Private Companies Partner to Conserve and Purify Water

By Caroline Descorbo

Having access to clean drinking water is essential to sustaining human life. According to the Center for Disease Control, 780 million people do not have access to “improved,” or sanitary, sources of water. According to the World Bank, 88 percent of diseases contracted in developing nations can be attributed to unsafe drinking water and inadequate hygiene practices. Some private companies are trying to make a difference by using new technology to reduce waste and increase access to drinkable water.

While many developing nations suffer from a lack of safe access to drinking water, developed nations are concerned over the dwindling supply of water. In their paper, Georg Meran, economic professor at the Technische Universität in Berlin and Christian von Hirschhausen, professor of economics at the German Institute for Economic Research, state that even though progress has been made over the past decade, the amount of people in the world who have access to safe water is scarce. Wasting resources such as drinkable water is detrimental to not only the environment, but humanity as well. Many countries aimed at mitigating water have implemented or are considering implementing water tariffs. However, they found that water tariffs may negatively impact economic growth and argue that it would especially hinder poorer households from accessing water supplies.

When water is extracted from most resources, it must go through a filtration process which is often complex. Groundwater also runs the risk of containing pollution and may be too contaminated to filter. However, when sap is collected from Vermont maple trees and the sugar is extracted, naturally pure drinking water remains. In other words, no further purification is necessary.

Adam Lazar, founder and CEO of Asarasi Sparkling Tree Water, found a way to put the leftover water to good use. On his Kickstarter campaign, he states that, “We discovered that 500,000,000 gallons of naturally, pure tree-filtered water, the byproduct of maple syrup production, is lost every year through current maple production processes.” The 39-year-old entrepreneur designed Asarasi Sparkling Tree Water as a way to prevent this valuable resource from going to waste. The company has partnered with two big cider and maple companies in New York, for help with putting its inventiveness into action.

After the company extracts the water, it is put into eye-catching, eco-friendly glass bottles. A four pack can be purchased for $5.89 on LuckyVitamin.com, or in grocery stores throughout the United States, primarily in the northeastern region.

While the price of the product may appear daunting to many, the technological innovation brought forth by Lazar may be able to revolutionize the water industry. It is often the case that goods that initially hit the market are too expensive for the average consumer to afford. As market demand and mass production increases, however, the prices of goods decrease significantly and such products quickly become consumer staples. A good example of this phenomenon is the advent of the modern cell phone. When the cell phone first came to market, it was priced at a whopping $4000 with a battery life of 30 minutes. Now, according to the United Nations, 6 billion people have access to mobile phones worldwide.

As a privately owned company, Asarasi Sparkling Tree Water is in control of its own processes and funds. When environmental goals are in the hands of the government, according to Richard Stroup and Jane Shaw, senior fellow emeriti at the Property and Environmental Research Center, “they are subject to a process that is often driven by groundless accusations, supported by public fear, and legislated with special interest in mind. Populist sentiment and pork-barrel politics, rather than actual environmental dangers, currently determine priorities.” Although Lazar is striving to make a name for himself and this company, he has the environment’s best interest in mind.

According to economics researcher Josephine Fogden, unclean water can be a cause of disease, and even lead to death. If Lazar’s company continues with its successful journey, a new and efficient water resource will be available to many. The technology that emerges from the private sector by creative entrepreneurs such as Adam Lazar is crucial to promoting environmental sustainability and reducing global consumption of scarce resources like water.

 

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Israeli Consumers Would Benefit from Greater Competition in Agricultural Industry

By Kristen Carpenter

A gallon of milk in Israel costs approximately $6 and eggs are priced at around $3.50. Meanwhile, the prices of milk and eggs in the United States cost consumers about half as much: $3.20 and $2.41, respectively. Israel’s high food costs can largely be attributed to the country’s arid and hilly landscape being adverse to large-scale agricultural production. As a result, Israelis heavily rely on food imports. While this already makes Israelis vulnerable to fluctuating international market rates, protectionist trade barriers imposed by the government to insulate the local agricultural industry from competition contribute to increased prices for food.

