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How Economic Growth Leads To Freedom

Iqbal Z. Quadir Tuesday, 17 September 2013.

Today, 75 percent of people globally have access to a mobile phone. Of the six billion subscriptions worldwide, 77 percent are held by people in developing countries. And despite the great disparities among high and low-income regions globally, there is a reasonable parity in access to mobile phones.

131106 freedomMoreover, the ubiquitous proliferation of this modern technology in low-income countries has taken place quite rapidly, over the course of half a generation.

Even when lacking basic needs—food, water, medicine, shelter, education—billions of people all over the world today rely on a technology that was reserved for the wealthiest sliver of the wealthiest nations a mere fifteen years ago. In contrast, for example, the governments in low-income countries have been trying to provide electricity for roughly sixty years, but 87 percent of their rural populations and 56 percent of their urban populations still lack access to it.

We could analyse this rapid global proliferation in the relatively narrow terms of business and marketing or with a broader lens of technology and society, but it might be most useful to approach it at a more fundamental level—that of political economy. Indeed, to take a more limited approach would not do justice to a phenomenon that has been so pervasive and rapid. In the field of economic development, the speed and impact of its spread render the mobile phone a clear outlier. But what if the cell phone phenomenon were not an exception but, rather, an illustration of fundamental principles? What if a study of this phenomenon could serve as a guide to the best political-economic path forward?

Adam Smith sat down to write An Inquiry into the Nature and Causes of the Wealth of Nations about 250 years ago, long before the invention of the cell phone or even the landline telephone. But his work has provided the foundation for analysing political economies ever since its publication in 1776. Smith had little to say about technology and innovation, but the relevance of his reading of human nature and how it affects social and economic processes has endured. Smith’s observations on the general nature of human advancement and interactions go a long way toward explaining the extraordinary proliferation of cell phone technology, as well as bottom-up economic development more generally. Smith articulated his insights and observations to promote broad-based economic empowerment, through which other elements of progress ensue. The cell phone phenomenon, interesting in its own right, can exemplify Smith’s mechanisms of inclusive progress. But just as critically, we can move in another direction and look at cell phones to provide a re-reading of Smith, in significant part because his thoughts, though very relevant to low-income countries, are rarely used in “development economics.” While the impact of cell phones has been large and pervasive, a re-understanding of Smith may carry even greater import.

Of great relevance to low-income countries today, Smith was in search of processes that give rise to “universal opulence which extends itself to the lowest ranks of the people.” His insights are of particular note in this regard since he was writing in eighteenth-century Britain, where at least some conditions were similar to those in low-income countries today. Smith connected the improvement of the lives of the poorest people to the improvement of the society as whole: “Is this improvement in the circumstances of the lower ranks of people to be regarded as an advantage or as an inconveniency to the society? . . . Servants, labourers and workmen of different kinds make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”

This point is not an isolated one in Smith’s writing; it permeated his main thesis. Throughout this article series, I hope to demonstrate Smith’s relevance to low-income countries in several different ways, but for now I will quote Carl Menger, who in 1891, “after careful reflection,” attested to Smith’s distinct alignment with the poor: “A. Smith placed himself in all cases of conflict of interest between the rich and the poor, between the strong and the weak, without exception on the side of the latter. I use the expression ‘without exception’ after careful reflection, since there is not a single instance in A. Smith’s work in which he represents the interest of the rich and powerful as opposed to the poor and weak.”

Read the second instalment of insights from Iqbal here next week.

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Iqbal Z. Quadir

Iqbal Z. Quadir

Iqbal Z. Quadir is a Professor of the Practice of Development and Entrepreneurship at MIT and Founder and Director of the Legatum Center for Development and Entrepreneurship at MIT, which administers a highly competitive fellowship for graduate students who intend to launch enterprises in low-income counties and promotes discourse on bottom-up development. He is also the founder of Grameenphone in Bangladesh.

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