Microcredits as an Illustration of Scott’s Four Rules of Thumb

By Lotte Levelt

In the conclusion of James Scott’s“Seeing Like a State”, the author lists four rules of thumb with the aim of improving development planning. These four rules are the following: Firstly, take small steps; secondly, favour reversibility; thirdly, plan on surprises; fourthly and finally, plan on human inventiveness[1].

 Many development aid programmes are often criticised. Tom’s shoes is often put forward as an example; when free items, such as shoes, arrive at unpredictable times this hurts the local, receiving community in two ways; they do not know when and in what sizes the shoes will arrive, and local shoemakers lose their jobs.[2]  On the other hand, a development programme that is generally deemed successful is that of ‘microcredits’. Microcredits work because they largely adhere to Scott’s four rules of thumb.

Microcredits are part of ‘banking with the unbankables’. The world’s poor lack collateral, meaning they usually cannot receive loans, for instance for setting up businesses. Because they cannot bank, their skills and knowledge remains unutilised. The main idea of microcredits is to grant small loans for locals to break through their poverty cycle, independent of foreign aid. Microcredits embody Scott’s first rule, precisely because it is ‘micro’, the loans may for instance vary from $50 to $250[3], meaning that if a local’s business does not work out, there are no huge losses. This also ties in with the second rule, because the loans are so small, they are in a way reversible: small projects will be stimulated, rather than overambitious, large-scale ones that may be hard to change once implemented. The third rule and fourth rules are not illustrated explicitly but may become reality once locals are given the opportunity to develop their skills, and unpredictable, high quality projects emerge. 

The Early Bird Gets the Worm?

By Lotte Levelt

The timing of market entry of a company has great influence on its later success, or failure. A concept related to this is the so-called ‘first-mover advantage’. Its theory, described among others by Pierson as the ‘filling up of political space’, is widely supported. Interestingly however, the real world shows both first- and second-mover advantages, of which two will be illustrated, through Amazon.com.

First-mover advantages are the benefits a company gains (e.g. economic profits) through pioneering. According to Lieberman and Montgomery, these advantages stem from three main sources: technological leadership, pre-emption of assets and buyer switching costs.

Amazon.com (launched in 1995) appears to be a success story of ‘the early bird gets the worm’, being the first significant company to enter the online book market. It gained technological leadership through learning effects (dropping costs with cumulative output) and patents, its innovation to extend with other products proved successful. Other bookstores (e.g. Barnes and Noble) soon followed with their own web site, but did not manage to even approach Amazon.com’s success. Amazon.com’s pre-emption of assets, in this case the filling up of space on the internet was dominant. Finally, other bookstores had to invest in attracting consumers away from Amazon.com, which failed: Amazon.com is now partnered with Barnes and Noble.

However, there is another side to the story. Unbeknownst by many, Book Stacks Unlimited, or books.com, was launched already in 1991 as the first online seller of books. Therefore, the original significance or size of the company entering a market also has a large impact on its success, perhaps in spite of perfect timing. 

In conclusion, the timing and sequence of companies entering a market have great – but definitely not complete- influence on their later success. Meanwhile, it remains disputed if Amazon.com is an early bird, or a case of ‘the second mouse gets the cheese’.

Colonialism: to be continued...

By Lotte Levelt

The topic of colonialism has always been controversial and surrounded by heated debate. It is generally agreed that the expansion of Europe from the 15th till the 20th century has ceased, but this century-long colonisation has certainly left its marks in both ex-colonised and ex-colonising countries. The colonised countries’ side of the story regarding the consequences of colonialism is predominantly subject to research. Nonetheless, the way colonialism is treated in previously colonising countries is at least striking, and perfectly illustrates how colonialism is still sensitive and perhaps in a way perseverant.

The Netherlands, a previous - and major - coloniser itself, illustrates just how delicate the subject matter is. The country has been questioned and criticised multiple times in the way it deals with its colonial past, for instance in lawsuits and regarding education about colonialism. What is termed ‘politionele acties’ (‘police actions’) by the Dutch state was in fact the Indonesian War of Independence, both terms describing the military aggressions of the Netherlands in attempting to prevent the end of Dutch control in Indonesia between 1947 and 1949. Furthermore, a case of a woman being raped by five members of the Royal Dutch Indies Army during the aggressions has come to light. The Dutch government stated the case had expired - a claim that was later refuted in court, as it concerns a crime against humanity.

The Dutch case in Indonesia presents a solid of example of how the sensitivity and controversy of colonialism is still widespread and will most likely continue so in the future. The way previous colonisers deal with their colonial history differs per country. What is apparent, however, is the need for these previous colonising countries to take responsibility, instead of shutting their eyes for something that may have happened in a faraway place, a long time ago.