The Jerusalem Institute for Market Studies estimates that ending Israeli agricultural subsidies and protectionist market barriers would save Israeli consumers around 3 billion shekels a year, or just over $850 million in US dollars. Following a series of mass protests against high prices, the Israeli parliament moved to reform the agricultural industry by passing the “Cornflakes Law.”

The Cornflakes Law, formally the Law for the Protection of Public Health Regulations (Food), deregulates certain aspects of the agricultural industry, such as easing imports of nonperishable food. The law also increases import quotas in the country while decreasing the amount that foreign competitors have to pay customs to sell certain food items.

The most promising aspect of the law for Israeli consumers is that it gives supermarkets and small importers access to “parallel import” commodities. Essentially, the practice of parallel importing allows for goods to be imported without receiving the direct consent of the main manufacturer who holds the intellectual property rights to that product. For example, the same brand of rice can be transported directly from Spain or the original producer in Greece instead of going through the primary importer. This drives down the prices of goods for consumers. In effect, easing import restrictions on dry food products has increased competition between domestic and foreign companies. Large supermarkets are decreasing costs through directly importing from foreign food exporters while giving Israeli consumers access to a wider array of products.

Perishable food items are not accounted for under the Cornflakes Law. This is ironic due to the fact that price hikes in dairy products were one of the many factors (along with high costs of other food items, housing, transportation, and gas as well as perceived economic injustice) that prompted a series of demonstrations by hundreds of thousands of Israelis in 2011. During this time of unrest and consumer dissatisfaction, Israelis launched a boycott of cottage cheese and other dairy products to pressure legislators to adopt reforms in the food industry. Yet, deregulatory measures to lower the price of dairy products have yet to be taken.

While implementation of the Cornflakes Law was an important first move in reforming its  outdated protectionist economic policies, Israel ought to continue deregulating the agricultural industry. Removing trade barriers in agriculture as well as extending the scope of the Cornflakes Law to apply to perishable food items would substantially benefit Israeli consumers and foreign trading partners like the United States. These actions would decrease the high costs of food in Israel while encouraging economic growth and prosperity.

 

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How Israel’s Crony Capitalism Undermines Its Reputation as a “Start-up Nation”

By Kristen Carpenter

Israel is often nicknamed as the “start-up nation” for its thriving high-tech industries and successful entrepreneurial ventures. Unfortunately, the country is also known for its protectionist policies in the economic sector. A report by the Brookings Institution found that Israeli industries have above-average market concentration rates across all sectors, including manufacturing, real estate, transportation, and retail. These industries lack market competition as a result, leading to price increases for consumers and higher costs of living.

The Organization for Economic Cooperation and Development (OECD) collected data from 48 member and non-member states to measure regulatory restrictions in the professional services and retail distribution sectors in 2013. The research focused on analyzing price controls, barriers to entry, and other regulations that impact the operation of businesses. On a scale with 0 as least restrictive and 6 as most restrictive, Israel scored a 3.51 in retail trade regulations. This puts Israel as the third most restrictive OECD country, behind Belgium and Luxembourg. By contrast, Turkey received a 2.38 and the United States a 1.90 under the same measure.  

Israel’s regulatory environment and protectionist policies shield businesses from competition at home and abroad. This fosters crony capitalism, a system wherein corporations that curry favor with the government can lobby for regulations to their competition.

Regulations that promote market concentration and shield existing companies from foreign competition encourage Israeli supermarkets to increase the prices of goods. Shufersal, the largest retailer in Israel, opened its doors in 1958 as Tel Aviv’s first modern supermarket. It now has 248 stores across the country. Shufersal and Mega, another major Israeli supermarket chain, own roughly 60 percent of all food outlets. Tnuva, Strauss, and Osem-Nestle control 40 percent of Israeli food processing. The company Tnuva holds a near monopoly in the dairy industry, controlling 70 to 90 percent of dairy sales.

