wealth and some have not. Transforming an underdeveloped economy to a developed economy requires long term strategic mapping as well as a huge amount of capital outlay. This project is aimed at providing practical solutions tailored to the local environment that leverages the convergence of existing technologies to register people and life events e.g. Birth, Death, Marriages, Assets (of all kinds â€“ houses, lands, Goats, Cows, livestock etc), Owners trades/Profession, and through economic modeling, mobilize the currently dormant trillions of dollars in local assets in developing nations to generate capital in the local economy via Asset Securitization. We will provide through economic modeling, a global standardized index that financial institutions can use to better assess individualâ€™s worth and improve the lending practices. This process will generate needed capital in developing nations. Additionally, this process of asset securitization will provide transparency and accountability for invested and loaned funds to the various nations by the Worldâ€™s financial organizations e.g. IMF.
Recent GDP statistics published by the IMF â€“ World Economic Outlook - notes that the United States alone generates 23.5% of the worldâ€™s GDP, while Africa and South America jointly produce about 10%. Clearly, this is not a function of the size of the population, as Africa and South America combined are far more populous than the USA and by the same comparison, the combined land resources of Africa and South America are far larger than the USA. It could be argued however, that Africa and South Americaâ€™s larger areas of pristine, unpolluted land and atmosphere provide an invaluable, global asset, when compared to most of the industrialized world, who have larger areas of depleted ozone layers, and yet these spaces are under constant threat by individuals who see the exploitation of these resources as their only realistic economic options; or, more sadly, as the path of least resistance to vast personal wealth. The undervaluing of Developing World resources in fact shows a dramatic skewing of our global value system.
On a recent visit to South Africa, as I took off from Cape Town, I admired the beauty of the land from a birdâ€™s eye view and I thought to myself that such property in my current resident city of Greenwich, Connecticut, USA would be worth far more than in South Africa. This lead to the question of why such a condition exists and what can be done to mend this disparity in value? In a literature review spanning key works such as â€œGood Capitalism, Bad Capitalismâ€ , to â€œThe Mystery of Capitalâ€ to â€œThe Birth of Plentyâ€ , most of the current writing seems to throw up a common thread, which weaves together the assumptions that the tenets of prosperity are based on the following pillars: 1. Property rights, 2. Civil laws that protect property rights and empowered courts to adjudicate, 3. Capital Generation, 4. Innovation and Entrepreneurship, 5. Adequate Infrastructure.
A Proposed Roadmap to Prosperity:
In most developing economies, one or more of these pillars is missing. More prevalent is the establishment of property rights through diverse cultural systems, and the protection thereof with cultural norms and civil laws. A potential approach to these non-Western, yet complex and traditional valuation systems, which I have not seen in any of the prior research, is to leverage new technology to create a local and nationwide â€œeRegistryâ€ of all assets (land, real property, farms, cows, goats and so on) that then can be converted into a globally understood and accepted common currency.
As with the development of the Internet, which did not come from a single technology but from the timely convergence of multiple streams of technological development, the convergence of new technologies has the potential to enable asset owners, regardless of location or type of asset, to partake in an artificial nervous systems that can begin to sense, capture, record, transmit and even value an asset in nanoseconds via the eRegistry.
By the same token the â€œeRegistryâ€ could be used as an eGovernment Revenue Generation base, Census and Population Control Issues database, Disease control and Health and wellness resource etc. The â€œeRegistry,â€ when enabled with data mining capabilities and localized economic models that consider local economic nuances, can easily predict future pricing of assets, local market behaviors and, when intelligently used with proper governance processes, will build a second understanding and â€œlayerâ€ of that society for both individuals and the community at large by allowing for another, more global perspective of individual and communal wealth to emerge. With this model, a new Digital Global Common Currency will emerge that can enable global open capital sourcing. The eRegistry will enable us to build an Entrepreneurial Information Exchange Platform that could be analogous to a real-time global commerce commodities trading floor. The Information Exchange will also become an open platform for Virtual Doctors and Health Care Services, Local Commodities Trading, Media for Capital Generation, Quantitative tool for Micro credit lending efficiency, as well as products and services brokerage functions.
The assumption is that, by having people understand the value of their assets in a new way, which complements their traditional understandings, this can help them to leverage those assets in a more global setting, build the local economy and achieve a higher standard of living for the whole global community.
Once the eRegistry database is created and secured/certified by local government, the stage is set for building a local economic model that can translate each asset value to indexes that can be universally applied to lend money based on the owner(s)â€™ asset value anywhere in the country, and eventually worldwide. This National asset net worth could then be leveraged to create a Community Bank that is mandated to cater to small street vendor entrepreneurs in developing countries so they can be more productive and expand their businesses, thereby generating more wealth for entrepreneurs within respective countries. While the entrepreneurial spirit of street vendors is globally recognized, such tiny businesses need help from the national common purse that will elevate them from poverty and help them contribute to economic growth. With this asset registry and universal pricing in place in â€œeRegistryâ€, lenders can verify ownership, check for encumbrances if any, place liens if appropriate, and hence eliminate the risk of loss/fraud while at the same time generating capital that grows the economy. This eRegistry essentially acts as a â€œthird mediumâ€ between a localized economy based on traditional systems, and a global economy based on Western systems.
Enabling Technologies: The most important technologies that we are converging to build the asset registry and modeling system are:
Cloud computing that connects government to citizens, business to business, business to consumers, versatile and inexpensive sensing; ubiquitous wireless networking; social networking, and real time data mining to extract useful information and insight about assets pricing â€“ present and future. Finally, with the smart sensor capabilities, assets of all kinds can be easily registered through sensing and transmittal using simple cell phones and other handheld receiving devices powered by the new â€œMobile Cloud Computingâ€ capabilities.
Benefits: The potential benefits of this eRegistry are as follows:
â€¢ Creates a reliable data source for more accurate Census/Population
Planned Implementation Approach:
The planned implementation approach includes:
â€¢ Collaboration between MIT Media Lab and Harvard Law School - Berkman
TO BE DECIDED BUT MY WISH AND BELIEVED STRATEGIC WAY FORWARD.
â€¢ Establish a joint center for â€œDemystifying the Wealth of
Nationsâ€ that will focus on:
Schedule and Timeline:
This article originally appeared on the Law Lab blog.