Archive for the ‘Poverty Reading List’ category

« Older Entries

Portfolios of the Poor book review

February 21st, 2010

portfolios of the poorRecommended Reading

Portfolios of the Poor: How the World’s Poor Live on $2 a Day

by Collins, Morduch, Rutherford & Ruthven

This recently published book has got a lot of buzz amongst the microfinance industry as providing new insights into the actual financial activities of < $2/day (key UN definition of very poor) families.  The book includes the one-year financial “diaries” of 250 families living on $2/day in Bangladesh, India and South Africa painstakingly collected by researchers after building trust with families to share their daily financial transaction details.  These are summarized into cash flow and household “balance sheet” statements to analyze the fascinating volume and scale of financial transactions which these families  juggle in order to survive, and occasionally thrive.

There are a lot of good insights in this book and I recommend it for those who value data in order to design innovative and helpful financial services for base of the financial pyramid families.  Here are a few highlights I noted:

  • Every family had both loans and savings
  • Families accessed on average of 8-10 different financial instruments in the year
  • Cash flow turnover was up to 300-500% of total net income
  • Incomes are not just low, but also uneven and unpredictable … creating higher complexity to manage cash
  • Families often borrow even when they have savings
  • It is not uncommon for savers to pay interest/fees rather than receive them to those holding their savings
  • Moneylenders are often used for short-term loans … interest paid perceived as a convenience fee rather than interest rate
  • Flexibility/adaptability is a critical factor when the poor select financial services
  • Financial transactions outside the formal financial system (including MFIs) greatly outnumber those with MFIs
  • The downsides of informal financial transactions:  unreliability, lack of privacy, lack of transparency

Poor households would benefit greatly from reliable, convenient, reasonably pricing “formal” financial tools to help with:

  • daily cash flow management
  • savings (for long-term needs)
  • borrowing for flexible uses

No comments »

Posted in Poverty Reading List

Tags:

Slavery book review

December 6th, 2009

phuleSlavery
by Mahatma Phule

Slavery was written around 1900 as an expose on the caste system in India. As a reformer and social activist, Phule (along with his wife) advocated for women’s education and sought to bring light on the devastating “slavery of the mind” which enabled the upper caste peoples (particularly the Brahmin caste) to control and continue impoverishment of the vast majority of Indian people using the Hindu religion.

Ambedkar, one of the father’s of India independence (author of the Indian constitution and himself a dalit … aka Untouchable), condemned the Hindu religion which he referred to as Brahminism … essentially the worship of Brahmins.

I have included PDFs of the Slavery book as, although I have a hard copy, it is no longer in print and very hard to find. I found this copy on-line, but the website which published it is quite unreliable.

Related posts on the India caste system:

Slavery by Mahatma Phule

DEDICATED TO THE GOOD PEOPLE OF THE UNITED STATES
AS A TOKEN OF ADMIRATION FOR THEIR SUBLIME DISINTERESTED AND SELF SACRIFICING DEVOTION

in the cause of Negro slavery;
and with an earnest desire,
that my countrymen may take their noble
examples as their guide in the emancipation
of their Sudra Brethren from
the trammels of Brahmin thraldom.

Please post comments on what you think of this and whether it is relevant for today.

3 comments »

Posted in Poverty Reading List

Tags:

Out of Poverty book review

December 5th, 2009

out of povertyRECOMMENDED READING

Out of Poverty: What works when traditional approaches fail
by Paul Polak

Polak, a psychiatrist by training, shifted his full-time efforts to working on poverty over 25 years ago.  He founded International Development Enterprise to focus on helping small, developing country farmers earn more income.  IDE has already helped millions of very small farmers earn their way out of extreme poverty in countries including Bangladesh, Cambodia, Ethiopia, India, Myanmar, Nepal, Vietname, Zambia and Zimbabwe.

While this isn’t the best written book (the content could have been delivered in less than half the pages), the content is worth hearing.  Polak recounts many stories of individual farmers, their challenges, their failures and their triumphs.  The net is you’ll understand some better facts about smallholder farmers and what practical ideas will help them step out of poverty.

Getting the facts right

Here’s the tone of the book quoting from the preface:  “I hate books about poverty that make you feel guilty, as well as dry, academic ones that put you to sleep.  Working to alleviate poverty is a lively, exciting field capable of generating new hope and inspiration, not feelings of gloom and doom.  Learning the truth about poverty generates disruptive innovations capable of enriching the lives of rich people even more than those of poor people.”  Polak believes that we (in the West) are misinformed about why the rural poor stay poor and why most of our efforts don’t help them.

Polak’s Three Great Poverty Eradication Myths:

  1. We can donate people out of poverty.  Polak provides many examples of how well meaning donors have continued to invest billions of dollars in places like Sub-Saharan African with zero net impact on poverty over the past decades.   He notes, “more people are beginning to realize that making it possible for very poor people to invest their own time and money in attractive, affordable opportunities to increase their income is the only realistic path out of poverty for most of them.”  Needless to say, he is not impressed with Jeff Sachs “more of the same” approach to bigger and bigger donations … especially through governments.
  2. National economic growth will end poverty.  Most of the GDP growth in developing countries is happening in the urban environments and it is concentrated amongst a small sliver of even those urbanites.  He notes that growth is a requirement, just not sufficient by itself.
  3. Big business will end poverty.  From his experience, he disagrees with folks like C.K. Prahalad (The Fortune at the Bottom of the Pyramid), that many large businesses will end up serving the poor.  Most of them just can’t adjust to the ultra high-volume, low-margin approach required to serve these customers.

