A prevalent and difficult situation to resolve among rural villages is the lack of disposable income throughout a region. Even if one household or village has the good fortune of increasing their productivity, to whom will they sell? If all the surrounding households and villages in the region have no or very little disposable income, the challenge of investment is assessing and planning how to improve not just one household, but also the entire region. Otherwise, the investment into one household or village will have no means to expand their economy because they have no one to sell to.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


One of the attributes of an expanding, growing economy is a net export gain, where export may simply refer to the next nearest village. If the products of a village or family’s economy are wholly consumed by its participants, then there can be no export and resulting expansion. It therefore is not sufficient to simply accelerate velocity, nor increase the amount of money in the economy, nor advocate non-monetary trade exchange (barter). It does advocate producing a product that is needed and valued and can be exported. Since the labor of most impoverished villages are absolutely consumed with “staying alive”, including finding fuel sources for cooking, retrieving water, maintaining a garden, or seeking and retrieving other food sources, then to increase productivity a change In production methodology must occur. In addition, every household, and therefore every member of a village, is required to contribute to the village’s productivity. Adam Smith’s Invisible Hand states that as one individual pursues his desires and becomes more productive then he inadvertently increases the economy of the whole village (a figure to the right helps to create a mental picture of this idea). His idea demonstrates the multiplier effect. As one participant is successful at making a larger profit, he spends his money locally and all the participants benefit. This is an outstanding observation, one that is a foundational argument of microeconomics, but makes an assumption that prevents this idea from occurring in poor, rural villages; a participant of the economy must have the ability and opportunity to produce a product that is valued and sold to another economy, i.e. sold to participants outside his own economy.

 

Since there is no spare time to be productive over and above the demands of “staying alive” in these rural villages, the options for stimulating growth in these economies are limited. Much of the growth in developed economies is the result of advancement of technology, which leads to the implementation of that technology, acquired through financial credit, and secured by private property rights. It stands to reason that there must be a way to increase productivity without increasing labor or increase the value of the product of the labor. There are some plausible options to stimulate growth: First, the product of this economy must be three fold: It must reduce the amount of daily labor (and it’s associated time) required to “stay alive”, it must be a substitute for a product already produced, and it must be capable of being exported. This option requires the investor to assess what products, say agricultural products, can be produced given the quality of the land, availability of water, availability of equipment, and the exportability of that product. Then, the investor would provide the equipment (in a lease to own arrangement), education, experience, and wisdom to nurture the fledgling venture to fruition. A second option is for the investor make the same assessments on his own, build the venture, and invite villagers to participate as they are able, and create an employee owned operation such that as the participants gain disposable income, a percentage goes back into the venture and is bought by its employees.

 

 

 

 

 

 

 

Actual knowledge about what creates growth is largely unproven; however recent advances in econometrics and more accurate measurements in many countries is creating new knowledge by compensating for the effects of variables to determine probable causes out of merely correlational statistics 

Some theories used in the past to promote economic growth have been largely discredited by 2000, including communism, which removes free-market incintives to innovate; protectionism and price controls, which remove the free-choice ability of buyer and seller to negotiate a pareto-optimum (societal optimum) choice; import substitution, which can have the effect of controlling investment to the point of having the nation produce the wrong mix of goods as compared with their comparative advantage; and politically instable macroeconomic restructuring plans, which by switching back and forth or unpredictably remove incentives to invest.    Wikipedia – Development Economics

 

 

 

Generally speaking, per capita GDP has been directly linked to quality of life. This assumes that an increase of productivity has a direct relationship with an increase in the quality of life. This data becomes skewed when a basically poor nation is able to sell a highly valued natural resource and only a few actors receive significant sums, causing an un-true representation of per capita GDP. This does not justify the use of the discredited theory of communism as a method of promotion of quality of life because distributing the wealth of one individual to more needy individuals represents a large disincentive for one to excel and a disincentive for the many because they will receive without providing any effort for the gain.

            Assuming that GDP is at least a marginally superior measurement of a country’s quality of life, the question still stands as to the most successful theory of creating growth. There are a host of variables that directly affect the growth of a fledgling economy, which include, but are not limited to, consumer confidence, lending confidence, government stability, increased level of technology, and increased level of education.

 

 

            What is a comfortable standard of living? Being able to identify level of a living standard is almost as elusive as identifying what happiness is, but unlike an emotion, we can identify some of the physical characteristics of a standard of living. Thankfully, history provides us with a measurement of these characteristics demonstrating where we (as a civilization) were, where we are, and where we would like to be. Health care, for instance, and associated characteristics including infant mortality and nutrition, were largely misunderstood even as recently as a century ago, but through technology, education, and research, life expectancy of members of a developed country has been extended 10 to 30 years. Variety, the opportunity to choose what to eat, what to wear, what skills to have and develop, how to be employed, how move about, where to sleep, where to live, and much more reflect an increased standard of living and are a product of increased technology, education, research, and product development.