Sunday, August 22, 2010

A Response: Is Top-Down Development the Answer?

I was planning to talk in my next post about an approach that I think sits at the cross hairs of top-down/bottom-up. But, the provoking comments and emails on the last post proved to be a heavy helping of mind fodder, it got me to typin’, and eventually the response took a life of its own like my tomatoes in the back of my fridge. Shame...tomatoes are expensive here in Ghana.

To sum up the comments on the last post: Do I buy top-down approaches to poverty alleviation?

The post takes a one-sided perspective, I suppose, to play devil's advocate. Perhaps killing the suspense (I know you were on the edge of your seats), I’ll go ahed and tell you that I buy Kofi's argument, but only conditionally that it is one component of a broader arsenal of poverty alleviation tools, and should be paired with bottom-up methods.

There have been some successes of top-down approaches to development, aid-driven or not. To give a couple examples, China's SEZs and big government initiatives have made substantial inroads, though inequality is staggering and widening (however this is generally what we see when countries become more capitalistic - see Russia). “Poor” in China is not the same as “poor” in Africa – I’ve found this out when visiting villages in China and digging deep to see what injustices the government had done and how overwhelming their poverty was, coming back mostly empty-handed. And I noted Ghana's success with the banking sector as another example.

HOWEVER, I think Jes and Thomas, the commenters, are right too – top-down approaches (talking aid now; I'll get to business separately) have overwhelmingly failed to distribute wealth evenly. But I think, at least for the big aid side, it's because they've been sending the wrong incentives. What I didn’t tell you about Ghana’s success story was that it came after 19 adjustment loans (loans based on policy conditionalities) from the World Bank/IMF tag team. Adjustment loans were based on governments promising to change, rather than a proven track record. Thus, the worse a country’s policies – which you could see in high inflation rates, high black market premium (manipulation of exchange rate), etc. – the more money it received. I’m not saying give the money to rich countries, but rather tie the aid to the track record instead of promises to change (fortunately, this is starting to happen).

And, the entire incentive system of donor organizations is misguided – how many industries are there in which your goal is work yourself out of a job? As I realized after meeting with a World Food Program director to discuss the extension of WFP’s support in northern Mozambique, the people deciding to continue the NGO programs, at the end of the day, are mostly the same people whose jobs are at stake.

Looking at top-down business aside from top-down aid, I think it only gets you halfway. Providing income and job security is where big business can thrive in poverty alleviation, but simply having a low-wage job doesn’t ensure that your family can escape the poverty cycle.

Bangladesh has been largely transformed by the textile industry, which arrived when foreign investment by South Korea’s Daewoo started up one plant in 1980. Now the textile industry employs 3.5 million people and accounts for 80% of the country’s exports. When I was staying in Dhana’s industrial area, I’d watch every day as women in their colorful sarees would head to work, and I even visited one of the factories (and got kicked out when they thought I was asking too many questions). When I went into the slums for interviews, I found that textile jobs were helping, but workers weren’t escaping the cycle.

This is where there are opportunities for grassroots NGOs and bottom-up approaches. Bottom-up approaches, by definition, build on local capabilities rather than trying to overcome their weaknesses. Grassroots organizations can provide things that normally aren’t offered to the poor, like access to credit, which uses the local characteristic of the poor placing a high value on reputation. And big businesses, geographically speaking, don’t reach everyone. People flooded to Dhaka – the textile industry and other job opportunities weren’t in the villages. This is where NGOs can do things like helping develop village enterprises or cottage industries, in which they help the poor make and market handicrafts for high-end markets.

I don’t think this answer of “both” comes as a surprise to many people reading this. It’s pretty clear that there’s no single answer to poverty alleviation, especially with the poor at varying rungs of the economic ladder and countries in varying stages of development. Again, I appreciate the comments and emails – it keeps me thinking. If only getting side-tracked could always be this productive!

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