An AP story for a new project I’m involved with to get cell phones into the hands of people who need them, an innovative new program from Tracfone Wireless:

By LUCAS L. JOHNSON Associated Press Writer (August 18, 2008)

A cell phone company is offering free wireless phones and 68 minutes of free air time to more than 800,000 low-income Tennessee residents in a program aimed at ensuring they can make a call in an emergency.

Prepaid cell phone provider TracFone Wireless Inc. announced Friday that it’s launching its SafeLink Wireless program in Tennessee, which officials said would become the first state to have widespread, free emergency wireless service for poor people.

SafeLink provides eligible low-income households with a cell phone, access to 911 emergency services and 68 minutes of free air time for up to a year before customers If customers run through their 68 minutes, they can still call 911 (which is a free call) and they can purchase additional minutes for other calls at a discounted rate, said Jose Fuentes, director of government relations for Tracfone Wireless. The cell phone’s standard features include voicemail, text capability, call waiting, international calling to over 60 destination and caller ID.

John Taylor, a spokesman for Sprint Nextel Corp., one of the nation’s top three carriers, disputed Fuentes’ claim of sparse advertisement. He said Sprint participates in the Lifeline program by offering a discount on services and advertises on its Web site and through print, such as mailings. According to the FCC, 21 million households across the country qualify for Lifeline. “I’m elated that this program is providing needy families with access to basic cell phone service,” said Democratic House Speaker Pro Tem Lois DeBerry of Memphis, which has the state’s highest low-income population.

Fuentes said families may qualify if their household income is not above 135 percent of the federal poverty level, and if they receive assistance through government programs such as Medicaid and Supplemental Security Income.

Nicholas P. Sullivan, a visiting scholar at Massachusetts Institute of Technology, recently released a study (“Phoning in a Major Econmic Boost”) analyzing the impact of mobile phones on low-income households. He said the troubled economy makes the phones even more of an asset.

Tennessee Safety Commissioner Dave Mitchell agrees a cell phone is a valuable safety tool, especially when someone is traveling. “This program will allow drivers to call 911 if they encounter an emergency or get stranded while on the road,” he said. “I am thrilled that Tennessee is the first state in the country to offer this program and help keep our citizens safe.”

Last spring I completed an in-depth research report on the role cell phones in helping Americans get work and make money. Released by the independent New Millennium Research Council (NMRC) think tank, Cell Phones Provide Significant Economic Gains for Low-Income American Households concludes that providing cell phones to the 38 percent of America’s 45 million poorest households now without them — including millions of seniors, Hispanics, African-Americans and rural residents — could help them get work or make money worth $2.9 billion-$11 billion. The study is based on two surveys: a scientific poll by Opinion Research Corporation (ORC) of 1,005 Americans and a statistically large online sampling of 110,000 prepaid cellphone users (provided by Tracfone). The study is the first in the U.S. to zero in on potential economic and public safety benefits to those in the bottom two quintiles of household income (less than $35,000), who are much less likely to own cell phones. Those who do not now own a cell phone tend to be older (37 percent are retired), less educated (29 percent have a high school education or less), low income (38 percent make less than $35,000 a year) or unemployed (30 percent).

Not along ago, India’s Tata Motors introduced the Tata Nano, a car that sells for rougly $2,500 USD. Now, another India’s Spice Telecom has introduced a people’s phone selling for roughly $20. It lacks a screen and other bells and whistles, but is aimed at the “next billion” owners of cell phones in the developing world.

I recently spoke to Bread for the World at two different events in Chicago and was very amazed that various of the listeners drew a parallel between rural Bangladesh and rural America. Bread is a national Christian organization (started by Art Simon, brother of late Senator Paul Simon of Illinois) focused on eradicating hunger and poverty. The group’s main cause celebre is lobbying AGAINST the U.S. farm bill, which awards subsidies to agri-businesses. Farm subsidies, of course, are the bete noire of WTO agitators, who claim that rich countries are artificially reducing food prices and thus hindering imports of sugar, corn, cotton etc. from poor countries. They are right!

But the parallel with the story of You Can Hear Me Now is more subtle, and more interesting. Just as foreign aid to governments soldifies power in capital cities to the exclusion of remote rural areas, farm subsidies to big corporate farmers gives small family farms zero chance of competing. The small farm has already been driven out of the big money crops (corn, cotton, sugar), but many small farmers would still like to grow, say, organic vegetables, for which there is a growing market (see Whole Foods and Trader Joe’s). But they get no subsidies or support, when in fact they are the farmers who need support.

There is little hue and cry in the U.S. about the farm bill, because everybody loves farms and think we are preserving a charming way of life. INSANE! We are protecting a very strong lobby of corporate farms that is working against the very life we imagine worth saving — and we are contributing to global poverty by cutting off imports of what should be lower priced foodstuffs.

