STOP SAYING THAT! “Increased regulation hinders economic growth.”

At best this is a half-truth. For example, consider a new regulation on industrial air pollution. This would certainly add a financial burden to industries that produce air pollution, e.g., factories, refineries, etc. But, these represent only a fraction of the whole economy. More broadly, such regulations would create opportunities for innovation. There would be lots of money to be made from producing and selling air filters and other pollutant-reducing technologies. This would have the effect of growing and diversifying the economy, both in financial terms and in the creation of jobs. And then of course there are the non-economic benefits, notably less toxic air. So, please stop saying that increased regulation hinders economic growth.

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In Defense of Cash

Not having cash — not a positive image

Will getting rid of cash have benefits for society? This is a question that economists and public policy experts have been debating more and more. In fact, India (among other countries) has begun to eliminate all large denomination bills. The stated logic driving such programs seems to be that large bills are the primary enablers of organized crime and tax-evasion. There’s probably some truth to that (see Freakonomics podcast). However, many of the poorest people in society also rely on cash for their living expenses. They often have limited access to banking, or no access at all.

So, let’s assume for a moment that we could overcome the accessibility issue — that we could provide banking services to everyone. This is a big assumption, given that we’ve largely failed to do it up to this point. But, let’s assume we could eliminate the poor’s reliance on cash. Immediately it becomes clear that the biggest winner of all these new banking customers would be the banks themselves. But, let’s make another assumption: we can overcome any moral objection to banks profiting from consumer demand that is mandated by the government. So, for the time being, let’s be satisfied that we’ve eliminated the need for cash without further disenfranchising the poorest populations.

Now we’re left with the crime issue. Ideally, cash would be phased out over a decade or so. There would certainly be missteps, but hypothetically criminals would eventually no longer have access to the near perfect fungibility of cash. Now we find ourselves having to embrace another major assumption: in the absence of cash, criminals will not develop alternate means to conduct their “discrete” business dealings. Furthermore, even if they do develop new means, these would be inferior to cash in terms of “discreteness” and fungibility.

It seems fair to assume that any new currencies used for shady dealings would be electronic, for example like Bitcoin. This presents a whole new slew of complications for law enforcement. Hard cash can be traced and is increasingly hard to counterfeit. Electronic transactions, however, do not necessarily abide by the relatively rigid rules of the analogue world. Digital spaces harbor far more possibilities for “hacking” the system. It seems reasonable to assume that the code for a digital currency could be counterfeited in far more ways than the layout of paper currency. Furthermore, if social media use is any indication, financial transactions in the digital realm have the potential to become increasing anonymous and thus harder to trace (unless we take the authoritarian step of requiring real-name internet registration).

In the end, becoming a cash-less society might have some short-term impact on criminal activity. But, these effects would be hard-fought and by no means guaranteed. In fact, forcing criminals to innovate may make them harder to catch. It is far more likely that eliminating cash will have an immediate and lasting impact on the poor. Moreover, cash is useful for daily, non-criminal exchanges. For example, whenever possible I tip in cash. It’s more personal, and goes directly to the other person, rather than on a circuitous route through banks and management. Even as we continue to embrace the convenience of digital payment methods, we should not undervalue the social importance and impacts of cash.

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Project Proposal: Comment

In the first presidential debate, both candidates stated that nuclear weapons are the greatest threat facing humanity (one of the few points on which they agreed). Nuclear weapons are a big threat, potentially. Some, including President Obama, make a strong argument that climate change is the biggest threat. Clearly, we must continue to develop informed and forward-thinking solutions to both these problems.

Poverty, however, is a far more destructive and immediate threat. Abject poverty directly threatens the lives of more than a billion people worldwide. Indirectly, economic inequalities create the environments for the spread of disease, social unrest, and terrorism (all of which top many lists of the greatest threats to humanity).

