Latest Malawi postcard – entrepreneurialism in response to volatility

I was reminded me of an Economist article I’d read discussing Jacob Hacker’s The Great Risk Shift.  Hacker argues that in the US (although not confined there) over the last thirty years income instability has been rising whilst the ‘social safety net’ has been wearing thin.   Hacker explains this situation as caused by a shift in economic risk from government and companies to families.  Whilst Hacker is pretty downbeat about this increasing volatility for ordinary people, the Economist reminded readers that one person’s volatility is another’s dynamic, mobile society.  It is probably good for most of us that there are more jobs in Tesco than on ships.

The effects of volatility in Malawi are, of course, far greater than in the US, although the causes are different.  For the last two years lack of rain led to famine.  This year we’re lucky that the rains have fallen heavily, but at the moment people are still poor until the tobacco and maize harvest can be sold in the spring.  I was interested in how people respond.  There’s a ‘booze pub’ in Kasungu that encapsulates a couple of responses.  One is that of the customers drowning their sorrows.  Another is the owner’s.  He serves cheap ‘shake-shake’ beer and vicious spirits – not much profit on each sale, but the bar is packed seven days a week, all day.  And he’s diversified.  There’s a brothel out the back which makes a tidy profit minus a bribe for the police, but that’s recouped in the bribes he receives as one of the only people in Kasungu licensed to issue MOT certificates.  The owner’s response to volatility has been to recognise opportunities and to diversify and insure against the future. 

It is a little facetious to use the criminal bar owner as a positive example of how to cope with an uncertain world.  But he highlights the way that many Malawians I’ve come across use entrepreneurialism to manage economic risk.

However, the poorest Malawians, who could most benefit from such a response, are often the least able to engage in anything other than subsistence (or near-subsistence) agriculture.  For them, accumulating any assets is practically impossible.  One reason for this is that the majority of crimes in Malawi are crimes of need – poor people robbing poor people, causing a cycle of crime and poverty.  Added to this is the fact that, as the 2004 ‘Malawi National Crime Victimisation Survey’ says, ‘poverty is characterised…also by an inability to devise an appropriate coping or management strategy in the face of shocks and crises’.

The ideal way to manage economic risk is through a dynamic and mixed economy of the kind I witnessed in Cape Town.  We’re a little way off that in Malawi, but the MicroLoan Foundation, where I’m working, is perhaps helping the country take a tiny step in that direction.  Through the provison of capital and business education the charity helps the poorest to set up the kind of enterprises that give them at least a chance to take the initiative and prepare for what is, at the moment at least (and probably always will be as the modern world increasingly extends its reach), inevitable economic volatility.  

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