Poor people are poor because they don’t have enough money

Kind of obvious … it’s what the poor tell you when you ask them … but Polak argues that the “poverty experts” have much more complicated answers which is why they are so often distracted from actually helping the poor become not poor.  Poverty experts argue that the poor are poor because (a) they don’t have power; (b) they are uneducated; (c) they get sick/disease too often; (d) they need clean water; (e) they need better seeds/fertilizer (or no fertilizer); etc. etc. etc. and the granddaddy of all … they need ALL of these things before they can have any hope of moving out of poverty.  Polak argues that “finding a practical solution requires a different strategy … finding the simplest single ‘lever’ capable of producing the biggest positive result.”  The answer is – increasing income.

#1 Way for Small Farmers to Earn More Money

Polak believes that growing high-value vegetables, fruits and herbs as a cash crop during the dry season using drip irrigation is the #1 opportunity for small one-acre farmers (and even “landless” people) to earn upwards of $500/year which is enough to start them on the positive cycle towards getting out of < $1/day poverty.  IDE has focused R&D on building a drip and sprinkler irrigation products affordable and sturdy enough for these farmers.  Combining this with their affordable treadle pumps and a few other inventions to assist with water movement and storage, provides a scalable, practical solution.

Here are some additional highlights that I gleaned from this book:

  • 800 million people live on developing country small farms.  Vast majority of these $1/day people have one-acre farms with poor soil and no irrigation.  Their main crops are rice, wheat and corn and they usually can’t produce enough to feed themselves.  If they have access crops left over when they sell it in the market, these crops rarely generate more than $200/acre which isn’t sufficient to move them out of poverty.  Hence, they are stuck indefinitely.
  • Get on the ground with the poor.  We spend so little time actually gathering first hand data from the poor.  So many “solutions” are designed from behind desks often 1,000’s of miles away. Get close, observe and ask questions and you will see the simple and obvious things that are needed and can be done in a specific context.
  • Affordability is #1.  The poor must be able to afford to pay fair market price for the tools to enable them to earn more income.  This is the ONLY solution that will scale to help millions and will keep on being available.  The measurable benefits must be realized in months and ROI within a year.  For products designed to serve the poor, “Affordability isn’t everything.  It’s the only thing.”
  • Price subsidies make things worse.  He argues with examples of how subsidizing goods and services almost always ends us making poor people worse off … and this includes food.
  • The green revolution will come later to small farmers.  First they need to get affordable irrigation.  Then they need to have enough savings/income to afford the more expensive inputs.  And then they need to have enough resources to not be financially devastated if there is ten-year flood/drought.  So, it will come, but later.

2 comments »

Posted in Poverty Reading List

Tags:

The Bottom Billion book review

May 20th, 2008

thebottombillionThe Bottom Billion: Why The Poorest Countries Are Failing and What Can Be Done About It
By Paul Collier

When a book is recommended by both The Economist (more conservative) AND George Soros (quite liberal), it is bound to be interesting … and this book did not disappoint. Collier is a British economist and former research director at the World Bank with a particular focus and experience on Africa. By training and interest, he is a statistician which he states clearly and explains that he’s just “sharing the numbers.”

Looking at the world the wrong way

He starts off by stating that he believes we’re looking at the world (from the perspective of economic development) in the wrong way. The current mainstream way of viewing the world is that there are 1 billion rich people and 5 billion poor people. He says that a better way to look at (and understand the world) is that there are 1 billion rich people, 4 billion people well on their way to becoming rich and 1 billion people who are poor and becoming [absolutely, not just relatively] poorer. That is, about 4 billion people live in countries where they are seeing incredible economic growth rates which if they continue will in the next few decades bring the vast majority of their citizens out of poverty and into the middle class. [See my previous post, Is the world getting better?]

He focuses on this “bottom billion” people who live in some 58 countries who are stuck and not participating in the benefits of economic development through globalization and other means. Their reality is more the fourteenth century way of life … civil war, plague and ignorance. These people are concentrated in countries in Africa (70%) and Central Asia. In 2000, these 1 billion people were poorer than they were in 1970. The typical person in these countries has 1/5 the income of the 4 billion people in other developing countries. He believes this problem is denied by the development biz (aid agencies and their contractors) and the development buzz (what he calls the “headless heart” generated by rock stars, celebrities and NGOs). He argues that the traditional approaches of conservatives and liberals are both failing and a new approach is required based on what we’ve learned and what we know.

Growth is good

When he was at the World Bank, his research department produced a controversial paper called “Growth Is Good for the Poor.” The paper points out that “the central problem of the bottom billion is that they have not grown. The failure of the growth process in these societies simply has to be our core concern, and curing it the core challenge of development.” He says that we should not be indifferent to how an economy grows, but that the exaggerated suspicion of growth (now often a bad word which must be prefaced by “sustainable, pro-poor”) by those who are concerned about development. He critiques this view by stating that “the problem of the bottom billion has not been that they have had the wrong type of growth, it is that they have not had any growth. The suspicion of growth has inadvertently undermined genuinely strategic thinking.” He goes on to state, “we cannot make poverty history unless the countries of the bottom billion start to grow, and they will not grow by turning them into Cuba … a stagnant, low-income, egalitarian country with good social services.”

