No fire without smoke

From Nextbillion.net, a piece entitled "The Dark Side of Remittance Economies" asks:

In Development and Base of the Pyramid circles, we often discuss remittance economies and innovative ways to send remittances home; what we don't always think or talk about is what forces people to leave their home countries in the first place and what they experience when they go abroad. In the case of Nepal, as I've written about before, migrant laborers most often

 travel to the Middle East and Southeast Asia, often having their passports taken away from them upon arrival and not getting paid for months at a time. So would systems that facilitate sending remittances home actually encourage and facilitate such an unjust ecosystem? 

First off, having your passport taken away and not getting paid for months at a time constitutes slavery (Article 1 of the Supplementary Convention on the Abolition of Slavery). Incredibly, slavery remains a major issue today, as more than 27 million people "live their every day in slavery or slavery-like conditions." And while not all enslaved persons are migrant laborers (and of course, vice versa), it is true that many economic migrants end up in terrifying situations. As noted by the UN Special Rapporteur, "Some of the most traditional forms of slavery such as debt bondage [have] evolved and now manifests [themselves] in the plight of some migrant domestic workers."

Remittances from migrant workers, however, are one of the most stable, largest sources of capital for many developing countries, more so than official development aid (ODA) or foreign investments. Moreover, remittances are actually more reliable and tend to be counter-cyclical. While remittances are going to decline this year, along with ODA and private investments, they will decline less. According to the Migration and Remittances Group at the World Bank, "despite the prospect of a sharper decline in remittance inflows than anticipated earlier, these flows will remain more resilient compared to many other types of resource flows such as private debt and equity flows and foreign direct investment, which are expected to decline or, in the case of portfolio flows, perhaps become negative in 2009 as foreign investors pull out of emerging markets."

To be clear: the most sustainable form of capital flows to the developing world is not only in decline, but in its current form, relies - at least in part - on modern forms of slavery and forced labor. Indeed, for these flows to remain stable, millions of people have to endure harrowing trips across, and sometimes between, continents. There are more than a few stories about boat loads of migrants that capsize, end up shipwrecked, with their occupants arrested, and often deported. 

It's an incredible shame that there aren't better systems in place to promote a much healthier form of migrant labor - in Spain, for example, the government used to run a program to recruit foreign workers in Morocco and Latin American countries, based on the labor needs expressed by industry groups. These people were given temporary work authorizations and were subject to quite strict verifications - nonetheless, their conditions of employment were far, far better than what most can expect when immigrating on their own. 

Mustafa, 26, Somalia:  « The travel took me one year through the desert and Five days of sea. The sea was unstable, twenty-five people where on the boat at the beginning, but only fifteen people arrived in Malta. » Février 2008. © Pierre Le Tulzo  

Getting it wrong

A recurrent theme in international development is the issue of measuring and reporting aid effectiveness - this topic gets a lot of buzz, and rightly so. Especially in an age of fiscal constraints, it is ever more important to deploy funding to projects that work. There's a lot of debate about whether official development aid is more effective than chanelling funding through small local NGOs, big international ones, or something in between. What I find baffling is that a lot of people are willing to say that one is the better alternative - personally, I think that there are some government agencies, some NGOs (large/small) that are good at handling aid money, and others that aren't. Dismissing one model for the other doesn't make any sense, given how heterogenous the group is. 

As the excellent blog Good Intentions are Not Enough points out, one of the main problems with aid agency/NGO reporting is the fact that negative findings are often swept under the rug, or spun into a positive narrative because these agencies are afraid of jeopardizing their sources of fuding. The problem is that funders often don't have the capacity to closely monitor/evaluate the impact of their donation, and rely on reporting from their grantee... Which is obviously problematic, for a number of reasons. Even if the grantee outsources evaluation to a third party, the results that filter back to the donor aren't always guaranteed to accurately reflect reality. There's also the issue of overstating a crisis or situation to attract funding, another dangerous and unsustainable practice. Organizations and agencies that receive aid are all actually competing for resources - they are, after all, entities that employ staff etc. and whose own existence depends on the existence of a need, a crisis, a situation that has to be addressed. It's no wonder that they tend to overstate, spin, or misreport the facts to their donors - for some, it is a matter of organizational survival. 

