Lack of institutional cooperation between individuals in a marketplace reduces efficiency and prevents potentially beneficial contracts from being cemented. The reason behind this lack of trust is the fact that the government cannot be counted on to uphold contracts, property rights and the like. Without this legal guarantee, people are hesitant to do business with people they don’t know, or who are from different backgrounds, thus preventing business relationships from being established.

Feder and Feeny identify three categories of institutions: constitutional order, institutional arrangements and normative behavioral codes. The constitution describes the fundamental rules for society, the guidelines for making laws. For example, the First Amendment in the US Constitution prohibits the government from obstructing some individual freedoms such as freedom of speech and freedom of religion.

Institutional arrangements refer to laws, contracts, regulations and other legal instruments designed to maintain order and stimulate growth. A lease is a basic example of an institutional arrangement.

Finally, normative behavioral codes refer to the norms followed by a culture. In the developed world, the norm is for most marketplace activity to take place within the formal sector, where government institutions protect buyers and sellers and maintain competitiveness and fairness. Conversely, in many developing countries, the informal – or unregulated – sector is where most market activity occurs, resulting in diminished trust between buyers and sellers.

For example, land may be transferred according to a government regulation yet the transfer of this land to a certain ethnic group or tribe may be forbidden according to a normative behavioral code. Additionally, poor institutional arrangements such as lack of enforcement or registration procedures could be the issue.

In developed countries, these three institutions generally all follow and reinforce each other, but in developing countries one institution may be followed more by some and another more by others, creating different, opposing “laws” in the same place.

In many developing countries, where tribes and family lineages play a large role in social group formation, the lack of collaboration between unfamiliar groups leads to economic inefficiencies. More specifically, a culture that prefers to do business within the confines of family lineage only, will see less division of labor and a consequent lower degree of specialization as per Adam Smith’s theories. For example, Annen cites Rabellotti and Schmitz who suggest an interesting reason for Brazil’s superior performance to Mexico in the footwear manufacturing space. The authors note that social capital in the Sinos Valley manufacturing area in Brazil is created in local, open social networks supported by business associations that serve the entire district. In contrast, Mexican footwear manufacturers in Gaudalajara and Leon cooperate based on strong family ties, destroying the benefits of trading and collaborating based on normal economic incentives (Annen, 2001).

This leads to the important distinction between inclusive and exclusive social capital. Exclusive social capital describes the value created by collaborating within closed social networks, where entry is difficult and requires bribery, paying a fee or spending time getting acquainted and proving yourself to the exclusive social group. On the other hand, inclusive social groups have low entry costs and exist to further the interests of a broader community.

Aside from less division of labor, there are two other downsides to exclusive social capital: lack of innovation and rent-seeking activities. In industries with a high degree of technological change, the closed nature of these groups impedes potential efficiency innovations that come about from the diffusion of ideas. Granovetter also made a similar point in saying that few “strong ties” are a lot less beneficial than many “weak ties” (1973). It’s important to note however that the negative effects of exclusive social capital on innovation depend on how much dynamism is required in the industry in question. To illustrate, consider the software industry versus the precious gems industry. The former requires firms to constantly innovate and collaborate to stay competitive, however, given the relatively simplistic nature of the precious gems industry, a mine owner doesn’t need to collaborate or innovate as he or she is simply taking materials out of the earth and selling them to processors and retailers.

Lastly, exclusive social capital leads to rent-seeking activities, which get in the way of real economic incentives. When the likelihood of entry into a market is determined by the level of a firm’s influence vis-à-vis other firms, potential entrants tend to spend more on trying to obtain an item than it is actually worth to them (Davis and Reilly, 1998). Therefore we have inefficiencies taking place as firms waste resources on simply trying to get their foot in the door instead of investing all resources into the wellbeing of their business.

Although inclusive social networks result in higher economic efficiency than exclusive networks, there is major issue that arises and challenges the integrity of inclusive networks as they grow. Since inclusive networks rely on members having good reputations, cooperation within groups can only take place if every member is aware of other members’ past actions. With small networks, this is easy to manage but as the membership and heterogeneity of an inclusive network increase, it becomes more difficult to inform every member of every other member’s past behavior. This means that a network works best when it’s size is not allowed to grow to infinity, but rather to point where information sharing is manageable (Annen, 2001).

