Getting Better

The New York Times reviews Charles Kenny's book, Getting Better:

In the not too distant past — 1980 — one of every six babies born in the West African nation of Liberia died in infancy. Overall life expectancy was a mere 48 years. The great majority of Liberians couldn’t read in 1980. Most girls had never attended school.  Over the last 30 years, infant mortality has fallen sharply, and life expectancy has jumped to 58 years. Most Liberians today can read. More than 80 percent of girls attend school. Politically, the country is much freer than it was in 1980, the year of a deadly coup.

Economically, however, Liberia has been the world’s single worst performer over the last 30 years. Per capita income has fallen an astounding 80 percent, according to official World Bank statistics, which makes the country an extreme example of Africa’s long-running economic troubles. While people may debate the causes of those troubles — corrupt and autocratic governments, feckless foreign aid, postcolonial hangover — everyone seems to agree that Africa is a story of failure.

But is it?

In a new book called “Getting Better,” Charles Kenny — a British development economist based in Washington — argues that the answer is absolutely not. Life in much of Africa and in most of the impoverished world has improved at an unprecedented clip in recent decades, even if economic growth hasn’t.

“The biggest success of development,” he writes, “has not been making people richer but, rather, has been making the things that really matter — things like health and education — cheaper and more widely available.”

...One caveat to Mr. Kenny’s argument is that progress in Africa has slowed over the last decade or so, largely because of the scourge of H.I.V. And by any definition, the quality of health and education in sub-Saharan Africa remains horribly low.

Several countries there still have a life expectancy of only about 45 years. By comparison, life expectancy in the Stone Age was about 34 years, notes Gregory Clark, the University of California, Davis economist who wrote “A Farewell to Alms,” an economic history of the world.

“Despite the creation 60 or more years ago of cheap medical interventions that can dramatically reduce infant mortality and despite considerable medical aid and assistance from the rich countries,” Mr. Clark told me, “the poorest countries in Africa have advanced life expectancy 10 years from conditions in 200,000 B.C.” 

...

Mr. Kenny responds that H.I.V. is akin to a modern plague. The fact that sub-Saharan Africa has made even modest progress while battling the plague is remarkable. Much of the rest of the world, meanwhile, continues to make great progress on health, education, infrastructure and even human rights.

He is certainly right that people often overlook this progress and instead believe that global misery is intractable. “The strongest argument against a moral imperative to act,” as Mr. Kenny says, “is that we are powerless to make things better.” Clearly, we aren’t powerless. The real question is not whether foreign aid and local government programs can work — it’s which programs work and which do not.

The most hopeful part of Mr. Kenny’s hopeful message is that progress in health, education and human rights may ultimately bring economic progress as well. He is cautious on this point, noting that economists have failed time and time again to come up with consistent explanations for economic growth.

But African growth has accelerated over the last decade, and the acceleration followed improvements in education and other basics. It’s true that Africa’s growth is unimpressive compared with the Asian miracle, but the growth is still the most rapid in Africa’s recorded history. Perhaps those investments in Africa’s people needed time to produce returns.

As I read “Getting Better,” I couldn’t help but think of some parallels with life in the United States. Our own economic growth has been disappointing for much of the last four decades. Over that same period, though, other aspects of American life have improved enormously. A large majority of Americans experience far less discrimination today — be it discrimination based on sex, race, religion or sexual orientation — than they would have 40 years ago. For most people, life was not better in the fondly remembered 1950s and 1960s.

Kenny's book says that even though people in many countries have not seen incomes increase, they are much better off anyhow because the drivers of the better life are innovation, ideas, and institutions:

