Saying Farewell to Derek Newberry, Examining the Nature of Philanthrocapitalism and Development

NextBillion.net - Development Through Enterprise

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NextBillion News Vol. 27 July 31, 2008
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Saying Farewell to Derek Newberry, Examining the Nature of Philanthrocapitalism and Development

[Contents]

1. "What is Called Development: Exploring the Nexus of Economy"
By Joseph Bornstein

2. Featured topic: Just Another Emerpor by Michael Edwards, and Philanthrocapitalism.

3. Featured Blog Posts

Moving On: What I learned From Shrimp Farmers
By Derek Newberry

Reporting from the Growing Inclusive Markets Forum
Grace Augustine

New Base of the Pyramid Resources on Nextbillion.net
Theresa Newhard

4. Featured Event: SEVEN Fund Offers $50K to Spur Investment Indicator Discussion

5. Jobs/Careers: Director, FOundation & Corporate Relations, Root Capital

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1. "What is Called Development: Exploring the Nexus of Economy"
(See topic debate here)

By Joseph Bornstein

I recently had the pleasure of attending a presentation by Al Hammond which detailed his plans for revolutionizing rural medicine and access to telecommunications in developing nations. Here is a condensed rendition of the picture he painted: The majority of rural communities in developing nations have no access to telecommunication systems, and this is a problem considering that telecommunications are an essential tool for offering the poor services and possibilities that they would otherwise not have access to. The communications gap can be bridged by installing wireless access hubs in remote communities and the hand of wireless technology could leapfrog reaching almost any community at a cheap price.

This innovation opens a whole new market for cell phone companies and offers yet another excellent pipeline for BoP development and for getting a share of the fortune at the base of the pyramid. This is what we in the BoP community would call a double bottom-line profit model because the business plan is not only economically profitable, but also reaps social benefits by providing the services of telecommunications to poor rural communities. In this model, social justice meets capitalism. They shake hands, and build a better tomorrow.

Like many bad things, the concept sounded fantastic at first. But then, I found myself stopped in my thinking's tracks when the presenter remarked that the natural progression of services provided by this newfound rural telecommunications industry would be as follows: First there would be mobile banking. Then, education services. Lastly, entertainment would inevitably enter the market. This progression, if we can all it "progress" invokes Henry D. Thoreau's critique of the technology boom that took place during the industrial revolution in US America. Noting the difference between economies which are framed in terms of ends that are truly valuable, and economies framed in terms of ends that offer the mere illusion of value, Thoreau writes:

"Even the poor student studies and is taught only political economy, while that economy of living which is synonymous with philosophy is not even sincerely professed in colleges. The consequence is, that while he is reading Adam Smith, Ricardo and Say, he runs further into debt inevitably. As with our colleges, so with a hundred "modern improvements;" there is an illusion about them; there is not always positive advance . . . . Our inventions are wont to be pretty toys, which distract our attention from serious things. They are but improved means to an unimproved end, . . . . We are in great haste to construct a magnetic telegraph from Main to Texas; but Maine and Texas, it may be, have nothing important to communicate (Walden, 50)."

Thoreau does not say that we should refrain from studying and employing concepts of political economy, but only that such endeavors are void of actual purpose if not grounded by an economy of living/philosophy. In order that political economies can empower us to be richer individuals, they must aid us in achieving a worthy and good end-not just another "modern improvement" presented in the guise of a better life.

I believe this critique to be just as applicable to the development community of the 2000s as it was to the US in the 1800s. Thoreau asked whether the telegraph communicated anything of importance, and I find myself asking the same question about bringing cellular phones to remote rural communities. What if there is nothing of import to communicate from urban areas to rural areas and vice versa? And while we are on the subject of reevaluating the meaning of the word "poor," what if we are making people poorer by providing services that are actually positive hindrances to reaching an end of true value? In this whole pursuit of "development," what if we've forgotten to consider an economy of living that grounds the purpose and value of our political economy?

If we are to take Aristotle's notion of happiness as the final end-that which makes a person truly rich-can we say that telecommunications makes its customers happier? Based on those close to me, especially those with Blackberries and other means for accessing the full power of connectivity, it seems that perhaps telecommunications may make people less happy, or, shall we say poorer.

In this regard, a CEO of an environmental consulting firm (he will remain unnamed) told me a story about an electricity project that his company launched some years back. The company, we'll call it "BoP-Star," had been contracted by the government to complete a project to provide a remote rural community with the service of electricity via renewable power. His perspective of the community's overall happiness before the project was quite high, which was part of what inspired him so deeply to do a good job. And a good job he did. Within a few months the project was complete, and he returned home to the States. Due to his affinity for this community, he returned several years later and found that the service of electricity had made the community poorer in overall happiness by no small amount.

