Tag Archives for " global poverty "

Class resentment in Depression-era England

class resentmentA review of Messenger of Truth (Maisie Dobbs #4), by Jacqueline Winspear

@@@@ (4 out of 5)

Maisie Dobbs’ private practice as a “psychologist and investigator” is taking off when she receives a curious assignment from a wealthy journalist celebrated for her front-line reporting in World War I. Georgina Bassington-Hope explains that her twin brother has died, and she is convinced  he has been murdered despite the police and the coroner’s conviction that his death was an accident. She wants Maisie to dig deeply and find the truth. Over the following weeks, Maisie’s life will be dominated by this unsettling case.

A complex intellectual puzzle

Georgina’s brother, Nick, was a brilliant painter whose work was beginning to earn him a fortune when he tumbled from a scaffold where he was about to hang his masterpiece. Maisie finds it difficult to obtain evidence that his death was anything but accidental: the case is a complex intellectual puzzle. Her thoroughness, obsessive attention to detail, and refusal to take anything at face value eventually lead Maisie into dark corners where the truth eventually emerges. The story is unsettling but it lacks the repeated violence of so much other detective fiction. Maisie works with her brains, not her fists.

Class resentment in Depression-era England

Messenger of Truth, the fourth in Jacqueline Winspear’s venerable series of Maisie Dobbs novels, is set in the closing days of 1930 and the early months of 1931. With the terrors of World War I still vivid in every mind, the Depression is in full force. Unemployment is rampant, and the fascist politician Oswald Mosley  is gaining a following with his demagogic message. The ostentatious wealth of Georgina’s family contrasts with the desperation all around. Maisie’s class awareness rises as the gross inequities weigh on her more and more heavily. Having been born and raised close to the edge of poverty, Maisie has gained an education only through the lucky accident that the aristocratic family that employed her “in service” has given her opportunities for education and advancement closed to millions of others.

What makes social change happen?

social changeA review of The Social Labs Revolution: A New Approach to Solving Our Most Complex Challenges, by Zaid Hassan

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“Planning based-approaches — so common across government, civil society, and even business — represent a neo-Soviet paradigm” and have long been shown to be at best minimally effective in fostering meaningful social change.

If that assertion is a revelation to you, you’re sure to find The Social Labs Revolution illuminating. No matter how familiar you may be with economic development, urban planning, or other fields in which disciplined planning is a fixture, you’re likely to discover something new in this challenging book.

The author, Zaid Hassan, has built a consulting business on the basis of his belief that, instead of “strategic planning” by “experts,” the world’s most urgent and compelling problems can be solved only by bringing together large, diverse teams representing every aspect of the population that is most directly affected. Working together over months or years as a “social lab,” a team consisting of as many as 36 people struggles together but, eventually, and after considerable conflict and unhappiness, will arrive at a set of practical approaches to prototype as the first stage in solving the problem they share. At its core, a social lab is characterized in three ways: it’s social, it’s experimental, and it’s systemic (in that the ideas that emerge “aspire to be systemic in nature.”). Work within the lab is based on the “U Process” championed by Otto Scharmer.

The problems Hassan and his colleagues choose to address are invariably deep-seated and often life-threatening. The Social Labs Revolution focuses on three long-running experiments, one on sustainable food, a second on malnutrition in urban children (specifically, those living in Maharashtra state in India), and the third on stabilizing the (notoriously unstable) nation of Yemen. For example, the first of these three, a Sustainable Food Lab, was global in scope and participation, bringing together participants from government (Brazil, The Netherlands), civil society (World Wildlife Fund, The Nature Conservancy), and corporate food companies (Unilever, General Mills) who worked together for two years. The author credits the team with putting “sustainability” on the radar screens of global food companies.

As Hassan concedes, his consultancy, Reos Partners, is not alone in advancing the social lab technology. He also mentions a Chilean innovation, SociaLab, which addresses new enterprises to alleviate poverty, and the Abdul Latif Jameel Poverty Action Lab at MIT, and points to a number of similar though less structured examples such as Greenpeace’s Mobilisation Lab, set in motion “‘to break through and win on threats to people and the planet.'”

The Social Labs Revolution is blissfully short and easy to digest, with the exception of an annoying digression into an academic discussion of the philosophy underlying the social labs concept. I don’t know about you, but whenever I come across repeated references (13 of them) to the philosopher Martin Heidegger and his disciples, or any other recognizable name from the ranks of dead white philosophers, I head for the exits. Instead of that digression, I would have enjoyed a more detailed discussion of the results that emerged from the three social labs mentioned most prominently in the book. What Hassan offers is spotty and inadequate.

Nitpicking: Someone — the author, the editor, or the proofreader, I know not who, or what potential combination of them — seems to believe that Jack Welch was “the legendary CEO of General Motors.” Fact-checker, please!

 

 

An optimistic view of economic change in Africa

economic change

The Bright Continent: Breaking Rules and Making Change in Modern Africa, by Dayo Olopade

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It starts with the title itself—Dayo Olopade’s challenge to the prevailing sentiment that sub-Saharan Africa today is little different in its essence from the “dark continent” perceived by nineteenth century colonialists. In The Bright Continent, Olopade catalogs an impressive number of innovative businesses, social sector ventures, and even an occasional government initiative that contribute to the fast growth of this long-underestimated region.