It makes it complicated to evaluate the effectiveness of aid in this context: not only do you generally have to contend with insufficient monitoring mechanisms at the project level, which make it difficult to know whether any quantifiable objectives are met, but there are also all these qualitative dimensions that come into play. The straightforward elements of evaluating aid effectiveness can sometimes be overshadowed by subjectivity - the reputation of an organization, who's on the board,  its ability to serve beneficiaries at scale...etc. And let's not forget the highly political nature of official development aid - the fact that Israel, Egypt, Colombia and Pakistan are the countries which receive the most American official development aid (ODA) is a telling fact (not counting Iraq and Afghanistan.) To genuinely evaluate the effectiveness of aid, we shouldn't just be looking at the glossy quarterly and year end reports. For some well-entrenched organizations and agencies, the validity of their model, of their projects is barely questioned.

Interestingly, when it comes to ODA, there seems to be a correlation between the degree of aid dependency and lack of transparency and accountability on the part of the recipient government. ("The Open Budget Survey reveals that those countries performing least well in terms of budget transparency practices share certain characteristics, including lower income levels, dependence on foreign aid, reliance on revenues from hydrocarbon extraction, and weak democratic institutions.") For a lot of these countries, ODA is their principal lifeline, and to stop the flow of funds would probably have catastrophic consequences for the population (actually, that is an assumption - would be interesting to find out what impact lower levels of ODA would have on a country like Liberia)

The whole "aid effectiveness" debate is rather obscured, in my opinion, by political and subjective factors - how can we effectively evaluate the impact of aid when aid disbursements themselves aren't based on genuine levels of need, but rather on how well the agency, organization or government is able to convince donors of that need. Whether one looks at ODA, or funding for agencies/NGOs carrying out development activities in low income countries, we're never going to be serious about "aid effectiveness" until we look at the full process, from needs assessment to expost evaluation. 

Until we are able (willing?) to do so, we'll have to accept a certain degree of inefficiency when it comes to aid. It's not a perfect system, far from it, but the fact that such vigorous debate exists around development aid - in all of its forms - is a hopefully a sign that, as time goes by, we'll be much more sophisticated when it comes to efficient aid allocation, monitoring and evaluation.

Apparently, World Vision in Liberia didn't get that memo.

A disturbing example of large scale corruption within NGOs just emerged in Liberia. Astonishingly, 90% of World Vision's aid to Liberia went missing - they lost $1mm as their project managers were selling food and using construction materials that were supposed to benefit Liberians (World Vision was a sub-grantee for food distribution and food-for-work projects.)

World Vision calculated that $884,681 worth of food was missing, with a total loss, including ocean freight expenses to ship the food to Liberia, of $1.45 million.

The United States spent an additional $300,000 for construction materials, most of which were never used on the intended projects.

Unfortunately for World Vision, it means that their fundraising will suffer as a result - while this is obviously too bad for them and the beneficiaries of their other, functional projects, there is no reason why donors should not sanction World Vision for its lack of oversight. World Vision apparently employs 250 people in Liberia, which is quite significant - besides other international organizations or the government, there are few employers of this size in Liberia (hence the 85% unemployment rate...) and they've been operating there since the early 80s - it's quite unbelievable and unacceptable that it took them 2 years  to uncover this massive fraud. 

I honestly have no idea how something of this scale could have occured - how is it possible that no one realized that 34 of the towns intended to benefit from this project didn't exist? It really says a lot about WV's management capacity and how (un)rigorous their internal monitoring mechanisms are. In addition, in a context of poverty, how could over a million dollars disappear discreetly? 

