Strange Perspectives on the Welfare State

Yesterday, the Cato Institute was hosting an event on the Welfare State, so Claudia and I thought it would be a good opportunity to hear some alternative viewpoints to what we have been learning in our "History of an Injustice" class.

James Bartholomew who wrote a book called, "The Welfare State We're In", was speaking. Michael Tanner from the Cato Institute (== Libertarian) was moderating and Dr. Wendell Primus, the Senior Policy Advisor on Budget and Health Issues to Speaker Nancy Pelosi (== Democrat) was there to provide an alternative view.
In many ways this was my first exposure to DC politics (even though the author was British and the book is about the UK) and really my first exposure to non-liberal thinkers in person since I started caring about social justice.

It was pretty shocking and disappointing all around.

Bartholomew struck me as a too absurd for reality cartoon character. His talk was all disjointed anecdotes about how things were better 100 years ago, and his solution is to figure out how to go back to those times. This was the killer quote from his talk:

"At the lower class level, there used to be a large number of really decent, honorable, admirable, low paid people in Britain. I don't think you would stand up in England and say that was the case now, that would be absurd." (@9:25 in the talk)

Not only does he want to eliminate any kind of unemployment and housing assistance, but he also thinks publicly funded education needs to be eliminated. His main argument for eliminating public schools was a story about a poor Welsh boy from 100 years ago who was educated by a local church charity school, read classical literature and went on to become Prime Minister. He claimed that if this boy had been bussed off to the school of today he probably wouldn't have learned how to read.

As he was saying all of this stuff I was shocked. I was disappointed in myself for not being able to remember some key statistics from my class. Bartholomew spoke about welfare as a trap that lures in the poor and they can never emerge from it, yet I recently learned that 75% of all Americans will live below the poverty line during the course of their adult lives. In other words poverty is cyclical, it is often the result of a short term circumstance (health problem, recession, divorce, etc) and it will hit most of us at some point in our lives, but we will probably emerge from it. Unfortunately I could barely remember the 75% number, and I was sadly realizing that my grasp of the class's material was less than what I needed for it to be functionally useful.

Luckily, Dr. Primus (who also worked in Clinton's administration) was speaking. I expected someone like Josh Lyman from the West Wing to passionately tear Bartholomew to pieces with rational arguments and hard data.

I was greatly disappointed. He certainly didn't agree with Bartholomew, and he wanted to talk about health care companies, but beyond that I didn't really follow much. He also used anecdotes. His were mostly about how poor people "make mistakes" and need things like health insurance.

Certainly the most intelligent speaker was Michael Tanner from Cato. Intelligent but totally out of touch. He kept speaking about how much money was spent on welfare related activities. He used real numbers, which was good, but the crux of his argument seemed to be, golly gee those numbers are high, shouldn't we care that we are spending so much money on these government programs? He didn't mention caring about the poor.

One thing was mentioned that all speakers seemed to agree on. They all had a great appreciation for the challenge of getting things done in a democracy. With these sorts of old white men standing at the front of the room I also had a great appreciation of just how hard it must be.

The opportunity of SMS

A few weeks ago I attended a technology salon here in DC. "The Technology Salon is an intimate, informal, and in person, discussion between information and communication technology experts and international development professionals."

Sounds cool, right? And it was. A Vodafone Foundation board member was there to talk about what Vodafone is up to in developing countries. There were a lot of smart people working in international development in DC and we had some good discussions.
The presentation from Vodafone was interesting, and it was great to see that they are aggressively building markets in developing countries. There were a few things from the presentation and discussion that I found strange, and suggested to me that service providers like Vodafone have a lot to gain from listening to international development and technology geeks. Indeed, the m-pesa idea (cellphone banking in Africa), one of Vodafone's big success stories, came from organizations working in finance in Africa.

The vast majority of projects that were discussed around the table leveraged SMS, which is not surprising since virtally all of the world's five billion cellphones can send SMS (and not MMS or email or internet). These five billion phones are an opportunity for service providers like Vodafone to grab tremendous amounts of market share. Many of the five billion phones owners have very little disposable income, but would quickly spend it on communication activities. Unfortunately, it sounds like the Vodafone strategy is to try and increase the amount of money spent by the average customer per month (currently about $5), which will translate into immediate profit, as opposed to reduce prices for SMS services which would lead to more demand, more customers, more communication and eventually more profit. Given that developing countries have by far the fastest economic growth rates, I would be establishing long term customer loyalty, so that five years from now my phone company is best positioned to take advantage of a more developed economy. Cheap SMS can do that.

Examining the cost of SMS pricing a little closer shows that it is probably the most expensive form of communication in the world, despite the cost to the service provider being almost nothing. SMS messages are attached to existing voice packets (this is where the 160 character limit comes from) and hence consume no additional bandwidth. In other words the bandwidth cost to the provider for sending SMS is zero (minus some capital costs). Why then does it cost 10 cents to send 160 characters? Sending $1 worth of data via your broadband internet connection would cost $61 million dollars to send over SMS.

Contrasting this SMS situation is Vodafone's problem with data services. They are struggling to figure out how to handle people that use their phones to download movies. Vodafone offers a fixed price for unlimited data, but a few users are spoiling the party by downloading gigabytes of data on their phones every month and squeezing the network capacity for the rest of the users.

Okay, so let's check the score. College kids are paying $50 a month for a firehose of wireless multimedia bandwidth which they use so much it is actually crippling the network. Poor farmers in Africa who need to know the price of tomatoes in the market are paying 10% of their daily earnings to send a 160 character message that costs the service provider nothing.

This is all very broken. But this is also a big opportunity for both Vodafone and people in developing countries.

The Vodafone Foundation's strategy for developed countries focuses on sports and music, while their strategy for developing countries is all about health. Setting aside the sports and music focus, I suggest that Vodafone should enable ultra low cost communication via SMS in developing countries. Maybe 1/2 a cent per SMS?

Not only would this build gigantic market share for the first cellphone provider to do it, but it would enable all sorts of value added services and projects to rise out of the villages that are in most need of new livelihoods that will lift them out of poverty and into the 21st century (and make them bigger consumers of cellphone services).

There are already a bunch of mediocre SMS based projects created and subsidized by people in places like Washington DC that are poised to do some good. What happens when we give people in developing countries the tools (and appropriate pricing) they need to solve their own problems? You get solutions. Solutions that are relevant, sustainable, innovative and worldchanging.

Distributing the future

Imagine the future. Supertunnels through the earth's core for quick travel. Subvocal communication. 1000 year lifespans.

I feel like it has been the future this week. Some people got sick and died in Mexico and the whole world is holding its breath in trepidation. It's like everyone forgot that we were mortal and will die. I know that flu isn't supposed to kill strapping youngsters, and that we are overdue for a pandemic. And don't get me wrong I am as addicted to disaster news as the next guy, so I'm not complaining.

I'm just saying that in the future somebody getting sick and dying probably will be a major news event.

(Image by Jösé@flickr)