NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

There has been a lot of buzz about new models of foreign aid and the role of social entrepreneurs since our post on President Obama and the NextBillion.net Agenda for the Base of the Pyramid. Guest blogger Apoorva Shah also shared some great points about the important actors in aid reform, including the American Enterprise Institute.

Iqbal Qadir, a noted social entrepreneur and Founder of MIT’s Legatum Center for Development and Entrepreneurship, argued effectively in his opinion piece in the Wall Street Journal for the overhaul of America’s current model of international aid and a renewed focus on supporting entrepreneurs in developing countries. Qadir details America’s earlier motives in pouring aid into other countries as a way to cement alliance and allegiance to the U.S. and he points out that such models are now sterile and in fact often inhibit the true democratic development of aid recipient countries. While Qadir offers a historical perspective on why such models are in dire need of re-shaping and re-doing, other noted journalists and bloggers have also been focusing on the link between Obama, sustainability, foreign policy, and international aid.

I came across some important materials and entrepreneurs for the NextBillion.net community to ponder and discuss and I hope you’ll join in on the dialogue. I will also echo Apoorva’s central question: What role can the NextBillion.net community play in the debate and formation of President Obama’s policies on foreign aid? What do you think is the role of entrepreneurs in development and in helping America better support international development?

First, I was thrilled to read in the attached Obama Campaign policy statement that he has plans to create an entitiy that provides seed capital to SMEs and even build “SME Universities” in partnership with American business schools. Based on this policy statement alone, there is clearly thought being put into new approaches to development, including an understanding that the private sector plays a critical role. There is also some talk of there being a new, coordinated Agency to oversee the multiple U.S. agencies for international development, including PEPFAR, USAID, and MCC. Obama has called for the doubling of foreign aid, but what does that aid look like? Is it charity or investment? And how is the aid being distributed?

Bill Gates has also called for the doubling of funds directed toward foreign aid, but this request is perplexing. Gates is a unique and interesting advocate of innovation in development and he has recently called for a new, “creative capitalism.” But calling for a doubling of foreign aid is not the same as a call to embrace creative capitalism. Does this send mixed messages? What do you think?

Peter Beinart, a Senior Fellow at the Council on Foreign Relations, presents an interesting analysis of America’s foreign aid policies and points out:

“In the 1990’s, American soft power was based on more than goodwill; it was based on economic and ideological hegemony. There was only one widely accepted path to prosperity–deregulated, American-style capitalism. And there was one central destination for a poor country seeking the investment and aid it needed to travel down that path: Washington.”

But, he continues, “That is no longer the case.” I agree, and think that countries seeking America’s investment should have a more diverse pool of options to choose from. It would probably be a much more empowering exercise to help countries think through several paths to development, before they eagerly accept American dollars. If Obama were to introduce a full-fledged initiative on business at the base of the pyramid, offering struggling MNCs a way forward and at the same time a new approach to improving the lives of the world’s 4 billion poor, this would be an amazingly potent initiative and America and its aid recipients might just get what they want: revenue generation and economic growth. Let’s call the initiative, “The Committee for Global Development and Entrepreneurship at the Base of the Pyramid” (GDBOP).

Obama could harness the power of entrepreneurs here in the U.S. and in developing countries to collectively brainstorm and decide where and how America’s international aid should be distributed. The example of social entrepreneurs has more to offer in the way forward, because, afterall, development entrepreneurs work from the bottom up, with the base of the pyramid, and bottom-up innovation has always been Obama’s strong point.

For examples of the building wave of BOP entrepreneurs in developing countries, check out Francisco Noguera’s coverage of the attendees at Santa Clara University’s 2008 Global Social Benefit Incubator program, including entrepreneurs such as Alfonso Gamboa of the Philippines. Echoing Iqbal Qadir, Mr. Gamboa calls for a drastic paradigm shift in development funding, stating, “The answer to poverty is business development, not charity. . . . Trade, not aid.”

The above ventures and dozens of others highlight a new movement of entrepreneurs that connect the interests of America with the democratic development of other countries, which, as Qadir points out, leads to more secure allies for the United States. I believe that our NextBillion community has a huge role to play in alerting not only the Obama Administration, but the development community as a whole, to entrepreneurs in developing countries and here in the U.S. that offer new choices and innovative alternatives to traditional approaches to development and foreign aid.

Such entrepreneurs are young and have broken out of an old world understanding of what makes people and countries grow. They understand the changes that are needed and I would suggest to Obama to keep a close eye on their work. One of the things that caught my attention when I saw Obama speak in Boston in February of 2008 was him saying that he supports entrepreneurship. He has certainly proven himself receptive to the trends of younger generations with his brilliantly-executed use of new media in his campaign and his hiring of a Facebook Executive to help in that effort.

I hope that he will continue this trend and pay close attention to the building wave of social entrepreneurs both in the U.S. and abroad and adopt their approaches to development in the same way he adopted young people’s new media approach to communication. NextBillion.net is certainly part of the new media wave and so are all of you, because of our collective use of the internet to discuss and share analysis instantaneously.

Maybe President Obama is reading this post and all of your comments right at this moment. Here’s hoping.