To put Olopade’s story in context, the World Bank recently announced that economic growth in sub-Saharan Africa is expected to rise from 4.7 percent in 2013 to 5.2 percent in 2014, compared to 3.5 percent globally. And the CIA World Factbook lists eight African countries among the twenty fast-growing nations in the world in 2013. However, these numbers must be interpreted with caution, since the measurement of economic indicators in most countries in the region is notoriously unreliable (as economist William Easterly reminded us in The Tyranny of Experts), and growth in GDP or even GDP per capita doesn’t necessarily mean that life is getting better for the seventy percent of sub-Saharan Africans (600 million) who live on $2 a day or less. Still, there is clearly a lot going on in Africa these days, and it’s time for the world to pay much closer attention.

Olopade, a first-generation Nigerian-American whose parents, both physicians, have roots in rural Nigeria, brings a fresh and well-grounded perspective to the project. She refuses to accede to conventional word usage, rejecting terms such as “developing country,” “emerging nation,” “poor country,” and “rich country” in favor of her own constructions. One is the term “fail state,” connoting a country whose government fails to deliver essential services but is not a “failed state,” which she applies only to Somalia. Another is the distinction between “lean economies” and “fat economies.” (You can guess which is which. Not a bad way to look at things, is it?) She also organizes her material around a clever device she calls mapping, relating new developments in terms of five “maps” that dominate the reality of Africa today: Family, Technology, Commerce, Nature, and Youth. These five maps “showcase the unique institutions that bind black Africa together and are building its bright future,” Olopade writes.

Permeating the book is the concept of kanju, a term in the Nigerian language Yoruba that the author loosely translates as “hustle,” “strive,” “know how,” or “make do.” In practice, kanju means bending the rules and devising workarounds — a concept similar to the Hindi and Urdu term jugaad, which also is often used to characterize the unconventional solutions that people come up with out of necessity.

Here are just a few of the many recent ventures featured in The Bright Continent, every one of them an example of kanju in action:

  • EGG-energy (Tanzania) wires homes and businesses and furnishes them with reliable electricity using rechargeable batteries, charged at central locations where customers exchange them for new ones—at half the cost of energy from the local (highly unreliable) grid.
  • MPedigree and Sproxil (piloted in Ghana) use scratch-off codes with a phone number a customer may text to learn whether a medicine is authentic—in a region where thirty percent of drugs are counterfeit.
  • M-PESA (Kenya) provides two-thirds of Kenya’s population with a banking and person-to-person funds transfer service using text messaging on mobile phones.
  • Bridge International Academies (Kenya) operates hundreds of bare-bones private schools that offer consistent, quality education for $5 per child per month, supplanting ineffective and unreliable public schools.

Olopade emphasizes that virtually everywhere in the region, national governments are “a constant impediment to development progress,” typically ignored if possible and almost universally disdained. (She reports that ninety-two percent of the businesses in Lagos, Nigeria’s largest city with a population now estimated at 21 million, operate outside the law.) Rwanda is an outlier. There, the autocratic government of Paul Kagame enforces rapid and orderly development free of corruption in a pattern similar to that of Lee Kwan Yew in Singapore in decades past. Visitors to Rwanda, including friends of mine, note the surprise they registered when they learned that “everything works there.” The country is on a fast track toward middle income despite (some might say because of) a lack of high-priced natural resources.

The author does have blind spots. I detected a couple of errors in her reporting, and, more consequentially, she seems to have been bamboozled by Columbia economist Jeffrey Sachs, the driving force behind the ill-fated Millennium Villages Project. Olopade refers to the project respectfully, although the available evidence points to the effort as a dismal failure. (The full story is told beautifully and authoritatively by Nina Munk in The Idealist, a biography of Dr. Sachs that focuses on the village project.)

In researching this book, Olopade, a journalist, spent many months traveling across the continent to observe the promising changes underway and interview the bright, resourceful, and usually young innovators who are creating change in one of the world’s most tradition-bound areas.

Inequality, Infant Mortality, and Foreign Aid

1A review of The Great Escape: Health, Wealth, and the Origins of Inequality, by Angus Deaton

@@@@ (4 out of 5)

Has the human race made progress since the days when all our lives were nasty, brutish, and short?

Some might think this question patently silly, since it would appear to answer itself. But Angus Deaton finds in it a point of entry into his inquiry on “health, wealth, and the origins of inequality,” the subtitle of his ambitious new book. He is in no doubt that humanity has progressed, not steadily but by fits and starts — and continues to do so to this day. “Today,” he writes, “children in sub-Saharan Africa are more likely to survive to age 5 than were English children born in 1918 . . . [and] India today has higher life expectancy than Scotland in 1945.”

