Jacqueline Novogratz: A third way to think about aid
Nov 10th, 2009 by Graham Bath
After listening to Dambisa Moyo discuss aid strategies and their failings in Africa (provided by Williee on October 14th) I became interested in alternative strategies. It was this interest that led me to Jacqueline Novogratz.
Novogratz and Moyo continue the debate on which method will be the best suited to bring the world out of poverty. Moyo, examines foreign capital provided by foreign governments and suggests that it is the policies of aid that foster country dependency on foreign Investment creating unmotivated governments in terms of looking for alternative financing. Novogratz, on the other hand, submits the idea of “patient capital” which sees poverty stricken people not as passive recipients of charity but individual customers and looks to invest philanthropic capital in local entrepreneurial innovation thus avoiding the creation of dependent, unmotivated governments.
An interesting difference between Moyo and Novogratz is the belief in the appropriate time frame within which success can be seen, where Investment will be allocated and who will provide the capital. They are both discussing aid but through quite different sources. Moyo points to aid graduates and explains how aid distributed through governments can be successful if it is done in a “sharp, short and finite” manner; this way a dependency is not allowed to emerge. Novogratz explains how “patient capital” invests in the local community leaders and entrepreneurs and requires a “long time horizon in terms of allowing those entrepreneurs time to experiment”. It seems to me that most discussion about global policy shifts and the quest for alternative approaches to global issues is often presented with emphasis on immediate implementation of them for fast results. It was nice to hear Novogratz use the word ‘patience’ throughout her presentation, notably, when talking about returns, building trust, and having local innovations reach the global scale.
I enjoyed the presentation and think that she is on to some key concepts: solutions must begin from the perspective of those we wish to help; funding that enables enterprises to grow and intertwine fostering partnerships is important; patience is important in such bottom up aid as uneven development has put some nations far behind others in terms of infrastructure and economic well being; a new approach to end poverty is needed and the time for us to begin innovating and looking for new solutions is now.
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I really liked the take in this video that development and aid should move towards funding entrepreneurial activity, or ‘patient capital’. This is inline with the NGO that I am studying for my research paper, Alchemy World, whose objective is to alleviate poverty in the global south through social entrepreneurship, focused education and a business support programme. I agree that since so many of the goals that NGOs strive towards, such as alleviation of poverty, inequality, and injustice, remain, a new paradigm is needed in assessing how to carryout development. I think that currently with the idea of aid, we use a mentality that we need to help them. In this sense we exoticize the global south and project our idea of what development is, viewing them as underdeveloped. This, to me, is another form of colonialism since NGOs are based on western ideas of development and stemming from western discourse: we are still looking at the global south as ‘the orient’ and ‘underdeveloped.’ Instead, we need to change these western ideas to incorporate those in the global south. Therefore, by giving poorer nations the necessary skills and by funding entrepreneurial activity we allow them to create their own business plans and foster their own economic activity, moving past this colonialism. In this way social entrepreneurship allows the global south to develop on their own terms and without needed to depend on foreign aid dollars. Instead of supporting unmotivated governments, we are just providing them with the tools to stand on their own two feet.
Novogratz speech had many admirable qualities. It addresses the financial crisis, the historic problems of aid in both steams of thought and yet remains firmly optimistic. She’s engaged with concepts of dignity and self-determination and not hesitant to invest in high risk sectors such as agriculture. It’s difficult to criticize such a well developed concept that she (and her team) clearly have put a lot of self reflexive thought into. Further she admits that her way is not the only way and this is merely a third way to ‘think’ about aid – not ‘do’ aid which is a refreshing distinction. She’s open to alternatives, indeed she asks for them.
Yet there are a couple things i’m unclear about. The drip irrigation sucess story she points to. Im unclear as to what the relationship between her organization and the entreprenuer is. She briefly mentions “thats when patient capital steps in” and this leaves some unanswered questions:
how do they step in? What is the power relationship like? Does patient capital simply provide managerial and beuracratic assistance to market and distribute others innovations? Is there a formal contract? Do they become partners or shareholders? Are there examples when capital was patient and the whole project was scrapped or it found that the innovation wouldn’t work or would not be accepted?