Global improvements in quality of life have been fostered by the spread of technology and ideas. Very cheap health technologies that can dramatically reduce mortality have spread rapidly across the world. The proportion of the world’s infants vaccinated against diphtheria, pertussis and tetanus –the DPT shot—climbed from one fifth to nearly four fifths between 1970 and 2006. And ideas that save lives –wash your hands, don’t defecate in the fields you eat from—are increasingly accepted.
People around the world are also more ‘informed consumers’ than they used to be. They demand not only soap to wash their hands, they want schools to educate their girls, and they want governments which respect their rights. The increasing demand for education in particular is an important part of the story behind climbing primary enrollments –less than half of primary-age kids worldwide were enrolled in school in 1950, by the end of the century the figure was closer to nine out of ten. Valuing ABCs and getting DPTs –these are the forces behind global improvements in quality of life.
The spread of technologies and ideas explain a strong global pattern to quality of life improvements with countries rich and poor, tropical and temperate, seeing similar rates of progress over time. The shocks of AIDS and state collapse explain most of the (limited) variation from that global pattern in the case of health. And a similar story applies to measures of education –if less so to human rights.
At the same time, a country’s relative standing in terms of quality of life appears to be connected to the same historical factors that explain present-day relative income performance. Even if global inequality in quality of life has fallen, countries that started earlier in the provision of health and education services, or began with a greater respect for human rights, remain ahead to this day.

Habit Formation & Marketing

Marketers can get people to spray large amounts of odor neutralizer even where there is no odor, so maybe they can get people to do things that are good for them too?  NYT:

Some of the most ambitious habit experiments have been conducted by corporate America. To understand why executives are so entranced by this science, consider how one of the world’s largest companies, Procter & Gamble, used habit insights to turn a failing product into one of its biggest sellers. ...In the mid-1990s, P.& G.’s executives began a secret project to create a new product that could eradicate bad smells. P.& G. spent millions developing a colorless, cheap-to-manufacture liquid that could be sprayed on a smoky blouse, stinky couch, old jacket or stained car interior and make it odorless. In order to market the product — Febreze — the company formed a team that included a former Wall Street mathematician named Drake Stimson and habit specialists...
The first ad showed a woman complaining about the smoking section of a restaurant. Whenever she eats there, she says, her jacket smells like smoke. A friend tells her that if she uses Febreze, it will eliminate the odor. The cue in the ad is clear: the harsh smell of cigarette smoke. The reward: odor eliminated from clothes. The second ad featured a woman worrying about her dog, Sophie, who always sits on the couch. “Sophie will always smell like Sophie,” she says, but with Febreze, “now my furniture doesn’t have to.” The ads were put in heavy rotation. Then the marketers sat back, anticipating how they would spend their bonuses. A week passed. Then two. A month. Two months. Sales started small and got smaller. Febreze was a dud.
The panicked marketing team canvassed consumers and conducted in-depth interviews to figure out what was going wrong, Stimson recalled. Their first inkling came when they visited a woman’s home outside Phoenix. The house was clean and organized. She was something of a neat freak, the woman explained. But when P.& G.’s scientists walked into her living room, where her nine cats spent most of their time, the scent was so overpowering that one of them gagged.
According to Stimson, who led the Febreze team, a researcher asked the woman, “What do you do about the cat smell?”
“It’s usually not a problem,” she said.
“Do you smell it now?”
“No,” she said. “Isn’t it wonderful? They hardly smell at all!”
A similar scene played out in dozens of other smelly homes. The reason Febreze wasn’t selling, the marketers realized, was that people couldn’t detect most of the bad smells in their lives. If you live with nine cats, you become desensitized to their scents. If you smoke cigarettes, eventually you don’t smell smoke anymore. Even the strongest odors fade with constant exposure. That’s why Febreze was a failure. The product’s cue — the bad smells that were supposed to trigger daily use — was hidden from the people who needed it the most. And Febreze’s reward (an odorless home) was meaningless to someone who couldn’t smell offensive scents in the first place.
P.& G. ...collected hours of footage of people cleaning their homes and watched tape after tape, looking for clues that might help them connect Febreze to people’s daily habits. When that didn’t reveal anything, they went into the field and conducted more interviews. A breakthrough came when they visited a woman in a suburb near Scottsdale, Ariz... Her house was clean, though not compulsively tidy, and didn’t appear to have any odor problems; there were no pets or smokers. To the surprise of everyone, she loved Febreze.
“I use it every day,” she said.
“What smells are you trying to get rid of?” a researcher asked.
“I don’t really use it for specific smells,” the woman said. “I use it for normal cleaning — a couple of sprays when I’m done in a room.”
The researchers followed her around as she tidied the house. In the bedroom, she made her bed, tightened the sheet’s corners, then sprayed the comforter with Febreze. In the living room, she vacuumed, picked up the children’s shoes, straightened the coffee table, then sprayed Febreze on the freshly cleaned carpet.
“It’s nice, you know?” she said. “Spraying feels like a little minicelebration when I’m done with a room.” At the rate she was going, the team estimated, she would empty a bottle of Febreze every two weeks.
When they got back to P.& G.’s headquarters, the researchers watched their videotapes again. Now they knew what to look for and saw their mistake in scene after scene. Cleaning has its own habit loops that already exist. In one video, when a woman walked into a dirty room (cue), she started sweeping and picking up toys (routine), then she examined the room and smiled when she was done (reward). In another, a woman scowled at her unmade bed (cue), proceeded to straighten the blankets and comforter (routine) and then sighed as she ran her hands over the freshly plumped pillows (reward). P.& G. had been trying to create a whole new habit with Febreze, but what they really needed to do was piggyback on habit loops that were already in place. The marketers needed to position Febreze as something that came at the end of the cleaning ritual, the reward, rather than as a whole new cleaning routine.
The company printed new ads showing open windows and gusts of fresh air. More perfume was added to the Febreze formula, so that instead of merely neutralizing odors, the spray had its own distinct scent. Television commercials were filmed of women, having finished their cleaning routine, using Febreze to spritz freshly made beds and just-laundered clothing. Each ad was designed to appeal to the habit loop: when you see a freshly cleaned room (cue), pull out Febreze (routine) and enjoy a smell that says you’ve done a great job (reward). When you finish making a bed (cue), spritz Febreze (routine) and breathe a sweet, contented sigh (reward). Febreze, the ads implied, was a pleasant treat, not a reminder that your home stinks.