Visit www.bread.org and get involved in changing the farm bill!

 

A very interesting opinion piece in the Jan. 29 Wall Street Journal notes that both the Nobel Prize winner in economics (Edmund Phelps) and peace (Muhammad Yunus) highlighted the impact of entrepreneurship in their Nobel addresses. “Phelp’s Prize” by Amar Bhide, a professor at Columbia University, and Carl Schramm, president of the Kauffman Foundation, picks at the open wound between plain-old entrepreneuers and social entrepreneurs. I basically agree with them, but I also beg to differ as I think they compare apples and oranges. (I don’t link to the article because I don’t have a subscription to wsj.com.)

Of the 35 winners in economics, 28 never mentioned the word “entrepreneur.” Phelps mentioned it 17 times–more than the total over the previous 19 years! Yunus mentions it 6 times. Twenty-three mentions in two Nobel speeches has to be a record. But it is almost as if the laureates had a different dictionary in front of them when choosing their words.

Phelps talks about a transformative entrepreneurship that is central to capitalism, by sparking growth of small businesses that become large commercial operations; Yunus talks about microloans that don’t involve economies of scale or lead to significant new enterprises. The writers ask, ” Can turning more beggars into basket weavers make Bangladesh less of a, well, basket case?”

Well, no–but. It’s a false dichotomy–and the writers know it. They note Bangladesh’s export-oriented garment industry as being “larger and more productive than individual craftsman,” which is true, as a way of saying that it is better to provide venture capital to growing businesses than seed capital to individuals. They also note that government reforms, such as those that are now propelling Vietnam to new heights, are more important than microloans. But because the Bangladesh government is intractably backward and corrupt and anti-private business, does that mean that Yunus’s loans are a bad thing? I think the writers are reacting to the hoopla rather than the reality.

I am not an unabashed proponent of microloans, because I agree with the writers that while they may lift individual families out of poverty, they do not scale an economy. But I do not think microloans are a bad thing–how could they be? Some, such as Alexander Cockburn in The Nation (“The Myth of Microloans”), paint microloans as the devil incarnate, due to farmer suicides in India.

To me, the issue is clear: Capital that helps people raise a cow and escape poverty is as good as capital that helps start an Apple Computer. Yes, there’s a difference of scale. But there’s also a difference of context. The two sources of capital are not comparable–one’s in America, one’s in Bangladesh. But that doesn’t mean they’re not both productive.

And what about microloans that help build a GrameenPhone, the largest and most successful business in Bangladesh? It would not have been built without microloans that allowed distribution into rural villages, because Grameen Bank would not have backed the project. Does that not count? The authors cannot take a potshot at Yunus’s track record without examining his full portfolio.Â

Straw-man arguments are not compelling. It’s not either-or. Let’s deal with the facts on the ground–and celebrate entrepreneurs and capital that builds businesses of all kinds.

I don’t want to sound like Scrooge, but I can’t help myself after reading the cover story of last Sunday’s (Dec. 17, 2006) New York Times Sunday Magazine. “On Giving,” written by Australian philosopher Peter Singer (Princeton University), who suggests that world poverty could be elimninated if only Americans donated more of their money to the cause.

I mention the article here because the theme of You Can Hear Me Now is that private enterprise that sparks grassroots entrepreneurship is a better long-term solution to poverty eradication than foreign aid or charity, which inevitably end up in the hands of a narrow elite and enrich those who are powerful enough to grab the spoils.

Singer begins with this “textbook” dilemma: If you, a rich American, saw a poor Bangladeshi child drowning in a pond, do you have a moral imperative to soil your shoes and save the child? The answer, in case you are struggling, is YES! The author moves from this slam dunk to the problem of world poverty, which he claims is largely the fault of developed nations, and thus seeing that and knowing that, do we not have the same moral imperative to come to the aid of the poor as we do to the aid of the drowning child? Again, the answer is YES!

Now comes the fun — collecting the money from rich Americans. Starting at the top of the totem pole and moving down, the author looks at income groups in the 90th percentile and above, and decides how much of their money they should donate. For the top .01%, 33% of their income; for the top .1%, a mere 25%; and so on down to the top 10%, who average $132,000 per year. They are “required’ to donate the “traditional tithe,” or 10%.

Now come the questions that the editors apparently forgot to ask, or the author refused to answer:

• To whom should this money be given?
• How would it be used?
• What’s happened to the billions in foreign aid and charity given over the past 50 years?
• What if someone in the top 10%, who makes $95,000 a year, has a mortgage, two children in college and two cars, which is not an unreasonable assumption? Should he or she take $9,500 off the top and send to — oh, there is no address.
• What if all the money — which Singer figures would total $404 billion from the top 10% of American families — lifted everyone out of poverty for a year, but then the same people sank back into poverty the following year?
• Worse, what if the $404 billion were misappropriated, human nature being something even philosophers cannot control or change, and corrupt governments becoming even more heinous and hateful to their people, and the poverty rate actually increased?

