Martin Burt, the former Mayor of Asunción, is holding a paella for twelve in his hands. Asunción's finest is around his table. But none of us is getting any paella. Martin is standing there, eyes locked on the TV screen. Riots have broken out, the local station tells us. The city is in flames. Martin has seen his share of this in Paraguay. It was Burt who, as Mayor, after the 1989 toppling of President Stroessner, refused to let the army into the capital, bringing in municipal garbage trucks instead to cordon off and contain the trouble-spots. But this is new. This isn't his city in flames. This is mine. This is London. "You know what else?" my neighbour comments as the news flash ends and moves to the Eurozone crisis, "In Paraguay we also have 14.5% growth."
Has the first world-third world distinction broken down? Is what London is experiencing now a glimpse of the OECD's future, one where patterns of immigration, unequal development and now new social media have created a structurally unstable society? And if it is, do we need to learn fast how to deal with these new challenges?
I'm in Paraguay for a BBC World documentary focusing on an education project of Burt's that might offer some ideas. Eight years ago Martin had a realisation. A systemic change was needed to address Paraguayan poverty. "For 1500 years people have been farmers in Paraguay" he commented, "and guess what? They are still poor. It's not good enough to teach people to be farmers." says Burt, "You need to teach them to be successful farmers."
Burt's Fundación Paraguaya, set in the Chaco, one of Paraguay's poorest rural regions, would do just that. It would take 15-18 year old kids faced with the chronic challenges of Paraguay's 40 percent unemployment, rural poverty and underfunded education system, and equip them not just to survive but to adapt and thrive as entrepreneurs. There would be two results if it worked. The first would be a free education--the rural poor could use these business skills to generate enough revenue from the schools micro-businesses to cover the costs of the school's teachers. This would be education, in other words, that paid for itself. The second would be jobs--they would use these qualifications to get the university places and jobs that would lift them and their communities out of poverty.
I spent three days at the school getting to grips with the model as part of the BBC's "Down to Business" show on social enterprise. Martin had told me some of the numbers. The school now pays for itself; the 17 social enterprises the students run generate the US$300, 000 a year it needs to cover all its costs. Despite its additional focus on these microbusinesses, the school also outperforms on the national curriculum. 100% of the graduates have gone into employment or higher education. The school has added an estimated value of US$5.2 million over the last five years to the Paraguayan economy through the school fees it has avoided and the extra tax income it has created. But the real story wasn't the numbers. It was the people.
I met Marta, whose father had that week been arrested for the attempted stabbing to death of her mother. "This is how you sell dulce de leche", she explained to me, as she set out in the local town to sell the US$50 crate of produce that would pay her tuition for the week. Then in one fluid motion, before I could react, she opened up the lid and wafted the caramel under my nose. "Simple." She sold the lot. I met Saulo from the Toba Qom indigenous tribe, a graduate of the school in the middle of his Bachelor's degree, and the only one in a community of 1500 ever to have attended university. I met Jorge, another graduate of the school and the tenth of nineteen children. Stuck without money to pay for his university fees, he found an old people's home, went to the manager and offered a deal. "I will get you as many free vegetables as you want. You give me a plot of land in the courtyard and a room for free." With the profits from sales of the spare organic tomatoes the home couldn't eat, he paid for university.
Jorge, now a teacher at the school, explained to me its central principle. "You sell an egg, you sell it for 15 cents. You sell an omelette, you sell the same egg for a dollar. What we teach isn't agriculture. It's value added." And this transfer of value-added from the middleman to the campesino is at the heart of the poverty reduction vision. There are two conflicting schools of thought about income inequality. The first is the doctrine that differences in wages legitimately reflect marginal value added, so don't tinker with them or it's a distortion. The second is that differences in wages reflect the power system, so don't tinker with them in any serious way unless you're looking for a revolution. Either way they stay. The success of the school is to get out of this gridlock, empowering students without political disruption, from the bottom up not the top down, with the skills to migrate up the value chain, where they can earn profits not subsistence livelihoods. As Burt puts it, "The model is this, and no more; It's 'Don't give me aid. Buy my cheese.'"
There are now more than a dozen international projects underway replicating the model in developing countries from Bolivia to Uganda with a goal for 50 schools by 2017. But are there some lessons beyond emerging markets? Are there lessons for OECD economies? As gangs of youths burned down parts of London, I was in the fields with a gang of Machete-wielding Paraguayan eighteen year olds. Parallel stories of social and economic marginalisation, but there was one major difference. The Paraguayans weren't looting. They weren't hacking open the cartons of Krispy Kremes at Tesco. They were hacking down a field of organic sugar cane to sell it at a 15% premium to the market. Why? Maybe part of it is this. Over three years in addition to a national curriculum education, the Fundación Paraguaya has given them a set of skills across 17 micro-enterprises, urban as well as rural, that prepare them for the uncertainties of the real world. How to price the cost of goods sold, how to calculate the margin they need to break even, how to brand organic goods, how to run a restaurant's balance sheet, how to sell. With these skills they can pay for University. They can get a job. They can create an economic future, and they know it.
As unemployment heads towards 20% for the UK's 16-24 year olds, there are two options available. We can ban balaclavas, silence Facebook, muse about moral collapse. Or we can learn from the people who have been grappling with these problems for 30 years, and have started to come up with some of the answers. As Martin Burt commented, "The old economic certainties have gone. Our education system is out of date. What we need is an education system that equips us for entrepreneurial resilience, to adapt to and succeed in new environments. That is the indispensable skill." No one is saying there is a silver bullet. But if what we want is a generation equipped not just for Krispy Kreme consumption but for production, not just for destruction but for value creation, it could be we need to look at the approaches that have started to prove themselves in emerging markets.