Tag: economics

Here’s a business idea…

My colleague actually runs a side business, of which she is the manager. She and her ex-boyfriend (whom she was going to marry until he cheated on her and physically hit her) started a business in money lending.

The business model is that they focus mainly on government employees, who have a stable salary. The clients need to have a bank account and an ATM card. The client comes into the office, hands over their ATM card and PIN and the staff goes check on their account. Once everything is confirmed to be in working order, the client is disbursed a loan. Simple and quick. The loans vary from 50,000 to 200,000 Ugandan shillings (around $20 CAD to $81 CAD). The company keeps the ATM card. At the end of the month, when the client gets their salary, the company withdraws the amount borrowed directly from the ATM before handing the card back to the client. If the client blocks the account or runs away, the company, ‘simply,’ pays the police a small bribe and they arrive at the client’s home to get the money back. Default rate isn’t very high, apparently.

She says the clients are so desperate for money sometimes that they don’t really care about the interest rate. Their child is sick. They need to pay school fees. They need money for a funeral. Business is booming and all their clients are willing to pay the 25% PER MONTH interest rate.

Can you imagine? 25% PER MONTH. That’s 300% a year!

The business is doing so well that they are thinking of adding in more branches. Their only constraint is cash flow, because they don’t have enough money to lend out. In fact, they might have to raise the per month interest rate to 30% because of insufficient lending capital. They think they’ll still get just as much business.

I’m fascinated by how cash flow is such a problem here. There seems to be virtually no habit of saving. I thought it was only limited to the farmers I work with, but it seems like the same is with, presumably more educated, government employees.

Categories
agriculture

The politics and economics behind urban agriculture (specifically land tenure and zoning issues) are so complicated that it’s getting me really excited. Well, it actually makes my job a bit harder, but then if it was an easy issue to be solved, it would have been solved already.

One day, when I learn a little bit more, I will write a post about these complicated dynamics between individuals, organizations, and the physical environment.

Categories
economics thinking

student directed seminar weekly reflections: week 1

  • Our economic models (or any kind of models for that matter) are based on the perceptions of the world, therefore they can never be complete. The models also have to change with time and conditions, or else they become a generalization because of blind belief, not true evidence/data input.
  • The problem comes when proponents of a certain model (whether Keynes or free market) take those models made for a specific instance to be an economic “law” (where in the world did that kind of language come from anyways? How can anybody who has no set of complete data prove that something is a law? The scientific methods are much stricter than what the economists use (in part because most scientific experiments can be repeated while changing only one variable), I don’t even understand why economics is a science in the first place).
  • Proposal of using the online world to try out new economic policies and methods. I think it’s an interesting idea, but I am worried about the issue of unequal representation. Obviously, the online world only attracts certain demographics (young, have leisure time to spend online, relatively affluent), how can these tested models account for those who are excluded (and probably more marginalized?). What would be the result if this kind of model were applied to a developing country where the mentality may be totally different?
  • Survival of the fittest: evolution has no specific endpoint; animals do not evolve to become better in general, they evolve to become better suited to a certain environment. Once that environment changes, whatever was best before is not ‘best’ anymore. Is this the same with economic models? Maybe there is ONE economic model which is best suited to a certain circumstance. But I would really disagree that “natural” economic forces will choose the best path for us.
  • Can economics be non-judgemental? Can there be no value based assumptions behind an economic recommendation? My professors from food and resource economics classes always say that it is the job of economists to remain impartial and present all the policy recommendations only according to economic measurements of efficiency, income distribution etc. It is the job of the politicians to make value judgments on which economic policy to choose to implement. But I don’t think economists can be as apolitical as that (I’ve been obsessed with the notion of whether ‘apolitical’ even exists or not). Any kind of measurement criteria on its own is a value judgment. Plus, whatever model you base you calculations on also has a huge baggage of assumptions. How can we be completely impartial? Is that even a good goal? Should we just accept that we can’t and be more aware of it so we don’t fall into the apolitical trap?
  • Food as a commodity? I agree with the idea that food is not a normal commodity. Historically, food has always had two functions. First to satisfy the cultivator’s hunger (and socio-cultural needs) and then as a commodity to be traded, but only in times of surplus. The problem of food economics currently, as I see it, is that we’ve often forgotten that the most important function of food is to feed yourself! Now it is more important to earn money from your food to go buy more food. That just sounds too bizarre to me. What about those who do not grow their own food, you say. Well, support policies that ensure those grow the food will always be able to have surplus to provide to the economy!
  • * Plus, I have a huge thing about how economics usually just defines food as simply food. Wrong! Food has many categories. There are better foods (for you, for the environment, for the animals) and bad foods. You can’t put them into the same category for analysis and policies because they ARE DIFFERENT THINGS!!
  • What really propped Germany back up after the world war? Was it simply the welfare state and free market or aid money? I think it links to an essay I wrote a while ago about how “the west” used mercantilism to give themselves a head start in their economy (while they demand developing countries to completely open their borders now!)
Categories
writing

Essay: china vs india

Tiffany Tong

March 19th, 2008

Which Country Made the Better Choice?

China and India, the two Asian powerhouses where 37% of the world population lives, have become the miracles of economic development of the modern world (Current World Population (ranked), 2007). China and India have sustained GDP growth, unmatched by any other country in the history of human kind, of 9.4% and 7% average respectively for over a decade (Dahlman, 2007). The proportion of Indians living in extreme poverty (on $1 a day or less) has fallen from 40% to 25% in a decade, while in China, between 1981 and 2001, the proportion fell from 53% to just 8% (Sharma, 2006). The countries have followed “diametrically opposed development paths (Sharma, 2006)”: one is now the IT-enabled service center of the world and the other is the factory of the world (Dahlman, 2007). In this paper, I will compare the strategies and performances of the economic reforms of China and India and ultimately argue that due to their diverging economical strategies, it is very difficult to conclude which country is superior in terms of economic development; both have major advantages and flaws that will need to be addressed before true sustainable development can be attained.

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Categories
writing

Essay: The Chinese Mercantilists

The Chinese Mercantilists

Tiffany Tong
November 15th, 2007

China has been growing in GDP at rates that the world has never seen before. It took China less than 10 years to double its GDP, while it took Britain 58 years, the USA 47 years, and Japan 34 years (Hou & Hou, 2002). Countries that started market reforms at the same time as China have all seen less growth (Remmer, 1998). There are many speculated reasons for this apparent disparity: in this essay, I will argue that a mercantilist approach to the political economy is necessary for a smooth transition into a capitalistic system with free markets. Drawing from the Chinese case study, I will attempt to identify the characteristics of the reform policies and explain why it has been so successful in terms of economic growth. In the process, I will try to answer questions such as “is creating devolution beneficial to rapid growth?” or “is a strongly autonomous government required to push reforms forward?”

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