References:

Annen, Kurt. “Inclusive and exclusive social capital in the small-firm sector in developing countries.” Journal of Institutional and Theoretical Economics JITE157.2 (2001): 319-330.

Davis, Douglas D., and Robert J. Reilly. “Do too many cooks always spoil the stew? An experimental analysis of rent-seeking and the role of a strategic buyer.” Public Choice 95.1-2 (1998): 89-115.

Feder, Gershon, and David Feeny. “Land tenure and property rights: Theory and implications for development policy.” The World Bank Economic Review5.1 (1991): 135-153.

Granovetter, Mark S. “The strength of weak ties.” American journal of sociology(1973): 1360-1380.

In order for people to participate in and develop an economy, there has to be financing that lays the groundwork for innovation and entrepreneurship. Without this, poor people in developing countries are forced to spend all their time getting food, water and shelter; an entire life devoted simply to staying alive. Microfinance programs have been commended for their ability to raise people out of poverty while stimulating the economy and calming civil unrest. Basher finds three strong positive effects associated with the microfinance program run by the Grameen Bank in Bangladesh: a decrease in the relative preference for male children, higher participation in non-economic events such as elections and spillover effects due to individual empowerment (2007).

In Bangaldesh, there is a strong preference for male children because, in the Bangaldeshi culture, male offspring are responsible for supporting parents in their old age. Since females have been empowered and now have the ability to be their parents’ old age caretaker, we see an attitudinal change in families toward the desired gender of their child. Basher has also demonstrated that the Grameen Bank has had a direct effect on reducing fertility rates (2007). Luci and Thevanon studied the link between economic growth and fertility and found a J-shaped correlation between the two. This means that as a country develops, its fertility rate decreases (2010). Therefore, the Grameen Bank’s work seems to directly contribute to development in Bangladesh.

When rural women receive their loans from the Grameen Bank, they get to do activities that women generally do not do in Bangladesh. More specifically, these women have financial dealings with field officers, participate in group meetings and visit Grameen offices. This strengthens their self-confidence and encourages them to participate in non-economic events. Basher’s experiments revealed a positive correlation between duration of association with the Bank and likelihood that a person will vote in the national election (2007). This indicates that, generally speaking, getting financing from the Bank takes participants from being passive loan recipients to empowered, aware individuals who play an active role in their communities.

In the pre-1990 era of the Grameen Bank’s activity in Bangladesh, social attitudes toward women’s participation in the program were very negative – 81.1% of respondents faced objection from friends, family or the community at large when they discussed their plans to participate in the Bank’s program. Making money was an untraditional role for women in the country at that time. As more and more women joined the program, social attitudes started to change; it became more normative for women to participate in the economy. In the 1995-99 survey asking respondents the same question, only 6.25% faced any objection to them participating in the program (Basher, 2007). This indicates that the Grameen Bank’s activity in rural Bangladesh has helped modernize that society’s view on women’s roles in the face of longstanding values and custom. These broad spillover effects have empowered women and have created a more tolerant environment, which is an ideal breeding ground for progressive policymaking, economic growth and peace.

Although effective at helping the poor get on their feet, microlending programs could be used in more creative ways that would further development goals. For example, perhaps microfinanciers could partner with nonprofits to provide business training and advice that would result in loan recipients using their credit in more profitable ways. Right now, recipients are simply given loans without much direction on how to use the money. If there were advisors that helped these informal sector workers tailor their output to the demands of the local or global economy, this may cause a snowball effect and result in more exponential growth – providing jobs and stability. In addition, microlending could be linked to constructing houses, providing drinking water, sanitation and health services (Onyuma and Shem, 2005). By investing in locals to confront the huge tasks that governments have failed to do or NGOs aren’t able to do, infrastructural needs can be met while providing jobs for the people who need the infrastructure.

