Tag: development assistance

MIcro-Finance: Crisis and Response

For years, microfinance appeared to be one of the most promising means of fighting poverty and underdevelopment worldwide. With all the hype, it then became a kind of global movement—a hybrid combining social good with economic goods, morality with moneymaking. A few years ago, the Nobel Peace Prize committee hopped on the bandwagon and laureated Yunus.

Over the last year, however, MF has faced a growing crisis, primarily in parts of India and in Bangladesh. It has also apparently suffered from the economic downturn like much of the rest of the lending industry–of which it is clearly a part notwithstanding its social aspects.

In many ways this is a sad but predictable moment. After the oversell, reality always hits hard. For me, the interesting question is how microfinance as a movement responds to its crisis—and more generally how other social movements do so. (Some might quibble about whether MF should be considered a social movement, but I think of the term broadly—and don’t want to get bogged down in definitional squabbles.) To my knowledge this is an important but understudied issue—one that goes well beyond microfinance in its significance to activists and presumably to scholars.

In business schools and among corporations, a similar kind of issue seems to have been tackled previously. There have been a number of books written and fortunes made about “crisis management”–for companies facing major scandals or owning up to big errors. Think BP, Shell, Tylenol, etc. Of course the situation is different for an individual company than for an entire industry (e.g., nuclear power in the wake of Chernobyl or Fukuishima).

These business sources may provide some practical ideas for the MF industry and individual lenders to tackle their crisis. But, I’m wondering whether anyone can suggest ideas from political science or sociology that might be relevant to this kind of question: How does a social movement deal with a crisis, i.e., a series of events that calls its methods and even its goals into serious question? I have a graduate student researching the conceptual and empirical issues, but speaking off the cuff, it seems that there are a number of typical responses:

1) Deny, deny, deny.

2) Counter-Attack: go for the message as well as the messengers, especially their jugulars.

3) Purify: if #1 and #2 fail, rid yourself of the bad apples or bad approaches, best through public ritual. In a broad movement, rather than a single organization, this may be difficult. Distancing may be the most feasible approach.

4) Re-dedicate: loudly restate your belief in remaining principals and principles.

5) Re-authenticate: deploy your most authoritative “objective” allies to restate their deep belief in your principals and principles. A Nobel or two in your stable usually helps.

6) Divert: change the subject, by pointing to your many successes, preferably in realms distant from the one that got you into trouble.

7), 8), 9): Please add your ideas–both additional strategies and any relevant literature on the issues.


‘Tis the season

This year began with a human tragedy of horrific proportions — the earthquake in Haiti. We may never know precisely how many people died, but the government in Port-Au-Prince estimated 230,000 in February.

The news did not improve as the year progressed. Consider this ANI news report from Saturday about flooding in Pakistan — and keep in mind that floodwaters have not yet receded in some areas even though the worst flooding occurred months ago:

It is estimated that the floods affected up to 20 million people, while over 750,000 homes were damaged or destroyed.

The UN had rated it as the greatest humanitarian crisis in recent history, saying that the number of people suffering from the crisis exceeded the combined total in three recent mega disasters – the 2004 Indian Ocean tsunami, the 2005 Kashmir earthquake and the 2010 Haiti earthquake.

In 2011, experts predict that thanks to La Niña, Kenya may well experience a humanitarian emergency. Zimbabwe is on the brink of disaster because of cholera, measles, and flu outbreaks.

Haiti itself is ending the year with a cholera epidemic that has infected 100,000 people and killed nearly 2200 already.

And yet, despite these truly heart-wrenching emergencies, the number of people harmed and killed in them is dwarfed by the ravages of day-to-day poverty of the type described in Paul Collier’s work on the world’s “bottom billion.” A billion people live in abject poverty on $1 a day and roughly another billion live on $2 per day.

In the November/December Washington Monthly, Charles Kenny, a senior fellow at the Center for Global Development, explains that “complex humanitarian emergencies” like the Haitian earthquake and Pakistani floods are not, in fact, the primary source of human suffering worldwide:

[F]ocusing on war, flood, famine, and earthquakes is in itself a selection mechanism. Humanitarian emergencies are thankfully rare, concentrated, and usually short-lived events. Take Africa—often seen as the home stable for the four horsemen of the apocalypse. Less than three-tenths of a percent of the population was affected by famine in the average year between 1990 and 2005. And in 2005, only one-half of 1 percent of the population were refugees.

If tens of millions of people are in need of urgent assistance every year, this still suggests that, however telegenic are humanitarian crises, they don’t represent the biggest challenges of global poverty. More than 16 percent of children born in Africa die before their fifth birthday, for example. Around a billion people worldwide are malnourished….The considerable majority of extreme human suffering occurs outside of what is commonly recognized as a crisis situation.