Quite apart from the fact that their Community Resettlement and Rehabilitation Project ended up being a massive failure because of this fraud, it's also worth noting that their model of importing food from the United States for aid is a flawed approach - why not purchase locally and support the Liberian agricultural sector and its small-holder farmers? Owen Barder recently wrote  that instead of importing food aid to Ethiopia, cash transfers would be more effective in combating hunger (which makes a lot of sense, by the way: in doing so, you would reduce the cost of providing food aid). I suppose the risk here is that people may not use the cash for its intended purpose - but the counter-argument is that if the person would naturally use the cash for whatever is their greatest need, which hopefully doesn't involve getting drunk at the local bar...(more about purchasing food aid locally here, and more about untying food aid here)

 I have serious beef with this World Vision drama: not only did they fail the people of Liberia by botching the design and execution of its CRRP, but this is also going to contribute to increasing the distrust for organizations doing similar work. The "public relations disaster" mentioned by Kleinman is not limited to WV, but will have repercussions for other NGOs. Shame. 

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Warning: shameless plug

As for The Niapele Project's School Nutrition Initiative in Liberia, we just received a small grant from the GO Campaign to cover the start-up costs of the project. While we certainly don't have the ability to operate at a scale quite like a large INGO, we're still planning on feeding 600 kids/day during the upcoming school year. And we take monitoring seriously - in addition to having trustworthy program coordinators, we track the impact of the program through regular medical assessments. We'll also be sourcing food items for the project from an agricultural co-op in Central Liberia which is run by a local grassroots organization, Malaya. While we don't have the enormous budget, staff and long standing experience of World Vision in Liberia, Niapele's work in Liberia is guided by an honest assessment of needs at the community level, and we believe that our small-scale impact will be long lasting. 

This 'n' that

Amazing conversation/fight between Bill Easterly and Jeffrey Sachs going on right now over at Huffington Post - the "Cliffs Notes" of it are available here. I'm pretty amused by all of this - it seems so very modern for two of the world's most renowned development economists to duke it out via their blogs and columns. And Easterly just joined Twitter: 

penelopeinparis@bill_easterly vs. J. Sachs: http://ow.ly/aInw.amusing - although I wonder if this is sorta lowering the standards of educated debate.

bill_easterly@penelopeinparis @saundras_s u mean that educated debate that includes Bono&Angelina?

penelopeinparis@bill_easterly - touche. Still, 2 bad muck raking takes over the constructive discussion,& thats what ppl will focus on,instd of real issues

I'm so very entertained by modern media and information exchange. 

In other news, I just finished reading Tears of the Desert, the memoirs of Dr. Halima Bashir, a woman doctor in Darfur. In spite of the fact that I spent most of the second half of the book swallowing my tears, I really enjoyed her story. The horror... Goodness. We have all seen, read or heard accounts of rape as a weapon of war (in Liberia, in the DRC, in Sudan....), but the personal nature of her account made it even harder to bear. It almost makes me in favor of celebrity advocacy - how could you not want to be outspoken if you knew you could draw media (and potentially, political) attention? 

Paradigm shift, maybe

In spite of what David Rothkopf has to say on the subject, I am really hopeful that the crisis that has been shaking the world economy since last fall will not have been in vain. Given all that has happened, and the intense amount of media scrutiny and public debate on the outcomes of the "Crash of 2008" (however you want to call it - does it even have a proper capitalized name yet?), you would think that this would have created some space for a healthy discussion regarding the future of our civilization... We live in a world of gross overconsumption, excess and waste. While I'll be the first to admit that I'm firmly part of this system, I see the need to adopt a system that doesn't promise to drive us straight into the wall as an urgent one (Lula said it best.)

