Horse sense, and the promise of inclusive development

During the last several decades, Third World governments, backed by international aid organisations, have poured billions of dollars into cheap-credit programmes for the poor, particularly in the wake of the World Bank’s 1990 initiative to put poverty reduction at the head of its development priorities. And yet those responsible for such transfers had, and in many cases continue to have, only the haziest of ideas of what they achieved, and how their interventions could have been better designed to achieve real impact. Designing a policy is very different from its implementation at the local level. Equal attention has to be paid to implementation gaps in order to achieve success.

There is growing evidence and recognition that serving poor people requires strong commitment from organisational leaders who not only have greater intentional outreach but match their intent with action. Programmes can have better outcomes through wider participation of all stakeholders, particularly local communities who can better identify their issues and problems. Though well-thought, externally introduced projects can help development; they cannot be sustained in the absence of active involvement of the people whose problems are being addressed. Instead of trying to sell their ideas with vacuous phrases, professionals and practitioners would do better to discuss openly about their plans and listen to the good solutions that ordinary people have. When the community organises and identifies needs and collaborates in the formulation of strategies, they become the solution.

From the drawing board to delivery, one has to inhabit the product and the programme, living every detail as if it were a living, breathing organism. One has to put so much of life into this thing and there are such rough moments that most people give up. They cannot be blamed. One has to be burning with an idea, or a problem, or a wrong that s/he wants to right. If one is not passionate enough from the start, s/he will never stick it out.

The international poverty industry is worth trillions of US dollars a year. It’s bursting with experts, advisors and consultants. There is a surfeit of reports, studies, books publications, PhD grants, consultancies and loans. Rural development is now becoming an old-fashioned cause. It is now dominated by a new breed of savvy professionals calling themselves development experts. Social entrepreneurship is another one of its kind and has become the bandwagon everybody is clambering on and every progressive politician across the country wants a piece of the development pie. There is big money in these development projects.  

The old school approach of stimulating the local economy through local resources and local talents is being frowned upon but it is now increasingly becoming clear that quick fixes advocated by market entrepreneurs don’t work. Development requires sustained efforts. The recipients of aid need, training, hand-holding and constant and consistent mentoring to use the levers they are being provided. Such support has to come from groups that have local knowledge.  The institutional players in the sector must set up such types of human intervention that empower the marginalised local households and communities.

Although imported programmes have the benefit of supplying “pre-tested” models, they are inherently risky because they may not take root in the local culture when transplanted. Homegrown models have greater chances of success. The millions of households who constitute the rural poor are a potential source of great knowledge and creativity who, under present institutional, cultural and policy conditions, must seek only their own survival. Their poverty deprives not only them but also the rest of us of the greater value they could produce if only they were empowered.

We need to temper our optimism about several untested interventions whose potential is grossly overvalued. One of them is technology. Technology — no matter how intelligently designed — is only a magnifier of human capacity and intent but is not a substitute. If you have a resource of competent, well-intentioned people, then the appropriate technology can amplify their efforts and lead to amazing outcomes. But, in circumstances where that devotion is lacking, as in the case of corrupt government bureaucrats, or minimal capacity, as in the case of people who lack basic education, no amount of technology will turn things around. A glaring case is of telemedicine. It has been touted as a revolutionary tool for curing dysfunctional rural health. But we all know it has not been able to deliver the promised results.

Most projects rarely fulfill their promise. For instance, teaching farming practices through video requires capable agriculture-extension officers and devoted nonprofit staff. Technology has positive effects only to the extent that people are willing and able to use it positively. Our obsession with so many shiny gadgets has hardly helped us in delivering in ways we expected. This is the lesson of most social programmes the world over. They have a role to play when we develop the capacity of the people to absorb it.

There are at least five different types of capital — natural (land, water, forests, livestock, weather), human (nutrition, health, education, skills, competencies), physical (roads, buildings, plant and machinery, infrastructure), social (kinship groups, associations, trust, norms, institutions) and financial. One of the causes as well as consequences of poverty and backwardness is inadequate access to all these forms of capital. Thus to look at financial inclusion in an isolated way is problematic.

Merely pumping a backward region with financial capital is not going to be enough in the absence of improvements on the side of human, social and physical capital. The people in the first place have to be healthy and educated to be productive, so that they can use finance effectively. There has to be a substantial degree of trust and functioning institutions, in other words social capital, for economic transactions to take place in an atmosphere of confidence. Finally, there has to be adequate access to physical capital in terms of roads, bridges, canals, warehouses and market yards, In addition to electric power and telecommunication, for financial capital to be useful. In the absence of all this, merely insisting on financial inclusion will not work.

It is in the light of this learning that philanthropy has undergone a steady intellectual shift with regard to international economic development models giving rise to the modern idea of impact investing. What used to be an “aid”-based approach is now an “empowerment”-based approach that focuses on investing in local entrepreneurs who create local solutions to local problems. It is, therefore, no surprise that, taking the mission of philanthropy forward, the trending sectors within impact investing are food and agriculture, affordable housing, education, healthcare, inclusive finance, renewable energy, and women’s empowerment — the same sectors that have long been the focus of philanthropic initiatives.

Economics is also undergoing a course correction. Economists have tended to content themselves with a ridiculously simple picture of human motivation, rationality and well-being. They are now realising that theory, to be of use, must keep its feet on the ground.  Economists have drifted too far from the actual world. Ronald Coase’s poignant words in his book, The Task of the Society, sum up the modern dilemma:

“Economics, over the years, has become more and more abstract and divorced from events in the real world. Economists, by and large, do not study the workings of the actual economic system. They theorise about it. As Ely Devons, an English economist, once said at a meeting, “If economists wished to study the horse, they wouldn’t go and look at horses. They’d sit in their studies and say to them, ‘What would I do if I were a horse?’”

We need to actually study the horses.

The writer is a member of the Niti Aayog’s National Committee on Financial Literacy and Inclusion for Women