"You know, after you guys delivered the inputs out here to your shop. Another big NGO came to the village officials asking if they can open a shop here to sell inputs like you guys," the local agricultural officer nonchalantly mentioned as he chatted away with the program staff on a rather not-so-busy afternoon, "apparently the village officials told them they already have your shop, so they can go somewhere else for their own shop-opening." With that, the agricultural officer threw a sly smile at the program staff, not willing to explain further the process of the village officials' decision-making.
But the implication of what he was saying was quite clear even if he refused to say more about it. For the village officials (perhaps also for himself), the decision to turn away other suitors was an expression of trust, but simultaneously, pressure. To them, a certain organization is given access to the village because the local leaders granted them the privilege. The organization ought to feel honored to be the only or the few, and as a result, is expected to perform. What was promised before the venture started better be realized on the ground without fail and without any detrimental changes along the way.
For the village officials in question, they see that "preferential market access" is the way to ensure that the provider provides the best possible service. For dealing with NGOs, it may theoretically make sense. After all, NGOs are by their very purpose, supposed to provide economic support to the local populace, where private actors and all levels of governments have failed. In essence, what NGOs are supposed to provide, in their minds, are pretty "public goods," a congregation of different resources that ought to be cheaply (or even freely) accessible for all members of the community. It makes sense that one actor should provide for all.
But let's look at it from a purely economic perspective. What the village officials have done, by rejecting competing organizations that provide the same service, is to create local monopoly that has, for all practical purposes, exclusive rights to provision of services. With local transport options to market towns expensive and difficult, local demand has no choice but to rely on a single source of supply. For the rational economic actor, it is high time for, for the lack of better word, price-gouging. The supplier can raise the price as high as anything marginally below the sum of market price, round-trip transport, and costs of wear-and-tear.
For agriculture, the leverage of the monopolist on price is even higher. Consider the fact that most farmers purchase their seeds and fertilizers right before planting begins, due to the lack of financial planning in villages. Purchases must be made in matter of days, and even hours before planting needs to happen. The monopolist supplier can easily take advantage of the urgency in purchases. Right before planting season starts, prices can be hiked up drastically, taking advantage of the fact that, at that point in time, the farmer, even when having the financial means, will not have the needed time to travel all the way to market towns.
Aside from the prices, the monopolist should rationally be even less trustworthy on quality of products and services supplied. At least prices are visible and comparable across all locations for the same product. But quality is often visible only after seeing and touching. The farmer simply does not have the resources to go physically check product quality across distant locations. By taking away competitions within a certain village, the local officials rob the local populace opportunities to pit suppliers against one another to offer visibly better products within short distances.
The economic reality is that a monopolist in a locale with few credible access to alternative markets have zero incentive to offer best price or quality on products and services. An organization could come in and speak of altruistic reasons for doing the best they can, but with what evidence should one expect them to stick to their words simply because they are offered monopolistic rights? If anything, wouldn't the provision of monopolist rights incentivize people to lie about their selflessness, and turn even the selfless into opportunistic businessmen wanting to make a quick buck by screwing over gullible locals?
As much as the village officials acted in a way that is intended to help their people, they need to take into account one thing when they do their decision-making: in the business-centered modern society that their villages are gradually integrating into, trust is an extremely rare commodity. While many villages have understood this point the hard way, it seems like many others are simply too inexperienced with such harsh reality to be cautious in handling external parties. Even if the organizations they deal with are genuinely positive in intentions, it would be urgent for the decision-makers to wise up quickly.
But the implication of what he was saying was quite clear even if he refused to say more about it. For the village officials (perhaps also for himself), the decision to turn away other suitors was an expression of trust, but simultaneously, pressure. To them, a certain organization is given access to the village because the local leaders granted them the privilege. The organization ought to feel honored to be the only or the few, and as a result, is expected to perform. What was promised before the venture started better be realized on the ground without fail and without any detrimental changes along the way.
For the village officials in question, they see that "preferential market access" is the way to ensure that the provider provides the best possible service. For dealing with NGOs, it may theoretically make sense. After all, NGOs are by their very purpose, supposed to provide economic support to the local populace, where private actors and all levels of governments have failed. In essence, what NGOs are supposed to provide, in their minds, are pretty "public goods," a congregation of different resources that ought to be cheaply (or even freely) accessible for all members of the community. It makes sense that one actor should provide for all.
But let's look at it from a purely economic perspective. What the village officials have done, by rejecting competing organizations that provide the same service, is to create local monopoly that has, for all practical purposes, exclusive rights to provision of services. With local transport options to market towns expensive and difficult, local demand has no choice but to rely on a single source of supply. For the rational economic actor, it is high time for, for the lack of better word, price-gouging. The supplier can raise the price as high as anything marginally below the sum of market price, round-trip transport, and costs of wear-and-tear.
For agriculture, the leverage of the monopolist on price is even higher. Consider the fact that most farmers purchase their seeds and fertilizers right before planting begins, due to the lack of financial planning in villages. Purchases must be made in matter of days, and even hours before planting needs to happen. The monopolist supplier can easily take advantage of the urgency in purchases. Right before planting season starts, prices can be hiked up drastically, taking advantage of the fact that, at that point in time, the farmer, even when having the financial means, will not have the needed time to travel all the way to market towns.
Aside from the prices, the monopolist should rationally be even less trustworthy on quality of products and services supplied. At least prices are visible and comparable across all locations for the same product. But quality is often visible only after seeing and touching. The farmer simply does not have the resources to go physically check product quality across distant locations. By taking away competitions within a certain village, the local officials rob the local populace opportunities to pit suppliers against one another to offer visibly better products within short distances.
The economic reality is that a monopolist in a locale with few credible access to alternative markets have zero incentive to offer best price or quality on products and services. An organization could come in and speak of altruistic reasons for doing the best they can, but with what evidence should one expect them to stick to their words simply because they are offered monopolistic rights? If anything, wouldn't the provision of monopolist rights incentivize people to lie about their selflessness, and turn even the selfless into opportunistic businessmen wanting to make a quick buck by screwing over gullible locals?
As much as the village officials acted in a way that is intended to help their people, they need to take into account one thing when they do their decision-making: in the business-centered modern society that their villages are gradually integrating into, trust is an extremely rare commodity. While many villages have understood this point the hard way, it seems like many others are simply too inexperienced with such harsh reality to be cautious in handling external parties. Even if the organizations they deal with are genuinely positive in intentions, it would be urgent for the decision-makers to wise up quickly.
Comments
Post a Comment