Yesterday, I came across a TED talk by Ray Anderson, the CEO of a carpet company. Now you might think - as I did - that hearing Mr. Anderson's take on the "business logic of sustainability" would probably not be the most enlightening and thought provoking experience (again: carpet company.) Well, that is a misguided impression, dear reader, and I invite you to check out his 15 min talk in the video below. Personally, I'm a huge fan of the Environmental Impact Equation (min 4:40), and particularly of his re-writing of it (min 11:18). 

Obviously, developing a "new civilization" is no easy feat, and you can't draw a fancy road map for completing this task. Nonetheless, the notion that Anderson introduces in his speech, that we must decrease the importance of "Affluence", and increase the importance of "Happiness" in our calculation of the impact of production really appeals to me (watch the video, really). Sure, it's a pipe dream - and for working with (and not for) the private sector on a daily basis, I know that the notion of the triple bottom line is far from being a central tenet of modern business.

However, stories like these instill a little bit of hope:

The video [The Story of Stuff] is a cheerful but brutal assessment of how much Americans waste, and it has its detractors. But it has been embraced by teachers eager to supplement textbooks that lag behind scientific findings on climate change and pollution. And many children who watch it take it to heart: riding in the car one day with his parents in Tacoma, Wash., Rafael de la Torre Batker, 9, was worried about whether it would be bad for the planet if he got a new set of Legos.

Of course, no one wants their kids (or other people's kids, even worse) becoming staunch and unwavering advocates of the environment at home - I can already picture children across America going through their mothers' cosmetics and hiding/throwing away (I mean, recycle) all of the products that don't meet their high standards. Regardless - and seriously - I do believe that tackling the question of how to adapt our modes of production/consumption to current realities (more people, more pollution, less resources) will require some efforts on the educational front. Leaders of tomorrow (it's apparently too late for today's leaders) will need to view the world through the filter of sustainability - and that can only happen if we educate and shape our young generation to respond appropriately to the challenges of their time. 

The Story of Stuff is an amazing video, which I highly recommend you watch - similarly to the Anderson TED talk, it shows how modern means of production are outdated. I'm not surprised that it's being used in classrooms across the US to teach students about the environment and climate change. Living in Vancouver, I sometimes feel like I live "in the future": few people still use plastic water bottles, taxis are almost all hybrid, buses are electric, electricity comes mostly from hydropower... etc... There are so many signs that we are turning a corner in terms of how we approach consumption/waste - but not nearly enough, in my view. And I suppose it will take time. And that, to a large extent, it's the millions of small, everyday paradigm shifts that really make a difference (recall Rafael de la Torre Batker who was worried about the effect of a new set of Legos on the planet). 

The Economist published a story about money growing on trees. Wait. What? 

When forests vanish, people suffer. That is why many believe that there is an urgent need to bring forests onto the global financial balance sheet. Last year Pavan Sukhdev, an economist at Deutsche Bank, reported that the world was losing natural capital worth between $2 trillion and $5 trillion every year as a result of deforestation alone. If money could be made by selling these ecosystem services, then the financial equation for forests would change.

So a London-based firm, Canopy Capital, is taking up the challenge with Iwokrama International Center (Iwokrama is 370,000 hectare forest in Guyana). They are creating an entirely new class of asset management, by analyzing all of the "services" the forest offers and putting a price tag on it: carbon sequetration, soil regulation, oxygen production... Possibilities are endless, seemingly. I think the conclusion of The Economist piece captures it: "For a few bright sparks out there, financial innovation and engineering combined with science will let them generate wealth in a whole new way."

Brilliant! I'm already imagining the answers we'll hear when we ask a child, ten years from now, what he or she wants to be when they grow up: "I want to be a financial scientist!" 

Dead Aid Bandwagon

If you are a development nerd, you have probably read ad nauseam about Dambisa Moyo's new book, Dead Aid. In the last few months, there has been an interesting debate happening between different schools of thought. Essentially, Moyo argues that foreign aid to African countries is one of the preeminent root causes of Africa's underdevelopment (for lack of a better word), and that instead of throwing billions of (wasted) dollars into the hands of dicators, African governments should instead be given access to more private finance. 