Will Publicizing Corruption Make it Worse?

The NYT has a story  about IPaidABribe.com.   The idea is that people write in accounts of petty corruption and bribes to reduce these problems which are endemic in the developing world and reduce the quality of government.  Yglesias wonders if publicizing the corruption will just cement it as a norm and make it even more entrenched because people will get "a sense that 'everyone does it' ...and that's 'the way the system works'." This is just the kind of plausibly counterintuitive (but wrong) thinking that Slate, Yglesias' website, is famous for. 
I am optimistic that publicizing corruption will help increase government quality.  There are two possibilities.
First, even if Yglesias is correct and people make bribery an entrenched norm, then standardizing the norm will make government more efficient.  Government salaries can be more easily adjusted to compensate for the bribes and if the norms are universally accepted, then the bribes just become standardized fees.  A big problem with corruption is that it increases transactions costs by increasing uncertainty.  Reducing the uncertain information caused by corruption would reduce its cost.
Secondly, if corruption does not become an entrenched norm, then citizens will be more content to pay higher taxes and/or fees to clean up government and make it work more efficiently without corruption.
Either way, publicizing corruption is a force for better government and better society because it reduces the information failure of uncertainty about the prices for getting government to work.  

Read the NYT story (link at top). 

Hernando de Soto & Property Rights

Note: This old post is updated at Medianism.org

Hernando de Soto thinks that legal property rights are the key to prosperity.  The government must clearly define and enforce very specific private ownership rights.  De Soto's thesis is:

Unreported, unrecorded economic activity results in many small entrepreneurs who lack legal ownership of their property, making it difficult for them to obtain credit, sell the business, or expand. They cannot seek legal remedies to business conflicts in court, since they do not have legal ownership. Lack of information on income prevents governments from collecting taxes and acting for the public welfare. "The existence of such massive exclusion generates two parallel economies, legal and extra legal. An elite minority enjoys the economic benefits of the law and globalization, while the majority of entrepreneurs are stuck in poverty, where their assets –adding up to more than US$ 10 trillion worldwide– languish as dead capital in the shadows of the law." To survive, to protect their assets, and to do as much business as possible, the extra legals create their own rules. But because these local arrangements are full of shortcomings and are not easily enforceable, the extralegals also create their own social, political and economic problems that affect the society at large.