References:

Basher, Md Abul. “Empowerment of microcredit participants and its spillover effects: evidence from the Grameen Bank of Bangladesh.” The Journal of Developing Areas 40.2 (2007): 173-183.

Onyuma, Samuel O., and Alfred Ouma Shem. “Myths of microfinance as a panacea for poverty eradication and women empowerment.” Savings and Development (2005): 199-222.

In the past century, the rise of capitalism has led to a slow transition of corporations becoming the real world superpowers rather than nation-states. The fundamental issue behind this is that governments are there to look out for their citizens – they are inclusive institutions there to provide the necessities for a society to function and flourish – whereas corporations are only looking out for themselves. The selfishness of corporations coupled with their influence has challenged communities that are, by definition, generally altruistic groups of interdependent people who work together to propagate a common agenda of peace and productivity. Corporations know that if a sense of community flourishes, people may become hostile toward them. This is exemplified by ‘Keep Austin Weird,’ which was a campaign by locals and small businesses to prevent chain stores from building locations in downtown Austin, TX. This shows a resistance to corporations in favor of a more grass-roots approach to doing business. Given our market economy, where people respond to incentives, corporations are simply doing what any person would do: maximizing utility out of every situation.

Corporations and governments will often make their motives look different to the public compared to what they actually are. One example of this is the US invasion of Iraq after 9/11. Harvey notes how President Bush often said that the United States’ role in Iraq was to spread a key American constitutional right: “as the greatest power on earth we have an obligation to help the spread of freedom,” Bush claimed (2005). In Freedom’s Just Another Word, Harvey explains how the Bush Administration used this language to create a sense that America was fighting some sort of crusade for freedom when in reality they were just trying to have boots on the ground to protect their oil interests. This idea goes hand-in-hand with the ideas conveyed in the Rise of Corporate Power in America where the author insists, “it is the corporate interest more than the human interest that defines the policy agendas of states and international bodies” (Korten, 2001). The power that corporations and governments hold, especially when working together, allows them to accomplish their goals no matter what citizens actually want.

The proposed, and approved, Kinder Morgan pipeline gives another good example of this. This pipeline will run from the tar sands of Alberta to the southern British Columbia coast in order to increase oil exports. As lucrative as this may be, there are risks such as the pipeline leaking and causing environmental damage. In Burnaby, BC, the Vancouver suburb where the pipeline will end, people have squatted on the construction site to protest the pipeline. The land where the pipeline will end is Indigenous land that has not been ceded to Kinder Morgan; this corporation does not have permission from the Indigenous landowners to build on that site, yet they are going ahead anyway. They got permission from the government and that’s all the red tape they need to go through; the fact that the land is not ceded means nothing to Kinder Morgan. Fifty-three people have been arrested for getting in the way of Kinder Morgan surveyors and Kinder Morgan has also filed lawsuits against protesters in an effort to deter them. Shouldn’t it be Kinder Morgan facing legal action for building on land they don’t have permission to build on? This issue highlights the power that corporations and the government have when they work together.

More attention needs to be given to the benefits of corporations recognizing the ‘triple bottom line,’ in which financial, environmental and social costs are all accounted for. By assigning monetary values to social and environmental exploitation, corporations can be held accountable for their actions. Once multinationals start doing this, they will gain respect from communities as they will become inclusive institutions rather that extractive, exploitative ones.

Harvey, David. A brief history of neoliberalism. Oxford University Press, 2005.

Korten, David C. “Rise of Corporate Power in America.” When Corporations Rule the World (1995).

RCMP Arrest Protesters at Kinder Morgan Tar Sands Pipeline Expansion (2014). Environment News Service. Retrieved from http://ens-newswire.com. Accessed 2014, November 23.