Having worked at the World Bank and Goldman Sachs, Moyo - who hails from Zambia - offers a refreshing perspective on the aid debate (which is typically dominated by white males... no surprises there, right?)

Her book unleashed an outpouring of commentary - some condemning her views, others wholeheartedly agreeing, and everything in between. I have been tempted to throw in my two cents, but the more I read about it, the more convinced I am that a) everything that could be said, has been said and, b) the debate over whether aid should be stopped or not is such a macro discussion that, ultimately, we're getting stuck at the "50,000 foot" view - and that doesn't really help move the debate forward constructively. Because, as we all know, foreign aid will NOT end - even if you were able to show by a+b=c that aid caused most of Africa's problems, Official Development Aid (ODA) is still a critical foreign policy tool, and to call for its halt is unrealistic.

Anyway.  

Most recently, Francis Fukuyama voiced his opinion on the matter in Slate. He compares Moyo's argument with another prominent African scholar's views, Wangari Maatai. His piece, I thought, actually touches on a couple of really key issues, which most commentary on "Dead Aid" have failed to focus on. Excerpt:

Both women see sub-Saharan Africa's fundamental problem not as one of resources, human or natural, or as a matter of geography, but, rather, as one of bad government. Far too many regimes in Africa have become patronage machines in which political power is sought by "big men" for the sole purpose of acquiring resources—resources that are funneled either back to the networks of supporters who helped a particular leader come to power or else into the proverbial Swiss bank account. There is no concept of public good; politics has devolved instead into a zero-sum struggle to appropriate the state and whatever assets it can control.

This view actually echoes what one of the most prominent French African scholars, Jean Francois Bayart, writes in his book "L'Etat en Afrique: La politique du ventre". In this book, he writes that the "politics of the belly" - which is to say the political culture that is prevalent in Africa whereby rulers seek to accumulate power and possessions -  is not only the fundamental issue that has been plaguing the continent, but also a product of its very particular social, political and economic history. In his book (which I unfortunately don't think has been translated into English), he describes how complex social and political networks arose in the context of colonial and post colonial sub-Saharan Africa, and how the polity that emerged is defined by an intricate interplay between foreign dependency, reliance on local (and often socially constructed) tribal or ethnic identities and leaders' destructive desire to selfishly accumulate resources. 

Of course, given that we're talking about a whole continent, generalizations are very hard to make - so while one can certainly find counter points to Bayart and Fukuyama's argument, there is an element of truth to it, which to me captures the most powerful criticism of Moyo's book: it's not aid per se that's the problem - it's what's being done with it, and how it's being managed. And of course, Moyo knows this. But, as Owen Barder notes:

It seems to me that Dambisa Moyo has set up a false dichotomy between aid and entrepreneurship. Many of the things Moyo would like to see - better access to financial services, a better business environment, lower tariffs - can be (and are) supported by aid. 

It's been frustrating to read Bono's response to Moyo, as well as the reactions from a lot of people "shocked" that Moyo would call for an end to foreign aid. But, if (like me...) you subscribe to the Easterly school of thought that holds that most ODA ends up being horribly wasted and that an entirely new ODA regime needs to come about, then her argument, while virulent and, frankly, aggressive, makes sense. 

Just recently, from (of all places) USA Today:

Two United Nations agencies spent millions in U.S. money on substandard Afghanistan construction projects, including a central bank without electricity and a bridge at risk of "life threatening" collapse. 

In the current context, I think it's great to debate the virtues (or lack thereof) of ODA - however, focusing on that macro question shouldn't be a reason to turn our focus away from the real issue: today, there are millions of aid dollars at work - how do we actually make them work, with a view to incrementally decrease countries' dependence on foreign assistance? 

Oh, aid effectiveness... You are hella elusive. 