In The Great Escape, Deaton, a veteran professor of economics and international affairs at Princeton, explores inequality — between classes and between countries — with a detailed statistical analysis of trends in infant mortality, life expectancy, and income levels over the past 250 years. He concludes that the large-scale inequality that plagues policymakers and reformers alike in the present day is the result of the progress humanity has made since The Great Divergence (between “the West and the rest”) since the advent of the Industrial Revolution. “Economic growth,” Deaton asserts, “has been the engine of international income inequality.” 

No argument there: Deaton is far from alone in this belief. Other scholars have written extensively about this topic in recent years. A Farewell to Alms: A Brief Economic History of the World, by Gregory Clark, is just one example.

Late in the 18th Century, the countries of Northern Europe and North America on the one hand and those of Asia, Africa, the Middle East, and Latin America on the other hand were not that far apart as measured by the available indicators of health and income. Deaton cites “one careful study [that] estimates that the average income of all the inhabitants of the world increased between seven and eight times from 1820 to 1992.” However, that average obscures a harsh reality. The ever-quickening rate of change in “the West” since 1760 or so has widened the gap between (and within) countries to an extreme degree. Deaton terms the freedom from destitution and early death that so many of us now enjoy “The Great Escape,” taking his title from the 1963 film of that name about a massive escape of prisoners from a German P.O.W. camp in World War II. 

Only now is the gap closing between the rich nations and China and India (by far the world’s two biggest countries, with nearly 40 percent of the planet’s population and half the world’s poor). Deaton doesn’t consider a bright future for all a certainty, not by any means, in view of global climate change and the ever-present threat of killer pandemics. But, assuming the species continues to thrive, there is sufficient data available now to have some confidence that the gross inequality now existing among nations will not persist forever. After all, five sub-Saharan African countries are now growing their economies faster than China’s.

However, that misleading factoid ignores the outsize role that China has played in “the Great Escape” globally. Deaton notes, as have other observers, that “the number [of] people in the world living on less than a (2005) dollar a day fell from about 1.5 billion in 1981 to 805 million in 2008 . . .  [This] decline in numbers is driven almost entirely by the Chinese growth miracle; if China is excluded, 785 million people lived on less than a dollar a day in 1981 compared with 708 million in 2008.” (This reality is one of the principal reasons why Paul Polak and I insist in The Business Solution to Poverty that traditional methods to end poverty have largely failed. After all, China’s methods were hardly traditional!)

In the course of exploring the historical record of growing inequality on the world stage, Deaton delves deeply into the role of foreign aid (officially, Overseas Development Assistance, or ODA) and finds it comes up short. “You cannot develop other countries from the outside with a shopping list for Home Depot, no matter how much you spend,” he writes. With the exception of outside interventions in public health programs — including such breakthroughs as the eradication of smallpox and the near-success with polio — Deaton finds that foreign aid has done more harm than good. He argues that where the conditions for development are present, outside resources are unnecessary. Where they’re absent, ODA entrenches local elites, distorts the local economy, and discourages local initiative. The author insists that “the record of aid shows no evidence of any overall beneficial effect.”

But that’s only part of the story.

In 2012, ODA totaled about $136 billion. Throw in another $30 billion or so from NGOs, and total outside assistance comes to under $200 billion annually. However, net resource transfers from developing countries to rich countries are well in excess of $500 billion annually. (Transfers reached a peak of $881 billion in 2007, fell with the Great Recession, but are rising again.) Quite apart from the fact that an estimated 70 percent of “foreign aid” is actually spent on products and services from donor nations, ODA merely puts a dent in the huge disadvantage that poor countries suffer as a result of lopsided trade policies and prevailing political and commercial imbalances. In any case, just one factor in those resource flows — remittances from overseas residents of poor countries to their families back home — are twice as large as ODA.

The Great Escape is a worthy effort from a senior scholar whose wide-ranging studies have led him to big-picture conclusions. Policymakers and practitioners should be listening carefully.

 

 

Microcredit Doesn’t End Poverty

1A review of Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor, by Hugh Sinclair

@@@@@ (5 out of 5)

“Some microfinance is extremely beneficial to the poor, but it is not the miracle cure that its publicists would have you believe. Microfinance has been hijacked by profiteers, and we need to reclaim it for the poor. The problem is not with a few rogue operators, alas, but with systemic flaws that permeate the sector.”

Thus does Hugh Sinclair lay out the thesis he pursues in Confessions of a Microfinance Heretic. If you skip over this statement in the opening pages of the book, you could easily conclude that Sinclair can see no good at all in the $70 billion industry that has grown up under the impetus of Muhammad Yunus’ 2006 Nobel Peace Prize. After all, Sinclair writes — at least twice — that he wouldn’t invest a single dollar in microfinance today. Nonetheless, he insists that the “debate is not whether microfinance works, but how the inherent conflicts of interest can be managed.”