Before the electricity project, the community's cohesiveness was high. Everybody was in the same sleeping pattern because their body's rhythms followed that of the sun. This basic foundation of a shared sleep-cycle provided an essential groundwork for people to partake in daily life as a closely linked community. With the electricity project came a new sleep cycle along with increased hours of so-called productivity. Electronic entertainment such as TV also entered the culture and people started wanting things that they had never even seen or imagined before, suddenly finding their old way of life to be shallow and boring. Due to this drastic decline in the quality of life within the community and the mentality-shift fostered through electricity, my friend regretted the project he had spearheaded because it had made the community genuinely poorer.

Though I find a strong lesson in the story above, please do not take me as being against community and rural development. In fact, I have dedicated a good amount of my energy to the cause. The point I intend to make is that technological solutions as well as solutions grounded solely in political economies are not solutions at all, but rather the introduction of good or service that distracts us from things which enable people to lead richer lives. This distinction between a political economy and an economy of life offers the potential to invert our perspective on BoP development and show us that we need to begin with an appropriate philosophic framework before considering any project.

It also shifts a large degree of the focus regarding what needs to change away from the BoP itself, reaching to the middle of the pyramid (MoP) as well as the top of the pyramid (ToP). Perhaps it is not the BoP that needs to modernize, but rather the middle and top of the pyramid that needs to downscale and adjust its way of life so that the very structure of our economy and livelihood does not marginalize the poor and destroy the ecosystems upon which so many rely.

Many people offer the argument, "but we are simply providing services to fulfill poor people's wants and desires." I answer that many of those wants did not exist before the product to fulfill that want was there, and that it is not until the product of luxury is offered that it becomes desired, and it is not until it is introduced that people perceive themselves as dependent upon it for a good life. Take air-conditioning: Before we had AC we just made do with the heat. Once AC was introduced and once we acclimated to it, living in Texas, for example, became "unbearable" without AC to keep us cool.

And at this juncture, I often am presented with the argument, "But the genie is already out of the bottle. Technology and development are here, and people, even in remote communities are hearing about it. It's happening and there is no turning back." I do think that this point is quite true. It seems that communication technologies and information sharing has entered into the mainstream of how it is that humans think and live. This does not mean, however, that we should blindly place the majority of "development" on technological solutions. Rather it is an opportunity to focus on the appropriate nexus between an economy of life and a political economy.

It is only through thinking in this holistic fashion, some would even call it whole systems thinking, that we can do development that actually makes people richer.

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2. Featured topic: Just Another Emperor by Michael Edwards, and Philanthrocapitalism.

A Servies of six posts review Michael Edwards' new book Just Another Emperor and explore the dynamics of philanthrocapitalism. Authors include: Derek Newberry, Moses Lee, Manuel Bueno, Nitin Rao, Rob Katz, and Francisco Noguera.

A Dialogue on Philanthrocapitalism: "Just Another Emperor" Reviewed
By Derek Newberry

"The profit motive could be the best tool for solving the world's problems, more effective than any government or private philanthropy,"
-Oracle CEO, Larry Ellison

Larry Ellison's bravado makes Michael Edwards mad. Similar quotes highlight the introductory section of Edwards' new book, Just Another Emperor. Throughout his book, and in related articles published by the Financial Times and OpenDemocracy.net, Edwards makes it clear that he is tired of pro-market hype - and he doesn't want you to buy into it. Edwards takes aim at the market-based principles of development underlying the base of the pyramid (BoP) perspective and even mentions BoP movement leaders by name.

Here at NextBillion.net, we've followed Edwards' work closely. Having read his book and articles, our cadre of Staff Writers has decided to offer a sampling of our thoughts in response to Edwards' ideas. In this and five subsequent posts, NextBillion staff will offer our own personal perspectives on Edwards' diatribe against what he calls "philanthrocapitalism." Today, I'll kick off this dialogue with my own review of Just Another Emperor.

Read more.

A Dialogue on Philanthrocapitalism: To Add, But Not to Be
By Moses Lee

Michael Edwards' recent book on "philanthrocapitalism" reminds me of a recent conversation I had with my sister, a social worker. Over dinner one day, she started going off on business types:

Why is it that business people think they are the answer to all the world's problems? You guys come off so arrogant! Somehow, we, who have been working in the civil sector for centuries, struggling to solve social issues, are completely inept, and you guys, who have all the money, are going to solve all the problems.

I think many people have a similar perspective. And perhaps rightly so.

Read more.

A Dialogue on Philanthrocapitalism: Are BoP Businesses Useful Tools Against Poverty?
By Manuel Bueno

Recently, there has been some debate surrounding business involvement in philanthropy and its usefulness after the publishing of "Just Another Emperor?" last March by Michael Edwards. Michael Edwards, Director of Governance and Civil Society at the Ford Foundation takes a critical look for the first time at a relatively new phenomenon: using sustainable business tools and models to solve poverty problems. NextBillion.net's core content (and passion!) deals exactly with these issues.