What is causing these one billion people to be left behind?

Collier has identified four traps which he believes must be recognized and addressed in order for these countries/people to break out of their condition of ongoing misery caused by poverty. I have made a few highlights on each of the traps:

(1) the conflict trap

  • 73% of these countries are in (or have recently been in) a civil war
  • Civil war is much more likely to break out in these countries — have the starting income per person and you double the risk of civil war
  • The rebels are almost always as bad in governance as their targeted incumbents … their social justice messages are rarely made a priority if they get into power
  • Natural resources help to finance conflict (and sometimes motivate it)
  • Ethnic minorities are just as likely to rebel with or without discrimination
  • There is no statistical significance on likelihood of civil war based on income inequality or whether or not it had been a colony of another country
  • Civil war reduces growth by about 2.3% per year and typical war is 7 years

(2) the natural resources trap

  • 29% of the bottom billion live in countries where resource wealth dominates the economy
  • The “resource curse” works like this … resource exports cause the country’s currency to rise in value against other currencies … this makes the country’s other export activities less competitive … yet these other activities are often key for technological progress. This can work while resource demand is high, but there are always downswings.
  • Needed reform (and diversity of economic development) is very difficult to get support for during resource boom times and almost impossible during down cycles.
  • The heart of resource curse is that resource rents (ability to earn excessive profits during boom periods) make democracy malfunction when resource profits are at or above 8% of national income. He asserts that in these situations autocracies outperform democracies by a large margin.
  • Both democracies and autocracies with resource abundance underinvest their profits and invest them badly.
  • Democracy is critical yet insufficient … politicians need to exercise restraint rather than the usual practice of obscene levels of patronage.

(3) the trap of being landlocked with bad neighbors;

  • 38% of the bottom billion are in landlocked countries.
  • Neighbors matter…the economic health and infrastructure of your neighboring countries are particularly important for these countries…both as export markets and necessary transportation routes to other export markets. Growth does still over.
  • He makes multiple suggestions for how to break this trap … all which take bold intentional policies.

(4) the trap of bad governance in a small country.

  • There is not much popular enthusiasm for economic reform (think: making medicine) because it has unfortunately got a bad reputation and people are inpatient.
  • These “failing states” are both failing their citizens and are increasing the likelihood of falling into the conflict trap.
  • A failing state is more likely to experience a turnaround the larger its population, the greater the proportion of secondary educated and has recently emerged from a civil war. Interestingly, democracy and political right didn’t seem to be an important factor.
  • The average time it takes to turnaround a failing state is 59 years!

He also notes that even once countries break through these traps, it is now harder for them to compete in the global market as they are latecomers to the globalization party. He reminds those against globalization though that our last experiment with retreat of trade, capital flows and migration (1914-1915) was a ghastly experiment. So, we need to figure out ways to provide on ramps for the bottom billion to participate in growth afforded by global markets.

The weakest part of his book is his recommendation that we rely on the G8 (group of 8 large economy countries) forum to implement his ideas. This is just not going to happen. The G8 forum has proven to be ineffective for almost everything it is supposed to address to date that I have little hope for a miracle here. So, while I think Collier has challenged us with some helpful data and insights to that data, we need additional new thinking on how to engage with these ideas and get them into the mainstream political forum … to make helping the bottom billion escape from their traps a reality rather than a dream.

See also Mark Lange’s series of articles which cover more of Collier’s ideas.

1 comment »

Posted in Poverty Reading List

Tags:

A Billion Bootstraps book review

February 20th, 2008

billionbootstrapsA Billion Bootstraps: Microcredit, Barefoot Banking, and the Business Solution for Ending Poverty

by Phil Smith and Eric Thurman

I think this the best book that I’ve read so far which provides an introduction to microcredit which is designed for a non-industry expert and, more specifically, for someone who is looking to get involved in microfinance.

It is genuinely co-authored with each author writing alternating chapters. Eric Thurman is the industry expert having previously led two leading multi-country microfinance organizations, Opportunity International and HOPE International plus Geneva Global, an interesting group which advises/supports philanthropists in international giving strategies. Phil Smith is a successful oil industry entrepreneur who tells his story about learning about microfinance and how and why he is now such a passionate investor.

A couple of highlights from my reading:

