Aid Realism for the Idealist

The failure of foreign aid to lead to economic development has left many cynics in its wake. For this reason, I enjoyed The Blue Sweater, Jacqueline Novogratz's story of moving from aid-idealism to aid-realism without ever passing through the way-station of aid-cynicism.  As a naive, aid-idealist Novogratz spent a lot of time on the circuit in Africa; eventually hard lessons wore away the naivety but not the idealism.  Of course, Novogratz learned a lot about the corruption, failure to experiment, and lack of accountability of the aid agencies but she also learned to be realistic about the do-gooders:

Philanthropy can appeal to people who want to be loved more than they want to make a difference.

But the hardest lessons were about the poor.  In the late 1980s, Novogratz worked with a group of native women to build up a thriving business in Rwanda.  Inevitably some of her friends became terrible victims of the 1994 genocide.  Perhaps even worse, some of her friends became perpetrators.  Hard lessons like these drove Novogratz's evolution.

I've read the following sort of thing many times:

It is so often the people who know the greatest suffering--the poor and most vulnerable--who are the most resilient, the ones able to derive happiness and shared joy from the simplest pleasures.

I've heard it so many times, I tend to dismiss it but Novogratz follows up with this:

That same resilience, however, can manifest itself in passivity, fatalism, a resignation to the difficulties of life that allows injustice and inequity to strengthen and grow...

Which, for me at least, turned a trite observation into an important insight.

Novogratz's experiences eventually developed into the Acumen Fund, a venture capital firm for aid.  The idea is to invest patient capital in scalable, for-profit businesses that deliver services to the poor.  The fund, for example, has invested in a firm producing drip irrigation systems in Pakistan, a Tanzanian firm that produces mosquito nets and an Indian firm producing internet-telephone kiosks in small villages.

The fact that the businesses have been for-profit has been critical.  In selling bed nets for example the Tanzanian firm learned that talking about malaria doesn't sell. What sells, in the words of one of their top salespersons is, "The color is beautiful, and you can hang the nets in your windows so that your neighbors know how much you care about your family."  As Novogratz puts it:

Beauty, vanity, status and comfort....The rich hold no monopoly on any of it.  But we're a long way from integrating the way people actually make decisions into public policy instead of how we think they should make them.

Patient capital is no panacea--what is?--but by investing in entrepreneurs who must listen to their customers a charitable venture-capital firm can multiply the effectiveness of its philanthropy.  

There is a powerful role both for the market and for philanthropy...Philanthropy alone lacks the feedback mechanism of markets, which are the best listening devices we have; and yet markets alone too easily leave the most vulnerable behind.