I am sounding like Scrooge, aren’t I? I guess I just need more data. Data, say, that shows that adding 10 phones per 100 people adds .6% to the national GDP (from the London Business School). Stuff like that. I don’t think philanthropy or charity are necessarily misguided, any more than I think that free enterprise or markets are the solution to poverty. But I am appalled that a cover story in a widely read Sunday news magazine could be so illogical and unpersuasive.

An excerpt from Muhammad Yunus’s Nobel Peace Prize acceptance speech, in which he publically prods majority owner Telenor to cede majority control to Grameen:

“Grameen Phone is a joint-venture company owned by Telenor of Norway and Grameen Telecom of Bangladesh. Telenor owns 62 per cent share of the company, Grameen Telecom owns 38 per cent. Our vision was to ultimately convert this company into a social business by giving majority ownership to the poor women of Grameen Bank. We are working towards that goal Someday Grameen Phone will become another example of a big enterprise owned by the poor.”

I wonder how this went over in Norway, where Telenor is the largest telecom company?

Based on my discussions with principals of GrameenPhone and Grameen Telecom, I don’t see this happening. But I do see a possibility that GrameenPhone, or some portion of it, will be listed on the Dhaka Stock Exchange, which would add 30% to the overall market cap and open up ownership opportunities for the people of Bangladesh, although not necessarily the Grameen borrowers. When? Who knows?

Muhammad Yunus, en route to Oslo to collect the Nobel Peace Prize for his pioneering work with microcredit in Bangladesh, has let it be known that he has a side agenda in Norway: challenging Norway’s Telenor to cede majority control of GrameenPhone.

GrameenPhone is a partnership between Telenor and Grameen Telecom, an affiliate of Grameen Bank, but Telenor holds 62% of what is the largest phone company in Bangladesh. Yunus insists that Telenor made a legally binding agreement in 1996 to give up majority control within six years. Yunus would like to turn GrameenPhone into a “social business” that reinvests profits in the company and its customers. Telenor, for its part, says that it has reinvested most of the more than $1 billion in profits and has yet to recoup its initial $87 million investment.

Yunus told Fortune in Dhaka ahead of his departure: “There’s tension between us and Telenor. There’s a philosophical difference. They’re oriented toward profit maximization. We’re oriented toward social objectives.”

Says Telenor CEO Fedrik Baksaas: “Different opinions are part of daily business life. We have never committed to reducing our share in the company.”

Two stories outline the core arguments on either side.

Nobel Peace Prize Winner Itching for a Fight (Fortune.com) presents Yunus’s case on behalf of Grameen–essentially that Telenor is depriving the poor of Bangladesh of their rightul spoils.

Telenor Says No Quarrel with Nobel Peace Laureate (Reuters) presents Telenor’s response–in essence, that it is willing to talk, but that GrameenPhone is a business that has done more to aid development than all development programs combined.

It’s going to be dark in Oslo on Sunday. It also could get a little hot.

One of the key themes of You Can Hear Me Now is that private investment is a better route to poverty eradication than World Bank loans and programs. A new report from the World Bank reaches that same conclusion, as reported in today’s Washington Post.com. Private investment that sparks indigenous entrepreneurship which in turn leads to creation of millions of rural income opportunities is by and large a better way to drive GDP growth than loans to govenments that don’t effectively deploy the funds or distribute the money.

The Bank’s Independent Evaluation Group looked at 25 countries into which the World Bank had poured nearly $10 billion between 2001 and 2005.

“Achievement of sustained increases in per capita income, essential for poverty reduction, continues to elude a considerable number of countries,” the report declared, singling out as particularly ineffective programs aimed at the rural poor. Roughly half of such efforts from 2001 to 2005 “did not lead to satisfactory results.”

Overall, since 1990, the incidence of people living on less than $1 a day has dropped from 28% of the world’s population to 19%. But most of that drop has occured in China, which has experienced the fastest rate of economic growth in human history–and taken virtually no World Bank money. Do you see a pattern here?

What if that $10 billion had been privately invested in local businesses that were productively using the money? Peter Goodman, who wrote the article, concludes:

“Some of the report reads like an amalgam of the sorts of criticisms that have been leveled against the World Bank for years by activists who accuse it of an ideological bias toward market reforms and a callous disregard for the people bearing the brunt of such policies. The report chides the bank for failing to help cushion poor people against price and currency liberalizations; for focusing on the fiscal sustainability of pension systems to the deriment of the poor; for promoting the privatization of power industries without thinking enough about wiring up the indigent.”

The World Bank calls the report “overly bleak.”