  • They argue that we should expect higher returns on our philanthropic $, not less than our financial investment returns. They note how people invest philanthropic $ too much with their hearts rather than their minds and that’s why there is such little impact usually made by those investments. Accountability to quantified results is needed in philanthropy.
  • Their rule of thumb is the capital required to help a family out of poverty through microcredit is approximately the level of average annual income per capita of the borrower’s country (GNI per capita).
  • Microcredit has dramatically lower cost-per-life (CPL) impacted “return” than any other kind of investment they could find. They estimate that this could be as little as 1% of per capita GNI based on 20 loans cycles (1 every 6 months for 10 years) and an average family size of 5. Even if you conservatively discount the impact, it likely not more than 10% of per capita GNI.
  • In the Democratic Republic of Congo, the average income is $120, so the CPL would be 1-10% of that or $1.20 to $12. Wow! It is an order of magnitude (10x) more expensive in middle income countries (e.g. Eastern Europe) and two orders of magnitude (100x) more expensive in developed countries. So, if you are looking for maximizing your CPL…low income countries are the best investment by far.
  • They present the concept of “microcredit plus”. They prefer the term “microcredit” over “microfinance” as they see the credit piece as the driver and everything else that is added on is part of the “plus”. They are strong supporters of the “plus” services that can accompany and complement microcredit … but leave that up to you to decide what matters to you.
  • They provide a list of some of the major international microfinance organizations along with some very good advice of how you need to do your own due diligence to find out what their true overhead is. Eric, the industry expert, says it is not unusual to be 50% or more!
  • They provide a list of ways you can invest/participate in microcredit. This is a good summary of your general options … although you’ll still need to do a bunch of homework.

What I think is missing from the book:

  • There continues to be too much focus on telling the stories of how the exceptionally rich are doing philanthropy … the Gates, Buffetts, Omidyars, etc. which while maybe inspirational is frankly pretty irrelevant to the rest of us. Then there’s the only very rich examples of ex-bankers, etc. We need people who are telling more stories of ordinary individuals like the rest of us making a difference.
  • This book is very focused on supporting the impact of microfinance through donations even though they extensively use the “investment” language to describe your donations strategy. They do note that some people are making loans to provide capital for microfinance, but this is more of a side note. I think that there needs to be more written about helping people take a more holistic approach to “investing” in social impact which includes both philanthropy (donations/volunteering) and investing with the opportunity for capital return (and possibly a profit.)

No comments »

Posted in Poverty Reading List

Tags:

Creating a World Without Poverty book review

January 29th, 2008

Creating a World Without Poverty: How Social Businesses Can Transform Our Lives
by Muhammad Yunus

Muhammad Yunus, 2006 Nobel Peace Prize recipient, has recently released his second book, Creating a World Without Poverty. The centerpiece of this book is Yunus proposal for a new kind of institution called a “social business” which is a for-profit business which has as its top objective a social objective/mission. Yunus makes a passionate argument for the benefit and role of social businesses in helping us move extreme poverty to museums.

I have written a fair amount on Muhammad Yunus, Nobel Peace Prize winner and his first book, Banker to the Poor on my blog. Yunus is an incredible innovator and one of my current day heroes who has made a huge impact on addressing global poverty. So, I was eager to read his new (and second) book.

While I do recommend reading this book, I would call this less of a book and more of a collection of stories and speeches on topics with a little more detail thrown in than a speech generally allows. So, don’t be expecting something “integrated”, but a bunch of Yunus’ current thinking and favorite topics.

Social Business. The centerpiece of this book is Yunus’ concept of a social business. His argument is that humans are actually interested in more than self-interest … they are also interested in helping others. Traditionally, there are 3 primary organization types: (i) for-profit businesses; (ii) non-profits/NGOs and (iii) government. He is proposing the need (and opportunity) to launch a new entity, a social business, to serve the needs of the world’s poorest citizens.

Yunus has a rather specific and narrow definition of the term/concept of a “social business.” Yunus defines two kinds of social businesses: (a) a business which is owned by the poor; and (b) a business where investors are only allowed to receive back their capital invested (that is, no additional return whatsoever.) He primarily focuses on (b) where the primary objective of a social business is a specific social objective plus it must be self-sustaining (i.e. generate financial surplus) in order to provide on-going and growing fulfillment of its social mission. Type (a) social businesses can be pure profit-making machines with the benefit to the poor provided through the profit surplus. Or social businesses could be both type (a) and (b) like Grameen Bank.

Yunus sees no room for businesses with owners/investors (other than poor people) which earn a profit (he calls them profit-maximizing) calling themselves social businesses or having any long-term potential for delivering much social benefit to the poor. He believes that the profit motive will always win-out and these hybrids will ultimately not serve the poor. He also assesses other examples of organization formats to help the poor including coops and NGOs. [See separate response to Yunus' social business concept.]

Social Entrepreneurs. Yunus defines social businesses as a subset of the larger social entrepreneur segment. That is, all social business operators are social entrepreneurs, but not all social entrepreneurs run social businesses. That is, what they do is either not run as a for-profit/sustaining business and/or it doesn’t meet his criteria for a social business per above.

The Grameen Bank Story. There is a whole section/long chapter dedicated to succinctly telling the story of the Grameen Bank. For those of you who who haven’t read Banker to Poor, this hits many of the story high points (and some later additional points) in much fewer words.

Grameen Companies. Yunus provides one of the first overviews (that I’ve seen) of the 24 (!) companies/entities that Grameen Bank has launched in the last 25 years. He describes what they are doing and identifies some as successful and others as work-in-progress. All of them are intended to help the poor in Bangladesh with just one, Grameen Trust, which is seeking to help the poor outside Bangladesh today.

The Grameen Danone Story. Yunus tells in detail the story of how the new Grameen Danone venture in Bangladesh transpired. [I wrote about it here a while ago and got it mostly right ;-)] This is Yunus’ posterchild example of a social business (except it does pay 1% dividends). It is a very compelling and interesting story of how Danone, the world’s largest yogurt company created a new JV with Grameen in Bangladesh to deliver nutritious food products to the poor of Bangladesh. Their first product is a tasty, healthy yogurt product aimed at children which is priced right and is run as a business. Grameen Bank borrowers provide the milk through the cows they have financed. Danone designed a new micro-yogurt factory that supplies a local area and is sold door-to-door by women entrepreneurs from Grameen Bank in their villages. This is a great example of a social business.

