Demystifying the 'Wealth of Nations'

by cnolan

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 – 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 individual’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 World’s financial organizations e.g. IMF.

Recent GDP statistics published by the IMF – World Economic Outlook - notes that the United States alone generates 23.5% of the world’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 America’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 bird’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 “Good Capitalism, Bad Capitalism” , to “The Mystery of Capital” to “The Birth of Plenty” , 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 “eRegistry” 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 “eRegistry” could be used as an eGovernment Revenue Generation base, Census and Population Control Issues database, Disease control and Health and wellness resource etc. The “eRegistry,” 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 “layer” 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)’ 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 “eRegistry”, 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 “third medium” 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 – 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 “Mobile Cloud Computing” capabilities.

Benefits: The potential benefits of this eRegistry are as follows:

• Creates a reliable data source for more accurate Census/Population control activities
• Creates a National and Global inventory and source of wealth
• Unlocks the Wealth of each Nation for a better global prosperity
• Creates an Index that will be portable and can be replicated at the national level as well as possibly globally to source capital for local Entrepreneurs
• Becomes a robust platform for other capital-generating financial systems .e.g. Micro-Credit financing, etc.
• Self-generates Capital to fuel the local economy
• Encourages and develops Entrepreneurial Spirit needed to grow an economy
• Minimizes and reduces poverty
• Improves the quality of life
• Assures more accurate citizen’s participation in the local government’s election process
• Creates new Industries for new jobs, e.g.,
o Asset appraisal and valuation
o Asset Insurance
o Risk Management
o Economic forecasters
o Asset Management - The ability to monetize the equity in assets that have been valued for future investments
• Promotes Cleaner Society
• Creates other products and services that result from the new ideas e.g. Water vending machines managed by current roadside vendors, organized Roadside Mechanics, etc.
• Improves Tax Revenue Generation for the nations. Tax revenue is needed to effectively run the government and provide civic society services including individual Rights protection which is currently unavailable in most remote locations. And when available, the property value is grossly understated for minimal taxation reasons.

Planned Implementation Approach:

The planned implementation approach includes:

• Collaboration between MIT Media Lab and Harvard Law School - Berkman Center
• Solicit for IMF/World Bank and UN organizations Sponsorship as well as Private Sectors.
• Engage the Local governments that are ready as Co-Sponsors with full on-the-ground participation from local staff.
• Develop an economic education platform e.g. “EconoForce” to educate the citizen in asset and capital management
• Engage local citizens as much as possible in the process to have a vested interest in the success of the renewed way of building wealth for their countries, given this is a “Citizen Centric” project.

TO BE DECIDED BUT MY WISH AND BELIEVED STRATEGIC WAY FORWARD.

• Establish a joint center for “Demystifying the Wealth of Nations” that will focus on:
o Adequate knowledge transfer to make the new system sustainable.
o Continued cross pollination of knowledge and innovation between the
countries and the MIT/Harvard partnership for a better world.
o Continued Entrepreneurial spirit incubation.
o Continued Civil Society Economic Empowerment.

Schedule and Timeline:
The schedule and timeline of this initiative is as follows:
• Establish stakeholder group – 30 days
• Formalize launch and implementation plan – 60 days
• Select pilot countries – 90 days
• Begin implementation – 120 days

This article originally appeared on the Law Lab blog.