The New Economic Paradigm

I’m on a bit of a hot streak with facilitating some great teacher trainings, and I am highlighting what it is I do with the teachers here on the blog. This post is an explanation of my second teacher training of the year. The first training was on the importance of entrepreneurship. A warning and an apology: I got a little carried away on this one. It is long, but I hope worth it.

During teacher trainings we do not just talk about concepts and theories. We also go over teaching strategies and activities to do with the students. In this particular training I introduced what has basically become my personal teaching paradigm:

“Teach by asking questions, don’t teach by giving answers.”

I’ve gone over this paradigm before and its philosophical underpinnings, so I won’t go over them again. However, it is something extremely important to work on with Nicaraguan teachers. I like to call the Nicaraguan school system a “loudspeaker” system (don’t worry, in two and a half months I will have a full blog post on my theory). In the absence of teachers, the Ministry of Education could simply put a loudspeaker in every classroom and broadcast lessons from an air conditioned studio in Managua. They would get the same results. This is problematic, because the students do not learn how to think. They simply receive information, which they may or may not retain.

The answer is to get teachers to start making more interactive classes that incorporate more critical thinking. The classes on idea generation, creativity, and innovation in the entrepreneurship curriculum are ripe for this sort of change. I’ve seen far too many teachers and Volunteers simply tell students that creativity and innovation is important when they offer products and services. Period. No justification, no explanation, no helping the students understand for themselves why this is the case. My main goal for this training was to get that to change in León.

Once we convince the students (and their teachers) that there is a need for a “new economy,” the next step is painting a picture for them of what that looks like. It is one thing to say, “Be creative!” but it is a whole new challenge to teach the students what that means and how they can come up with innovative ideas.

The current economic paradigm goes something like this:

“I need a job… There is no work… I have to put a business in my home… What do I have familiarity with?”

This attitude begets the same old ideas over and over again. In every Nicaraguan neighborhood you will find various convenience stores, a pharmacy, maybe a bakery, and some used clothing shops. On each end of my block this is a corner convenience store. That’s two convenience stores literally one block from each other. It is completely unnecessary.

If someone does not want to put a business in their home they can sell door to door. No need for knocking in Nicaragua. You just yell in a shrill nasally voice what you are peddling, your voice penetrates all walls in all houses, and if someone wants your product they just open the door and yell at you, “Muchacha!” However, to get the product to someone’s front door you have to wake up at the crack of dawn, go to the market to get the primary goods, and then maybe head to the local grind mill to grind it up (think corn for fresh tortillas, people). This is all while you are trying to get the kids out the door. Once they are out of your hair you run out and get some firewood for the clay oven, then you fire it up and start cooking, which lasts all morning. The fumes probably do not vent very well, and your lungs become a little blacker every passing day. When the kids get home for lunch you better have something ready for them to eat. In the afternoon you fill a basket with your products, place it on your head, and hit the streets. After all that work you may only earn C$ 0.75 (not even $ 0.03 at the current exchange rate) per tortilla, before you factor in input prices and labor!

Worst of all, it is not as if Nicaragua has a shortage of tortillas, convenience stores, or crappy bakeries. People just turn to this kind of work out of pure necessity. And the result is extremely high levels of competition and razor thin margins. Sometimes I wonder if the tortillerías are earning at all. They must have to churn out thousands of tortillas a day to squeak out a profit.

A Volunteer from Matagalpa took this picture from Cerro Apante and used it to illustrate copying in Matagalpa. She says that each arrow represents a bakery. I doubt that she actually located each bakery in the photo, but whenever I show it to teachers or students no one doubts me. And whether the arrows represent bakeries, pharmacies, convenience stores, or used clothing stores, the message gets across. The old economic paradigm is pervasive and damaging.

My strong belief in the need for new ideas comes from my education in economic theory. I may be (un)employed as a volunteer, but if you asked me what my profession is, I suppose I would have to say that I am an economist. I don’t remember enough from Intermediate Macro to get into the intricacies of endogenous and exogenous growth models, but I see strong reason to believe that technological progress is the driver of real economic growth. To me, technological progress does not only have to mean the invention and implementation of new technology, but can also refer to the implementation of more efficient processes, increases in productivity, and offering new products and services that people like or need. In any case, something positive has to be done internally to the economy to drive growth.

This is the first step in changing the attitude of the students. We need to convince them that Nicaragua is yearning for new ideas. What does the new economic paradigm look like?

“I don’t want to work just for subsistence. I want to create something new! Maybe in the process I can help my family, my community, and the country.”

“What is my community lacking?”

“What resources can I exploit?”

“What are the problems in my community?”

“How can I alleviate the problems of our daily lives?”

“Is there a luxury that I can offer?”

“What is in high demand but has very short supply?”

Once that strong platform of the importance of new ideas has been sturdily built we give the students tools to come up with new ideas. One is called the five factors to generate ideas. The students make rapid fire lists for each of the five factors:

• Resources in my Reach
• High Demand, Low Supply
• Problems and Annoyances in Daily Life
• Community Problems
• Tastes and Preferences of the People

We also teach them something called the Osborn Model, which is a simply technique to come up with new ideas. You think of an object, and then think about how you can change it. Modify it. Substitute something. Add something. Reduce or enlarge. Invert. Take away. Divide. Combine. Reorganize.