The Poor Lack Capital. Yunus has a strong belief that the first place to start with helping the poor is to provide capital. He argues that at the core of poverty is that the poor lack capital so “the poor work for the benefit of someone else who controls the capital.” He says that “poverty arises from the fact that they cannot retain the genuine results of their labor”, so “the poor work for the benefit of someone else who controls the capital.” Sounds like Marx, huh? Yunus is very much a democracy advocate and capitalist though and encourages a business (not socialist) approach to addressing poverty. In fact, he is quite negative about the ability of non-profits/NGOs and government to provide much help to the poor without the contribution of business.

Microcredit Interest Rates. Yunus has a very simple test for whether interest rates charged for microcredit are fair. He grades interest rates that are up to 10% above cost of funds as “green” (best), 10-15% above as “yellow” (warning) and >15% as “red” (he calls them “moneylenders”). He then has a few footnotes which admit that there should be some exceptions. While I agree that philosophically that there should be more transparency and accompanying scrutiny on interest rates charged by MFIs, his formula is very centric on Bangladesh and other like countries like India and are not reflective of the realities of the cost of doing business in most other emerging market countries. So, unfortunately, I think his test is more the exception than the rule.

International Capital for Microfinance. Curious to me, Yunus picks a fight and argues that international/foreign equity and debt capital for bad for MFIs. Some of this comes from his perspective that these investors have for-profit objectives (counter to his social business criteria) and some from the additional cost due to currency risk issues. He argues for national, subsidized megafunds to provide the capital to MFIs along with urging governments to authorize MFIs to collect and then re-lend savings (currently prohibited in most countries with Bangladesh being a notable exception.) I think his first point is too restrictive as there just isn’t enough subsidized capital to go around. I am fully in support of his second point on savings and think that this would be a huge benefit to the poor.

Technology for the Poor. Yunus is a big proponent of the power of technology to transform and uplift the poor. Grameen Bank has launched companies which have brought cell phones and internet services to villages across Bangladesh. And yes, the poor have very productive means of taking advantage of these services. He encourages the development of new technologies which are targeted at the poor. Probably his most interesting idea is a handheld device which provides simultaneous translation so the poor can more easily communicate with the globally important economic languages.

So, quite a bit to chew on from an economist from Bangladesh!
UPDATE: Here is Grameen Foundation’s blog on this book

1 comment »

Posted in Poverty Reading List

Tags:

The Poor Always Pay Back book review

November 17th, 2007

The Poor Always Pay Back: The Grameen II Story

by Asif Dowla and Dipal Barua

If anyone is interested in seeing inside one of the world’s most innovative microfinance organizations, this is a fantastic documentary of the huge transformation that Grameen Bank (founded by Muhammad Yunus) … 2006 Nobel Peace Prize winners … went through over the last few years to deliver “version 2″ of the Grameen approach to microfinance.

This book is written by practitioners for practitioners. So, there are lots of details, examples, explanations and market research data presented … including some which is not all that positive (e.g. that borrowers don’t uniformly increase sending their daughters to school). This book is a must read if you’re in the microfinance field and want to see how the next generation of microfinance is being rolled out.

The book starts off with a detailed review of the first generation of the Grameen methodology now called “Grameen I” or Grameen Classic. It explains the issues/challenges faced with the Grameen Bank using this model and how many of the learnings from their approach naturally drove them to adapt for an improved model. Then it describes the new Grameen II model in detail including the open-access savings, flexible loan products, a range of deposit products, self-reliance at the branch level, no need to access donor funds, their ability to keep interest rates very low, insurance products, pension products, education loans, elimination of group loan guarantees and more.

There is also a very good chapter on how Grameen Bank is intentionally starting to serve the poorest of the poor who are generally not serviced by microfinance because they are often surviving through begging. Grameen’s beggar’s program is built into the core of staff incentives to ensure that no one is being left out of access to financial services.

My only critique of the book is that it is a bit dry. You need to approach this more as a textbook and research document. I’m glad that the authors and others involved took the time to write this up to give us an indepth look at the Grameen story!

1 comment »

Posted in Poverty Reading List

Tags:

China Shakes The World book review

October 13th, 2007

China Shakes The World: The Rise of A Hungry Nation

by James Kynge

I picked up this book to increase my understanding of how things work inside of the fast-growing economy and most populist country in the world. Kynge was the China Bureau Chief for the Financial Times from 1998 to 2005 providing him a very expansive viewpoint on the changes going on inside of China over a period of immense change in China.

Kynge looks at how entrepreneurs in China are leveraging access to liberal capital access from China’s banks to dramatically start and grow entire new business empires. One example he describes is how an entire out-of-date steel mill based in Dortmund, Germany [employing at its peak 10,000 workers] is purchased by a China entrepreneur, deconstructed by an imported team of Chinese works, transported to China and reassembled as an exact operating replica. This project was appropriately named Phoenix.

