How to Change the World, Locally

While opposing bad policies and promoting good ones is a worthwhile endeavor, creating small pockets of prosperity, freedom and entrepreneurship is just as important.
August 28, 2013 • Commentary
This article appeared on The Umlaut on August 28, 2013.

Politics matters — bad policies make people poor, unhappy, sick, or they can even kill them. But if we are trying to promote policy changes that we see as desirable — or stop policies that we deem damaging — should we be focusing primarily on the political process?If policies are designed — as classic public choice literature suggests — to cater to specific coalitions of interests, then the voice of the individual policy scholar is probably immaterial to the outcome. True, politics is not just about self‐​interest but also about ideas. However, ideas operate with long and variable lags, and with the exception of few superstars, it is unlikely that any of us alone will influence on the climate of opinion.

For those who want to steer policy, however, there are underexploited opportunities other than just trying to make it in Washington, Brussels or Westminster. Adam Gurri wrote on Monday about the tail risk of social experimentation, focusing on the potentially disastrous outcomes of changes in policies or institutions. But one can easily draw the opposite lesson from his article — that there is a potential for spectacularly good social and economic outcomes triggered by seemingly trivial initial factors.

Technology is one such factor. With cheap, high‐​accuracy GPS devices, communities of dwellers in underdeveloped countries with no legal titles can mutually recognize their property claims to land. Communities with well‐​recognized informal titles can then be a strong political force urging the government to recognize people’s claims to land formally and reduce the risk expropriation, according to Peter F. Schaefer. This view turns on its head the conventional idea of land titling reforms as of a top‐​down process instigated by the government but rather sees the recognition of property claims by the government as the ultimate result of a series of localized steps that are made possible through a combination of new technology and local activism.

It’s not just about technology. Sometimes, small changes in social organization or institutions at a local level lead to enormous political and economic shifts. Look at China. As Ronald Coase’s and Ning Wang’s book on Chinese economic reforms illustrates, the Chinese road to capitalism — albeit still of a largely controlled and unfree variety — would not have happened without local experimentation:

Private farming, for example, was secretly engaged in by starving peasants when it was still banned by Beijing. Rural industrialization was spearheaded by township and village enterprises that operated outside state control. Private sectors emerged in cities when self‐​employment was allowed to cope with rising unemployment.

Chinese economic take‐​off — the most significant growth miracle in modern history — was made possible by disparate decisions by local Party officials or farmers who clandestinely decided to bypass the official line of the Party. Only much later did the Party leadership recognize and encourage these reforms — and translated them into the official Deng Xiaoping doctrine of a cat that can catch mice — regardless of whether it is black or white, or capitalist.

A similar role was played by Chinese special economic zones. Initially, these were just four places opened in 1980 where economic activity could take place without the debilitating effect of the existing regulation, which were then followed by an explosion of other ‘free’ or ‘open’ economic zones in the late 1980s and early 1990s, leading to a de facto liberalization of the coastal provinces of the People’s Republic.

In the same vein, in his recent book, Gurcharan Das claims that India has grown at night — when government is asleep — and cites the example of the city of Gurgaon, which has grown from being a backwater into one of the wealthiest places in the country because of the dysfunction of its local government, which has forced people to rely exclusively on the private sector. The story of Gurgaon, he says, represents the microcosm of India’s economic take‐​off.

Recognizing the importance of local change offers some hope for the largely intractable problems of societies like Egypt or Morocco, where wholesale economic reforms — of the kind the world saw in certain countries of Eastern Europe in the 1990s — appear impossible. Hope lies in places like the Suez Special Economic Zone, or the Tanger Free Zone — and potentially in the proliferation of free cities throughout low‐​income world.

While opposing bad policies and promoting good ones is a worthwhile endeavor, creating small pockets of prosperity, freedom and entrepreneurship is just as important — particularly if some of them may prove infectious. One hopes that the combination of dedication to community service and disinterest in politics among millenials will be channeled into bottom‐​up technological and institutional experimentation, which will keep governments at bay and empower poor people around the world.

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