BOP 5

Book Review: Chapter 5 (Reducing Corruption: Transaction Governance Capacity)

Book: The Fortune at the Bottom of the Pyramid

Library Reference: None

Amazon Reference:

Quote: “Most developing countries do not fully recognize the real costs of corruption and
its impact on private-sector development and poverty alleviation. The capacity to
facilitate commercial transactions through a system of laws fairly enforced is critical
to the development of the private sector.”
-C.K. Prahalad

Learning Expectation:

For this chapter, I would like to learn if the poor are really poor and I also want to learn about the ultimate paradox. I also want to learn about TGC. Other than this, upon scanning the contents, by the end of this chapter I expect to learn about the Andhra Pradesh e-Governance Story.

Review:

The first thing in this chapter that I have noticed was the discussion with the header “Are the Poor Poor?” This title is very interesting and the question was stuck in my head. Are the poor really poor? It is stated that the poor are poor because they lack resources. I agree with this. People are indeed poor but not only because they lack financial resource. People are poor because they also lack in other resources that could aid them in improving their situation. Based on my understanding, this is only one of the assumptions that people have because they think that knowing this would help in poverty reduction by aiding them.

In my point of view, even if I agree with the statement that the poor are poor because they lack resources, there are still other possible reasons as to why they are poor and it can also be dependent in the way that their minds run. Some poor people think that they are born poor and will die poor no matter how hard they try so they don’t try at all.
Aside from this, another thing that I have noticed in this chapter is the part about building TCGs. TCGs are about creating transparency and eliminating uncertainty and risk in commercial transactions. This is quite interesting because it is said that it is more than laws or regulations. By the way, TCGs stand for transaction governance capacity. It consists of laws, regulations, social norms and institutions. For me, it is good that people came up with such an idea as the TCG. If you eliminate uncertainty and risk in commercial transactions, it makes people believe it is safe and gain more trust. Another is the lessons from the Andhra Pradesh Experiment. The most important lesson here I think the equation wherein the cost of being inside the system when divided by the cost of being outside the system is less than or equal to one. In my understanding, the benefits of being inside the system are much greater than outside the system’s.

What I Learned:

By the end of this chapter, I learned about the transaction governance capacity. I have also learned about the different assumptions that people have with regard to whether the poor are indeed poor. Another is the conclusion that came up in relation to the said assumptions. Of course, I also learned about the Andhra Pradesh Experiment.

Integrative Questions:

1. What is the ultimate paradox C.K. Prahalad was referring to?
2. What is TGC all about?
3. What is the significance of the Andhra Pradesh e-Governance Story?
4. What are the lessons from the Andhra Pradesh experiment?
5. What is the significant role of TGC?