This book explores the issue that even with an economy growing at 9-10% per year, China generates a few million less than the need 24 million new jobs each year. Beijing politicians face incredible pressures to keep the economy growing in order to generate these new jobs in order to maintain peace and order. He says, “China is like an elephant riding a bicycle. If it slows down, it could fall off and then earth might quake.”

Some of the statistics Kynge presents about China’s economic boom:

  • 400 million people raised out of poverty
  • 120 million people migrated from farms to factories
  • Quantum leap in education standards for 10’s of millions of children
  • Construction of first world infrastructure on a massive scale
  • Growth of over 40 cities with populations exceeding 1 million people
  • Commercialization of housing
  • Vaulting progress up the technology ladder which has helped unleash one of the greatest ever surges in general prosperity
  • Lowered cost of goods leads to greater purchasing power of the poor in developed countries

He contrasts this with the dark sides of China’s boom:

  • Massive pollution which dramatically impacts their citizens’ health and beyond their borders
  • Poor working conditions in many factories with very limited ability for workers to organize
  • Growing inequality of the richest and the poorest
  • Massive demand for natural resources domestically and globally acquired at “any cost” without regard for human consequences
  • Widespread corruption
  • A failed healthcare system

Kynge covers many of the more recent tussles between China and developing countries on military objectives, offshoring, populists movements and more.

While this is not per se a book about defeating poverty, it is a good read for understanding some of the complex dynamics at play inside China … still home to 100’s of million people living on less than $2/day.

No comments »

Posted in Poverty Reading List

Tags:

The Trouble with Africa book review

February 10th, 2007

The Trouble With Africa: Why Foreign Aid Isn’t Working

by Robert Calderisi

If you care about a hopeful future of Africa, you’ll want to read different perspectives to make sure that you’re getting the whole story. Calderisi tells about his experience working for much of his 30+ years in international development (mostly in Africa and mostly with the World Bank) and provides an insider perspective on why we are attaining so little results from our aid investments and makes some very specific recommendations on how we should re-direct international aid efforts.

The book is organized more into personal stories and observations which are helpful illustrations but make the book less organized that it could be. Calderisi finishes up with 10 recommendations which I thought could have been made earlier and then expounded on in more detail. Maybe that’s his next book ;-)

No cash to tyrants. Calderisi has a very different perspective than Jeffrey Sachs who has recently gained popularity with Tony Blair, Bono, Clinton and others with his End of Poverty ideas/book. Sachs advocates primarily for increasing the international aid budgets to help Africa out of what he calls its poverty trap (read Easterly’s critique of this theory). Calderisi argues that the international community (including donors) have to play hardball with the rampant corruption of government thugs in Africa who are more interested in flying first class and depositing ill-gotten cash overseas than in truly helping their countries build a better future for their citizenry. He goes into detailed stories of how these various thugs have ruled Africa and how most African countries are still ruled by thugs — even those considered democracies. He says we need to declare that the holiday is over for African tyrants.

Africa needs to move from victim to ownership. Calderisi argues that “slavery, colonialism, the Cold War, international institutions, high debt, geography, the large number of countries and population pressures all have had an effect on Africa. But none of these can explain why the continent has been going backward for the last 30 years.” He goes into specifics about how Africa’s cultural norms and lack of willingness to address widespread petty (and large-scale) corruption are also major issues. He also states that international donors are so often more interested in being politically correct in their public commentary on Africa than they are in telling the truth about what’s really going on in Africa. This “correctness” does no help to Africa despite its helpful intention.

The international trade large sucking sound. One of the most interesting topic Calderisi raises is the massive economic loss that Africa has experienced from its loss of export markets. He states that Africa in the past 30 years has lost over $70 billion a year (in 1990 dollars) in GDP related to exports (mostly to Asia) due to severe neglect by governments in managing their economies. He explains that this is equivalent of $700 per family per year which means that the current international aid budget at the equivalent of $40 per family per year is a pittance and even a doubling of aid would have little economic impact vs. these loss of exports. Calderisi says that accusations that Africa has suffered more than others from international trade rules (globalization) are just not true. If it were true, then we could simply lift all remaining foreign trade barriers and provide an immediate boost to Africa’s fortunes. Unfortunately, Africa has refused to concern itself with foreign markets and must reverse this approach to be in a position to benefit from international trade.

Good intentions are just that. A story about the trouble with foreign aid … “in the northeast corner of the Ivory Coast, the United Nations Development Programme (UNDP) spent $900,000 over three years trying, unsuccessfully, to show farmers how to grow onions. Just 90 miles away, in the neighboring country of Burkina Faso, farmers were growing onions in similar agricultural conditions quite profitably — with aid.” Sad, but not an isolated story of the results from paternalistic aid projects.

The complexity of aid. You might ask, does Calderisi actually care about African people and creating a better future? Is he saying that all aid is wasteful? He demonstrably does care. His stories of personally breaking ranks with traditional international aid approaches and connecting with common people to listen to them and help them are genuine and admirable. Calderisi states that the difficulty of providing effective aid is not a reason for not trying. He illustrates the complexity of aid though through a quote from the economist P.T. Bauer: “The argument that aid is indispensable for development runs into an inescapable dilemma. If the conditions for development other than capital are present, the capital required will either be generated locally or be available commercially from abroad to governments or to businesses. If the required conditions are not present, then aid will be ineffective and wasted.” This is a real dilemma.