Inadequate competition results in comparatively higher price levels in the food industry. This fosters social unrest. In 2011, the price of cottage cheese had increased by 45 percent over a three year period, prompting a “Cottage Cheese Protest.” Then in 2014, a consumer in Germany posted a receipt from a recent purchase of chocolate pudding from the Israeli brand Milky. The receipt showed that the product costs significantly less in Germany than in Israel, where the good is made, which led to more consumer protests. This led the Israeli government to implement widespread reforms. Later that year, the Israeli parliament, known as the Knesset, passed the “Cornflakes Law,” which aims to reduce regulations with high burdens of entry and smooth the way for the importation of non-perishable food items, such as cereal, rice and crackers. Ironically, the law does not apply to dairy products, the food that sparked the protests.

The United States is no stranger to protectionist policies that result in high prices for consumers. A key example is the Jones Act, which requires vessels traveling through American ports to be owned and manned by at least 75 percent of American citizens and be built in the US. By artificially reducing competition, the Jones Act resulted in significant net costs for the American economy.

In both Israel and the United States, protectionist economic policies have negatively impacted consumers by making goods more expensive for consumers and hindering the economic growth of other industries. Allowing for increased free-trade and market competition from abroad would ultimately prove beneficial to consumers paying lower prices for goods and increase economic growth.

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How Technology is Enabling a Revolution in Effective, Efficient Self-Regulation

By Maia Hass

As the world becomes more technologically advanced, the online peer-to-peer sharing economy grows with it. In the last decade, digital platforms such as Airbnb, VRBO, and HomeAway have introduced more personalized lodging options. However, the unique features associated with these platforms have raised concerns among consumers and legislators about the lack of security that comes with staying inside a stranger’s home. In response, the Miami Dade Board of Commissioners recently passed Ordinance No. 17-78, which requires hosts to acquire certificates of use, limit how many properties they can rent out, and enforce a number of “vacation rental standards” on guests, as well as pay local tourist and state taxes. However, studies show that consumers’ concerns can be alleviated when lodging platforms engage in self-regulation.

Staying overnight in a stranger’s home can be a frightening experience for those who are new to using platforms like Airbnb. Although short-term rentals are independently run, mechanisms for self-regulation are put in place by companies that help ensure consumer safety. With self-regulation, the regulation of goods and services provided to the public is monitored by the private sector rather than the government. One major component of self-regulation that many peer-to-peer platforms incorporate is the use of ratings as a way to measure the reputation of homeowners and customers alike.

In their paper, “Self-Regulation and Innovation in the Peer-to-Peer Sharing Economy,” New York University professors Molly Cohen and Arun Sundararajan emphasize the importance of incorporating reputation mechanisms into business models as a way to “(1) provide information that allows buyers to distinguish between trustworthy and non-trustworthy sellers (2) encourage sellers to be trustworthy, and (3) discourage participation from those who aren’t.” They argue that reviews, ratings, background checks, and other forms of reputation mechanisms solve the market failures inherent in these platforms that government legislation aims to correct through increased regulation. Reputation mechanisms such as reviews encourage trust and facilitate accountability among members of the community.

A study by Dr. Ulrike Gretzel and Dr. Kyung-Hyan Yoo found that roughly 97 percent of travelers from the sample read reviews and ratings while planning their trips, with 61 percent finding reviews more likely to be reliable and up-to-date. When making any decision, whether choosing a destination, picking a place to eat, or booking a vacation rental, the majority of individuals gravitate towards their peers for accurate testimonials on the product or service. In the case of vacation rentals, the mechanism of measuring reputation allows users to treat reviews as confirmation for whether a possible rental is clean, safe, or worth the try.