Meandering again

It's been a while.... Lots of things happening professionally, personally, all across the board, it's been a rather eventful Spring. Except it's not *really* Spring here in Vancouver - the weather gods have been particularly ungenerous, save for the few nice days that they kindly (and I'm pretty sure begrudgingly) bestowed upon us. 

In any case, my Google Reader is finally under control - reading (or skimming through...) the 1000+ articles that have been accumulating in there, in addition to catching up on all the reading and informing myself I have failed to do in recent times was a bit daunting, but here I am again, ready to contribute. 

Before diving back into my favorite topics, I think a Niapele update is in order. 

For the past 9 months or so - basically since the financial crisis and the resulting meltdown occured - we have seen a sharp drop in donations. Truth be told, this also coincided with Celina, my co-director, and myself getting full time jobs (girl's gotta eat!), and we weren't fully prepared to cope with dwindling spontaneous donations. In spite of our success as a small start-up organization (feeding 100s of kids for a school year... providing for 20+ abandoned children for nearly 2 years..... supporting a small organization for handicapped children...), we have been struggling to mobilize the funding that we would need to make all of the aforementioned projects true successes.

For instance, the School Nutrition Initiative which we ran during the 2007-2008 school year - we served daily meals to over 600 kids and 30 staff and teachers at the only tuition free school in the Buduburam refugee camp. [Note: After more than 2 years being involved in this project, I have yet to wrap my mind around the concept of private, costly education in a refugee camp as the "best" alternative for schooling for refugee children.] The program cost about $2,000 per month, including salaries of kitchen staff, and had start up costs of about the same amount (pots, utensils, stoves, renovations to the cafeteria space which we rented....). Over the course of the school year, we worked in close cooperation with the Carolyn A. Miller School, its donors and supporters, as well as with an incredible, dedicated Ghanaian nutritionist, Adam Sandow, to develop, implement and continually refine the School Nutrition Initiative. The program delivered positive results, which you can read about here.

Now, we are trying to recreate this same initiative in Liberia, where our partner, the Carolyn Miller School, is now operating out of. While a refugee camp setting was a challenging environment for us to succeed in, Liberia is a whole different story - essentially demolished by the war, Liberia is still reeling. And despite advances on many fronts, there are still some core challenges that need to be seriously taken on. Our very own - and very brave - Megan Sullivan just arrived in Monrovia to act as our Country Director, and assist our Program Manger, Henry Snyder. We are really hopeful that, with her presence, we'll be making strides towards improving the sustainability of our partner organizations - as well as our own. 

Raising funds for the School Nutrition Initiative in Monrovia is a priority for us at this point. We've carried out a needs assessment exercice at the school, and we drew up a budget with them - for $2500, we can restart the program. That's probably something we can achieve in the next couple of months - however, what's much, much more difficult is to secure the funding to actually run the program every day of every week.... We feel that starting up the program without the guarantee of funding to make it last would be suboptimal - that goes against our principle of sustainability, and would be devastating for the school, and its students. 

So Megan is initiating a series of meetings with donor organizations and agencies at the country level - hopefully, we will be able to secure the support of a reliable funding partner for our activities. The model is simple and replicable, and by cutting costs and having a lean operation, you can feed A LOT of children, all the while stimulating the local economy by purchasing from local food producers, by employing staff for to run the program. That's really the beauty of working at the grassroots level, with community-based organizations - with relatively small amounts of money, you can have a significant impact. 

One of my favorite new blogs, Aid Watch, ran a piece (a post?) about aid effectiveness in Nepal - excerpt:

Doing an inventory of small NGOs working in the various districts, then giving out small amounts of funding ($10,000-$20,000 a year) probably gets the most done. Skip the audits and heavy-duty report writing and verify with a small team equipped with a camera. A picture is worth a thousand words (or reports) it's there or it isn't and the camera tells you. NGOs with barely enough budget to survive have little motivation and opportunity to corrupt the process. They are community members themselves and the community can police its own quite effectively. Nearly anyone living in a small community in Nepal can tell you in short order who is working for the good of the community and who is lining their own pockets. Snap photos, ask the locals and you'll know for sure that your aid dollars did something.