Kenny explains in that article that humanitarian emergencies are often rightly followed by new emergency assistance — even as development aid to address the endemic problem of global poverty languishes. Thanks partly to the Great Recession, government development assistance is certainly down from peak levels earlier this decade.

Americans like to consider themselves a charitable people — particularly at this time of year. Indeed, Giving USA Foundation reports that Americans give away over $300 billion annually, which is over 2% of GDP. And it amounts to a lot of cash. Jeffrey Sachs has been saying for years that global poverty could be eradicated for about $200 to $250 billion per year.

However, close scrutiny reveals that individual charitable giving by Americans does not typically go to causes that help the global poor — or national poor, for that matter. In the December 6 issue of The Nation, CUNY Graduate Center History Professor David Nasaw asks, “Where does this money go?”

Some to disaster relief or to feed, clothe and shelter the poor—but not very much. Former Labor Secretary Robert Reich claims that only about 10 percent of charitable giving goes to the poor and needy. A third goes to religious organizations; 13 percent to education; 7 percent to hospitals, healthcare organizations and research; 4 percent to arts and culture; 3 percent to international peace and relief efforts; 2 percent to environmental and animal-related causes.

Although it is never easy to quantify giving, closer scrutiny of individual, as opposed to foundation, funding indicates that much of it goes to causes that directly or indirectly benefit the donors. Individual donors are more likely to give to the church or synagogue they or members of their families attend, to their alma maters, their children’s private schools and the museums and cultural institutions they patronize.

I am not sure of the precise NGO or IO targets for charitable giving to alleviate global poverty, but I am certain that this issue should be a higher priority for individual donors like you and me — though Nasaw points out that the 3.1% of Americans earning $200,000 or more annually (or who hold assets above $1 million) give about 70% of the $300 billion US total.

I guess that means we need to convince affluent people to be less selfish in their annual giving.

One last note. Nasaw points out that thanks to the US tax code, “every $100 donated to charity by a high-income person means $35 less to the Treasury.” He is not trying to sound like a Grinch (or perhaps a Scrooge), but if affluent people could not deduct their private donations, the US Treasury would have nearly $75 billion potentially to use in the public interest.


Sailing up stream….

Last week appeared to be Development Week at Foggy Bottom. Secretary of State Hillary Clinton gave her long-promised “Development” speech. The next day, Dr. Rajiv Shah was sworn in as the new administrator for USAID. In his speech, he identified four key priorities for his tenure:

1. To improve lives and fight poverty,
2. To expand human rights and economic opportunities,
3. To build democratic institutions and improve governance
4. To advance U.S. foreign policy to enhance our own prosperity and security.

Both Clinton’s speech and Rajiv’s appointment seem to me to strike the right notes, i.e, that development and diplomacy are as essential as defense in the conduct of American foreign policy.

Of course, as my friends at the National Priorities Project (based here in Northampton, MA) routinely point out, development and diplomacy aren’t even in the same league with the Pentagon.

Take the Afghanistan surge, for example. Jo Comerford, the head of NPP wrote an analysis of it over at TomDispatch.com. She notes that Obama’s decision for 30,000 additional troops will cost roughly $1million per soldier — about $30 billion total (that would be $57,077.60 per minute for us taxpayers). She writes:

For purposes of comparison, $30 billion — remember, just the Pentagon-estimated cost of a 30,000-person troop surge — is equal to 80% of the total U.S. 2010 budget for international affairs, which includes monies for development and humanitarian assistance. On the domestic front, $30 billion could double the funding (at 2010 levels) for the Children’s Health Insurance Program and the Low Income Home Energy Assistance Program. (My emphasis)

Or think of the surge this way: if the United States decided to send just 29,900 extra soldiers to Afghanistan, 100 short of the present official total, it could double the amount of money — $100 million — it has allocated to assist refugees and returnees from Afghanistan through the State Department’s Bureau of Population, Refugees and Migration.

Leaving aside the fact that the United States already accounts for 45% of total global military spending, the $30 billion surge cost alone would place us in the top-ten for global military spending, sandwiched between Italy and Saudi Arabia. Spent instead on “soft security” measures within Afghanistan, $30 billion could easily build, furnish and equip enough schools for the entire nation.

Given the deeply embedded domestic structural factors (political and organizational) that routinely fuel increases in defense spending and ridicule development assistance, it’s hard to find much promise in Clinton’s proclamation that:

It’s time for a new mindset for a new century. Time to retire old debates and replace dogmatic attitudes with clear reasoning and common sense. And time to elevate development as a central pillar of our foreign policy and to rebuild USAID into the world’s premier development agency.

Yeah, well, good luck with that….


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