Alongside its heavy emphasis on reputation, Airbnb has created a “Trust and Safety team” that consists of hundreds of employees who work 24 /7 to screen Airbnb users. They do this by conducting extensive background checks on users and have developed a “risk scoring” mechanism by which reservations on the site are assessed for suspicious behavior. As the company’s site explains, “every Airbnb reservation is scored for risk before it’s confirmed. We use predictive analytics and machine learning to instantly evaluate hundreds of signals that help us flag and investigate suspicious activity before it happens.” In order to foster an environment of transparency, Airbnb prohibits users from deleting reviews that they disagree with. Their site also offers several guides and safety tips available for users to follow before booking or renting out a room.

While certain unpleasant experiences may be difficult to avoid, sites like Airbnb have installed measures to help mitigate this threat and ensure safe and secure transactions. Regulatory barriers may pose threats to the growth of these platforms and negatively impact consumers looking for affordable lodging options. Through online reviews, background checks, and other forms of self-regulation, the private sector can safely and effectively operate without the need for additional government regulations.

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Entrepreneurs Create Wealth that Builds Civil Society

By Giovanna da Silva

On March 4, Whole Foods CEO John Mackey led a discussion on social entrepreneurship at LibertyCon, an international pro-liberty student conference hosted annually by Students For Liberty in Washington DC. Mackey detailed his political and business journey from being the owner of a small organic food store to heading one of the largest supermarket chains in the United States. In his talk, he argued for the importance of businesses directly giving back to communities:

“Businesses are inherently good because they create money for others, but if we–if business doesn’t support the nonprofit sector, we’re forced to have the government become all powerful. It’s very important that we have a vital, effective civil society.”

Many economists cite the fact that traditional entrepreneurs promote economic growth by opening firms, hiring employees, and investing their capital into future projects and investments. In an article published by the Harvard Business Review, Mackey credits the spread of capitalism with the increase in economic prosperity and higher standards of living around the world. He states that over the span of 200 years, the average life expectancy of the world’s population skyrocketed from 30 years to 67 years and global income has increased fifteen-fold.

Within the United States, disdain towards greed and wealth dates to the early Protestant settlers. In their paper “Entrepreneurship and Philanthropy in American Capitalism,” Zoltan Acs, a leading expert on entrepreneurship at the London School of Economics, and Ronnie Phillips, professor of economics at Colorado State University, assert that the Puritans viewed overt displays of wealth and luxury as sinful and advocated instead for the donation of excess profits. They posit that the culture of philanthropic capitalism in the United States arose out of this form of Protestant morality and inspired entrepreneurs to give up large portions of their wealth to charitable causes. For instance, Andrew Carnegie dedicated most of his fortune to philanthropy by founding Carnegie-Mellon University and endowing over 3,000 public libraries, and many other public institutions. Similarly, Johns Hopkins University, MIT, Duke, and the University of Chicago were all founded by entrepreneurs seeking to make a lasting impact on society.

According to researchers at the Heritage Foundation, American entrepreneurs donate 80 percent more of their income to charity than the general population. Across income brackets, Guinevere Nell and James Sherk found that entrepreneurs contribute more to philanthropic causes than others do. Warren Buffett himself has donated a total of $46 billion to charity over the span of 17 years, which translates to over 71 percent of his wealth.

In Conscious Capitalism, Mackey argues that in the modern era, businesses must act as the driving force for social change. Businesses, he says, “must lead in the journey of human evolution rather than trail behind or be victimized by it. Business leaders must learn to heed the call for transformation and growth coming from within themselves, from their stakeholders, from society, and from evolution itself.”

As Acs and Phillips point out, measuring the social and economic impacts of the universities, foundations, libraries, and charitable organizations founded and funded by entrepreneurs is difficult. Through conscious capitalism, however, many businesses have incorporated into their mission the desire to leave a civil legacy with society and resolve social ailments without the help of the government. Whether their motives are based in altruism or more self-centered reasons, society collectively benefits from their contributions.