What is the best way to improve people’s lives? How can we reduce poverty and increase economic opportunities? How can we call ourselves an advanced civilization without addressing these questions? In fact, there are many ways to accomplish these goals. More than at any other time in history, it is likely to find somebody working to improve these situations in almost any given corner of the globe. This is the new “local knowledge”. We must move beyond simply working with local communities to solve their problems with outside knowledge. This is the traditional community participatory approach to development programs. I suggest that now we must learn how local communities are already working to solve their own problems. And then applying this knowledge to similar problems faced in other communities around the world.

My doctoral research is a pilot program to test this theory. I’m looking at a huge problem in a very difficult place to solve it: Urban Migration in China. It’s a problem we find in industrializing countries around the world. Please see my project proposal here. (For a longer version with citations, click here.) I would greatly appreciate any insights (or potential funding sources).

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Project Proposal

Project Title: The decision-making of social entrepreneurs in China’s urban villages (PDF Version)

Overview: I am seeking funds to complete field research for my doctoral dissertation. I am studying how Chinese citizens are working to solve the many problems faced by migrant workers in their country’s biggest cities. The results of my research will: (1) help the Chinese improve the impacts of their programs; (2) hold lessons for people working on similar problems in other countries; and (3) offer outsiders a new and productive way of engaging with the Chinese. I will provide a final report on my findings, and gladly present them in person upon request.

What & Why: Despite all the social, economic, and legal problems faced by China’s 250 million migrant workers, previous research reveals little about how the Chinese are working on solutions. I have already investigated programs run by local governments and by non-profits. Both of these are hindered by enormous political and legal obstacles. It seems that for-profit businesses that address this major social issue – aka, “social entrepreneurship” – may be the most effective way to help migrant workers in China. Because they are run as normal businesses, the government does not overly scrutinize their programs. Because they generate revenue, they are not limited by legal restrictions and social stigma on charitable donations.

I will study the decision-making of the founders and managers of these businesses. How do they deal with the authoritarian legal and political systems in China? How do they decide what goods and services to offer migrants? Are they achieving their goals? What other goods and services could they offer that would further help the migrants?

The answers to these questions will: (1) help Chinese social entrepreneurs improve the impacts of their businesses; (2) hold lessons for people working on what is a common problem in other nondemocratic countries, which remain the norm across the developing world; and (3) offer outsiders a new and productive way of engaging with the Chinese beyond contentious international affairs and business negotiations.

How: I developed a survey for the social entrepreneurs, in order to gather information on how they design and run their businesses, as well as what obstacles they face, and their personal motivations. I will give this survey to 40 social entrepreneurs. From this group, I will sample 10 organizations, seeking to include a range of goods and services offered to migrants. I will spend one week at each organization, observing the daily operations, and conducting semi-structured interviews to gather more detailed information on themes revealed by the surveys.

I also designed a short social capital survey to gather data from the migrants on what services are available to them, who provides these services, and what additional services might further benefit them. I will give this survey to 100 migrants, approximately half of whom are served by social entrepreneurs. Comparing survey data from these two groups will help the social entrepreneurs improve their programs based on the real needs of their target population, and ultimately benefit the migrants by improving the goods and services available to them.

I will get informed written consent from all participants, and make all personal information anonymous to ensure confidentiality. This process has been approved by my university’s Institutional Review Board. I can supply more information upon request, including full versions of the surveys and consent forms.

Where: I will compare social entrepreneurs working on migrant issues in Beijing and Shenzhen. Both of these cities have significant migrant populations. Beijing is China’s most internationally visible city. Thus, programs that provide social services in the nation’s capital tend to come under strong government scrutiny. Shenzhen was the first Special Economic Zone in the country, and remains a hub of direct foreign investment, manufacturing, and finance. It is the startup capital of China, and as such has become a center for both tech and social innovation. Thus, in Shenzhen the government tends to prioritize business over politics. Comparing the experiences of social entrepreneurs in these two cities will offer a holistic perspective on the successes and failures of their solutions to the problems of China’s migrant workers.

When: I will conduct this research for thirteen weeks in June-August 2017. I will spend six weeks in each city, and leave one week as a buffer for travel and unexpected delays. I can provide a detailed research schedule upon request.