His recommendations for international aid priorities:

  1. Introduce mechanisms for tracing and recovering public funds
  2. Require all heads of state, ministers, and senior officials to open their bank accounts to public scrutiny.
  3. Cut direct aid to individual countries in half (instead focus on regional initiatives).
  4. Focus direct aid on 4-5 countries that are serious about reducing poverty (he suggests Uganda, Ghana, Mozambique, Tanzania and perhaps Mali).
  5. Require all countries (receiving aid) to hold internationally-supervised elections.
  6. Promote other aspects of democracy including a free press and an independent judiciary.
  7. Supervise the running of Africa’s schools and HIV/AIDS programs.
  8. Establish citizen review groups to oversee government policy and aid agreements.
  9. Put more emphasis on infrastructure and regional links.
  10. Merge the World Bank, IMG and UN development programme.

Bold recommendations indeed! But I think many of them are right on. What do you think?

More resources:

No comments »

Posted in Poverty Reading List

Tags:

In Defense of Globalization book review

September 18th, 2006

In Defense of Globalization

by Jagdish Bhagwati

Jagdish Bhagwati, an economist specializing in international trade and a professor at Columbia University, has written a very indepth book arguing that economic globalization overall has (and is having) a tremendous positive impact on the poor. He looks closely at the many critiques and perceptions of globalization and provides responses to many of them.

He notes the ironic fact that “anti-globalization sentiments are more prevalent in the rich countries of the North, while pluralities of policy makers and the public in the poor countries of the South see globalization instead as a positive force.” (p.8)

In commenting on anti-capital sentiments he notes, “I often wonder … how many of the young skeptics of capitalism are aware that socialist planning in countries such as India, by replacing markets systemwide with bureaucratically determined rations of goods and services, worsened rather than improved unequal access because socialism meant queues that the well-connected and the well-endowed could jump, whereas markets allowed a larger number to make it to the check-out counter.” (p.15) He notes that anti-capitalism, anti-corporation and anti-Americanism attitudes (for various different reasons) have have unfortunately turned into anti-globalization rhetoric.

Some people argue that Bhagwati is a free-market-with-no-limits zealot. I found Bhagwati to be very balanced in this book. He owns his own bias to taking a macroeconomic viewpoint while showing sensibilities for how there are impacts on a microeconomic level. He critiques the ultra-liberal and ultra-isolationist international trade viewpoints. He also provides many critiques of globalization practices and provides suggestions about how to reduce ill-effects, abuses and impact on the displaced. For instance, he argues for gradualism in changing short-term capital restrictions in order for the developing nations’ financial institutions to mature and prevent another Asian-type financial crisis.

Topics he tackles include:

  • Poverty: Enhanced or Diminished?
  • Child Labor: Increased or Reduced?
  • Women: Harmed of Helped?
  • Democracy at Bay?
  • Culture Imperiled or Enriched?
  • Wages and Labor Standards at Stake?
  • Environment in Peril?
  • Corporations: Predatory or Beneficial?

I found the last section of the book on how to improve governance to make globalization work better a bit dry and lacking in pragmatism … but this is a hard topic with much political complexity.

So, overall, I highly recommend this book for anyone who wants to get smarter about globalization benefits, problems and how to drive the benefits of globalization to more equal distribution.

No comments »

Posted in Poverty Reading List

Tags:

Guns, Germs and Steel book review

August 19th, 2006

Guns, Germs and Steel: The Fates of Human Societies

By Jared Diamond

This is not per se a book on poverty. The reason I list it here though is that if you want to get a non-Western, Judeo/Christian perspective of how human history might have developed and why certain people groups prospered and dominated more than others, then Diamond provides a good read. He looks back at anthropologic discoveries to attempt to piece together how different people groups ended up where they did and what enabled certain civilizations to develop more quickly than others. Here are a few of his findings:

  • Food production. Cultivation of crops and domesticated animals enables people to transition from hunter gatherer to more permanent living quarters. It turns out that the majority of the most beneficial domesticated grains originated in the Mesopotamia area. It also turns out that more large domesticable mammals were also found in EurAsia than in other continents.
  • Latitude reach. Spread of discoveries (including food production) are much more easily accomplished to similar climate zones. This means latitude-based spread is more common than longitudinal spread. EurAsia has a much larger similar latitude area than any other continent.
  • Germs bigger killers. He argues that most human germs/diseases develop first in non-human mammals which are kept in high density living situations and then mutate and pass on to humans. Very few killer germs were found in the Americas because there was limited animal husbandry and much lower density population situations which cause germs to gain their potentcy. When the more densely populated Europeans visited the Americas, they brought along diseases for which they had built up some immunities. Very few (if any) diseases were picked up from the Americans by Europeans. There were many more native Americans killed by European-originated disease than anything else.
  • Continental environments mattered the most. Diamond argues that our perception that societies developed differently because of different human biology (e.g. Europeans were more intelligent or more industrious or something else) is wrong. Instead, he argues (with considerable research) than it was the different continental environmental situations which played the largest role in determining where we are today.