 

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Gentrification in Frenchtown: A Nuanced Perspective

By Jordan Greer

Gentrification has been contentious since British sociologist Ruth Rich coined the word in the 1960s. Rich used the term to describe the process of wealthy citizens, landlords, and developers moving into British working class neighborhoods and renovating the area. This process of redevelopment, she argued, drove up the costs of housing and resulted in the displacement of the original residents. Some argue that Tallahassee is experiencing a similar phenomenon.

As Florida State University continues to grow its enrollment,  the demand for student housing steadily increases. Nearby Frenchtown residents have cited concerns over pressures to gentrify the area. Analyzing differing viewpoints on the subject can provide context to the debate over gentrification in Frenchtown and help devise appropriate policies for addressing citizen concerns.

Researchers debate whether gentrification benefits or disadvantages cities and low-income residents. Some academics claim that gentrification increases property values, displaces local residents, threatens the cultural character of communities, results in increased income inequality,  and promulgates class conflict. Sociologist Yamakata Zukin claims that gentrification fails to raise the median-family income of economically vulnerable residents.

Others academics counter that gentrification is a politically laden term that simply refers to the process of economic transition and prosperity that occurs in neighborhoods where capital is invested. Economist Jacob Vidgor argues that gentrification provides job opportunities to low-income residents and leads to higher quality public services due to an increase in the local tax base. Columbia University urban-planning professor Lance Freeman and economist Frank Braconi found in their study of seven gentrified neighborhoods in New York City that housing turnover rates were 19 percent higher in poor, non-gentrified areas than in gentrified areas, concluding that gentrification may not necessarily displace residents.

The University of Pennsylvania’s Penn Wharton Public Policy Initiative notes that gentrification occurs in large part due to economic opportunities available in urban areas. Market demands and zoning restrictions create “supply-side pressures” to revitalize blighted areas. Middle and upper-class citizens are attracted to urban areas because of job opportunities in the city and a desire to avoid long commutes. Limited and costly housing in “established areas” of the city incentivizes demand for developers to revitalize — and therefore gentrify — lower-income neighborhoods. City zoning laws artificially restrict the supply of housing due to regulations imposed on the height of structures, limitations on housing density, and regulations on the sizes of apartment units.

In an interview for this article, Curtis Taylor, Tallahassee Urban League Housing Development Coordinator, states that residents of Frenchtown feel the city is crowding them out by allowing student housing to replace parts of their neighborhood. He claims that residents perceive gentrification as a threat to the future existence and vibrant culture of their community.

Today, residents of a much smaller and much less economically vibrant community are all too aware of the challenges the neighborhood faces as a new wave of development threatens to eat away at the traditional fabric of the neighborhood. They have watched over the years as the physical footprint of the community shrank as the city made way for more students.

The needs of students, however, are also important to consider. Increased competition for housing can result in higher rents for students. Oftentimes, affordable housing in low-income neighborhoods is the only viable options for students. Some students may prefer to live in detached houses near campus. Furthermore, students are a crucial part of the city’s economy. Spending by FSU students both on and off campus amounted to over $1 billion in 2016. FSU students also generated around 14 percent of sales tax revenue in Leon County in 2016.

The issue of gentrification in Frenchtown is a complex one, as it deals with the conflicting interests of residents and students. Approaching gentrification from a nuanced perspective is an important step towards addressing increased demands for student housing in a manner that respects the needs and wishes of local residents.

 

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Why the U.S. Should Adopt the Nordic Approach to Private Roads

By Giovanna da Silva

Many view the United States as a free market capitalist state and Nordic countries such as Sweden and Finland as socialist due to their extensive welfare system. Yet, in the United States, most roads, highways, and other transportation infrastructure are publicly owned and operated. Meanwhile, the vast majority of roads in Sweden and Finland are operated by the private sector and maintained by local communities. Examining Sweden and Finland’s public-private road model may give us insight into how private roads can operate in the United States.

