An article by Robert E. Prasch in the Journal of Economic Issues (Vol. XXXVII, No. 2, June 2003), entitled “Technical Change, Competition and the Poor”, raises some interesting questions.

One possible result [of introducing a new technology] is that a new technology, a more expensive one, can become dominant while simultaneously becoming a necessity for others who may have preferred the status quo ante. … A possible result is that the median person may be better off after the adoption and diffusion of the new technology … even as the cost of “subsistence” rises. In such a case poverty would be a more difficult condition to escape if … access to the new technology in question is a condition for minimal economic and social participation in the larger society. (p.479)

Prasch goes on to give the credit card and automobile as examples.

Even if one chooses not to borrow against it, it serves as a signifier of trustworthiness, and its widespread use makes its possession a necessity for anyone who wishes to participate in a wide variety of transactions, including transactions that could formerly be conducted without it.

…

After most Americans adopted the automobile as their primary mode of transportation, a variety of other changes occurred. Among them, low-cost forms of transportation, such as railroads and trolleys, went into decline … [and became] less fully networked, poorly supported, and less reliable than seventy-five years ago. Moreover, after car ownership became the norm, zoning increasingly separated commercial from residential lands such that access to a dependable automobile is increasingly an implicit or explicit condition of employment. … Moreover, the public’s perception of the convenience and even the safety of [trains and trolleys] also declined as “respectable” people shied away from the prospect of a lengthy ride with persons of a lower socioconomic group. This, in turn, led to a lack of widespread support from the wealthier and more influential members of society…(p.450)

Without that support from the political establishment, such services were condemmed to decline. Likewise, Prasch points out the increasing disappearance of affordable pay phones with the advent of the cell phone. This raises the question of whether “adding the additional channel” of the internet for government services is will result in “upping the bar” for the poorest sector of society. As Prasch points out, the poor do not always have ready access to centralised services, such as libraries and local government offices, where internet kiosks are most likely to be located. Furthermore, where these services are decentralised, there are strong centralising pressures from cost-cutting.

Taking a step back, we should note that Prasch equates poverty with a loss of capability “for minimal economic and social participation in the larger society”. This is an approach based on the capabilities framework developed by the Nobel laureate Amartya Sen. Essentially, Sen stated that focussing on how much you earn is less useful than focussing on whether you are able to participate economically and socially in society.

When we consider that the minimum adult wage is less than NZ$7 (from memory) – giving a 40-hour week wage of less than NZ$280 gross – the cost of web access and a cell phone seems quite steep. Of course, those on benefits would be really stretched to cover all this, and one must question their ability to participate economically and socially in society. (And not be surprised that some people in such situations would provide a ready market for receiving cheap stolen goods.)

Indeed big corporations try to sail as hard on the limits of law as possible, and by this they create a constant trickle of consumer protection laws. Can MBA even imagine a company whose reason to exist is to serve, and only to take money for that to be able to continue to serve?

Daniel from VividCuriosity

Stupidity, stupidity, stupidity, but as ever it’s never the correct people who ultimately pay for the stupidity when the company’s fortunes inevitably tank.

To use your example, Good Costumer Service makes people repeat the buy, be happy with the company and finally drink more beer. So the contribution of that “Red Zone” is difficult to measure but finally it’s part of the spinal chord of relationships with costumers which are finally the ones that make the sales repeat.

The problem is that we have a addiction to easily measurable numbers and a short term goal fixation. And that creates finally the red zone/ green zone atmosphere. I’m on a Internship at a company (which name i cannot mention because of contract stuff that i don’t agree with) and they actually do this. They are so focused on the green zones that they ignore any innovation or proposal from red zones that will help red zones to make costumers happy to continue to use our services.

In conclusion, we need to measure costumer satisfaction and numbers, not just numbers not just costumer satisfaction. Red Zones make a big contribution, it just needs to be measured. So they can be turned green.

I had never heard of Naomi Klein’s latest work on Disaster Capitalism until I saw your Twitter yesterday. Since then I have read a lot of what she is saying. Very interesting … and thank you.

I think you know I worked for the Thatcher family through out the 80′s and 90′s, and I personally saw over $27 Billion (small in terms of our latest financial system bail-out) of privatization / public-private partnerships in the UK. We employed many of these approaches in Sugar Land as I was mayor, and it enabled us to have the second lowest tax rate in Texas (in our peer group) and create a vibrant economy (true effects of Supply-side Economics), yet we were able to lean on the private sector (the Green Zones) for a myriad of the municipal services (the Red Zones) in which you reference in your blog.

The citizens need to understand that as elected officials we MUST focus on providing the highest quality service, at the lowest possible price (tax rate). Sounds like a cute business mission statement, but it works in both the private and public sectors.

I agree with you that the Yin and Yang of it need to be kept in place and both cost and profit centers rely on one another to exist and flourish. Just as in the case of public – private partnerships (where the Green and Red zones work hand-in-hand), both sectors MUST work together to create equilibrium so that the citizens do receive the highest quality service, at the lowest possible price.

Great intellectually stimulating blog. I appreciate it Tara.