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 If you have ever gotten service at a car wash in Brazil, you know that many of them make up the phenomenon Hernando DeSoto calls dead capital. They operate outside of the formal economy, paying low wages off the books, skipping out on taxes and side-stepping regulations. This is the environment the owners of DryWash stepped into when their business first opened in 1994.

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In an earlier post I made the point that technology alone will not lead to moral progress.  Indeed, it takes the proper set of social institutions and cultural practices for technology to be leveraged to achieve just ends.  In Kharagodha, a small and arid salt-mining village in western India, it would seem that all the necessary steps are being taken to make personal computers a tool that actually improves lives.  Thanks to a small grant from Microsoft, the local miners union here is running computer classes for the miners and is setting up a digital lab to test the quality of salt extracted from the mines.  

In the past, miners in this small town were little more than surfs who toiled their lives away in the mines.  The middlemen, who brought the salt to market, provided the miners with enough food and drink to subsist and kept them in the dark when it came to the value of their salt.  Because of Kharagodha’s remote location, its miners had no way of contacting the outside world and had no choice but to resign themselves, generation after generation, to the meager compensation that the middlemen provided.  In the meantime, the middlemen profited handsomely.

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When I was a college student my roommates would occasionally bring home a dozen or more loaves of free bread, which they found while rummaging through the dumpster located behind the nearest Companion Bakery. Although they were just amateur dumpster divers, my roommates knew exactly where and when to find the cleanest dumpsters, which contained healthy, edible food. In an affluent country like the United States, dumpster diving is, above all, a political statement. It’s about sticking it to the man, saving the environment, and rejecting consumerism. Although it is still only a fringe movement practiced by a handful of diehards, dumpster diving is starting to catch on. In the fashion world, the snootiest of all industries, “dumpster chic” has entered the lexicon, suggesting that it is cool, perhaps even chic, to wear clothes from the dumpster. Even some of the most highbrowed intellectuals are embracing the movement. In Underworld, for example, Don Delillo suggests that dumpsters can be a plentiful source of food, ranting that, “This goddamn country has garbage you can eat, garbage that’s better to eat than the food on the table.” And he’s right, I can’t think of anything more delightful than French toast made with dumpstered bread!

But in much of the developing world, dumpster diving has nothing to do with high trends and political ideology. That is, it’s not about rejecting consumerism, but about being rejected by consumerism. When markets don’t meet people’s needs, they are left with few options but to subsist on the byproducts of consumption.

Take China for example. When it comes to consumerism, China is the United States on steroids. So if you think that the Mall of America is the worst thing since corn syrup, then wait to you hear about the great malls being erected in this self-proclaimed communist country. According to the New York Times, by 2010, “China is expected to be home to at least 7 of the world's 10 largest malls.” And these aren’t just any old super-sized malls. The South China Mall, for example, boasts a $400 million fantasy land with “150 acres of palm-tree-lined shopping plazas, theme parks, hotels, water fountains, pyramids, bridges and giant windmills. Trying to exceed even some of the over-the-top casino extravaganzas in Las Vegas, it has a 1.3-mile artificial river circling the complex, which includes districts modeled on the world's seven "famous water cities," and an 85-foot replica of the Arc de Triomphe.”

With all the hype coming out of China these days, especially after hearing about projects like these, it’s hard not to be a little skeptical. It is certainly true that consumerism—both in the United States and China—is the engine behind China’s burgeoning middle class, which now boasts almost 70 million people. But what has consumerism done to the other 1 billion people in this great country? Certainly they aren’t all dumpster divers, right? And yet somehow there are enough of them to generate headlines here in the United States. In an article published earlier this year in the New York Times, Howard W. French reports how “throngs” of poor Chinese peasants subsist by scavenging at some of the world’s most dangerous garbage dumps. “Even in the heartland of a booming China,” he writes, “Peasants can make far more money collecting plastic trash bags, tin cans and the rubber soles of shoes than they can as farmers or ordinary day laborers.”

“Were it not for dangers of the job,” he continues, “like being crushed by a bulldozer, inhaling noxious gases while wading knee-deep in fetid refuse or being beaten by warring gangs of scrap pickers for the mere prize of an unbroken bottle, it might even be considered a good job.”

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Update: Lee Schipper, Director of Research for WRI's Center for Sustainable Transport, comments below on the implications of a low-cost car for India.

A mass-produced, affordable auto revolution is coming to India. Or, as BoingBoing suggests, “make way for the hundred dollar laptop of automobiles:”

Tata Group Chief Ratan Tata told shareholders that the launch of the car would create a new paradigm in low-cost personal transport, carve out a new market segment and reach a broader base of the pyramid.

"The styling and designing of the car have been completed and prototypes are being tested in the plant. It will be a rear engine, 4-5 seat, four-door car with about a 30 horsepower engine," Tata said in the company's annual report for 2005-06.

The car will be launched in early 2008 and we believe it will be extremely attractive to the Indian consumer, particularly younger families, at a price level of about Rs one lakh, Tata said.

I absolutely love it when a big shot CEO uses terminology like “Base of the Pyramid,” because it demonstrates how some firms at least know the concept. Whether they are doing it in a sustainable, profitable way...anyway, while I love this concept from a BOP and economic development perspective, what worries me is twofold. First, what about the environmental impact of hundreds of thousands of additional cars on India’s already-congested roads? Answer to myself: it will be up to Tata to make these vehicles as fuel-efficient as possible. Second, will this push Indian development toward the US model of roads and highways and provide a disincentive to well-planned cities and public transport?

Original links via IndianRaj and SouthAsiaBiz. Original article in the Hindustan Times.