De Soto noted that poorly defined property rights make a natural disaster worse:

Two recent natural disasters ...grabbed our hearts - the tsunami that ravaged 11 countries on the shores of the Indian Ocean, history's worst, and the hurricane ...Katrina that inundated the city of New Orleans. Images from both regions were tragically similar: demolished buildings, floating corpses, stunned survivors, and water, water everywhere. There was one profound difference. In New Orleans, the first thing authorities did to secure the peace and assure rebuilding was to salvage the city's legal property records that would quickly determine who owned what and where, who owed what and how much, who could be relocated quickly, who was creditworthy to finance reconstruction...
In Southeast Asia, there were no such legal records to be found, because most of the tsunami's victims had lived and worked outside the law.
[With] the floodwaters still high, New Orleans' custodian of notarial records, Stephen Bruno, rushed to the courthouse basement where the city's property records were stored, hauled them out of the water and packed them into refrigerator trucks that ferried them to Chicago, where they were expertly dried. The restored documents were quickly sent back to New Orleans - 60,000 volumes now archived under armed guard.... "Abstractors" ...are painstakingly going through the documents that will produce the legal tools for designing and financing the city's recovery, allowing bankers, insurers and realtors to identify owners, activate collateral, raise financing, access secondary markets, make deals, close contracts, as well as make it profitable for utilities to pump energy and water into neighborhoods - the entire legal infrastructure that is needed to keep a modern economy in gear.
Such a scene was impossible after the tsunami of December 2004 sent ...waves the size of buildings onto beachfront property from Indonesia and Thailand all the way to Sri Lanka ...killing more than 270,000 ...In Banda Aceh, Indonesia, 200,000 homes were washed away, most of them built without property titles. When the water receded from Nam Khem, Thailand, a well-connected tycoon rushed in to grab the valuable beachfront. The survivors of the 50 families that had occupied the shore for a decade protested, but they didn't have legally documented property rights...
That is the case with the majority of people in the developing and ex-Soviet world, where legal systems are inaccessible to most of the poor.
Life in the extralegal world is at constant risk.
An earthquake rocked Pakistan ...leaving ...73,000 people dead. When a similar sized quake hit the Los Angeles area in 1994, 60 people died. The difference? ...inadequately constructed housing ...built outside the law ignoring construction codes.
But what poor homeowner ...has any incentive to invest in safer housing and reinforced concrete without evidence of secure, legal ownership and the possibility of getting credit?
Governments are powerless to enforce legal codes when most people operate outside the law. 
Typically, [rich] governments promote ...private property to increase property taxes. In the extralegal economy, people may pay bribes, but no one pays taxes. Where will the [government] money for reconstruction come from? Private property in the United States is likely to be covered by insurance - an estimated $30 billion worth for Katrina. In Sri Lanka, only 1 percent of the 93,000 tsunami victims were covered.
In the developing world, few people have an official address, never mind the kind of legal title to their assets required by insurers.  In the developing world, neither capital nor credit will venture where there are no clear property rights.  ...for developing countries without an adequate legal property system, peace itself is on the line - as was the case in the United States before more widely accessible legal property law gradually turned violent squatters into noble pioneers.
Before that, squatters had threatened to burn George Washington's farms unless he gave them title. ...That's where developing countries are today.
The bloodshed can be stopped. Livelihoods and businesses could be reconstructed in the developing world. But first the poor must be legally empowered. 
We take the law for granted; but without legal documents, people do not exist in a market. If property, business organizations and transactions are not legally documented, they are fated to remain forever uninterpreted and society cannot work ...Legally created titles and stock certificates generate investment; clear property records guarantee credit; documents allow people to be identified and helped; company statutes can pool resources for recovery; mortgages raise money; contracts solidify commitments.
Four billion of world's six billion people do not have this ability to create wealth and recuperate from disaster. Their constant tragedy is to live without the benefit of a single rule of law. ...Only if the poor themselves are legally empowered will they be in a position to turn the next tsunami into just another storm.

There are also excessive regulations on new entrepreneurs in poor countries.  In Lima, Peru, in 1983,   Hernando de Soto registered a business legally without paying bribes except when absolutely unavoidable (bribes were only unavoidable twice) and without using any political connections.  Normally the Peruvian elites use their political connections to obtain a business license and the rest of society works in the informal sector without any ability to write legal business contracts to obtain business loans or insurance and in constant danger of being shut down by police for operating a business without the necessary permits. 

