RDVP Class 1/10/2005

Greg's trip report: Development aid, good governance, and family ties

Monday’s class started off with a bunch of news, none of it good: a death in the family for one fellow, another down with pneumonia, and a tree from Stuart’s property had fallen in the storm, striking a neighbor’s house. On the plus side, Greg Wolff was back from his extended trip through Southeast Asia, and he gave a trip report. Though he had not been far from the Indian coast when the tsunami struck, he hadn’t even heard about it until late that evening, in contrast to his brother in the Midwestern US, who heard about it soon after it happened and had been trying to reach Greg. Greg talked about attending meetings of two different MFI’s in Bangladesh, and the worry that donor aid (both tsunami as well as traditional “big money” projects) would distort the local economy more than help it. He felt that the best approach was to connect local groups with each other and facilitate exchange with other groups, increasing the accountability, transparency, and responsiveness at the local level to build up trust. While Bangladesh is certainly poor in terms of dollars of GDP per capita, Greg warned against using solely that metric, pointing out that in other aspects (social relationships, etc) they were not poor at all. Greg favored a definition of poverty more as a deprivation of opportunity (not far off from Amartya Sen’s thesis in Development as Freedeom, I think.

Greg had asserted that the distinction between developed world and developing world was going away (from a communication and inter-relation impact point of view, I think) and that there were certainly communities of wealth even in the midst of “poor” countries, a view that Mans echoed from our time in the Dominican Republic. But when asked whether poverty should be viewed instead at the community level, Jose objected, saying that there are important examples of national poverty, such as the legal system of Venezuela. Greg agreed, and thought that clear title for land ownership was another “national” property, saying that more than one-half of all property in Bangladesh was involved in litigation, and that even the “winners” of the litigation came away poorer from the process. It was not an issue of laws, as good laws were on the books, but more a matter of execution, where local officials were not transparent or accountable. Yann agreed that a fair interpretation and execution of the law was something that you could not count on in many places of the world. Mans also commented that the extreme change you see with an administration change in some places (the Dominican Republic) exacerbates the patronage system and inexperience of officials. Greg argued that in order to build up local power and make the government responsible to the people, you need to minimize the distorting effect of power from the military, donors, and rich landowners. When these small groups account for too large a fraction of the dollars or power, the needs of the community are ignored in favor of the needs of the stakeholders that are providing the money.

Digression into efficiency of government services: Jose asked how many people we were killing just waiting in line? Greg said that kiosks were working for some government services in Hyderbaad, providing a more transparent interface with the government. He felt there was the need for a common platform that handled things like intermittent power and easy interfaces for semi-literate users, rather than having each project start from scratch.

Returning to the main thread of aid and money and government influence, Mans repeated a quote that he’d heard that 80% of all aid was worthless or worse. Farai said that with the continuous creation of new NGO’s and turnover of government officials, there was little continuity, or understanding among the NGO’s how to navigate the government. Even the government officials lacked the local context to help the NGO’s help the community. Greg mentioned that at his meeting with BRAC (MFI in Bangladesh), they’re addressing teaching women’s rights, providing legal aid, and practice rotation of loan officers and branch managers every three years (primarily for anti-fraud reasons). Greg waxed poetic about family values and the level of trust within families in the countries that he visited, but also pointed out that trust outside the family was practically non-existent. The result was that people tended to be very conservative, viewing a high cost of failure. Helen said that the previous family-orientation was starting to erode in China, leading to a higher level of economic activity. Greg and Durga mentioned that the importance of family could also be seen in the scale of the weddings that took 15 days and involved everybody—essentially a family reunion and business networking conference. Greg contrasted the social world of relationships (with the strength of collaborative authoring) with the commercial world of dollars (with its ability to allocate capital efficiently in conditions of scarcity), and wondered if there were some way that we could get the best of both. He felt that the social world was harder to “manage” since there wasn’t a currency with notions of transferability, divisibility, objective value, etc. But now more powerful IT systems allow record keeping that captures some of that nuance.

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Helen recommended the an article on Social Capitalists in the January 2005 issue of Fast Company magazine (I was surprised to learn that my collaborators, Grameen Foundation USA, were featured as one of the Top 25. There’s even a somewhat garbled mention of the Mifos project: “Currently in the works: open-software technology to facilitate more efficient delivery of microcredit to banks.” They meant “open source” not “open software”, and it’s not really about delivering microcredit to banks, but to borrowers. Most MFI’s are not technically banks.).

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Trust and Brand

There was further discussion of the tradeoff of trust and business efficiency, with Jose saying that the implicit level of trust (for consumers and businesses) was amazing: that (aside from cabbies, a problem everywhere) you could generally expect people to charge you a fair price, give you what they promised to do, and provide good service. Helen agreed, saying that it was the power of the brand, and when people cared about maintaining a brand, they generally dealt fairly. The competitive benefits of doing so meant that even US-based brands could succeed in China (like Starbucks) and that by entering the market, they raised the standards for all.

Politeness, fairness, and cooperation

Here we got into a bit more of a discussion on trust/politeness/fairness, with Amy commenting that one place in the US that she certainly did NOT see the level of cooperation was in driving. Citing the example of her recent trip to Tahoe, where merging to one lane caused a multi-hour backup because people were trying to eke out a small advantage rather than following orderly rules, making the overall system much less efficient, and slower even for those that “cheated”. Greg introduced an experiment called “The Trust Game” a two-stage two player game run on groups of men, women, and mix gender group in Portland (US), Tanzania, and Bangladesh.

Setup

Each player is given $100 (or equivalent local currency). They are told that they will be playing with (in one set of experiments) another person from their village or (second experiment set) from the poorest part of the country. They do not see or have a chance to talk with the partner.

First play: A gives to B

Player A chooses a portion of her initial allotment (between $0 and $100) to give to Player B. But along the way, the referee TRIPLES the amount. So if A chooses to give up $10, the referee gives B $30.

Second play: B gives to A

From the resulting money that B has, she chooses some amount to give to A. There is no way for the players to generate a binding promise, and as initially described, it is a one-shot (non-repeated) game.

Results

In general, player A gave 50% of their initial allocation to player B, and player B gave 50% of the (tripled) gift back to A. One significant difference though (and Greg noted that the sample sizes were small) was that Bangladeshi women gave a smaller amount (typically only 20-30%) when they were player A.