Score one for the private sector

As a classic liberal, many people will rush to respond to anything that I have to say with, "You think the market will solve everything! But really, you are just greedy and don't want to pay taxes." However, this is not the truth.

If I believed that socialism or communism or a welfare state could solve the world's problems, I could be persuaded to back the left's agenda. However, as a classic liberal, I believe that a liberal economy gives people freedom economically AND can solve many of the world's problems such as global warming and poverty.

The latter, in the form of education, is the one that a recent FT opinion piece highlights. The writer of the article is James Tooley who won a FT/IFC essay competition on the private sector's role in development. The article starts out with the conventional wisdom about education in the Third World.

"The accepted wisdom says children such as Amaretch need billions more dollars in aid for state education."

He continues his piece by discussing the reality on the ground.

"It ignores the reality that poor parents are abandoning public schools en masse, to send their children to 'budget' private schools that charge low fees - perhaps one or two dollars per month, affordable even to parents on poverty-line wages."

I have always stated that private schools are a healthy alternative to failing schools in America (and other developed countries). However, Tooley brings this view to the Third World with some convincing evidence. He found the following results in private schools in the Third World that were paid for with a fraction of the per-pupil teacher cost in public schools:

-Better drinking water and working toilets in the schools.

-Higher academic achievement.

-Better teacher attendance and performance.

Tooley also notes that many of these schools give some impoverished children and orphans vouchers to attend these schools. In one town in India, 18% of the children in private schools fit this category.

The next issue is funding. Tooley notes the role of micro-finance which provides very small sums of money at commercial (NOT subsidized) interest rates to individuals with few or no assets. This is in stark contrast to the conventional wisdom that calls for more unconditional aid to be spent on public schools. However, Tooley notes the problem with this logic:

“Aid agencies have thrown billions at trying to get schools to improve their curriculums or teaching. These interventions are not sustainable and fade away as soon as the donor-funded experts move on. You will often find the supplied computers and videos in the government head-teachers' homes, not the school.”

Tooley maps out his vision even further with the idea of branding. These private schools can morph into chains that provide education throughout the developing world. This will help break information asymmetries. He also theorizes about joint-ventures and other ways that the thirst for profit by investors can turn into education for the impoverished. Tooley ends with a hopeful view of the future.

“Educating Amaretch (a child in Ethiopia) is a solvable problem. Entrepreneurs who have created private schools serving the poor are eager for investment; they are waiting for the investors who can assist them in pursuing their central role in providing quality ‘education for all.’”

NGOs hurt poor people?

Say it ain't so! Oxfam is bad for global poverty? But isn't Oxfam an organization that is fighting to "find lasting solutions to poverty, suffering and injustice?" No. The answer is simply no. The reason: they do not believe in capitalism. They view development as striving towards a world where everyone is happy and making the same amount as everyone else. They despise wealth and do not realize how wealth is the opposite of poverty and how wealth fights poverty. Today's WSJ has a great editorial about the nasty effects of NGOs on citizens in the third world.

The editorial discusses how a new mine in Guatemala will create thousands of jobs for unemployed, poverty-stricken Guatemalans:

Residents of El Estor, a small Q'eqchi community of 40,000 people located in
northeast Guatemala, cheered when they heard that Vancouver-based Skye Resources was interested in reopening a local abandoned nickel mine…It's easy to see why there was such excitement. Skye Resources estimates that it will employ 1,000 people and create four indirect jobs in the community for every new mining
job. That plus an overall investment of at least $539 million is not irrelevant for an impoverished town with one of the highest illiteracy rates in the country -- over 40% for indigenous men and 35% for indigenous women.

However, this mine almost did not get off the ground due to local protests against the mine.

But last year organized and well-funded opposition nearly squelched the deal. In a country with such dire needs for capital and technology to lessen the want of the poor, it is worth exploring whether such anti-mine activism truly expresses the will of the people. Looking behind the scenes, the funding and instigation of the activism appears heavily driven by international nongovernmental organizations that end up discouraging development while trying to fulfill their own mission.

Who were the organizations?

Boston-based Oxfam America and Toronto's Rights Action are two anti-development NGOs active in Guatemala. Oxfam has partnered with MadreSelva (Mother Jungle), a Guatemala City environmental group headed by affluent urbanites, to block mining projects.

And what do these groups do in Guatemala?

International NGOs in Guatemala train local leaders to "empower" minorities and
indigenous groups and to denounce the mines as "neo-colonial" ventures. But the reality is that the very nature of the NGO saves it from having a real stake in the communities it affects through its activism. It can blow through town like a hurricane disrupting development and then be gone.

And what does the "evil" mine do?

The mines, on the other hand, have long-term relationships to manage. Concerned
about its role in Sipacapa, for example, Glamis funded the construction of a local road that was not needed for the mine but was beneficial to the poor community. It offered to fund 32 new teaching positions to help meet the increasing demand for public education in the area. The company also took an unprecedented step by helping to launch an independent monitoring association that will provide environmental studies, while ensuring that Glamis reports back to the communities and to other stakeholders.

The mayor of the town benefiting from foreign investment and who fought off unelected, socialist NGOs put it best:

"They justify their campaigns with our poverty," he says. "That's unfair." On the day of the pro-mine rally, he declared Sept. 30 to be El Estorian Dignity and Foreign and National Investment Day.