Two-thirds of roads in Sweden are privately operated and managed by local Private Road Associations (PRAs). These road associations are composed of homeowners who live along private roads. An estimated 140,000 kilometers (about 87,000 miles) of roads are the responsibility of 60,000 PRAs. While most Swedish private roads do not experience a high level of traffic, the delegation of roads to the private sector helps the government offset costs. Government works in conjunction with road owners and associations to subsidize the costs of repair and maintenance. Around 24,000 PRAs receive government subsidies.

The costs of upkeep are divided among members of the association. PRAs that do not accept government subsidies can prohibit traffic at their discretion. Those that receive subsidies must allow all vehicles to travel on their roads. Regardless of whether they receive funding, however, the associations may not ban horses, bicycles, and pedestrians from using the roads.

Private ownership by PRAs has proven to be a cost-effective measure for operating roads according to the the Swedish government. In 2001, a government-commissioned evaluation found PRAs could run their roads at about half the cost as for the national.

Finland employs a similar system. Many private roads are managed by local cooperatives. Finland has 78,000 kilometers (about 48,500 miles) of public roads and 280,000 kilometers (about 174,000 miles) of private roads. Of the 5 million people who live in Finland, around 700,000 of them reside near a private road. Like Swedish PRAs, Finnish cooperatives are made up of homeowners who live proximate to private roads. These homeowners collectively maintain their local roads and are eligible to receive subsidies from the federal government to cover a portion of their expenses.

The Finnish government determines the subsidy amount based on the amount of traffic that a road bears and the number of houses it serves. The geographic location and average income of the area also figure into its consideration. The shift in road management to the community ensures that roads are taken care of on a regular basis. This makes for a more efficient and democratic system of road maintenance because community members, unlike government officials from far away, are distinctly aware of the needs of their roads.

The private sector can be engaged to provide transportation services through several different approaches. Depending on population size, certain frameworks may produce more favorable outcomes than others. For instance, toll roads operated by private companies, as is the case with the Dulles Greenway in Northern Virginia, are preferable to local associations composed of community residents due to high volume of vehicular traffic.

On the other hand, sparsely populated regions of the United States may benefit greatly from implementing the Swedish model of privatization and establishing local private road associations. The government could help subsidize the operation costs to avoid imposing toll fees on outsiders who use the roads. This may also decrease operation costs and improve the quality of rural roads that are often neglected due to lack of state and federal funding.

Different models of public-private partnerships ought to be experimented upon in order to determine what works best for different cities and localities.

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Private Toll Roads: A Case Study of Tallahassee’s Orchard Pond Parkway

By Giovanna da Silva

Florida boasts the highest number of toll roads in the country. Until last April, state and local governments owned and operated all of Florida toll roads. Tallahassee’s Orchard Pond Parkway challenged this precedent, however, opening to the general public in 2017 and becoming the first privately constructed and operated toll road in Florida.

Financing new road projects can be difficult for state and local governments, as the federal Highway Trust Fund often experiences budget shortages. According to the Heritage Foundation, the Highway Trust Fund pays for one-fourth of public highway spending. In testimony before the Senate Finance Committee, Cato Institute’s director of tax policy studies Chris Edwards advocated for private-public partnerships, the repeal of regulations that prohibit tolls on interstate highways, and the privatization of state transportation to reform highway funding and offset budget gaps. Many cities in Florida resort to building toll roads to fund road maintenance. With the help of the private sector, toll roads can mitigate gaps in road funding on the federal and state levels. The success of Orchard Pond Parkway can serve as a model for increased public-private partnerships within Florida and the rest of the nation.

The Orchard Pond Parkway is a 5.2 mile two-lane toll road that spans North Meridian and Old Bainbridge roads and runs parallel to the existing Orchard Pond dirt road. The parkway helps alleviate traffic in the Northeast area of the city and reduces travel time to the Tallahassee International Airport.