Constructive criticism is always welcome, especially if it is from someone who has worked at Oxfam, Save the Children and the World Bank. In the fight against poverty, Edwards makes a distinction between government, civil society and what he calls, philanthrocapitalists. According to him this last group is made of market agents that claim to be able to solve social problems through business approaches alone. Edwards states that, although these approaches are important, they are very difficult to operate successfully at scale and that they usually experience some trade-offs between their social and financial goals. Furthermore, he argues that civil society might be being damaged by these trends.

Read more.

A Dialogue on Philanthrocapitalism: Working Passionately, but in the Wrong Direction?
By Nitin Rao

The close-knit community of development-through-enterprise professionals in Hyderabad woke up a couple of weeks ago to a series of e-mail forwards of an interesting article in the Financial Times. Michael Edwards, author of "Just Another Emperor", had raised a series of points that the development sector was driven by misguided calls for business thinking, leaving this community with hard questions: Were they working passionately, but in the wrong direction?

The crux of Edwards' argument is that the development sector should follow a different logic from business thinking and be driven by its unique values of compassion and collaboration.

Read more.

A Dialogue on Philanthrocapitalism: The Importance of Listening
By Rob Katz and Francisco Noguera

Philanthrocapitalism - harnessing business and the market to the goals of social change - is a controversial term. First introduced by The Economist's Matthew Bishop, then expounded upon by the Ford Foundation's Michael Edwards, philanthrocapitalism has been the subject of no fewer than four major online discussions and debates. Here at NextBillion.net, we have dedicated five blog posts to the topic, offering a range of opinions on Edwards' new book, Just Another Emperor: The Myths and Realities of Philanthrocapitalism.

Derek, Moses, Manuel and Nitin - who authored the first four entries in this series - offer a range of viewpoints, mostly critical of Edwards' argument that market strategies are inappropriate tools for driving social change. Edwards, of course, makes many salient points, and is not to be criticized as a hack. (Over at the Global Philanthropy Forum blog, Benetech's Jim Fruchterman deconstructs Michael Edwards in no uncertain terms, and comes close to making this very criticism. Edwards responds.)

Read more.

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3. Featured Blog Posts:

Moving On: What I Learned From Shrimp Farmers
By Derek Newberry

Every good story begins with a witty insight, a forceful statement - something to grab the attention of the reader. This one, unfortunately, begins with shrimp. Before I visited Northeastern Brazil, I had only known the tasty kind - the ones that are served on small platters or served over pasta, that are fantastic with a little butter and lemon.

A year ago, on a trip to the town of Tibau do Sul to research the aquaculture industry in the region, I encountered the much less pleasant type of shrimp - the alive kind that swim up and thrash you furiously with their little legs as you nervously wade through murky shrimp ponds. Some days the only sound that would penetrate the heat-induced silence of the farms I visited was the occasional shriek from another victim of an unexpected shrimp attack.

Read more.

Reporting from the Growing Inclusive Markets Forum
By Grace Augustine

Growing This past weekend, I had the pleasure of attending the Growing Inclusive Markets Forum in Halifax, Nova Scotia. The conference was hosted by the Faculty of Management of Dalhousie University and the Coady Institute of St. Francis Xavier University.

The Growing Inclusive Markets initiative is a UNDP program that aims to "raise awareness by demonstrating how doing business with the poor can be good for poor people and good for business." The forum hosted a mix of development specialists, academics, and practitioners, who were all debating the growing role of the private sector in development.

Read more.

Reporting from the Growing Inclusive Markets Forum
By Theresa Newhard

After a few weeks of non-blogging, I'm happy to write my first post on NextBillion. I've spent some time over the last few weeks updating the Resources section of the site, complete with additions to the case study, reports, books and articles sections. A couple of highlights are summarized below, but we'd love to hear your thoughts and comments on what's particularly valuable and what you think we're still missing in our virtual library. The entire list of resources can be accessed here.

Read more.
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4. Featured Event: SEVEN Fund Offers $50K to Spur Investment Indicator Discussion

The Social Equity Venture Fund (SEVEN Fund) has recently launched the VINE (Virtual Integrated Networking Experience) Competition. The unique competition, open to all, merges the world of commercial financial investment with open innovation to promote a broader free flow of ideas for investment in emerging market small and medium sized enterprises.

Read more.

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5. Jobs/Careers: Director, Foundation & Corporate Relations, Root Capital

Location: Cambridge, MA

Organization: Root Capital (formerly Ecologic Finance) is a nonprofit social enterprise that works at the critical nexus of international development and environmental stewardship. As a development finance institution, Root Capital provides affordable credit and financial education to environmentally, sustainable grassroots enterprises in the developing world.

Description: The Director of Foundation and Corporate Relations will manage Root Capital's investor relations programs and working closely with and reporting directly to the Managing Director for Philanthropic Investments. Root Capital's strategic plan has established an ambitious fundraising program with an emphasis on building relationships with key partners including financial institutions, corporations, foundations, and high net-worth individuals. The goal is to increase RC's lending capital from $19 million in 2007 to over $57 million by 2011.

Saying Farewell to Derek Newberry, Examining the Nature of Philanthrocapitalism and Development

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