Hernando de Soto’s research team followed all necessary bureaucratic procedures in setting up a one-employee garment factory in the outskirts of Lima. The factory was in a legal position to start operations 289 days and $1,231 later. The cost amounted to three years of wages—not the kind of money the average Peruvian entrepreneur has at his or her disposal. “When legality is a privilege available only to those with political and economic power, those excluded—the poor—have no alternative but illegality,” writes Mario Vargas Llosa in the Foreword to de Soto’s (1989) book.

De Soto did the same process in Tampa, Florida, where it only took two hours to obtain a permit to open a small business.  The process took over 1,000 times longer in Peru.  Why would anyone in Peruvian society want onerous restrictions on entrepreneurs who would like to start new businesses?  One reason is that existing businesses do not want competition from new ones.  A World Bank study found that incumbent businesses saw their incomes drop 3% after Mexico simplified business registration because increased competition lowered prices.  Workers also gained a 3% increase in employment and the number of businesses increased 5%.  

Ideology may also play a part.  Liberals may have been overly willing to see regulations as being benign whereas the incumbent business owners are overwhelmingly conservative and they benefit from these particular regulations.  De Soto's work has changed ideology around the world by publicizing the insanity of these regulations that only benefit a relatively small group of incumbent business elites who often see themselves as being in favor of entrepreneurialism in general even though they dislike specific entrepreneurial competition against their own businesses.  The world bank established the Doing Business Project in 2002 to measure the cost of pro-incumbent business regulations around the globe and merely by publicizing absurd regulations, they have been reformed.  Within the first five years, there were 193 reforms in 116 countries.

De Soto says that 2007-201? US financial crisis is partly due to the same sort of dynamics that keeps poor countries poor:  ill-defined property rights.

Why does ownership matter so much?
Ownership means that I have something to lose. If you're a banker, it means that you've got collateral. It also means that I'm credible, so you can give me credit. When you think about it, whether it's ownership, whether it's credit, whether it's capital, whether it's identification, none of the things that make a modern economy are possible without property.

How does this relate to the financial crisis?
The enormous amount of derivatives that had poured into the market—there are close to $600 trillion of these papers around—are also not recorded in a global or centralized manner, or in a manner that allows you to begin to quantify them. [Former SEC Chairman Christopher] Cox thought that maybe the toxic part of all of these assets was $1 trillion to $2 trillion. [Treasury Secretary Timothy] Geithner told us there's maybe $3 trillion or $4 trillion. Nobody really knows, so in a way [they've created an] informal or shadow economy. This unidentified paper is the source of uncertainty and the credit contraction.

So they're unidentified in the same way that ownership of, say, a slum in Peru or Africa is unidentified.
That's right. We have worked in places like Tanzania and Egypt and Ethiopia. When you go visit a home there you don't find justification for it through the books. In other words, it's not centrally available information. When you talk about shadow economies in many places, it's not only the economy of gangsters. It's also economies that are legal in every respect except for the fact that the paper, which backs up the ownership or the evidence that something exists, is not easily and publicly available. That creates the shadow.

Has the subprime mortgage market become a shadow economy?
Subprime mortgages are not a shadow economy. But what happened is that a lot of these mortgages got repackaged into securities. Then they became collateralized debt obligations and some of these mortgages were sliced and diced and put into tranches. When some of these mortgages went sour and people started defaulting on their payments, then of course a lot of the securities tied to them also started defaulting. But when you try and trace who's ultimately responsible for the value of that paper, you couldn't find it. That's the part of the market that has become the shadow.

ill-defined property rights in the subprime mortgage sector caused a meltdown. Does the same happen in the developing world?
Yes. That shadow hopefully is a temporary condition in the United States and in Western Europe. And it might pass in a year or 10 years, but it will pass. That passing condition that's occurring now in developed countries, that's a chronic condition in developing countries. We're always chronically in credit crunches—because you don't know who owns what, nobody dares lend to somebody else. Bringing the law to emerging markets is possibly the most important measure that can be taken to help these countries become rich. Look at the Iranians, look at the North Koreans—they're building nuclear plants. Look at the computer—they're being built in northern India. The issue isn't the expansion of technology. We can all get it, borrow it, buy it or steal it. The issue is how do you get a legal system that allows people to cooperate so as to create more complex systems and objects.