The second part of NextBillion’s interview with Kiva focuses two issues that drive the organization’s success: Kiva’s value proposition within the greater microfinance community and strong partnerships that connect Kiva to its entrepreneurs. As many of you have read, microfinance has a fair number of critics, like NextBillion’s Rob Katz who recently wrote, “Realists know the truth – it (microfinance) suffers from high interest, misrepresentation of repayment rates, poor risk management, and insufficient scale.” Yet, one can not ignore the potentially transformative role small business can play in developing countries. The beauty of Kiva is its ability to address some of the most damaging charges leveled against microfinance by allowing MFI’s to lower interest rates and offer additional services to its entrepreneurs, all while remaining self sustainable. How? The key is excellent partners and the lower cost of capital Kiva provides them (2% vs. 12% industry average).

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Writing during the US’s dismal performance at the World Cup, David Brooks, liberals’ favorite conservative, threw a low blow in an attempt to level the playing field. “No American player has managed to put a ball into the back of the net, but the U.S. team does lead the world in one vital category: college degrees.” Indeed, Mr. Brooks’s assessment of American academic superiority on the soccer field is correct. But after trumpeting the link between this country’s academic and economic accomplishments, Brooks fails to mention that the United States is also a global leader in many other fields, including green house gas emissions. What cheerleaders of the American economy like Brooks often overlook is that our economic success has been a pyrrhic victory resulting in immeasurable costs to our environment. For countries now starting down the path of development, the history of American capitalism raises many interesting questions about the future of our planet. Among them are these: Is economic growth inextricably linked to environmental degradation? If not, how can developing nations go right where the US has gone wrong?

If we trace the trajectory of modern capitalism back to its origins in England, we find what appears to be a frightening connection between economic growth and environmental degradation. Those “dark, satanic mills,” which powered the industrial revolution and drew the ire of Karl Marx, were more than just a factory worker’s worst nightmare. They were an environmental nightmare as well, spewing out toxins that fouled rivers and darkened skies. Today many modern industries are no less insidious when it comes to the environment. Just ask Laurie David, the outspoken environmentalist and wife of Larry David from "Curb Your Enthusiasm.” Or, if you don’t trust this “gulfstream liberal,” ask the residents of Cleveland, Ohio, who witnessed the Cuyahoga, a river that “oozes rather than flows,” catch fire in 1969.

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Most of the news about the One Hundred Dollar Laptop has been positive – and for good reason. It’s a great design project being done by some great designers (my father’s an MIT alum; I am required by birth to promo the place). There have, however, always been some lingering questions about the project and its business model – or lack thereof. Now, according to Business Week’s Bruce Nussbaum, there are some questions about its namesake price (quoted from SciTechToday via NussbaumOnDesign):

The little laptop that some say might change the world has moved closer to launch, and gotten a little bit pricier. Nicholas Negroponte, cofounder of MIT's Media Lab and head of the One Laptop Per Child (OLPC) nonprofit organization, said on Friday that the laptop, originally projected to cost $100, would probably cost closer to $135 to $140 at launch.

To me, price fluctuations indicate an inherent flaw in the OLPC plan – lack of exposure to market forces. As one Blogspotting commenter notes, the laptop was never intended to sell on an open market, which – in his opinion – renders the price increase moot. That very fact, however, shows just how undervalued this product could be, and forces me to think of situations whereby families would be forced to sell the laptop for the going (black) market rate. Do you purchase medicine for a sick family member or keep the child’s laptop? Not an inconceivable situation...especially considering how tech-starved many small businesses are in the developing world.

If you think George Bush’s solar powered spa is hot, hot, hot, then wait to you hear about Fabio Rosa and his electrifying projects south of the border. Who is this man, you might wonder? Well, Fabio Rosa is a social entrepreneur—a businessman with both social and economic motivations—who has spent the last twenty years bringing electricity to rural areas in Rio Grande do Sur, Brazil’s southern most state. In the early 1980s Rosa achieved the status of a cult hero after he introduced a technology that reduced energy prices by 90%, making electricity affordable to thousands of low-income residents.

But when Brazil privatized its electricity infrastructure in the late 1990s, Rosa, who was working with the publicly owned utilities, saw his projects come to a grinding halt. “The [private] utility companies had little experience working with low income rural markets, and saw no incentive to provide electricity to rural off-grid communities,” Yerina Mugica explains.

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I hear the average person in Latin America consumes one coke per day. Not a particularly scholarly source, but I asked a friend who had just gotten back from a long stint in the region why he felt this was the case.... he said that in Brazil at least he had met several women who bought liters of coca-cola every week even if they could ill afford it because as he quoted them, "my husband should be able to have a coke with every dinner. I can afford that." In other words he felt that for many, being able to drink a coke with every meal was a sign of status. I was thinking about this at a team meeting for New Ventures today when I distributed a few examples of possible newsletters for us to produce (I'll announce when the first one is published). The layouts and content worked, but my titles all got more or less trashed... for the record I still think "Rising Ties: Exploring the hidden connections that will lift all boats" is a cool heading for a report on global development trends. But I digress.

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If you’re in Madagascar at this very moment and you’re reading this blog, then chances are you’re attending Conservation International’s symposium, “Defying Nature's End: The Africa Context.” But for those of us who have to see lemurs in the zoo, here’s some information about what’s going on in Madagascar.

The four day symposium, which began yesterday, explores ways of harnessing Africa’s biodiversity and using it to reduce poverty in the region. Among the hotshot speakers are Columbia University economist Jeffrey D. Sachs who is also director of the U.N. Millennium Project. Unfortunately for U2 fans, Bono will not be in attendance. Neither will Angelina Jolie; she just had a baby.

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