I feel confident about Niapele’s ability to make a difference – with Megan in Liberia, I have a renewed sense of optimism. Celina and I are also going to continue finding new ways to raise funds, and, in an effort to be transparent, I’ll be posting updates about our progress. In fact, this is part of our broader attempt to revive our online presence as an organization – new Facebook public profile, new Twitter account, and a new resolve to make things happen.

 

For those who might have missed it, here is the video that Ayoka Productions made for us last year:

 

The End

While I was participating in Earth Hour last night, I read this incredible piece by Michael Lewis.  I really enjoyed reading about the demise of the financial system as we know it by candlelight - it actually reminded me of the time I spent in Ghana, every evening without electricity, but with great reading and conversation. 

If you want to understand what a mortgage backed bond is, and what it means to repackage it, and how absolutely unscrupulous and greedy Wall Street firms and hedge funds are - then read this. 

Did you vote Earth, by the way? 

This is great

www.thisisreality.org

Watch the video:

Nobody dares to predict today what will be the future of capitalism

Lula's wishful thinking in the Financial Times. 

(and speaking of Brazil, this is infuriating)

Understanding the poor?

I've been neglecting my little corner of the internet these past couple of weeks... Blogging can be a serious "monkey on your back" situation, and the more I put it off, the less motivated I become to write. Also, the fact that I've been doing a lot of writing and editing at work every day probably compounds this... Anyway, poor excuses. There is a lot I want to share, like for example (and in no particular order), my impressions of Peru, the value of a trillion dollars, Obama's greying hair and the ICC indictment of President Bashir (great article by Alex de Waal, who is The Authority on Darfur).

But I won't... Not today, at least (although chances are I will never write about Obama's hair). One of my colleagues forwarded an article from the Stanford Social Innovation Review a few weeks back, noting that the last couple paragraphs completely jive with our organization's mission (hurray! I agree with the conclusions of the article, and it gave me a warm fuzzy feeling that I spend my days working for an organization that embraces those principles) 

The author, Aneel Karnani, makes a lot of good points in this article called "Romanticizing the Poor". He lays to rest a lot of misconceptions about the business opportunities that exist at the bottom of the pyramid - his main thesis is that poor people are not necessarily aspiring entrepreneurs (as many advocates of microfinance see it), nor are they particularly discerning consumers (as corporations like to portray). Excerpt:

Beneath these beliefs in the market readiness of poor people lies a more basic assumption: people in dire straits are well-informed and rational economic actors. Yet this view denies the fact that poor people often act against their own self-interest. Of course, wealthier people sometimes do so, too. But poor people face far worse consequences for their bad choices than do more affluent people. And so romanticized views of BOP people as value-conscious consumers and resilient entrepreneurs are not only false, but also harmful. These views lead states to build too few legal, regulatory, and social mechanisms to protect the poor, as well as to rely too heavily on market solutions to poverty.

To support his views, he makes a number of compelling (and honest) arguments that deconstruct a "romanticized" vision of the poor, which rests on the assumption that they are rational economic actors. Of course, because he's talking about billions of people in a general way, these are clearly sweeping generalizations - but like all generalizations, there is a lot of truth to what he's saying. 

He notes, for example, that people who live in poverty tend to spend inordinate amounts of money on celebrations, festivals and what I will call, broadly speaking, escapism (he cites a recent field study in Sri Lanka which reveals that more than 10% of poor male respondents regularly spend their entire incomes on alcohol). This really resonates with me – I am still unable to understand why Liberian refugees in Ghana needed to have a costly “Miss Liberia” pageant, or make t-shirts for every last occasion of the year (you essentially cannot be a “real” organization or club until you have a t-shirt with your motto and logo on it). That always struck me as an immense waste of resources, particularly in a context of complete and utter need – you wouldn’t be pressed to find someone telling you about their t-shirt order and in the same breath asking you for money to buy food/water/go to the clinic.