The systemic flaws Sinclair perceives are eye-opening:

  • A majority of the money loaned to poor people goes not to help them launch or sustain microbusinesses to supplement family income but rather for current consumption, sometimes to buy food during a time when there’s not enough money coming in, sometimes just to buy TV sets.”Estimates for consumption loans range from 50 percent to 90 percent of all microfinance loans,” depending on the study. As Sinclair points out, citing numerous sources, the proportion of entrepreneurs among the poor is no bigger than it is among the rich. It’s naive of us to expect otherwise.
  • The interest rates charged for microloans are, far too often, prohibitively high. Muhammad Yunus’ benchmark — 10 to 15 percent above the cost of money — is rarely observed. Though there are indeed many, mostly small, nonprofit MFIs (Microfinance Institutions, generally microloan lenders) that charge no more than 25 or 30 percent, the bigger institutions, and most of the for-profit banks in the industry, typically charge far more. In one notorious case, the effective interest rate runs as high as 195 percent, but there are many other instances in which the rate exceeds 100 percent.
  • The amounts of money loaned by MFIs are far too small to permit businesses to grow to a size where they may employ workers outside the family. In fact, to the extent that businesses remain family-run, they frequently employ even the youngest children, sometimes withdrawn from school to work in the business. However, there’s another side to this question, as Sinclair reveals in an exchange with one businesswoman: “[W]e asked her about her future plans for the business, and whether she thought it could be built up further and be a useful business for her children to take over. ‘You misunderstand me. I don’t do this job because I like it or want to grow it into a big business. I do it so my children will never have to do work like this.'”
  • In countries where local laws and a lack of government oversight give free rein to the MFIs, competition run wild among them has sometimes led to credit crises. In India’s Andhra Pradesh state, for example, “There were more microloans than poor people.” And in Nicaragua “total lending by MFIs was estimated at $420 million in 2008, in a country of about 5.5 million, not all of whom were poor (and MFIs generally don’t lend to children).” Microloan customers frequently borrowed from several of the country’s 19 MFIs — the nationwide average was four — often to be able to pay back loans to other MFIs. “One particularly ambitious client in Jalapa had managed to rack up $600,000 in micro-loans.” As Sinclair disclosed in a talk he gave in Berkeley a few weeks ago, Nicaragua was only the first of several countries where the microcredit bubble is likely to burst. Stay tuned, he said.
  • The profit motive appears to have become the central preoccupation of the microfinance funds, which function like private equity funds, gathering together investment dollars and placing them in selected MFIs. Even some of the biggest and most prestigious of these funds — including the Grameen Foundation (USA), Calvert Foundation, Kiva.org, and BlueOrchard (the world’s largest) — have been tainted by longstanding investments in some of the most egregiously exploitive MFIs, brushing aside mountains of evidence that their investments were helping victimize poor people in Nigeria, Mexico, and other countries.

Despite all this, there is NO documented evidence that microfinance has achieved any reduction at all in the level of poverty. As a 2007 article in the Harvard Business Review stated, “In 1991, for example, Bangladesh ranked 136th on the UN Development Programme’s Human Development Index (a measure of societal well-being); 15 years later it ranked 137th.” And Sinclair writes, “In 2001, Nicaragua was the 106th poorest country in the world . . . Microfinance was almost unheard of in Nicaragua at this point, and there were no large microfinance funds throwing money around. By 2009, when the full Nicaraguan microfinance meltdown occurred, Nicaragua had slipped to 124th place.”

Hugh Sinclair is no cranky, slapdash journalist taking on a controversial subject for the sake of selling books. He is a ten-year veteran of the microfinance industry and has been involved as either an employee or a consultant by dozens of MFIs around the world and in several microfinance funds. He clearly knows whereof he writes, his citation of sources is extensive, and his publisher, Berrett-Koehler, is a highly respected source of books on business and current affairs.

Confessions of a Microfinance Heretic is an important book that should be must reading for anyone involved in international development.

NOTE: This review originally ran in this space in August 2012. I’m reposting it now for two reasons: (1) despite the importance of this topic, the readership for the original review was disappointing; and (2) in fielding questions recently on my book tour with Paul Polak to promote our new book, The Business Solution to Poverty, I have encountered questions about the impact of microfinance with surprising frequency. 

The quest to end poverty: Jeffrey Sachs unmasked

end povertyThe Idealist: Jeffrey Sachs and the Quest to End Poverty, by Nina Munk

@@@@@ (5 out of 5)

It’s difficult even to dip your toes into the field of poverty without tripping over the Millennium Villages Project. So extensive has been the coverage of this ambitious – some would say hubristic – endeavor that scholars may spend years sifting through the documented record. But anyone curious about the Millennium Villages need only read The Idealist, financial journalist Nina Munk’s eminently readable and extensively researched account of the Project and the extraordinarily gifted man who conceived and forced it on the world’s consciousness. Munk’s first-hand account should stand for years as the authoritative judgment on this ill-considered venture.

The Millennium Villages Project grew from a newfound concern with poverty in the mind of Jeffrey Sachs. Then a celebrated professor of economics at Columbia University and head of its Earth Institute, Sachs fastened on the idea of investing large sums of money in a dozen selected villages around sub-Saharan Africa to perform a sort of “shock therapy” that would lift the lucky residents out of poverty in five years and demonstrate to the world how anti-poverty work should be done. He set a goal of raising $120 million to fund the program, allowing for a budget of $120 per resident per year, for a total of $600 throughout its five-year duration. His goal was to achieve such undeniable success that the major foreign aid donors – the Americans, the Europeans, the Japanese – would then leap at the chance to pour hundreds of billions of dollars into replicating the Project throughout the African continent.

