Beyond Aid

"The Scott Bader was established in 1921. Today we are a Euro 220 million multinational chemical company, employing 600 people worldwide."

Hmm, not a company description that would normally catch my eye. My thought process would be something like, "chemicals, millions of Euros - oh only 600 people, wow somebody's getting rich off those chemicals.

And if it weren't for Small is Beautiful I would have left it at that. (For those who are just joining, I am just finishing up a series of posts by Jordan and I on the very interesting book - Small is Beautiful by E.F. Schumacher)

When Schumacher presented this as a model company my first thought was that they probably were not around some 30 odd years later. But there it is, Scott Bader is still very much around and succeeding.

What's so interesting about it? It is entirely owned and run by the employees. Early on Ernest Bader (picture) decided to hand over ownership of his company to his employees, even taking the steps to limit his own profits. And from what I can tell its been that way ever since. I encourage you to read their history pamphlet. It's a great story of faith (pacifism even for you Mennonites in the crowd) and business. If this was the status quo company model I can tell you that our world would be a much better place except that there would be no need for this blog which would be too bad!

So that's the last thing I wanted to bring out from Small is Beautiful. In summary, Schumacher attacks the concept of constant growth and bigger is better. From an environmental and societal perspective he demonstrates that our current study of economics is flawed and harmful. (I'm hoping to go to a discussion about steady state economics in a few weeks so keep posted!)

And now for something completely different...

The topic last week for my management of technology course was on the developing world. The required readings included a number of references to papers that back up what W. Easterly maintains. That foreign aid is simply not doing what it should. We also had to watch a video by Dambisa Moyo on her opinion of aid.

The suggested alternative was the theory by C.K. Prahalad that people, and especially corporations, can do good (financially) by doing good. In other words, viewing the bottom billion or two as consumers and producers and targeting them as such in the same way that corporations currently vie for the dollars of the developed world. From my experience this is already happening. India and China are developing products for people who live around the poverty line. From bicycles to cell-phones to watches and water pumps this concept is already old news. Part of me agrees with theory, and I even have some entrepreneurial ideas with this in mind. But part of me is a bit uncomfortable with this idea. Any comments?

This ties into a concept I mentioned a couple of weeks ago which was Foreign Direct Investment as an alternative to aid. Many countries, most notably the US, maintain that direct investment in a country is much more beneficial than aid and much less patronizing as well. Investment gets the country involved in the world economy and brings up the local education, access to technology and all that other good stuff (health, women's rights, etc) follows afterwords. As well, since FDI is entirely within corporations who are out to make a buck, mishandling and corruption of funds is much less tolerated than with typical aid that has to pass through many governmental hands. Unfortunately, it seems that FDI has far too many strings attached to truly be effective. Since companies simply want to make a buck, profits do not stay in-country and much of the investment simply goes back to the host country.

Both these proposals call for an end of foreign aid. Moyo seems to say let Africa suck it up (my words! - did I mention she's from Zambia!) while Prahalad at least proposes a new way to involve the developing world in the world economy. Any comments?

Anybody read "Dead Aid" yet?

Kurtis (from Waterloo)

Review of "The White Man's Burden"

So now a bit of history on the title of this blog - a topic which Jordan is far better suited to cover but we reserving his talent for a review of other development writings.

The title of this blog, “Two White Men with Burdens”, is a tip to William Easterly’s “The White Man’s Burden; Why the west’s efforts to aid the rest have done so much Ill and so little good”. Similarly, Easterly’s book is a tongue in cheek reference to the poem by Rudyard Kipling, "The White Man's Burden" (or the Wiki-link) However, Easterly's book is even more of a direct response to Jeffrey Sach's "The End of Poverty". (In fact, the two are listed as "Opposed" in their Wikipedia entries.)

I first read WMB somewhere in the middle of term term in Tanzania and it immediately struck a chord with me. As I read it, I was in the middle of my own development projects (I cringe to use that term) but more importantly I was familiar enough with my community to begin to recognize the ghosts and failures of so many projects that had gone before me.

Easterly provides a fairly easy read starting with an overview of the differences between the economic systems of western capitalism and the systems of traditional development work. His main argument is that while capitalism is driven by Searchers (entrepreneurs looking for a demand market that is not being met) , the development world is largely made up of Planners (people who assume they know the answer from their own experience disconnected from ground work developing strategies solely on paper). Throughout the book he provides case studies of development projects that have failed because they have far too much outside planning. What I found even more interesting was his contrasting of aid between various countries. With admittedly broad strokes he reviews many of the countries which received IMF money (ie BIG money) IMF over the last 50 years and where they are now. (Hint: It's not a pretty picture.) He contrasts this with places and countries that did NOT receive IMF aid and it makes for an interesting observation.

At the end of the book he does provide his own, albeit in my opinion, weak suggestion for how to reform the aid industry. He talks about "aid dollars" with which the recipients of aid project could vote, or buy, the aid projects that they were interested in from the aid agencies that they trusted. It is an interesting thought and does begin to address his criticism that there is no proper feed-back mechanism within the aid industry in which agency's are answerable to their donors and not the people they are trying to serve.
(Also read the NYTime's review of "White Man's Burden)

In some of our correspondence Jordan enlightened me to the fact that the one thing Easterly does NOT do very well is acknowledge the growing body of research that demonstrates his points very clearly. In other words, he leaves the reader to assume that he was the first to hold and promote this perspective on development. But I think Jordan may expound on this a bit more next week.
And I would be amiss not to acknowledge Dambisa Moyo, a Zambian economist with very impressive credentials. She wrote "Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa". This book is fairly high up on my to-read list and hopefully I can read it before the end of this year.
(Interesting disclosure. I had always had a bit of reservations for Bono's (lead singer from U2 - no links, you look him up) views on aid for Africa. I really appreciate Bono for a number of other reasons but in doing this research I've realised that he is on of the Sach's camp and definitely not in the Easterly / Moyo camp which is unfortunate in my opion.)

Well, there you have it, not the most interesting post but for those of you with the same sentiments (and especially anyone of differing sentiments!) please give it a read.

Kurtis (wrapping up my first semester in Waterloo)