European merchants had been trading with African communities for many years leading up to the beginning of the slave trade, which began around the year 1400. Slaves were great for western economies as they provided nearly free labor: a valuable input. While European businesses benefitted from this, groundwork of mistrust and ethnic fractionalization was being laid in Africa. Western slave traders employed Africans to hunt down slaves for them. This destroyed social networks since Europeans did not capture slaves themselves; the poaching was done by other African tribes and even by victims’ very neighbors. The effects of this early loss of trust between tribes and individuals can be seen today through weakened ties and strife between nation-states, tribes and ethnicities. This discourages the formation of broad ethnic identities, which are fundamental to establishing larger communities. Consequently, without trust and communication, most African countries have struggled to develop (Nunn, 2009). They lack the strong institutions needed to provide citizens with public goods such as education, infrastructure and health care.

Reference:

Nunn, Nathan, and Leonard Wantchekon. The slave trade and the origins of mistrust in Africa. No. w14783. National Bureau of Economic Research, 2009.

In a February 2014 episode of 60 Minutes, Anderson Cooper reported on US homelessness, explaining how it actually costs more to ignore the less fortunate than to provide them with free or heavily subsidized housing (some complex owners also donate some of their units for this cause). Cooper interviewed the Nashville faction’s project champion Becky Kanis who said, “a night in the hospital costs more than an average month’s rent… we are paying more, as taxpayers, to walk past that person on the street and do nothing, than we would be paying to just give them an apartment.”

The 100,000 Homes Campaign seeks out and surveys the homeless to find the most needy, then gives each of them their own apartment. The project has been a success as, once given housing, people generally find employment, make friends and partake in hobbies. This reflects a similar philosophy to that of the Grameen Bank, which empowers impoverished people through small investments called micro loans. People use these loans to fund long-term small business operations or to buy goods and then sell them at a margin on the street. When people are constantly wondering where their next meal is coming from or where they will sleep that night, they do not have the time or the resources to do what they’re capable of.

Returning to the 60 Minutes episode; Cooper makes an important point near the end of his report, mentioning how “a lot was achieved by getting people who don’t normally work together, such as outreach workers and private landlords, to focus on the city’s most desperate residents.”

The civic-minded owners of the condo complexes who voluntarily rent out units for little rent, economically speaking, are actually suffering a loss as a result of their philanthropy. Yet, as participating landlord Kirby Davis so eloquently put: “none of [the well-off] got to where [they] are without taking risks, so how about taking a risk for somebody else?”

Although it’s utopian to imagine a world where CEOs would consider anything but their shareholders, people like Davis show how powerful it can be when those at the top consider things other than the bottom line.

Critical thinkers often problem-solve by employing the model of systems thinking: analyzing in terms of interconnections, interdependencies, patterns and specific context. The fundamental idea behind the concept is that everything works in synergy; it is vital to have balance among facets of a system in order to achieve the greatest benefits possible for each segment. Traditional analysis, conversely, breaks down systems into constituent elements and examines them separately. Context is resultantly overlooked which can lead analysts to making a fundamental attribution error, where emphasis for explaining a persons behavior in a given situation is placed on internal issues rather than taking into account external influences. An example of this is how Huntington, in The Clash of Civilizations, paints Muslims as ‘backward’ and hopelessly obstinate. He essentially claims that Muslims are simply troublemakers and that they could never participate in a civil, cooperative international arena. It is important to take note of the oppressive regimes preaching anti-Western rhetoric that these people were living under when Huntington’s article was written. Muslims want democracy, peace and connectedness just like any other human does; their jaded impressions of politics were due to their country’s leaders’ discourse. Seeing things in context allows thinkers to establish the root cause of issues, which is vital to deducing solutions.

The Ganges water dispute between India and Bangladesh provides an example of how cooperation leads to improved outcomes for all. Ganges water rights were a source of dispute between these two countries since India built the Farakka Barrage in 1975. Although there were on and off treaties to share the water in the time between dam construction and 1988, for the eight-year period after that until 1996 India unilaterally withdrew water at Farakka, as there was an absence of any agreement. This caused Bangladesh to raise the issue in international forums, consequently deteriorating India-Bangladesh relations. When both countries saw a change of government in 1996, new hope for an equitable water-sharing agreement arose as India’s United Front government wanted to live up to their earlier promise of amicable relations with neighboring nation-states. At the same time, newly elected Bangladeshi Prime Minister Hasina “found that her political interests would be better served by signing a Ganges water-sharing accord with India than by using the dispute as a political weapon” (Swain, 2002, p. 69). The lack of agreement caused huge losses for Bangladesh’s forestry, agriculture and fisheries industries; continuing without a solution to the Ganges water issue would be economic suicide.