How much: I have already done seven months of field research for my dissertation. I need $12,000 to cover expenses for an additional three months. This amount is based on the budgets from my previous field research. It will cover my travel, living costs, direct research expenses (such as printing, data analysis, and small gift cards for the migrants), as well as a stipend for my local research assistant. I can provide an itemized budget upon request.

My bio: I am a PhD candidate in cultural anthropology. I have completed 54 hours of graduate coursework in research methods, data analysis, and the social aspects of economic behavior. I have taken three years of college level Mandarin, as well as participated in a two-month language immersion program at Beijing Normal University. I designed and taught an undergraduate course on global economic development. During two years at the Norman Borlaug Institute for International Agriculture at Texas A&M University, I prepared field-based reports on sustainable agricultural projects throughout South and Southeast Asia. As part of an NSF-funded team, I helped assess the impacts of the 2014 Ebola scare on African refugees in Dallas. I have conducted seven months of research for my doctoral dissertation in Beijing, Shanghai, and Shenzhen. My prior experience and professional connections in China help assure the feasibility of the final phase of this project.

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Zika: The China Connection

onechildGrowing concern about the Zika Virus may seem like a strange topic for this blog. In recent years, China has of course had a variety of viral epidemics. However, the knee-jerk response of several South American countries raises an unfortunate reminder of parallel histories of forced population control in the two regions. China famously used doomsday models to justify its one-child policy (Greenhalgh 2005), and forced sterilizations were all too common thoughout South America, for example, in Peru.

At present, El Salvador, due to perceived risks from Zika, has begun to urge woman to refrain from getting pregnant until 2018. In a characteristically heavy-handed responseBrazil has deployed its military to “spread awareness” of Zika in the lead up to Carnival. Though there is not yet a vaccine, Zika has a very low mortality rate. While evidence suggests that the virus may be the cause of an uptick in birth defects, the correlation remains unverified. Thus, given the dark history of forced population control in the region, it seems reasonable to suspect that Zika is just another in the long list of justifications for targeting poor, rural groups – where Zika-infected mosquitoes are likely more prevalent.

While based in historical precedent, this theory is not meant to be a conclusive assessment of the current situation in South America, of which I am by no means an expert.  This is merely a caveat from a China scholar to the experts who must now assess the broad implications of the Zika outbreak.

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Seeking Common Ground

love-vs-moneyRecent studies suggest that a phenomenon known as “social entrepreneurship” has emerged and been increasing in China over the past decade (Gu 2012; Zhao 2012; Zhao 2014; Zhou et al. 2013). In countries around the world, researchers have observed private citizens dubbed “social entrepreneurs” starting for-profit businesses to address localized problems related to poverty, access to education, and public health (Bornstein 2004; Dees 1998; Leadbeater 1997; Martin and Osberg 2007). Such issues are often linked to larger societal problems resulting from inequalities created by capitalism (e.g., LeRoy 2010; Piketty 2014; Stiglitz 2003).

Departing from the anti-capitalist rhetoric of the Mao years (1949-1976), the transition to a market economy in Reform Era China (1978-present) has replicated many of the inequalities being addressed by social entrepreneurs in other industrializing nations. Moreover, post-Mao government policies in China have heralded “the return of the god of wealth” (Ikels 1996), whereby individualism and materialism have become a means of governance (Hertz 2010:82; see also Farquhar 1996; Hoffman 2008; Kipnis 2007; Pun 2003; Yan 2010; Zhang and Ong, eds. 2008). Self-interest and the profit-motive have flourished since the early Reform Era, when teachers even began selling candy in classrooms (Chan et al. 1992[1984]:274). Thus, it is particularly interesting to find evidence of Chinese citizens who seem to be starting companies not only to make a profit but also to address local problems related to their country’s rapid industrialization.

At a time when China and the United States frequently clash over trade agreements, military agendas, and even international aid projects, Americans tend to be presented with a narrative of the Chinese as a calculating competitor, even a growing threat (e.g., Navarro 2015). These concerns are likely justified. Yet, the most populous country in the world is not simply defined by its government’s policies, both domestic and international. It is comprised, like ours, of individuals striving to create meaningful lives for themselves. They are not simply passive actors in a domineering political economy (e.g., Hsu 2007). In addition to potentially common enemies, the experience of seeking a moral life by working to improve their own country should resonate with Americans, and humanize a proud people whose aspirations are not so foreign from our own.

