One of the most mendacious contentions, often made by free marketers and other economic moralists, is the notion that the poor are not entrepreneurial, and this lack of risk taking results in poverty which can then be “justified” by a lack of initiative. The truth is that no one tries harder than a poor person, every day.
I'm writing from Kenya, where I have been contributing (in a very small way) to Oxfam's new global strategy. I can tell you, I have never seen as much entrepreneurial activity as I am witnessing every minute of the day on the streets of Nairobi.
Whatever is the cause of poverty, a lack of hustling is not it. These are consummate entrepreneurs, buying and selling on a majestic scale, on an hourly basis, as if their lives depended on it; which in many cases they do.
Rather than thinking of poverty as a number, an income threshold or a wage, I believe it is more useful to consider it from the standpoint of your time horizon.
Rich people have long time horizons because they don't have the anxiety of the daily grind
Poor people have short time horizons. They are so worried about today and tomorrow that they have no time to think about next month.
Rich people have long time horizons because they don’t have the anxiety of the daily grind, allowing them to make plans and devote resources, either personal or financial, to achieving these plans.
In essence, the difference between rich people and poor people can be expressed in the idea that rich people live in the future while poor people live in the present – not in the mindfulness Californian way of living in the moment – but in the desperate African way of making ends meet.
Poverty, as I have said before, obliterates the future.
Once you see it that way, you begin to understand that something much more than an absence of entrepreneurial flair is the issue. In fact, it is precisely the opposite. It’s the very lack of certainty, rather than swashbuckling embracing of uncertainty, that condemns a poor person.
The dearth of stability, institutions and structures is part of the problem. If you don’t have a stake, you live in a constant state of financial anxiety. Such acute financial anxiety is at the root of the non-stop trading and entrepreneurial relentlessness that you see on the streets of this enormous city.
Without credit, the person is stuck in the tyranny of the present
Many years ago, John Hume linked access to credit with human rights, and he helped set up the credit unions in the North. His argument was that credit, when used wisely, allows a person to envisage a different future for him or herself and allows that person to live in the future.
Without credit, the person is stuck in the tyranny of the present. Obviously, in the North, like so many things in the past, the banking system was sectarian.
Recent developments in technology, money and banking in Kenya, and other African countries, gives some cause for optimism.
On most street corners here, there is a guy selling “pay as you go” mobile phone airtime, hawking deals to whoever is passing. In recent years, these guys have become the agents of incipient social transformation. A new system of credit has sprung up in Kenya called “M-Pesa”, (M for mobile and Pesa is the Swahili for money).
Using basic text messaging technology, M-Pesa allows Kenyans to deposit money on their phones, buy and sell using the debit and credit facilities on their phones, transfer money on their phones to relations in the countryside and avail of micro-lending.
The agents hold cash and facilitate the trade, for example a relative sending money to family in the country. Everything is done with cheap Nokias rather than expensive smartphones.
Once poorer people got access to this basic banking tool, it took off. Today, 70 per cent of the population use M-Pesa and 30 per cent of the GDP of the economy is generated via M-Pesa. There are 50,000 registered agents acting as tiny banks, all over the place.
M-Pesa has dramatically reduced the cost of banking. For example, locals told me that only a few years ago, the only way to get money for remittances home to the countryside was to physically give a bus driver a bag of cash where, typically, he could charge up to 30 per cent for the pleasure of dropping the cash to a remote village. Often, the money and driver simply disappeared. Not any more.
And because M-Pesa is ubiquitous, it is viral and indispensable to the functioning of the economy. Remember, this innovation pre-dates and is much more successful than Apple Wallet, Venmo and the apps Silicon Valley raves about.
A small innovation has allowed a poor country to skip an institutional generation or two
In so doing, M-Pesa has combined a basic technology with a basic want, propelling the economy and allowing that critical shift, however small, in a poor person’s time horizons.
A small innovation has allowed a poor country to skip an institutional generation or two, by creating an entire banking system out of nothing. This is what progress looks like.
All over the developing world, technological innovation is having a huge impact, and the price of technology is falling rapidly, making it more available to more people.
For example, you can now buy a Chinese-made Tecno smartphone for as little as $30 (€27), opening up a whole new business that the Kenyans call the “digital hustle”. People use Facebook and WhatsApp for jobs, and a massive new business has erupted, creating fake Amazon or Tripadvisor reviews or – in a bizarre reflection of how the accident of birth dominates – a service whereby highly educated Africans write term papers for lazy rich US students in US colleges.
The digital hustle is big business all over the former third world – or the Global South as it is now known.
And of course, Africa is a battleground in the China v US trade war. At the moment, African online activity is largely on Facebook, Instagram and WhatsApp. So, the Americans have Africa's attention but have they Africa's wallet? They don't know how to make money out of poor people, because traditional US advertising methods demand high incomes.
As these global titans clash, the impact of the same technology on the world's poorest people is immense
In contrast, the Chinese have figured out how to make money from poor people's smartphones, through intensive use of its own version of Facebook, called We Chat at home in China. So the Chinese are now buying attention, by hoovering up any app that is popular across the developing world, from India to Rwanda.
As these global titans clash, the impact of the same technology on the world’s poorest people is immense and rapid. Access to basic credit is allowing countries to skip an infrastructural generation or two. It’s only the beginning.
And maybe, just maybe, it signals a tiny step in the long march from the present to the future that is so essential in transforming a poor person’s time horizon and their life.