1 comment »

Posted in Poverty Reading List

Tags:

The White Man’s Burden book review

June 24th, 2006

The White Man’s Burden: Why the West’s efforts to aid the rest have done so much ill and so little good

by William Easterly

Boy, has this book started a lot of controversy in the international aid community. You’ve even got Nicholas Kristoff writing an oped piece in the New York Times in response to his book! Easterly, a Professor of Economics at NYU and previously an “insider” at the World Bank, doesn’t pull any punches in asking the hard questions about the results of international aid. He’s an economist, so his book is full of numbers and statistics supplemented with a number of humanizing stories.

In a nutshell, he asks “After $2.3 trillion over 5 decades, why are the desperate needs of the world’s poor still so tragically unmet? Isn’t it finally time for an end to the impunity of foreign aid?” He points out that despite spending all of this money, we still don’t deliver vaccines and other medicines costing < $1 and insecticide-treated mosquito nets at a few dollars to those who need them and die without them. The main issue, he argues, is that our international aid agencies (he focuses mostly on multilateral and bilateral government orgs including USAID, The World Bank and the International Money Fund) are run by planners, not the entrepreneurial, finding-what-works “searchers”. We in the West are very utopian with a grand plan to eliminate poverty always the goal and what the politicians like to talk about.

The Big Push Strategy has no Basis in History

Easterly’s argues through his research data that the following legends persist and drive much of the “Big Push” thinking behind international aid strategy today:

  • Legend #1: The poorest countries are stuck in a poverty trap from which they cannot emerge without an aid-financed big push.
  • Legend #2: Whenever poor countries have lousy growth, it is because of a poverty trap rather than bad government.
  • Legend #3: Foreign aid gives a big push to countries to achieve a takeoff into self-sustained growth.

These “legends” are core premise for the “spend more on aid” supported by Jeff Sachs and others. Easterly questions the existence of this poverty trap concept as there have been many success stories of countries growing wealthy without significant aid (e.g. East Asian Tigers including Hong Kong, Singapore, Taiwan and South Korea). A few notes

  • May 2005 study that “found no evidence that either ’short-term impact aid’ or any other type of aid had a positive effect on [a country's] growth.” (p. 49)
  • “Over 1950-2001, countries with below-average aid had the same growth rate as countries with above-average foreign aid. Poor countries without aid had no trouble having positive growth.” (p. 39)
  • Another new study found that as aid represented 8% or more of the GNP of a country that the there was a negative effect on growth. (p. 50) He notes that 27 countries are already about the 8% aid level and that if the Big Push strategy continues that virtually all of the low-income countries will be pushed over the 8% level.
  • In reality, he notes that “most countries that escaped from extreme poverty did so with gradually accelerating growth.” (p. 51)

Some additional highlights from the book (I’m skipping a lot of other interesting stuff):

  • Government-to-Government Aid. He asks the question why our government aid agencies need to always give to directly to often corrupt other governments rather than through other orgs who could get the money to the intended people/projects.
  • Planning Markets? An oxymoron? Why so often do we in the West think that we can go in and impose significant market changes on the Rest and expect them to endure and succeed? This isn’t how it works (or has worked) in the West?
  • Political Correctness vs. Truth. Easterly highlights many examples where the IMF and the World Bank have continued to poor money into countries where there was blatant and widespread corruption with their previous capital. They need to call a spade a spade rather than deceiving themselves that somehow a miracle change will happen this time.
  • Helping Bad Governments will Make Them Good Governments? Easterly notes that this is a common argument to justify giving money to gangster governments arguing that it will promote their political development and reform. He responds “this argument is based on the overambitious goals of political transformation [which have no historical precedents].” (p. 157)
  • No Aid Org is Accountable. Since the multiple international aid organizations have very broad and overlapping (and sometime contradictory) goals/agendas, they can simply throw up their hands when they don’t produce results and blame it on the other guy. That’s why you always hear them take about “inputs”, not “outputs” (results). Easterly argues for scaling back aid agencies to focus/specialize on smaller, specific, measurable projects which they are held accountable for by independent evaluators and the receipients of the aid. Amazingly, this almost never happens today.
  • HIV/AID drugs. He explains that it costs $1,500 per year of total cost to administer the latest cocktail of HIV/AID anti-viral drugs even if the meds themselves are basically free. On average, people taking these drugs live an extra 3-4 years. He asks the question … have we ever asked the Africans how they’d recommend we spend the $5B we’ve committed to these treatments? Would they spend it all in this way? He has asked many Africans and they would likely spend very little of the $5B on this healthcare and instead spend it on other much broader impact healthcare initiatives which would save way more lives. Hmmm … interesting.

International Aid Needs Massive Reform

So, is Easterly against international aid? Surprisingly, not. He argues for significant reforms to focus on what works, smaller initiatives (vs. grand plans) and more accountability. So, his grand plan is that there is no grand plan. History argues that it is the initiative of the people themselves along with their governments are the only path to sustainable economic growth. In conclusion, Easterly summarizes:

“Aid won’t make poverty history, which Western aid efforts cannot possibly do. Only the self-reliant efforts of poor people and poor societies themselves can end poverty, borrowing ideas and institutions from the West when it suits them to do so. But aid that concentrates on feasible tasks will alleviate the sufferings of many desperate people in the meantime. Isn’t that enough?”

Scary for the status quo in international aid, but great news for the customer!

Read my full book review

Related Posts with Thumbnails

4 comments »

Posted in Poverty Reading List

Tags: