Earlier I did a post about Silver Bullets. Silver Bullets are ideas or interventions that we get infatuated with, and we start thinking, "If only we could do X...then it would work [or I would be happy!]" In my post, I fessed up to many of the international development Silver Bullets I have become infatuated with over time. I noted that, alas, real Silver Bullets are rare, and that economic growth and opportunity usually require a lot of different things that reinforce and promote each other.
This reminded me of a graphic that Legatum has put together called the Legatum Prosperity Ladder. It is a nice attempt to show how different financial instruments are important at different stages of a country's development. Grant funding is needed when countries are really poor, followed by microfinance at the next stage of development, then private equity, and finally public capital markets for the most developed economies. This Ladder is a nice antidote to those who think that any one form of financing is a Silver Bullet for economic development.
As I reflect on Legatum's ladder, I realize that it can also be applied to the different life stages of regular people -- even in rich countries. Many of us have ascended this ladder in our lives.
By all measures, I am among the best off people in the world. I was born in the most affluent country, grew up with positive role models, and went to some of the best schools. And I have worked at some of the best organizations and companies. But it could have been different. Here is my own story:
My success is due in no small part to hard work and determination--but also to an incredible amount of luck and assistance from others. My family ended up living below the poverty line for several years when I was in grade school and junior high. Luckily, there were grant-funded programs that enabled my siblings and me to be productive in school nonetheless. For instance, we ate free and reduced-price school lunches. My family was also eligible for food stamps (though we were usually too proud to accept them).
When her last child entered first grade, my mom, who was a single parent with five kids at home and few job skills, was trained and temporarily employed by a public jobs program. This program provided provide temporary income and then a stepping stone to regular employment for her. Some of us older siblings were able to get work as well - delivering papers, waitressing, etc. Our household income rose, so we were able to depend less and less on food subsidies and more on our own resources.
But we had few extra resources for education. I was able to get an extraordinary education, even though my various odd jobs could only pay for books and modest other fees. My public education was free, and then I received scholarships to a high-quality prep school, university, and graduate school. That schooling in turn enabled me to get an excellent job.
It was only when I was twenty-five that I began my full-time professional work life. Finally I was able to pay my way and take advantage of private financing markets through borrowing for a mortgage and equity ownership. After fifteen years working at my first job, I had, at age forty, accumulated enough experience and wealth to help launch my own organization.Everyone starts out life grant funded (usually through a combination of family, public, and sometimes other private support). If things go right, we leverage this early stage "investment" in our productivity to get good jobs and/or start businesses and become largely self-sufficient. And then, as we age, many of us come to depend again on a form of grant funding through Social Security, Medicare, Medicaid, and other forms of assistance for the elderly.
All of this leads me to think that, in developed economies at least, the Prosperity Ladder is actually a Prosperity Circle.