I like to use the example of a backpack with students. You put “backpack” in the center circle (all you need is a whiteboard for this classroom activity), and then start thinking about all the ways you can change up a backpack. And there are a million things you can do to a backpack. Add speakers. Add a rechargeable battery. Put on solar panels. Change the fabric to make it waterproof or super light. Take a strap off to make it into a shoulder bag instead of a backpack. Reduce the size to make a chic mini backpack. Add extra pockets. I’ve had students come up with more ideas still that I can’t remember.

Recently, I was thinking about my watch which is back in the States. It is a nice Citizens that my Grandma got me when I graduated college. However, I don’t like wearing it when I type on a computer. The metal hitting the keyboard irritates me. It would fit into the category “Problems and Annoyances in Daily Life.” So what can we do? Put “watch” into the Osborn Model. And just like that I thought of a metal watch, but the wristband on the underside of the wrist is made out of a softer material.

Of course, neither I nor most of my students have the knowledge or ability to produce this type of watch. And that I believe is the last part of the puzzle of the new economic paradigm. The students need to use their knowledge, skills, and abilities as a filter to see which ideas that they come up with are feasible or not. Luckily, one of the first classes in the curriculum we go over what an entrepreneur is and have the students reflect on their own personal knowledge, skills, and abilities. It is actually a very difficult class because a lot of internalized poverty and machismo bubbles to the surface in the students. You hear them say that they are not good at anything, or the girls say that they only know how to clean.

“The oppressed, having internalized the image of the oppressor and adopted his guidelines, are fearful of freedom.” ― Paulo Freire, Pedagogy of the Oppressed

I personally have not done a great job with that class, and reflecting on things I think I need to brainstorm some strategies with the teachers. Many of the students, boys and girls included, truly do have unique skills and knowledge, and exploiting them for new product and service offerings would not just be great for the economy, but for their self-esteem as well. In addition, this year I am trying to emphasize the importance of entrepreneurship for women. If we can’t get past this first hurdle at the beginning of the class we are not going to make much progress creating new economic opportunities for women.

So put together the students’ personal knowledge, skills, and abilities, help them adopt a new attitude toward work and economic activity, and give them some tools to come up with new ideas, and you have the recipe for success. Writing this article is helping me reflect on how I did with the teachers, and I think I need to work on the uses of the Osborn Model a bit more, plus what I mentioned about knowledge, skills, and abilities. I don’t want to let these foundational themes slip through the cracks before I leave, because they are so primordial to the success of the class.

At that point in the teacher training I’ve been going for two plus hours and the teachers start to glaze over a bit. I could go on for two hours more (and as anyone who has read this far would expect, I’m going to flesh it all out here on the blog), but instead I give the teachers a break and give some examples of good products, in pictures and TED Talk videos.

This awesome contraption is a cradle with built-in mosquito netting. The owner only needs to put in a small mattress and a baby can sleep easy without running the risk of catching a mosquito borne illness. So far this year in Nicaragua six people have died from mosquito borne illnesses (Malaria, Dengue Fever, Chikungunya, and/or Zika virus), one of which being a two month old just last week. This particular cradle was made for my host brother Juan Pablo by his paternal grandfather when he was born, a man who taught carpentry professionally. Juan Pablo, now more than 6 ft tall and having no need for the cradle, recently donated it to a local orphanage. If only his grandfather had commercialized this product he could have been extremely successful and helped contribute to alleviating a serious community issue. I asked the teachers if they thought that this could be commercially successful, and all of the teachers raised their hands.

I do not want the teachers or students to think that what we are asking of them – coming up with a new idea from scratch, taking into account their personal knowledge, skills, and abilities – is too difficult, so I also showed two TED Talks that highlight how accessible entrepreneurship can be, and also how impactful it can be for a community:

From the narrative, the problems in Malawi were more severe than what we encounter in Nicaragua (although we are in a serious drought at the moment). Nevertheless, a motivated young man used his ingenuity and a library to help solve numerous problems and pump water. In the case of the South African, he was certainly a very skilled chemist, but there is absolutely nothing stopping one of my students from gaining the same information from class, books, and the internet, and creating an innovative product. Plus, computers and internet in León seem more accessible than in that young man’s town.