I remember trying to organize a half day workshop on nutrition for the staff of the school I was volunteering at – I drew up a budget, and discussed it with my local colleague. He pointed out that my food/refreshment line item was quite small – indeed, I had only accounted for the purchase of water and some basic snacks. He explained that “no one would show up” unless I had the event catered and everyone got a “soft drink”. Yes – catered. In the end, most of the costs of the workshop were food related. I thought this was because I was white and therefore incredibly rich, of course, that people expected this. But time after time, I heard about these “catered workshops” during my time in the refugee camp.

Another trend which Karnani points to is how corporations take advantage of the lack of regulations in order to market products that are detrimental to a person’s health – such as liquor in very small (and therefore very affordable) packages. This brings up another memory: small sachets of rum that would litter the ground of the refugee camp. Except they weren’t being made by large foreign corporations but by smart local entrepreneurs – these are the guys who are really taking advantage of business opportunities at the bottom of the pyramid. This is a point I disagree on slightly – Karnani says: “It is not only tobacco and alcohol companies that exploit the weaknesses of the poor: Even Unilever, a consumer products company, preys on the anxieties of disadvantaged people” Umm… wait: it’s not only tobacco and alcohol companies marketing to the poor that exploit weaknesses – that’s what every single company that markets a non-essential product does!! Everyone on the planet is subject to shameless marketing, not just the poor. The difference is, though, is that I know I don’t “need” a blanket with arm holes (even though I know a lot of people who would fight me on this, but bear with me). At the bottom of the pyramid, as Karnani writes,

" …yet these advocates do not acknowledge that the poor lack the education, information, and other economic, cultural, and social capital that would allow them to take advantage of—and shield themselves against—the vagaries of the free market.”

I think he nails it with that sentence.

I really think that it ultimately boils down to education – what I’m talking about though, goes much beyond the Millenium Development Goal of providing primary education to all the world’s children by 2015 (that ain’t happening, by the way). In my mind, “education” comprises formal education at all levels, including the promotion of university or technical degrees, as well as skills and knowledge transfer. For micro, small and medium size enterprises, good leadership and sound management are essential for success – neither of these skills is born out of thin air, and individuals need to somehow acquire them. A direct result of this is the increased premium places on capacity building and technical assistance as crucial complements of financing for any informal organization or business in the developing world.

As Karnani accurately notes, for individuals to “take advantage of and shield themselves from the vagaries of the free market”, a strong regulatory framework is imperative. Consumers need to be protected and industries promoted, controlled and appropriately incentivized – isn’t that what we ask from our own governments? (well, perhaps Rush Limbaugh disagrees…) 

An interesting and rather intense debate took place over at Nextbillion.net regarding this piece - one of the scholars that Karnani criticizes in his piece, Al Hammond, responds to Karnani in no uncertain terms. I highly recommend checking out the vitriolic back and forth. Here's a softer response to Karnani's article.

Karnani's article is a must-read - as my good friend CPL said, "that's one of the best most honest pieces I have read in a long time.”

Oh, and here are a couple of photos from my trip to Peru

From 2009 pics

This man owns and runs a cheese factory/shop in the mountain town of Cajamarca, Peru. He started his business about 10 years ago, and now sells cheese in different regions of the country - his marketing strategy was developed with the help of a local economic development organization. He told us his story and showed us around his facilities, describing which challenges he faced as a small business owner - very enlightening. I'll admit the cheese wasn't really all that great (I'm from France... I have discerning taste in cheese), but on the other hand the dulce de leche (displayed in the center of the photo), was amazingly good. 

From 2009 pics

And this is "Lima-by-Night", viewed from the neighborhood of Barranco (I want to live there). Yes, it's a ginormous illuminated crucifix.