Probing the Edges of Globalization

Stephen DeAngelis

August 3, 2007

I head back soon to Iraq to pursue further work with the Pentagon’s Business Transformation Agency and the regional government of Kurdistan. I call these my trips to the Edge of Globalization. That is not a pejorative term (like going to the “middle of nowhere”). In fact, the Edges of Globalization are often bristling with activity and promise. If all goes well in Kurdistan, I hope to probe other Edges of Globalization and look for opportunities to foster development.

I first wrote about the Edge of Globalization in a blog focused on a trip to Kurdistan. My experiences there and in China is what has spurred me to consider looking for business opportunities along other Edges of Globalization that can help advance both the interests of developing countries and Enterra Solutions. These opportunities mostly exist in nations that Tom Barnett describes as “Seam” states –- countries that sit geographically between developed “Core” states and undeveloped “Gap” states. These seam states are critical in the international order. Individuals (as well as organizations and governments) who, in Tom’s words, are trying to “close the Gap” know that the chasm separating the developed world from the undeveloped world is much like any large wound that requires more than a bandage to close. To heal properly, doctors often pack such wounds with antiseptic gauze, which they change frequently, decreasing the amount of packing as they heal slowly from the outside in. Done properly, and if the plaster is as wide as the wound, eventually it closes.

Seam states are like healthy tissue surrounding a wound and those in the development business understand that sustainable prosperity must begin there. Foreign aid to Gap states (or as it is now known – official development aid) is like the packing material that keeps wounds from getting infected until natural healing takes place. Security is like the plaster that covers the wound. That plaster must be anchored in Seam states. Helping to foster sustainable development in Seam states hastens the closing of the Gap because the spillover effects of prosperity can jump start development in neighboring states. Currently my company is exploring opportunities in Iraq (Kurdistan), the United Arab Emirates (Dubai), China (Beijing and Shanghai), and in Africa. The opportunities vary as do the chances of success across this span of countries. Show me a seam state, however, and I will find you business opportunities.

In 1970, 38 percent of the global population (or 1.4 billion of the world’s 3.7 billion people) lived below the poverty line (earning less than a dollar a day). By 1990 the Cold War was ending and the percentage of the world’s population living in poverty had fallen to 26 percent. Since the global population had grown dramatically in those two decades (to 5.3 billion) the actual number of people living in poverty in actual terms remained the same (1.4 billion). Over the course of the next decade, the information age with its global connectivity helped reduce those living in poverty in both actual and relative terms. By 2000, 1.2 billion were still living in poverty, but that represented less than 20 percent of the world’s population. The United Nations Development Program estimates that by 2015 the relative and actual numbers of people living in poverty should be reduced even further to 700 million people or 10 percent of the 7.1 billion expected to be living. Many of those who are emerging out of poverty are found in the Seam states discussed above. They are looking for an even better quality of life and that search represents opportunity.

As we are all aware, income distribution across the globe is very uneven. It should come as no surprise that Africa is the poorest region. According to 2000 data, approximately two-thirds of that continent’s inhabitants live in poverty. Africa is the deepest part of the Gap. Statistically, virtually no one in the Core, represented by members of the Organization for Economic Cooperation and Development (OECD), fall into the poverty (i.e., those who live on less than $1/day) category. Arrayed between those two extremes are Latin American countries, where 8 percent of the population lives in poverty, East European countries where 2 percent of the population lives in poverty, East Asian countries where 20 percent of the population lives in poverty, and South Asian countries where 23 percent of the population lives in poverty. The areas in which I’m interested in getting Enterra Solutions involved include East and South Asia and Africa. What can be done in those regions depends on where they currently sit.

The more educated, the healthier, and the more connected they are, the more that can be accomplished with them in a shorter period of time. To demonstrate what I mean, consider a few more statistics. In 1970, 56 percent of those living in poverty lived in East Asia, 30 percent lived in South Asia, and only 11 percent lived in Africa. By 2000, even though AIDS and war ravished Africa’s population (dramatically reducing its growth rate), and East and South Asia remained the most populace regions on earth, the share of the world’s impoverished people living in Africa rose to 35 percent, while the figures for East and South Asia decreased to 32 percent and 28 percent respectively. How did this happen? The simple answer is globalization. East and South Asia embraced globalization and became home to emerging economies (Asian Tigers) that emerged as Seam states. The results were really quite stunning. To reach the next level –- joining the Core –- they need to adhere to the rules sets that engender trust among others engaged in the global economy. That is where Development-in-a-Box™ can play a significant role.

Improving capacities (i.e., fostering the necessary conditions to promote peace and prosperity) in Seam and Gap states is important for a number of reasons. Government capacities must be developed so that it can provide the social services and infrastructure necessary to sustain economic growth. Personal capacities must be developed to create a functioning middle class — an economic class that not only sustains economic growth but one that underwrites important government services. A middle class can only be developed through the attraction of foreign direct investment and the emergence of an entrepreneurial base. The kind of activities in which Enterra Solutions is engaging in Seam states assists on both fronts. We aim to be partners with governments, transnational businesses, and local entrepreneurs. Undoubtedly, as our plans move further along, we will meet others with similar objectives and hope to partner with them as well.