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Tuesday, December 04, 2007

Hugo Chavez and the Bottom of the Pyramid: Overcoming "Utopia"

By Abigail Keene-Babcock

hUsually, I stand by the belief that bringing politics into development discussions is a recipe for disaster for anyone ? be they journalist, blogger, development planner or, above all, the target "beneficiary."

Today, however, I can?t resist pointing to the political events in Venezuela (the extremely narrow 51-49% defeat of Hugo Chavez?s sweeping constitutional reform package two days ago), with the hope that they will spark discussion on NextBillion about what this means for the BoP. (For worldwide news perspectives on these events, click here).What does the situation in Venezuela say about the state of the BoP and viability of market-based solutions to create sustainable development, especially where other traditional development mechanisms (FDI and government-backed policies) have yet to succeed?

In response to the voting results in Venezuela, yesterday International Herald Tribune op-ed columnist Robert Cohen published a piece in the New York Times proposing "eight rules of modern political life as seen from Venezuela." Although that last sentence would have been better re-written as "eight rules of political life for viewing Venezuela from the US," I think "Rule #7" is particularly interesting, and gets at what I alluded to in my post last week on Latin American competitiveness:

7.) Utopias live. Decades of neglect of Venezuela?s poor by ruling elites opened the way for Ch?vez?s "revolution," with its promise of socialist cooperatives, improved health care and education, and "people?s power." In some areas, like health and education, he has delivered. But "El Comandante" has also tried to extend a controlled system for his greater glory. It benefits his crony capitalists in a make-believe economy of price controls, exchange-rate controls and unsustainable subsidies. When the crash comes, the poor will suffer and have no recourse. But the thirst for utopian illusion seems undimmed by 20th-century cataclysm, and the appetite for an anti-Bush is so voracious that the Ch?vez-as-Che concoction resonates, empty as it is.

This, I would argue, and not the development community?s continued work to provide charitable solutions, is the largest threat to efforts that make capitalist models work for the poor.

Why? Because in order to succeed, BoP solutions require buy-in from those they aim to help, and they require proving the long-term "emptiness" of this Chavez-type of growth, even when short-term benefits seem obvious. When markets fail the poor, it is obvious to them that they are excluded. The predictable response is very often not to seek solutions for improving markets; instead, it is asking government to override it, or get rid of it completely.

Microfinance, patient capital, designs for the other 90%, business-models to serve to poor, social entrepreneurship ? these have now captured the attention and, to an extent, the imagination of the development community.

The challenge that remains is at the ground level. It is capturing the imagination of the excluded, and providing returns on that important investment. And it is devising ways to overcome the easier route of utopian subscription, communicating nuances instead.

I cannot speak to the reality on the ground in Venezuela (though I encourage others to do so!), but I would like to believe that the voting results highlight a struggle to kindle more discussion of nuance and long-term results at the micro level.
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