Advances in communications is one of the key features of the I-Cubed Economy. We hear of the so-called “death of distance” and how improved communications are changing the lives of millions for the better. For example, the Economist likes to continually point out the benefits of mobile phones to the poor – as it did in this example from May 2005, “Calling across the divide”:
Wedged between stalls of dried fish and mounds of plastic goods, a red shipping container is loaded with Coca-Cola bottles. The local distributor for Soweto market, located in a tatty corner of Zambia’s capital city, Lusaka, sells all its stock every few days. A full load costs 10m kwacha (about $2,000). In cash, this amount can be hard to get hold of, takes ages to count and—being ten times the average annual wage—is tempting to thieves. So Coca-Cola now tells its 300 Zambian distributors to pay for deliveries not in cash, but by sending text messages from their mobile phones. The process takes about 30 seconds, and the driver issues a receipt. Faraway computers record the movement of money and stock. Coca-Cola is not alone. Around the corner from the market, a small dry-cleaning firm lets customers pay for laundry using their phones. So do Zambian petrol stations, and dozens of bigger shops and restaurants.
This is just one example of the many innovative ways in which mobile phones are being used in the poorest parts of the world. Anecdotal evidence for mobile phones’ ability to boost economic activity is abundant: they enable fishermen or farmers to check prices at different markets before selling produce, make it easier for people to look for jobs, and prevent wasted journeys. Mobile phones reduce transaction costs, broaden trade networks and substitute for costly physical transport. They are of particular value when other means of communication (such as roads, post or fixed-line phones) are poor or non-existent.
The most recent story along these lines was on the front page in this morning’s Washington Post – “In War-Torn Congo, Going Wireless to Reach Home”:
Until not long ago, if Zadhe Iyombe wanted to talk to his mother, he had to make the eight-day boat trip up the Congo River to the jungle town where he was raised. In a country with almost no roads, mail or telephone system and a grisly guerrilla war raging, making that exhausting and dangerous trip was about the only way he could find out if his 59-year-old mother was still alive.
Then he got a cellphone.
Now he talks to his mother every day. And once a week, with a simple new feature in African cellphones, he uses a text message to transfer five minutes of airtime to her phone to make sure she can always call him.
. . .
As surely as the light bulb and the automobile before them, the cellphone and text messaging are radically changing the way people live in the developing world. In widespread use for about five years in much of Africa, technology long taken for granted by the world’s rich has made life easier, safer and more prosperous for the world’s poor.
For the first time, millions of Africans are able to communicate easily with people who are beyond shouting distance. Farmers and fishermen, for example, use text messaging to check market prices, eliminating middlemen and increasing profits — and preventing long trips to the market on days it is canceled.
But communications is only part of the answer. The story of farmers checking on market prices (used a case study over and over again) is an example. Knowing the price is important; it gives the farmer market power in his negotiations with the buyer. But it is useless information if that farmer has no way to get this crop to market. This is where improved transportation comes in.
According to a new study by the Asian Development Bank (When Do Rural Roads Benefit the Poor and How?), “better rural roads are a necessary but not sufficient condition for graduating from poverty.”
The poor and very poor assign high priority to basic access. It reduces their vulnerability, and they consider it a matter of dignity to be able to communicate with the outside world and engage in social activities outside the village. This is confirmed by evidence from PRAs [participatory rural assessments] in the project and control sites. In the absence of improved opportunities to use roads, the poor rely on the primary network of paths, tracks, culverts, and basic access routes in the immediate village vicinity. Theirs is a walking world, and improvements to this primary village network of tracks, etc. that reduce the burden of basic household and productive tasks are likely to have a significant poverty reduction impact by reducing their time and energy impoverishment. In this context, the increased availability of intermediate modes of transport with larger carrying capacity to collect water, firewood, etc. is likely to have a greater initial impact on their well-being. They need to first accumulate surpluses even periodically to be able to seize new opportunities that motorized transportation may bring.
Throughout history, advances in transportation have sparked economic growth and increased prosperity – starting with the invention of the wheel. Roman roads and safe passage (pirate-free) on the Mediterranean fueled the economy of the Empire. The development of the rounded merchant sailing ship, the cog, greatly expanded Medieval commerce. The container ship changed the manufacturing calculus, forever some claim (see “The world in a box” in The Economist). And the development of overnight air freight and rapid package delivery services have made much of the e-commerce revolution possible.
The same will continue to be true in this new information age. While the movement of bits (information) is increasingly important, the movement of atoms (people and goods) is still critical. Cyberspace has not yet displaced real space and virtual reality is not the same as reality.
Let us keep this in mind as we craft policy for the I-Cubed Economy (and in the development of transportation-poor nations such as the Congo). Otherwise, we may find ourselves neglecting an important element of our economic infrastructure.