Shane Heywood

Musings on market-oriented approaches to International Development

Mortished has More (Light) to Shed…..

“There is a danger of expecting the results of the future to be predicted by the past.” John Keynes

Carl Mortished, in “Tycoons, give your billions to businesses, not charity” argues that in the variety of approaches that have been used to address poverty, traditional aid/charity is, in many senses, useless. In fact, the “the best way to create more happiness in places where there is misery (poverty, hunger and unemployment) is to create jobs and business opportunities, not to dispense charity.”

I suspect the “best” approach is not so clear-cut.

Mo’ Money, Mo’ Problems
Mortished reiterates a claim made by (apparently) Warren Buffet that dynasties, like the Ford family, detrimentally affect businesses. One of the major reasons Buffet, and implicitly other tycoons (?), donate is a view of philanthropy as a cure to the detrimental effects of dynasties on businesses: “Buffett is right that dynasties don’t work, but he is wrong if he thinks that philanthropy is the solution.”

I am a bit confused.

A yawning chasm exists between Warren’s belief in the detrimental effect of dynasties and a conclusion, by the author, that Warren deems philanthropy to be the solution. I would be highly surprised if Buffett would suggest that the solution to Ford’s problems is to turn the business into a charity.

And by extension, if Mortished is arguing that aid giving is a dynasty (not explicitly mentioned, but the only way such a point is truly relevant to his argument), it is questionable if turning the World Bank into a business is the “best” option.

More of the Same: Mortished and the Efficacy of Aid/Charity
To support his argument Mortished refers to “the White Man’s Burden,” by William Easterly (a good book, despite a title which sounds mildly colonialist. Okay, quite colonialist). In this book, Easterly talks about “planners,” organizations that seek to implement solution from the top down (think World Bank), versus “searchers,” people who work on the ground to find out what works, and then implement the identified solution.

In part, based upon this book, Mortished argues that what tycoons should be doing to address poverty, instead of donating to charity, is either implementing the next big idea in the developing world and/or investing in local businesses. In fact, “if he [Mark Zuckerberg, founder of Facebook] really wants to help the poor, he should come up with a good idea that will make money, jobs and wealth.”

A plausible argument, but surely not the full picture.

Such a claim makes the same mistake of the planners that Easterly (and Mortished) eagerly criticize: assuming that what worked in the West (industrialization and market-oriented businesses) will work in an identical manner with the same results from Mali to Madagascar. This is problematic for a few reasons. First, outstanding ideas are not so easy to find. The reason why Facebook and Microsoft are so exceptional is due to the fact that they are, well, exceptional. It is a fragile claim that since Gates found Microsoft, surely he can do so not only again, but also in Africa.

Further, over and above the conventional challenges of running a growing business, managing a business in the developing world inherently holds other challenges – something the article fails to address. Poor infrastructure and consumers who maybe illiterate can make transportation and marketing respectively more difficult. Sorry Carl.

“On the Money…”
So, why does this all matter?

Despite all of my concerns, the core kernel of what Mortished argues is largely on point. Greater income can mean a person has a chance to better health, education and overall, an improved livelihood. Of course, more money means less in war-torn or unstable environments. Yet, with the admitted difficulties that have plagued aid giving, job creation holds a significant potential for being a primary driver of economic development.

Additionally, Mortished correctly identifies the weaknesses of charities in addressing some development challenge. Yet, it is difficult to say such a weakness automatically points to business as the (!) solution. Not all challenges can be effectively addressed by business approach, nor can all changes be effectively addressed by a charity.

For you, why does this matter? In many ways. For one example, when donating this year, is this money best spent at a charity, or giving the waitress an extra tip?

What way do you think is most effective in addressing the quality of lives for people around the world?

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This entry was posted on December 18, 2010 by in Business, International Development, Social Entrepreneurship.

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