In December 1996, the prime ministers of both countries signed a new, 30-year, water-sharing agreement. Unfortunately, low rainfall during the first year of the treaty resulted in minimal spring and summer runoff, meaning that the two governments had to work together to increase the dry-season runoff. The implementation of the 1996 treaty thus created an environment conducive to discussing issues surrounding water. Discussions regarding “other water-related issues such as flood management, irrigation, river basin development and hydropower generation for the mutual benefit of the two countries” (Swain, 2002, p.70) replaced the previous unconstructive political debates. The value of meaningful cooperation became clear.

References:

Swain, A. (2002). Environmental Cooperation in South Asia.

Wolf, . T., Kramer, A., Carius, A., & Dabelko, G. D. (2005). Managing water conflict and cooperation. State of the World 2005: Redefining Global Security, 80-95

Too many people are disconnected from their meat; we’ve been so well trained to just go to the grocery store and not question anything except for the prices. This arises from the fact that farmers are not dealing directly with consumers. There used to be a day when people would go to the local market, pick out the animal they wanted to buy, and haggle the farmer on the price. Nowadays, processors get in between the two sides and undermine the sustainable eating process with packaging, preservatives and costly marketing. It’s important to discuss these matters because this is not simply our planet to exploit as we wish; animals deserve to be treated with respect, as this is their land too.

Concentrated Animal Feeding Operations (CAFOs) cram as many animals as possible into a small space for the sole purpose of fattening them up for slaughter. I think this is unethical because the animals aren’t given a nice life where they’re allowed to enjoy the little time they have. Rather, they’re living cargo that processors see as cash.

We have to also look at the positives of this situation to understand it holistically. Meat provides essential nutrients to humans. If all of it were free range its price would increase, as farmers wouldn’t be able to put as many chickens on a lot. That means decreased supply which leads to rising prices. Less people would be able to afford meat, which would put strain on other resources causing their prices to rise as well.

Some people argue that if humans all switched to a plant-based diet we could use animal feed cropland to grow for our own consumption. Given the worldwide popularity of meat and its growing demand in now-wealthier China, is this idea realistic enough to be worth even considering? There’s no doubt that this is a complicated topic and one has to look at all sides before forming an opinion. As mentioned, I believe animals should be allowed to live somewhat fruitful lives before going to slaughter. Small-scale farms would be best in my perfect world, but again this is quite unrealistic.

Hunting is the fairest method as animals at least have the chance to escape. However, if all we did was hunt for our food we wouldn’t progress much as a species as we’d be preoccupied with feeding ourselves. Would this lack of progress be more natural and fairer to Earth, or a waste of our intelligence? Isn’t a person’s answer to that question based on their values and perspective?

Writing this journal has caused me to more fully understand that ethics is a sliding scale depending on whose viewpoint you’re looking from. The personal result of this lesson is the insight that I need to always evaluate things fully before coming to an opinion. One cannot base decisions on what one feels; we have to think and analyze in order to come to appropriate conclusions.

A brief explanation of the game before you continue reading my post: http://www.lancaster.ac.uk/users/interculture/pcat6.htm

Before we started playing the barnga game in my LFS 250 class I just thought we were playing cards, I had no idea how interesting the game was going to actually be! I only realized that each person was playing by different rules when I thought I’d won a hand yet someone else took the cards. I understand that the point of this game was to give us a sense of what it feels like for someone to be immersed in a new culture, however, I have never been to a place foreign enough to relate this game to past personal experience. I’ve been all over Canada, the US, the UK and South Africa- which are all fairly similar in terms of the language spoken, popular culture and societal norms. For me personally, the barnga game was intriguing because of the different ways people would react when they thought they’d won, yet someone else would take the cards. Some people would be passive and just let whoever took the cards take then without protest, and on the flip side others would take the cards almost maliciously- knowing that they hadn’t truly won the hand. I immediately thought of the links between this behaviour and the different personality types we learned about through the Type Focus personality assessment.