You don’t need to know any more than this to understand that Sachs’ vision was fatally flawed and the Millennium Villages Project doomed to failure. An investment of $600 per person in lifting people out of poverty is an unconscionably large amount of money that no one in his right mind would ever agree to replicate. In any case, we learned long ago (or at least should have learned) that you can’t donate people out of poverty: what would come after the five years, the $600 were used up, and the Project staff no longer around? Would anyone in the villages have learned anything except that manna came from heaven? And, to top it off, the foreign aid agencies, the World Bank, and other big funders all had agendas of their own and would be extremely unlikely to follow Sachs’ lead even if they didn’t already consider him an arrogant and misguided pest. Regardless of the Project’s outcome, they were never going to fund its rollout.

If you have any field experience in developing nations working with people who live on, say, $2 a day or less, you’re not likely to find any surprises in The Idealist. The Millennium Villages Project failed in ways that were entirely predictable. But you may well enjoy the tale nonetheless. The author lays it out in devastating detail.

Once upon a time Jeff Sachs was a superstar. He was a wunderkind, a word that always seemed to be attached to his name in the voluminous press reports that featured him. Sachs was the guy who had miraculously rescued the economies of Bolivia and Poland with “shock therapy.” A Harvard professor of economics, an extraordinarily young tenured member of the faculty, he was widely regarded as the brightest light of the department, and for several years he could (apparently) do no wrong.

Then came Sachs’ assignment to Russia as it reemerged an independent nation from the ruins of the Soviet Union, and things didn’t work out so well. But Sachs protested that he wasn’t really in charge, and that the critics who characterized his performance there as subpar didn’t know what they were talking about. Somehow, he escaped with his reputation virtually unscathed. in 2002, Columbia University lured him away from Harvard with an obscenely large amount of money, including a $9 million town house in Manhattan, an endowed chair, and the leadership of an entity called the Earth Institute that allowed him to continue working as an international activist on the margins of academia. And when he turned his attention to world poverty, he somehow managed to raise an astonishing $120 million to fund his Millennium Villages Project – and even, five years later, an additional $60 million or so for a “phase two” of the project that hadn’t been originally planned.

That was then. Now, with a second major failure hanging so visibly around his neck, Jeff Sachs may well have seen the last of his 15 minutes of fame. Perhaps now people will be saying that Sachs was simply too smart for his own good.

Nina Munk is a long-time financial journalist whose work has appeared in numerous publications. She is now a contributing editor at Vanity Fair. In 2006, having had her fill of billionaires, she set out to learn and write about poverty. Sachs’ Millennium Villages Project was the biggest thing going, and she’d found her subject. She followed the Project’s work throughout its duration, including extended stays in the two Millennium Villages in Uganda and Kenya. The Idealist thus represents the culmination of years of work. It’s a brilliant example of honest, in-depth journalism of the sort so rarely seen in these hurried times.

For links to my reviews of other excellent biographies, go to 34 great biographies I’ve reviewed.

Narrowing global inequities: a reading list

Narrowing global inequitiesAs I’ve dug more deeply into the subject of global poverty in the course of writing The Business Solution to Poverty with Paul Polak, it has become increasingly clear to me that truly understanding how today’s glaring inequities have come about requires extensive knowledge in a wide array of topics, from Third World history to social psychology, development economics to the history of business and international trade.

Well, I confess I’m no expert in any of those fields. I’ve read widely in some, superficially in others, and I’m learning a lot.

My reading has emphasized economic history, the economics of poverty, colonialism, Third World development, social enterprise, and the ongoing debate about the impact of “foreign aid” (more properly, overseas development assistance). Along the way, I’ve reviewed in my blog many of the books I’ve read.

In previous posts, I’ve offered up reading lists on some of these subjects individually. Here, I’m sharing a compiled list. I’ve read all these books — some before I began my blog, so that I haven’t reviewed them. Where I’ve reviewed a book, you’ll find boldfacing and underlining that signifies a link to my review. The books are listed alphabetically by the author’s last name.

Banerjee, Abhijit, and Esther Duflo, Poor Economics A Radical Rethinking of the Way to Fight Global Poverty. PublicAffairs, 2011. 

Bing, Eric C., and Marc J. Epstein, Pharmacy on a Bicycle: Innovative Solutions for Global Health and Poverty. Berrett-Koehler Publishers, 2013. 

Bornstein, David, How to Change the World: Social Entrepreneurs and the Power of New Ideas. Oxford University Press, 2007.

——, The Price of a Dream: The Story of the Grameen Bank. Oxford University Press, 2005.

——, and Susan Davis, Social Entrepreneurship: What Everyone Needs to Know. Oxford University Press, 2010.

Clark, Gregory, A Farewell to Alms: A Brief Economic History of the World. Princeton University Press, 2007.

Cohen, Ben, and Mal Warwick, Values-Driven Business: How to Change the World, Make Money, and Have Fun. Berrett-Koehler Publishers, 2006.