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Market Value and Dirty Underwear

$3 solution to a $50 problem

$3 solution to a $50 problem

After the first week of my preliminary doctoral research in Shenzhen, I took two bags of dirty clothes to the laundromat across the street. It was about five days worth of clothing for my wife, daughter (3) and I. The woman (probably the owner) was very meticulous about counting each piece and ensuring that the lights were separated out. She wrote me two separate bills. The darks were 245RMB and the lights came to 80RMB. She showed me the total of 325RMB on her calculator. It seemed high at first glance, but I’d never had laundry done in China (I usually just wash it in a plastic tub), so I assumed it was fair. On my walk back to meet my ladies, I did a rough conversion in my head. At $16 to every 100RMB, I’d just paid over 50 bucks to do a couple loads of laundry.

The “hey wait a second” thought had crept into my head even before rendezvousing with the ladies. I didn’t even have to tell my wife what had happened to know her reaction. She laughed at me as expected, but was also very understanding. She actually told me to forget about it – to chalk it up to a learning experience. But we were on a tight budget, and so I decided to go back, eat a piece of humble pie, and ask for my money back. On my way, I looked up the word for “refund money”(退钱)– which I had learned before but now won’t ever forget. I told the owner that I was a poor college student, and that 325RMB was just too expensive for me. She said no problem, and was all set to return my money. But then, just at the last second, she asked me how much I wanted to pay. At first I thought she was trying to charge me some sort of return fee, but then she said, “How about 285?” And then it hit me. As a foreigner I didn’t know the value of anything in China, not even getting my dirty underwear cleaned. 325RMB is ridiculous for a couple loads of laundry. “150,” I said. She laughed, and countered, “Okay, 200.” I shook my head in agreement, “Okay, and it’ll still be ready tomorrow after 5:00?”

So, I wound up knocking about $20 off the original price. I learned a lesson about the value of getting your laundry done and the value of just walking away in a negotiation (and about just doing laundry in a plastic tub). An accidental technique has now become purposeful. I also learned an important lesson about learning the value of things. In China, value is determined in a very interpersonal way. It’s not something you can look up in a book, or even on a price tag. Understanding value is particularly experiential in the Chinese context.

Most anecdotal business stories are not very useful to foreigners running their own small businesses in China. They make great bar-talk, but mostly involve large companies, with enough money and large enough margins not to worry a whole lot about the difference between a few hundred, thousand or even ten thousand dollars. One such case involves a large American outdoor company which, as luck would have it, was told to me at a bar in Shenzhen by the American businessman it happened to. During a large order, the factory insisted on a large fee to release the merchandise. They asked for half-a-million dollars. This was negotiated down to a quarter-million. When the order was about to be released, the factory all of sudden demanded a million bucks. After a whole lot of negotiating and empty threats, the order was released for some amount slightly higher than a quarter-million dollars.

The lesson recounted by the American businessman was that the Chinese can’t be counted on to honor contracts, and may even rescind deals they themselves have initiated. That may be true. (What they don’t realize is that even at a million dollars, the mark-up at which the American company is selling the products makes such a sum inconsequential.) However, to individual businessmen, these sums of money are very consequential, and thus such a story, while entertaining, does very little to instruct one on how to start and run a business in the Chinese context. My assumption here is that the amount of money involved drastically changes the circumstances of business negotiations. And walking away may hold very different consequences for a small business owner whose entire business rests on a single negotiation. Thus, the strategy for handling any number of business related situations must be considered in relation to the scale of the business within the cultural context. In order to contribute to our understanding of Chinese economic practices beyond anecdotal evidence, I focus on expatriate entrepreneurs (“expatrapreneurs”) who own and operate small businesses in China. For them, financial profitably relies on practical cultural knowledge, and comes without the “free pass” extended to most foreigners for casual faux pas, or the financial leverage imbued to Americans representing multi-national corporations in China.

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