The insight I gained from this game matters because throughout my career I will have plenty of group work; understanding how, for example, introverts and extraverts interact will be of benefit to me now and throughout my life. I would be interested in doing a study to see if the extroverts tended to also be the ones who’d just take the cards, even though they knew that other people felt like they’d won the hand. Looking at it the other way, I would assume that people with a preference for introversion would be the passive ones who would just let whoever take the cards even though in their minds they won as well. Furthermore, I noticed a couple occasions where there was a dispute (albeit silent) over who had won. I wonder if the disputers both happened to have a preference for extraversion?

The connection I made between the barnga game and personality types is quite compelling to me. I’ve always been interested in psychology but this is the first time I’ve ever experienced it the same way a researcher would- in a controlled environment. In light of this experience I feel like I will be less judgemental of the way people act and perhaps more understanding because I now have a deeper understanding of how we don’t choose our personality characteristics; how people can’t help but act the way they do. To critique my observations, I’d like to point out that my classmates (introverted or extraverted) had little incentive to “fight” for the cards. Everyone knew that the class would end and it wouldn’t matter who ended up at the winner’s or loser’s table. Perhaps a better way of finding out if there actually is a tendency for the winner’s table to be mainly populated by extraverts would be if there was some sort of prize for winning and a penalty for losing.

I did a project this semester on Brasilia’s sudden growth in the early ’60’s which I found particularly interesting, this is a small summary highlighting how the poor were marginalized by this huge project.

The government did not allow the forces of supply and demand to naturally cause Brasilia to grow. Designers went with a shotgun approach and perhaps let their desire for Brasilia to emulate a modern, futuristic city blind them from the economic realities of organic city growth. For example, when the population increases in Vancouver, there is a higher demand for condominiums and thus developers start new projects. Since the state built Brasilia before anyone actually lived there, market forces were ignored with supply set by the government. Evidence of this is how Brasilia was designed to have a maximum occupancy of 500 000 inhabitants but now, including satellite towns, the population exceeds 2.5 million. This is understandable for it is tough to predict how popular and populous a new city will become; however, economists behind the Brasilia project should have realized that and allowed the city to grow naturally with minimal government planning. State-ownership of land was thought to be a more democratic urban spatial strategy; however, irony lies in the fact that only mansions (for the upper class) and condominiums (for the middle class) were a part of the original city plan . There was little thought put into residential planning for the poor, aside from a small number of low-cost housing units for the lower class citizens. This is not surprising given Costa’s utopian plan for an immaculate, modern city without the woes of other Brazilian metropolises.

Lower social classes in developing countries tend to be highly reliant on the informal sector: the part of the economy that is not monitored by any governmental regulatory agencies, and as a result, is not taxed nor included in a country’s gross national product. Spatially, Brasilia does not promote the informal sector. With large boulevards and green spaces, the informal market is mitigated; people simply drive everywhere, which does not permit street-level market interaction. As Ricky Burditt of the London School of Economics states, “[i]t’s got a place where you go to work. There are places where ambassadors have to sleep, and they are extremely unhappy about that because there isn’t a street life.” A lack of street life indicates a lack of the informal sector. Contrasting this with the suburban, organically developed, poorer, outlying areas where street life flourishes- we see a stark difference in the amount of informal economic activity. To critique this argument, one reason why the informal sector may be unnecessary in central Brasilia is the demographics found in this area. Workers in central Brasilia are wealthier (as they work for the government or are professionals) and thus, they do not need the informal sector’s services to provide lower cost products. Perhaps that was the ulterior motive of Brasilia’s planners: to segregate the rich from the poor. If that was not the objective, then why was there such a lack of low-cost housing in the Pilot Plan? Policies to increase the amount of low-cost housing in the central city area, and to reduce the amount of area occupied by parks in this zone would thus promote informal market interaction.