What set me questioning was the casual way she mentioned love and power – She say’s we’ve tried both (aid = love + power = trade not aid) and perhaps this generation can adopt both trade and power –
It’s possible that this line of thinking continues colonial discourse (there is an unmentioned NEED for the love and power of the North)
None of these questions are deal breakers but it would be necessary to know the answers to these in order to think critically about a third way. This is true for any argument that follows the logic of A didn’t work C didn’t work so it must be B (the compromise between the two)
I should say that I think Novogratz is right. I think her approach is the best way to organize capital – according to innovation and market need – not only in the global south but the North could do with more of this innovation as well, rather than top down market analysis and more ground up need based approach. I’d like to know more about the specific relationships and how she “steps in” but she’s definitely onto something and the world bank Et. Al and the microcredit Banks should take note.
As Peter said Novogratz is taking a ground up approach to fixing the issues of aid at a community or individual scale. This is in contrast to Moyo’s FDI approach which is still very top down focusing on bigger investments at a national scale which will hopefully trickle down to the bottom.
Another difference I see between these two approaches is that FDI would mean a continued major foreign presence in the economy supplying continued investment into the future. “Patient capital” or microcredit approaches, on the other hand, have the end goal of the entrepreneurial customer eventually being able to have a business that is self sustaining. I see the “patient capital” approach as being more effective for development purposes because it reaches the people most in need first and works with them directly to allow them to get themselves out of poverty. Inevitably both FDI and “patient capital” will and are happening at the same time but the people and companies they reach are very different.
I like how Novogratz talks about the innovations from the North and the South being equally important and needing to be shared. It is important that we recognize what the South has to offer the North and not always be trying to impose our innovations and ways of doing things on them.
As Peter said Novogratz is taking a ground up approach to fixing the issues of aid at a community or individual scale. This is in contrast to Moyo’s FDI approach which is still very top down focusing on bigger investments at a national scale which will hopefully trickle down to the bottom.
Another difference I see between these two approaches is that FDI would mean a continued major foreign presence in the economy supplying continued investment into the future. “Patient capital” or microcredit approaches, on the other hand, have the end goal of the entrepreneurial customer eventually being able to have a business that is self sustaining. I see the “patient capital” approach as being more effective for development purposes because it reaches the people most in need first and works with them directly to allow them to get themselves out of poverty. Inevitably both FDI and “patient capital” will and are happening at the same time but the people and companies they reach are very different.
I like how Novogratz talks about the innovations from the North and the South being equally important and needing to be shared. It is important that we recognize what the South has to offer the North and not always be trying to impose our innovations and ways of doing things on them.
As Peter said Novogratz is taking a ground up approach to fixing the issues of aid at a community or individual scale. This is in contrast to Moyo’s FDI approach which is still very top down focusing on bigger investments at a national scale which will hopefully trickle down to the bottom.
Another difference I see between these two approaches is that FDI would mean a continued major foreign presence in the economy supplying continued investment into the future. “Patient capital” or microcredit approaches, on the other hand, have the end goal of the entrepreneurial customer eventually being able to have a business that is self sustaining. I see the “patient capital” approach as being more effective for development purposes because it reaches the people most in need first and works with them directly to allow them to get themselves out of poverty. Inevitably both FDI and “patient capital” will and are happening at the same time but the people and companies they reach are very different.
I like how Novogratz talks about the innovations from the North and the South being equally important and needing to be shared. It is important that we recognize what the South has to offer the North and not always be trying to impose our innovations and ways of doing things on them.
“Love without power in anemic and sentimental, power without love is reckless and abusive,” – MLK Jr.
In some ways I think that this quote embodies what Moyo critiqued about the way that governments manage foreign aid. They are given all this power but they, unfortunately, forget the people who elected them into power to represent them and use it ‘without love’. They pass policies that forge on the ideas of capitalism and expand the uneven development that it entails. A large part of what Moyo argues for is increased accountability and ownership of the governments to and for their people. Instead of carrying out these ‘anemic & sentimental/reckless & abusive’ development projects, they need to engage more consciously in the actions that they carry out with development aid funds.
Novogratz is very much of an idealist, in my opinion and though I see how there is a lot to be said about approaching development from the bottom up I remain slightly skeptical about its overall impacts. In some of the examples she mentioned she spoke of how these entrepreneurs started small, but they have all now evolved into bigger more powerful enterprises. I believe that somewhere in that process of evolution the love get’s lost and the power takes over. Though they start off with the best intentions and progress seems optimistic, I find that in the long-run the marginal return of this ‘patient capital’ is diminishing, for the communities where they originate.
Furthermore, though they call it different names and they are take place on different scales there are a number of parallels between ‘patient capital’ and FDI. The long-term nature of investments, investing in particular communities, regions or individuals, and most of all they are another window/door into the ever expanding grid of capitalism.