So at this point, a Wall Street banker in a $10,000 suit is encountering basically the same problem that Nairobi slum dwellers have had to deal with for decades or more.
Absolutely. The difference, however, is that in Nairobi they are still struggling to understand that a property system is the best way that they can do things. In the United States, every piece of land, every house, every automobile, every airplane, every manuscript for a film, every patent is written up and recorded and described. There's only one thing in the United States which is not recorded in such a way and that's derivatives. We're only talking about 7 percent of the subprime market being in default, yet it is causing a major contraction in your economy. You're not getting your credit flowing because you don't know what is where and who it belongs to.

Extractive Institutions

Updated and moved to Medianism.org

Why Nations Fail, Uzbekistan Part 1:

take Uzbekistan. Why does it have 1/15 of the US income per capita? Perhaps it is because of “human capital” — Uzbekis having less education and education and skills? Well there’s a surprise, Uzbekistan has close to complete primary and secondary school enrollment, and close to 100% literacy. But look a bit deeper, and you’ll see something a little unusual going on in Uzbeki schools.
The basis of Uzbekistan’s economy is cotton which makes up 45% of exports. The cotton bolls start to ripen and are ready to be picked in early September, at about the same time that children return to school. But as soon as the children arrive the schools are emptied of 2.7 million children (2006 figures) who are sent by the government to pick the cotton. Teachers, instead of being instructors, became labor recruiters. In the words of Gulnaz, a mother of two of these children:

At the beginning of each school year, approximately at the beginning of September, the classes in school are suspended, and instead of classes children are sent to the cotton harvest. Nobody asks for the consent of parents. They don’t have weekend holidays [during the harvesting season]. If a child is for any reason left at home, his teacher or class curator comes over and denounces the parents. They assign a plan to each child, from 20 to 60 kg per day depending on the child’s age. If a child fails to fulfill this plan then next morning he is lambasted in front of the whole class.

The harvest lasts for two months. Rural children lucky enough to be assigned to farms close to home can walk or are bused to work. Children farther away or from urban areas have to sleep in the sheds or storehouses with the machinery and animals. There are no toilets or kitchens. Children have to bring their own food for lunch. In the spring, school is closed for compulsory hoeing, weeding, and transplanting (see here).
So school or no school, children aren’t learning all that much in Uzbeki schools. They are instead being coerced to work. This type of coercion is actually all too common, and is indicative of the sorts of institutions that not only fail to impart human capital to children, but are at the root of much more widespread economic and social failure.

Why Nations Fail, Uzbekistan Part 2:

So why are millions of Uzbek schoolchildren out in the fields picking cotton?
Uzbekistan gained its independence when the Soviet Union collapsed in 1991. Ismail Karimov, previously first secretary for Uzbekistan of the Soviet Communist Party, declared himself an Uzbek nationalist and became, and since then has remained, president through fraudulent elections and repression.
After independence, farmland that was previously under the control of state-owned firms was distributed to farmers. But they weren’t suddenly free to plant and sell what they wished. The government introduced regulations that determined what they should plant and how much they should sell it for. For cotton, that meant they would receive a tiny fraction of the world market price. For many, it wouldn’t make sense to grow cotton at these prices. But the government dictated that they had to. Before independence, much of the cotton was picked by combine harvesters. Yet given these rewards, farmers stopped investing in or maintaining farm machinery. So coerced child labor was Karimov’s cost-effective method of picking cotton.
Part of Uzbekistan is also ideal for growing tea. Interspan, a US company, invested heavily. But by 2006, Karimov’s daughter, Harvard graduate and international jet setter, Gulnora Karimova, had taken an interest in this marke. Gulnora is a woman of many talents as you can see from her web page: http:\http://gulnarakarimova.com/en/. For example she hangs out with rock stars like Sting