Road construction began January of 2015. Jeff Phipps, Tallahassee resident and owner of the land, opened the road to the public on April 18, 2016. Phipps contracted M of Tallahassee Inc., to build the road and construction costs totaled around $17 million. He took out a 30-year loan from the Florida Department of Transportation of $13.5 million and invested $3 million of his own money to finance construction. Phipps is leasing the road from Leon County to operate and maintain for 99 years. After this period, Leon County will assume sole ownership of the road. Toll revenues go towards upkeep and paying off the loan.

Phipps designed the road to minimize its environmental impact. He used 45,000 pounds of recycled concrete to build the road and incorporated wildlife crossings such as ecopassages, culverts, and other passageways to allow animals of different sizes to safely travel under or alongside the road. To reduce traffic noise, he leveled the road and constructed a 20-foot berm. He also built an accompanying  pedestrian-friendly bike trail on the old Orchard Pond dirt road. Additionally, Phipps plans to sell a large part of his land to the state for conservation.

“By building it [the parkway] myself,” he said in an interview with the Tallahassee Democrat, “I hope I can do a better job than if it had been done (by a government agency) on a tight budget. We’ll be able to save more trees and do more for wildlife.”

Use of the road has steadily increased since its opening. Phipps initially estimated traffic to be between 500 and 1,000 cars per day. It now averages 1,5000 to 1,650 cars on weekdays and 1,050 and 1,250 on weekends. The toll is $1.69, reduced to $1.19 for drivers with SunPass cards.

Based on current projections, Florida’s population is expected to grow from the current 20 million to roughly  23 to 27 million  by 2035. This increase will likely place pressure on roads and public transportation infrastructure. Public-private partnerships such as the successful Orchard Pond Parkway project may be the solution to road construction and maintenance amidst budget shortages and population growth.

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Middle Eastern Entrepreneurs Face Regulatory Hurdles

By Kristen Carpenter and Giovanna da Silva

Entrepreneurship often serves as a means to achieve social change. In the Middle East, social enterprises such as Glowork foster advancement by providing the disenfranchised with empowerment and professional development opportunities.

Many entrepreneurs and employment seekers in the area, however, face regulatory hurdles to starting their own business. Excessive regulations stifle job growth and increase unemployment rates. Reducing the amount of bureaucracy in the employment sector is crucial to promoting a healthy environment of entrepreneurship and increased rates of employment, thus facilitating increased economic growth.

Prospective entrepreneurs can face arduous regulations before they receive approval to create an enterprise. In Saudi Arabia and the United Arab Emirates, registering a business with their respective national governments can cost around $15,000. The cost of starting a business is highest in Yemen, however, where expenses amount to 73.5 percent of income per capita. In the West Bank and Gaza strip, registration expenses can reach 45 percent of income. In contrast, startup costs in Europe and Central Asia are just above four percent of income per capita. These exorbitant fees restrict those with entrepreneurial aspirations but little financial capital from starting their own businesses.

The World Bank’s “Doing Business” project collects data from local businesses in 190 countries and analyzes the regulations they face overtime. The project uses this information to compare regulatory environments of nations and regions worldwide. According to the report, Middle Eastern and North African (MENA) nations ranked in 115th place on average for “ease of doing business.” In the same category, Latin American and Caribbean states averaged in 110th place while the European Union ranked in 34th place. In Lebanon, securing a license to construct a warehouse averages 249 days, with the MENA regional average at 132 days. A business will need  90 days to receive electricity in Qatar and 68 days in Saudi Arabia.

Businesses in the Middle East are also constrained by stringent labor restrictions which contribute to a high unemployment rate in the region. Middle Eastern youth aged 15 to 24 experience a rate of unemployment at 21 percent. This contrasts with the global average rate of youth unemployment of 13 percent. While certain regulations are justified in order to protect the rights and safety of workers, an excessive amount of government involvement in the labor market decreases the rate at which companies employ workers. This especially hinders vulnerable groups such as women and young, inexperienced people from acquiring employment.