Collier, Paul, The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It. Oxford University Press, 2007.

Collins, Daryl, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven, Portfolios of the Poor: How the World’s Poor Live on $2 a Day. Princeton University Press, 2009.

Crutchfield, Leslie R., and Heather McLeod Grant, Forces for Good: The Six Practices of High-Impact Nonprofits, 2nd Edition. Jossey-Bass Publishers, 2012.

Diamond, Jared, Collapse: How Societies Choose to Fail or Succeed. Viking Press, 2005.

Easterly, William, The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. Penguin Press, 2006.

Elkington, John, and Pamela Hartigan, The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World.Harvard Business Review Press, 2008.

Govindarajan, Vijay, and Chris Trimble, Reverse Innovation: Create Far From Home, Win Everywhere. Harvard Business Review Press, 2012.

Guha, Ramachandra, India After Gandhi: The History of the World’s Largest Democracy. HarperCollins Publishers, 2007.

Hochschild, Adam, King Leopold’s Ghost: A Story of Greed, Terror, and Heroism in Colonial Africa. Houghton Mifflin Company, 1998.

Kamkwamba, William, and Bryan Mealer, The Boy Who Harnessed the Wind: Creating Currents of Electricity and Hope. HarperCollins Publishers, 2009.

Kidder, Tracy, Mountains Beyond Mountains: The Quest of Dr. Paul Farmer, a Man Who Would Cure the World. Random House,2003.

Kristof, Nicholas D., and Sheryl WuDunn, Half the Sky: Turning Oppression Into Opportunity for Women Worldwide. Knopf, 2009.

Light, Paul Charles, The Search for Social Entrepreneurship. Brookings Institution Press2008.

Lynch, Kevin, and Julius Walls, Jr., Mission, Inc.: The Practitioner’s Guide to Social Enterprise. Berrett-Koehler Publishers, 2008.

Mehta, Pavithra, and Suchitra Shenoy, Infinite Vision: How Aravind Became the World’s Greatest Business Case for Compassion. Berrett-Koehler Publishers, 2011.  

Moyo, Dambisa, Dead Aid: Why Aid is Not Working and How There Is a Better Way for Africa. Farrar, Straus and Giroux, 2009.

Newitz, Annalee, Scatter, Adapt, and Remember: How Humans Will Survive a Mass Extinction. Doubleday, 2013. 

Polak, Paul, Out of Poverty: What Works When Traditional Approaches Fail. Berrett-Koehler Publishers, 2006.

Prahalad, C. K., The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Pearson Prentice Hall, 2004.

Rifkin, Jeremy, The Third Industrial Revolution: How Lateral Power Is Transforming Energy, the Economy, and the World. Palgrave Macmillan, 2011. 

Sachs, Jeffrey D., The End of Poverty: Economic Possibilities for Our Time. Penguin Press, 2005.

Schwartz, BeverlyRippling: How Social Entrepreneurs Spread Innovation Throughout the World. Jossey-Bass Publishers,2012.

Sinclair, Hugh, Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor. Berrett-Koehler Publishers, 2012. 

Sullivan, Nicholas P., You Can Hear Me Now: How Microloans and Cell Phones Are Connecting the World’s Poor to the Global Economy. Jossey-Bass Publishers, 2007.

Wrong, Michaela, It’s Our Turn to Eat: The Story of a Kenyan Whistle-Blower. HarperCollins Publishers, 2006.

Delivering healthcare to billions of the world’s poor

1

A review of Pharmacy on a Bicycle: Innovative Solutions for Global Health and Poverty, by Eric C. Bing and Marc J. Epstein

@@@@ (4 out of 5)

Despite the widespread conviction that the state of the world is deplorable and getting worse by the day, the human race has made measurable, even dramatic progress in some important ways. The collective state of our health is the most telling example. In part because of the eradication of smallpox, the near elimination of polio, and the significant recent progress on HIV/AIDS, humanity in general is living longer and healthier lives. Average life expectancy at birth in India around 1950 was 38 years; today it is 65. In China, it was 41; today it is 77. Over the same period, average life expectancy in the United States has risen from 65 to approximately 80. Numbers can be misleading, but these tell a compelling story.

Building on this amazing success story, major institutions — the United Nations, the U.S. Government, and the Bill and Melinda Gates Foundation, for example — have invested billions of dollars in recent years, targeting specific diseases, promoting the use of vaccines, and building public health infrastructure in developing nations. All these admirable efforts promise to continue the favorable trend in healthcare that has unfolded over the last half-century.

However, there is a hidden dimension in this picture. As Eric Bing and Marc Epstein explain in Pharmacy on a Bicycle, billions of poor people living in rural areas all too frequently fail to gain the benefit of these advances in healthcare. It’s fashionable to look on the world today from the perspective of the cities, but in spite of the massive migration of the last several decades, nearly half (49%) of the world’s population still resides in rural areas. Great numbers of these people live far from transportation hubs, often hours or even days of walking from the nearest road. It’s to these billions of people, nearly all of them desperately poor by American or European standards, that Bing and Epstein turn their attention in their illuminating little book.