 and even duets with Julio Iglesias... Gulnora’s interest meant taking over Interspan’s assets and business. And this was not going to be by making an attractive offer. The company reports that men with machine guns, allegedly working for the Uzbek intelligence services, entered its offices and warehouses, and seized its assets and inventory. Its personnel were arrested and tortured. By August 2006, the company pulled out of Uzbekistan, and tea was now a Karimov family monopoly. The tea market is not the only one which Gulnora Karimova is said to have used coercion and expropriation to have taken control of. She has allegedly acquired shares in the Coca-Cola bottling franchise and in the oil sector through similar means, and controls the largest mobile phone operator, and has major interests in several other sectors, including cement and nightclubs. (Ironically, one of Karimov’s other daughters, Lola, is a “campaigner for the rights of children”!).
Government-imposed prices at which you’re forced to sell; coerced labor; expropriation of assets by the intelligence services and the president’s family. These are just some of the examples of what we call extractive economic institutions — economic institutions designed to extract resources from the population and businesses for the benefit of a narrow elite.
Like almost all nations that are poor, Uzbekistan fails because its people operate under extractive economic institutions, which provide few incentives for investment or technological ingenuity, and force people to engage in activities that they do not wish or are not well-suited to (such as farmers being forced to grow crops that they don’t want and children being forced to pick cotton rather than learn in school).
And the important point is this: these extractive economic institutions are not there by mistake. They have been designed this way for the benefit of the elite. There was no coerced child labor in Uzbekistan when cotton was produced by state-owned firms. This economic institution was introduced when Karimov and his cronies realized that at the prices they were imposing on farmers, cotton production was going to plummet.

Appropriate Technology

See Wikipedia's entry for Appropriate Technology 
Organizations:

• Practical Action is one probably the oldest appropriate technology organization. 
• Compatible Technology: Food processors, water purification.

Wood cooking stove technologies: Journey to Forever, ClimateTechWiki...
Biochar and cooking stoves.
Genetic engineering: golden rice, BioCassava, Aresa Biodetection
Charcoal briquette production from sugarcane waste (bagasse)
Lighting: LEDs, water bottle sky lights. 
Electricity generation
Bicycles and transport: Bamboo bike, Worldbike
Education: Project H
Sanitation and Sewage:  Daily Dump: Indian composting service and equipment.
Finance:
Water:

• purification: SODIS
• transport: hippo water roller
• collection (rainwater, dew collector, fog, solar still)
• pumping
• irrigation

Health

• Plumpynut
• LED Jaundice lamps
• syringe storage
• Vision: Adaptive eyewear
• Wheelchairs
• Prosthetics
• Vaccine tech

Security

• Mine sweeping: spider boot

Housing: Disaster resistant architecture
Refugee housing

Appropriate Technology is great and makes a huge impact on people's lives, but it isn't a panacea that can measurably grow median incomes.  That requires numerous technologies and systemic changes.  But each appropriate technology helps improve people's lives.  Some even save lives.  That helps nudge towards a tipping point of long-run systemic change.  Even Gutenberg's invention of the printing press did not have a direct measurable impact on GDP, but it helped propel Europe and then the globe towards that tipping point of economic development.

Profitable appropriate tech for the poor

Update: I reworked this old page at Medianism.org.

It is worth a view at the photos of some of the products that are described below. Eric Bellman at WSJ:

Indian companies, long dependent on hand-me-down technology from developed nations, are becoming cutting-edge innovators as they target one of the world's last untapped markets: the poor. India's many engineers, whose best-known role is to help Western companies expand or cut costs, are now turning their attention to the ...nation's own 1.1-billion population.

Note that the Tata Nano is an amazing accomplishment that gets 55mpg, but it is pretty small and its base price had risen to about $3,000 by 2011.

 

GE tapped the same pool of inexpensive expertise to target Indian hospitals and clinics that cannot afford its equipment designed for the U.S. GE Healthcare has used Indian software engineers to develop an electrocardiograph that costs $1,000, one-tenth the standard models used in the past. GE hopes to sell the technology in the U.S. eventually...

"In India we have the engineers that have the brainpower and the bandwidth to deliver on these types of projects,"...