I have one more cool video about using innovation to solve problems, but I did not show it in the interest of time. I would probably be more inclined to use it in an engineering or university setting:

Value Added Production

I like to go one step further with the teachers and students, not only to help them see that there is a dearth of new ideas in their communities, but also to steer them towards to more innovative and profitable products and ideas. There are three basic types of business:

• Production
• Commerce
• Services

First, I ask the teachers (or students if this were a group of students instead of a teacher training) to shout out businesses in Nicaragua. Inevitably, we almost always get the same answers:

• Fritanga (streetside food vendors)
• Shoe stores
• Shoe repairs
• Tailors
• Clothing stores
• Restaurants and bars
• Hotels
• Supermarkets
• The Nicaraguan equivalent of big box retailers
• Movie theatre
• Yazaki (Japanese car parts manufacturer that operates a large free trade zone factory in León)
• Tortillería
• Bakery
• Pharmacy

I could go on, but there is no need. After we have the list we go over definitions of the three types of businesses. Production is when you actually make something. Commerce is retail. It is when you buy something and then resell it to the public. And service is when you offer an intangible good. Our students have to come up with a production or services business, not commerce. Then, we categorize our list of businesses. There is always a little bit of confusion with fritanga, bars, and restaurants, but I get the last word. In my opinion, they are mostly services, because they are primarily providing the service of cooking for you and in some cases offering a nice environment for a meal or a drink.

Test yourself and see how well you can categorize the list.

In total there are six services, three producers, and five commercial businesses. Inevitably, production is the most underrepresented of the three categories. That is the sad reality of Nicaragua. The country does not produce much outside of agriculture. It imports a lot. Remember the antiquated economic paradigm? “I need to put a business in my house. What am I familiar with?” It certainly isn’t production. That’s why the current economic paradigm is leading to a stagnant economy. You’re not going to grow an economy by putting more retail in every neighborhood.

Of course I want to focus on production, so I introduce the concept of the value added production chain. When we produce things, we start with primary goods, and through processing, packaging, preservation, distribution, and other processes we add value to the primary goods in order to deliver a more desirable product to consumers. Value added production in some ways is the backbone of the diversified labor economy. It allows some people to not be subsistence farmers. Not everyone has the time to expel oil from vegetables and other primary goods, so we pay certain companies to do this for us. That is one example of the production of an intermediate good with added value. Cooking oils are intermediate because they are generally not directly consumed, but instead further used by consumers or producers to make finished goods.

I want the students, and Nicaragua in general, to position itself in the intermediate stages of this value added production chain. Producing intermediate products can be extremely lucrative, because a well packaged and preserved intermediate product (especially when we are talking about food products) can be scaled up and widely distributed. Of the three production businesses in our list – Yazaki, the tortillería, and the bakery – only Yazaki is well positioned on the value added chain. And it’s a foreign owned business. Of course, the students are most familiar with finished products (tortillas and bread, as examples), so that’s what they propose as product ideas. Sometimes you would think that the class is a cooking class, not an entrepreneurship class. The kids come in with finished plates of food, or worse still smoothies or milkshakes.

I go through the motions of teaching them about the value added chain, the difference between primary, intermediate, and finished products, and why value added production needs to be done in Nicaragua. I’ve mentioned time and time again the famous case of the plantain chips. The plantains are grown in Nicaragua, shipped down to Costa Rica, processed, packaged, and then shipped back to Nicaragua. The Costa Ricans are gaining the majority of the profit off of a product that could easily be produced domestically. All the money that Nicaragua earns for growing the plantains is being lost to the Costa Ricans. Nicaragua’s trade imbalance is not healthy, and I see no reason why Nicaragua can’t begin to correct it.

External Balance on Goods on Services as a % of GDP (Trade Surplus/Deficit)

The next step is convincing the students that intermediate products are more profitable than finished products. At the end of the lesson I literally ask them if they are convinced. I bring in the packages of some common foods, such as Jello, ramen noodles, and Tang. I made on poster paper a map of a town with a few cross streets and intersections, and I put adhesive plastic over the map so that I can draw on it with marker and erase. Then I draw a few little food vendors on the map to show hypothetical people or families that can earn a few bucks selling prepared Jello, ramen noodle soup, or simply selling Tang packets at their convenience stores. But then I ask the question, what about the companies that make the intermediate goods – the gelatin powder, the dried noodles, and the Tang – themselves. Those companies are selling to every vendor in my little town, plus in other towns, and other countries still. Which do you think is more profitable at that point? Selling the intermediate good or the finished product?

Assuming that they are convinced (if they aren’t I suppose I would just self-immolate myself right then and there and put an end to their misery and mine) there is one last step in the learning process. I bring the students’ or the teachers’ attention back to the list of businesses from the beginning of the class and I ask them how many offer intermediate products. On my list only Yazaki does, and often times there are none. That is not to say that there are no examples in Nicaragua at all. There are plenty. However, there are usually small producers that are not very visible or foreign owned companies like Yazaki. Flor de Caña rum is one prominent example that actually is a large Nicaraguan owned business, but other examples are more difficult to come by.

So hopefully at this point we have come full circle and the teachers are prepared to begin creating the new Nicaraguan economic paradigm. Assuming that the students realize the importance of entrepreneurship, they can use that drive to find problems that need to be solved, and offer a commercial solution to that problem, for the betterment of their lives and Nicaragua. I said that this teacher training on a new economic paradigm was prefaced with the new question asking teaching paradigm. I like to come back to that one more time so the teachers reflect on my teaching methods with them during the training, and also how these themes lend themselves so nicely to the question asking (also known as the problem posing method) method in the classroom with the kids.

My next teacher training is scheduled for March 15. I have not planned it out yet, but I do have some ideas coagulating in my mind.