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

A precept of NextBillion is that free markets provide the best, most sustainable solutions to poverty. So we’ve been especially interested in the debate over Fidel Castro’s legacy in Cuba, especially concerning health care.

Is it really possible that a dictatorial, communist regime actually benefited the poor people of Cuba? Did the end justify Castro’s means, which included suppressing both dissent and the country’s economy?

The answer is no. A very complicated no.

The fact is that communist Cuba enjoys a standard of health care that’s the envy of not just other Latin American countries, but any country, anywhere. One can debate whether quality care existed in Cuba even before Castro came to power in 1959, but that doesn’t change the current reality or explain the country’s thriving biotech sector.

The irony, however, is that Cuba’s health care system – the capstone of its economy – in built on principles of capitalism. The country famously trains lots of medical professionals, then exports them overseas to help where there are shortages. (Last year, 37,000 doctors and nurses were working in 77 countries.) This is good for Cuba’s image and even better for its bottom line; the doctors are part of a business deal that nets currency – $8 billion a year – and oil for Cuba. The fact that there are lots of doctors and nurses in Cuba is a happy side effect of its import-export policy.

And it’s not a coincidence that in Cuba’s “planned economy dominated by state-run enterprises” there are few other examples of economic success. That’s partially explained by the five-decades-old U.S. embargo against Cuba. But an even better explanation is that communism has deprived the vast majority of Cubans of opportunity.

Armando Valladeres, a poet and human rights activist, spent 22 years in prison for opposing Castro. He says that even if Cuba’s health-care prowess is true – he maintains it’s greatly exaggerated – it didn’t necessarily have to come with violence and human degradation. That’s an important point to consider as part of Castro’s legacy.

And as we negotiate these perplexing days of populist politics, income disparity, refugee crises, evolving philanthropy and global health threats, it’s also important to remember that markets have a history of finding a way to function. Even in communist regimes.

Bridge Over Troubled Waters

Just a month after Uganda’s high court ordered the closure of Bridge International Academies’ 63 schools there, its struggles are extending to neighboring Kenya.

On Monday, Kenya’s National Union of Teachers (KNUT) and global teachers’ union federation Education International released a report calling for all 405 of Bridge’s schools in Kenya to be shut down. The reason, it said, is that Bridge’s education is “of poor quality, is inaccessible for the very poor and students with special educational needs, and is unaffordable for most families in the communities in which it operates.” The majority of parents interviewed struggled to pay Bridge’s fees, the report asserted, and most Bridge teachers in the eight schools it sampled had no teaching qualifications.

Making matters worse for Bridge: These views seem to be shared by Kenya’s government. Its education minister told a media briefing that he had visited Bridge schools and agreed with the report’s criticisms, and that the government will soon release its own report on the schools.

The company is appealing the ruling in Uganda, but its future in both countries appears to be very much in question, as criticism of for-profit private education in emerging markets grows bolder – driven largely by teachers’ unions. Though it has the goal of reaching 10 million children across a dozen countries by 2025, Uganda and Kenya represent half of the four countries where Bridge currently operates. (In Liberia, it recently started managing a number of public schools as part of a government pilot program – itself controversial – to improve public education.)

Bridge has influential allies, as it’s backed by investors that include the World Bank, Bill Gates, Mark Zuckerberg, the Omidyar Network, Khosla Ventures and the Overseas Private Investment Corp. It seems likely to weather the storm. But its model – based on closely monitored, often minimally trained teachers who teach tightly scripted lessons guided by tablet computers – is drawing increasing scrutiny, in spite of the fact that Bridge schools are arguably superior to the often dismal public education options in many of the communities where it operates. You can read Bridge’s perspective on the need for for-profit education alternatives here, and we’ll be inviting both Bridge and its critics to share their views on these issues on NextBillion – watch this space.

One less reason to doubt cash transfers

Direct cash transfers have evolved from a radical idea to a widely accepted – and perhaps even overly praised – development solution. There’s an irresistible simplicity to the idea of fighting poverty by giving poor people money. And multiple studies suggest that the practice actually works, causing dramatic increases in income, assets, food consumption, and other areas vital to the extreme poor.

Last week, a new study undermined one of the strongest arguments against the practice: the fear that recipients of the cash would squander it on cigarettes, alcohol, and other non-essential (and often harmful) purchases. Surprisingly, according to a research paper by David Evans of the World Bank and Anna Popova of Stanford University, the exact opposite is true. After examining 19 studies of the impact of cash transfers on these “temptation goods” expenditures, the authors found that not one of them showed increased tobacco and alcohol consumption – and many of the studies showed a reduction in these purchases.

What explains this phenomenon? Evans and Popova point to a few possible reasons. For one, cash transfers may broaden the economic horizons of poor households, prompting them to view large investments in education or other productive activities as more feasible – and cutting back on drinking or smoking to make it happen. Another theory: Poor people are following the wishes of the governments or organizations that provide the funds, which urge them to use the money for welfare-enhancing purchases. Or it could be as simple as the fact that cash transfers generally go to women, who are more likely to use the money for their families’ benefit.

That’s not to say that the poor avoid frivolous purchases entirely. Evans and Popova cite estimates from Peru that show cash beneficiaries are more likely to purchase “a roasted chicken at a restaurant or some chocolates” soon after receiving their transfer. But as they say, “Hopefully even the most puritanical policy maker would not begrudge the poor a piece of chocolate.”

Can a wealth of information lead to wealth?

“Data” is one of those words that can kill a conversion. It just sounds … boring.

But in practice, data keeps people alive.

That’s the point of Scott F. Dowell, David Blazes and Susan Desmond-Hellmann, of the Gates Foundation, writing in Nature about precision public health – or customized health care made possible by the collection of information. They talk about how precise health data is becoming the norm in developed countries, but it took months in Guinea, when it should have taken days, to identify the largest Ebola outbreak in history. And sub-Saharan Africa, which has the highest childhood mortality rates in the world, is “where we know the least about causes of death.”

Things are changing, they say: “In the past two years, the U.S. National Institutes of Health, the Wellcome Trust in London and the Gates Foundation have all instituted open data policies for their grant recipients, and leading journals have declared that sharing data during disease emergences will not impede later publication.”

To their credit, the authors don’t just cite lack of health data in the developing world, they recommend four steps to help solve the problem: register births and deaths; track disease; incorporate laboratory analyses; and train more people.

We like to think that – given the profound need, the emerging acceptance of knowledge sharing and the explosion of technology-focused entrepreneurship around the world – what the authors have done is lay out four business opportunities.

Main photo: A U.S. medical student receives hands-on training in Cuba. Credit: Shelley Loewenberg

Homepage photo credit: Christopher Michel