Looking Past the Talk on International Aid

Posted by: Jonathan Ortmans on September 26, 2011 Source: Policy Dialogue on Entrepreneurship

Late September is always a busy time in New York and Washington for world leaders. New York is crowded with heads of state and visionaries at the UN Assembly or the Clinton Global Initiative, and in Washington, DC, the World Bank Group and IMF Annual Meetings that took place this past weekend always spur an assortment of organizations with global economic development missions to gather their flocks. We all wonder what all these expensive ‘meetings of the minds’ are accomplishing. To share my own bias, it prompts me once a year to check in and see how much development bureaucrats are really seeing and listening to the entrepreneurs on the ground doing the work.

In case you missed them, there are a couple of commentaries you should check out.

The first is from the front page of the Wall Street Journal on September 24 by Peter Wonacott. “Small Factories Take Root in Africa” offers an example of how a 34-year-old Brooklyn entrepreneur, Tim McCollum, located a rare source of premium cocoa in Madagascar and is now helping villagers learn how to deal with local customers. McCollum is an example of how entrepreneurs are going where many large firms will not, and—whether through shoes in Nigeria or hot sauce in South Africa—how abundant natural resources and low per capita income in Africa offer a still-untapped opportunity for startups and the resulting value they bring to those developing economies.

World Bank President Robert Zoellick also caught our attention with an interesting speech titled “Beyond Aid,” which argued in favor of re-thinking the business of aid in response to changing realities. A world beyond aid highlights “prosperity not palliatives; potential not patronage; dignity not dependency.” This paradigm in international development, affirms Zoellick, will meet changing needs with new technologies, private sector innovation, sustainable growth and green growth.

I hope a World Bank focusing on prosperity, potential and dignity means a World Bank less driven by the project-based funding and more focused on the sharing of innovative human capital and the enabling environment for startups. Beyond addressing corruption, poor education and basic health and nutrition, it makes sense that Mr. Zoellick includes technology. For example, in an era when cloud computing offers an even cheaper and easier way to start a business with little or no capital expenditure, are we focusing more attention on digital infrastructure in developing nations? Are we replicating models like Startup Chile that emphasize the importance of people and ideas over investment capital and infrastructure?

Economic development and startups go hand in hand, with new starts more committed than ever to solving local problems with innovative thinking. We need to make it as easy as possible for any global entrepreneur to help any community. At one of the recent flurry of events, I sat on a panel with Chris Haughey, a young entrepreneur who shared a video of how he got started. Having witnessed extreme poverty while educating young children working in trash dumps in Honduras, the motivation for Haughey’s startup was to provide useful employment opportunities while scaling a sound for-profit business concept. His magnetic wooden toy company, Tegu, is now launching into Europe this fall—and my kids are one of his customers! Mr. Haughey is doing well—but he is also doing good.

As opposed to thinking within hierarchical aid structures (e.g. donor-recipient, rich-poor, etc.), entrepreneurs are quietly, yet powerfully achieving gains in terms of quality of life and employment and wealth generation, the very puzzles that the aid institutions have been trying to solve for so long. These entrepreneurs’ tools are creative ideas, networks that know no borders, and, more importantly, their relentless energy to translate their ideas into wealth, jobs and opportunity.  Add to this diaspora entrepreneurs, who leverage networks of fellow “diasporans” to gain knowledge about market opportunities and infrastructural gaps that they can fill, and you have a much more potent force that any World Bank project or aid program. This was the case of Patrick Awuah, a former engineer at Microsoft who recently started one of the top universities in Ghana.

Zoellick’s speech was not just a recognition that private sector innovation is one of the strongest allies in international development, but also a wake-up call to the traditional aid “industry” itself. For example, innovative, collaborative practices are improving waste management and transportation around the world. In Curitiba, Brazil, for instance, recycling initiatives have been trading bus tokens, food and school supplies for trash collection in low-income neighborhoods.

While entrepreneurship is becoming a better respected tool for international development, until recently many leaders have missed the boat. As Carl Schramm, president of the Kauffman Foundation, has argued, new firms do not appear as a natural by-product of having free-market institutions. They are the result of an entrepreneurial system, a concept that unfortunately has not had a place in the traditional development models of the past decades. Perhaps the small guys busy fostering startup ecosystems around the world can help show the way. Perhaps next September when I check back, we will see more of Mr. Zoellick’s ideas trickling down within the World Bank and the community it leads.

Category:  Global  Growth & Poverty  Tags:  World Bank, IMF, Tegu, Honduras, Ghana