Pharmacy on a Bicycle rests on a single, fundamental premise: “Most poor outcomes [in healthcare] are caused not by lack of effective medicines or medical know-how. The ability to prevent and treat many of these diseases inexpensively has been available for a very long time. But getting the right remedies to the right people in the locations where they are needed, in a way they will use them, and at a cost they can afford is continually a challenge. This is not a scientific problem. It’s a business challenge.”

Bing and Epstein argue that humankind has never before been in such a good position to meet this challenge. The costs of many widely-used drugs have fallen dramatically, and scientists have greatly simplified the treatment of many diseases by combining multiple drugs into single capsules or tablets. Extremely cheap diagnostic techniques that provide nearly instant assessments are now available. Through telemedicine, a single well-trained physician can now offer her or his expertise to much larger numbers of patients. The widespread use of clinical checklists and the application of franchising to the healthcare industry have both improved access and lowered costs. And new business models, successfully piloted in many countries, using bicycles, motorcycles, and trained village-level representatives, make it possible for healthcare agencies and for-profit companies to overcome the “last mile problem” that has traditionally limited most of the benefits of the market economy to population centers. “We are now at a tipping point to make lasting global health impacts,” the authors write.

One of the most promising recent developments is the now near-universal access to cell phones; by next year, the number of mobile phones is expected to be greater than the world’s population. “Mobile phones are now being used for patient education and awareness, treatment compliance, health care worker training, data collection, disease and epidemic outbreak tracking, and diagnostic and treatment support.”

Pharmacy on a Bicycle is intended to spark much wider adaptation of these advances by making them more widely known. The book presents a seven-point implementation model called IMPACTS, which encompasses innovation and entrepreneurship, maximizing efficiency and effectiveness, coordinating with partners, accountability, creating demand, task shifting (e.g., empowering nurses to take on some doctors’ responsibilities), and scaling. The book includes an abundance of excellent examples that bring these deadly-sounding prescriptions to life.

Eric Bing is an M.D. who also possesses a Ph.D. in epidemiology and an MBA. He’s the director of global health at the George W. Bush Institute at Southern Methodist University. His co-author, Marc Epstein, is an eminent and much-published professor of management at Rice University in Houston whose previous teaching posts were at the Harvard and Stanford business schools and INSEAD (European Institute of Business Administration).

The sorry record of microcredit laid bare by an industry veteran

A review of Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor, by Hugh Sinclair

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“Some microfinance is extremely beneficial to the poor, but it is not the miracle cure that its publicists would have you believe. Microfinance has been hijacked by profiteers, and we need to reclaim it for the poor. The problem is not with a few rogue operators, alas, but with systemic flaws that permeate the sector.”

Thus does Hugh Sinclair lay out the thesis he pursues in Confessions of a Microfinance Heretic. If you skip over this statement in the opening pages of the book, you could easily conclude that Sinclair can see no good at all in the $70 billion industry that has grown up under the impetus of Muhammad Yunus’ 2006 Nobel Peace Prize. After all, Sinclair writes — at least twice — that he wouldn’t invest a single dollar in microfinance today. Nonetheless, he insists that the “debate is not whether microfinance works, but how the inherent conflicts of interest can be managed.”

The systemic flaws Sinclair perceives are eye-opening:

  • A majority of the money loaned to poor people goes not to help them launch or sustain microbusinesses to supplement family income but rather for current consumption, sometimes to buy food during a time when there’s not enough money coming in, sometimes just to buy TV sets.”Estimates for consumption loans range from 50 percent to 90 percent of all microfinance loans,” depending on the study. As Sinclair points out, citing numerous sources, the proportion of entrepreneurs among the poor is no bigger than it is among the rich. It’s naive of us to expect otherwise.
  • The interest rates charged for microloans are, far too often, prohibitively high. Muhammad Yunus’ benchmark — 10 to 15 percent above the cost of money — is rarely observed. Though there are indeed many, mostly small, nonprofit MFIs (Microfinance Institutions, generally microloan lenders) that charge no more than 25 or 30 percent, the bigger institutions, and most of the for-profit banks in the industry, typically charge far more. In one notorious case, the effective interest rate runs as high as 195 percent, but there are many other instances in which the rate exceeds 100 percent.
  • The amounts of money loaned by MFIs are far too small to permit businesses to grow to a size where they may employ workers outside the family. In fact, to the extent that businesses remain family-run, they frequently employ even the youngest children, sometimes withdrawn from school to work in the business. However, there’s another side to this question, as Sinclair reveals in an exchange with one businesswoman: “[W]e asked her about her future plans for the business, and whether she thought it could be built up further and be a useful business for her children to take over. ‘You misunderstand me. I don’t do this job because I like it or want to grow it into a big business. I do it so my children will never have to do work like this.'”
  • In countries where local laws and a lack of government oversight give free rein to the MFIs, competition run wild among them has sometimes led to credit crises. In India’s Andhra Pradesh state, for example, “There were more microloans than poor people.” And in Nicaragua “total lending by MFIs was estimated at $420 million in 2008, in a country of about 5.5 million, not all of whom were poor (and MFIs generally don’t lend to children).” Microloan customers frequently borrowed from several of the country’s 19 MFIs — the nationwide average was four — often to be able to pay back loans to other MFIs. “One particularly ambitious client in Jalapa had managed to rack up $600,000 in micro-loans.” As Sinclair disclosed in a talk he gave in Berkeley a few weeks ago, Nicaragua was only the first of several countries where the microcredit bubble is likely to burst. Stay tuned, he said.
  • The profit motive appears to have become the central preoccupation of the microfinance funds, which function like private equity funds, gathering together investment dollars and placing them in selected MFIs. Even some of the biggest and most prestigious of these funds — including the Grameen Foundation (USA), Calvert Foundation, Kiva.org, and BlueOrchard (the world’s largest) — have been tainted by longstanding investments in some of the most egregiously exploitive MFIs, brushing aside mountains of evidence that their investments were helping victimize poor people in Nigeria, Mexico, and other countries.

Despite all this, there is NO documented evidence that microfinance has achieved any reduction at all in the level of poverty. As a 2007 article in the Harvard Business Review stated, “In 1991, for example, Bangladesh ranked 136th on the UN Development Programme’s Human Development Index (a measure of societal well-being); 15 years later it ranked 137th.” And Sinclair writes, “In 2001, Nicaragua was the 106th poorest country in the world . . . Microfinance was almost unheard of in Nicaragua at this point, and there were no large microfinance funds throwing money around. By 2009, when the full Nicaraguan microfinance meltdown occurred, Nicaragua had slipped to 124th place.”

Hugh Sinclair is no cranky, slapdash journalist taking on a controversial subject for the sake of selling books. He is a ten-year veteran of the microfinance industry and has been involved as either an employee or a consultant in dozens of MFIs around the world and in several microfinance funds. He clearly knows whereof he writes, his citation of sources is extensive, and his publisher, Berrett-Koehler, is a highly respected source of books on business and current affairs.

Confessions of a Microfinance Heretic is an important book that should be must reading for anyone involved in international development.

Must reading about global poverty and the contrasting approaches to ending it

1A review of Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, by Abhijit Banerjee and Esther Duflo

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Public debate about the way to combat global poverty has ricocheted between two extremes. One was summed up in 2005 in The End of Poverty by Jeffrey Sachs, the Columbia economist who spearheaded the UN Millennium Development Goals. The other was laid out by former World Bank economist William Easterly the following year in The White Man’s Burden. Sachs advocates massive government-to-government foreign aid. Easterly deplores foreign aid, convinced that it does more harm than good.

In Poor Economics, Abhijit Banerjee and Esther Duflo seek a path between these two extremes, emphasizing the Randomized Controlled Studies they and their colleagues had conducted to ascertain what works and what doesn’t. (As of 2010, they had completed more than 240 studies in forty countries around the world.)They characterize Easterly’s approach as demand-driven, since he believes that poor people must seek their own solutions — a conservative, free-market attitude. By contrast, Sachs’ approach is supply-driven, reflecting Sachs’ conviction that a government must provide for its people based on consensus thinking about what poor people need — a liberal, top-down attitude. (I find myself bemused that I’m on the right side of this debate.)

Banerjee and Duflo report that their observations and research results support each of these two approaches — and sometimes both — depending on what issue they study. Hunger, health, education, financial services, family planning, business development, policy options: each field offers up a unique picture of success and failure attributed to one or another of the two approaches. In other words, circumstances and details matter, all of which may vary from one country to another. There is no silver bullet, they assert, no panacea to eliminate poverty.

Poor Economics focuses on the overarching question of whether there is such a thing as a “poverty trap.” Sachs contends there is: poor people will be stuck in poverty unless and until they are given the resources to release themselves from the trap. In many circumstances, Banerjee and Duflo find scant evidence to support this assertion. In others, however, they see the need for government intervention in the lives of the poor because otherwise they will perceive no reason to act for themselves.

Rather than identifying a simple, unitary explanation why Sachs’ approach often fails, they emphasize “ideology, ignorance, and inertia — the three I’s — on the part of the expert, the aid worker, or the local policy maker.” These three I’s, they claim, “often explain why policies fail and why aid does not have the effect it should.” Banerjee and Duflo explain further: “The poor often resist the wonderful plans we think up for them because they do not share our faith that those plans work, or work as well as we claim.”

It would be difficult to find two scholars better prepared than Abhijit Banerjee and Esther Duflo to forge a middle course through the opposite poles of thought about global poverty erected by Jeffrey Sachs and William Easterly. Banerjee, an Indian economist who is also the son of two economists, holds an endowed chair in economics at MIT. He co-founded MIT’s Abdul Latif Jameel Poverty Action Lab with Duflo, a French economist and a former MacArthur Fellow (recipient of the “genius” award).

For anyone who seeks deeper understanding of global poverty and the ways and means of fighting it, Poor Economics is must reading. This book is the latest I’ve read in my ongoing effort to study world poverty. For a list of additional books on the topic, go to my reading list.