Wealth creation not re-distribution

"Give someone a fish and help them for a day, teach someone how to fish and help them for a lifetime". These days, time is more important than money. I'd rather have the expertise of Muhammad Yunus, founder and Managing Director of Graneen rural Bank with its loans of relatively small amounts of money or Anita Roddick of The Body Shop for helping at orphanages in Rumania than their money. The initiative in which people of no fixed address and the homeless act as street vendors and sell a topical magazine called "The Big Issue" in the United Kingdom is another example of an idea which generates regular employment and income for people whilst providing useful information to the magazine's readers.

The article "The Competitive Advantage of the Inner City" (MICHEAL PORTER, HARVARD BUSINESS REVIEW, May/ Jun 95) calls for the replacement of the traditional social model to deal with inner city problems such as crime and drug use with a new economic one. The economic model creates wealth as opposed to the social model which re-distributes it. The economic model is about generating profit in the private sector rather than requiring subsidy from the public sector.

The social model involves offering housing benefit and income support. "Strategizing institutions such as governments offer subsidies and community funds in a vain attempt to solve problems such as those of the inner city. Subsidies lead to subsistence. We must stop trying to cure the inner city's problems by perpetually increasing social investment and hoping for economic activity to follow."

Instead, an economic program would be aimed directly at economic development in order to develop a self-sustainable economic base with employment opportunities and income earning possibilities. Economically viable companies are needed, bringing opportunities and jobs with them. Porter suggests that instead of corporate philanthropy and charity, companies should create business-to-business relations with inner city firms. "A sustainable economic base can be created in the inner city, but only as it has been created elsewhere: through private, for-profit initiatives and investment based on genuine competitive advantage- not through artificial inducements, charity or government mandates."

Porter believes that such a change in approach will not be easy given entrenched interests and strategizing attitudes: rethinking the inner city in economic rather than social terms will threaten those currently involved in social causes and those skeptical of business who persist in falsely viewing the private sector with suspicion.

Inner city businesses should be able to achieve economic viability- they have the advantages of being close to major transport routes and populations in their catchment area, generating local demand. The majority of people located in inner cities are willing to work.

Fortunately, as ever, the Web provides a low entry barrier means to establish a Web business by establishing an electronic community for say exchanging goods, partnering with other firms who want local content, and linking with other areas to generate wider information coverage. Web content could be used to generate positive non-web effects, and vice versa. There are plenty of opportunities on the Internet such as the current efforts to establish local search engines. Not only could these be set up by people in the inner city but also used by them to list and advertise local businesses. The low entry barriers to the Internet are such that web sites can be set up for everyone including gangs who can enlighten people as to what the latest slogans mean and what's cool and what's not.

Wealth creation, not re-distribution, sustainability not subsidy is the way of the unorganized world. Its about solving your own problems rather than relying on others to solve them for you.

Author: Simon Buckingham

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