Several Middle Eastern countries require businesses to pay fines for each person they fire regardless of the cause. In some cases, the business owner must re-train employees instead of firing them. This policy decreases the quality of customer service and disincentivizes workers’ productivity. It may also encourage employees to see their employment as a fixed source of income, unrelated to their job performance. Under this labor regulation, businesses are discouraged from hiring new workers. Additionally, this regulation encourages corruption and rule-breaking. Employment laws are often evaded in both the public and private sector.  

Companies avoid firing fees by signing a fixed-term contract with employment. Those working on fixed-term contracts, however, earn lower wages, experience higher turnover rates, and are trained less on average. Fixed term contracts also provide little opportunity to move up in the company.

Not surprisingly, 38 percent of firms in Lebanon report that labor regulations are a “major constraint to doing business,” followed by Oman at 35 percent, Syria at 34 percent, and Jordan at 14 percent.

The public sector is responsible for a large portion of employment in the Middle East due to government intervention in the economy and the nationalization of industries such as oil production notes the Brookings Institution in Washington, D.C. Incentivizing the growth of entrepreneurship in the private sector is integral to combating high unemployment rates. Lifting employment restrictions, streamlining the licensing and permitting processes, and decreasing the cost to register a business with the government are all important measures that must take place in order to advance the growth of entrepreneurship in the private sector and improve the standard of living of those who are unemployed.

 

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Bethel Church Vital to Frenchtown Community Redevelopment

By N’namdi Green

Today, faith-based organizations continue to influence communities beyond the religious realm. Bethel Missionary Baptist Church of Tallahassee is a prime example of a faith-based organization inserting itself into non-conventional fields.

Bethel has been at the forefront of economic development within the Frenchtown community in Tallahassee for almost 30 years. This includes past projects such as Bethel Towers, a 60-unit affordable housing apartment complex for the elderly, and the affordable housing neighborhood of Carolina Oaks. Leaders from the church see economic development as a platform to give back to the community. Bethel’s redevelopment projects seek to re-establish the once vibrant identity of Frenchtown.

An upcoming project on West Tennessee Street, proposed in conjunction with the Frenchtown Redevelopment Partners LLC, is one way the church hopes to bring economic prosperity and identity back to the Frenchtown community. This initiative is a mixed-use housing complex with a grocery store, retail space, economy drug store, a financial institution, and office incubators.

The reasoning for fusing these various entities together is rooted in the expressed needs of the community and the vision the church has for the area according to those directly involved in the project and interviewed for this article. In an interview for this article with one of Bethel’s economic empowerment leaders, members of the community approached Bethel with their ideas about what should be included in the project. The church took these suggestions under consideration. By working with community members, they believe, Bethel provides the foundation for restoring Frenchtown without sacrificing its identity.

Bethel’s leadership felt the community lagged economically compared to other parts of Tallahassee such as Midtown, a neighborhood that encourages development with a sense of culture. Bethel intends for the project to remedy some of the neighborhood’s economic shortcomings by developing businesses and educating members of Frenchtown through community empowerment programs. The proposed financial institution would counsel individuals on topics such as personal budgeting, money management, and debt prevention. If members of the community are economically empowered, Bethel believes the neighborhood will begin to thrive again.

A 2015 report by Governing Magazine states that programs funded by Cities for Financial Empowerment Fund (CFE Fund), a non-profit organization, saved clients an average of  $3,000. They did so by providing one on one financial guidance for individuals in poor neighborhoods in five major cities across the United States. Financial education initiatives and economic redevelopment are pertinent to Bethel’s focus of regaining Frenchtown’s unique economic identity.

As the project continues, Bethel may be laying important groundwork for a new path toward private-sector led urban revitalization. Whether these efforts create sustainable roots in the community has yet to be seen, but ongoing research and monitoring of these projects should provide important clues to how cities can reset the course of economic development in marginalized communities.

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