Monthly Archives: October 2011

Up and Out: Income Inequality and Political Polarization in the U.S.

This graph is very interesting.  It tracks the degree of political polarization over time and plots it against the Gini coefficient, which is a measure of income inequality in a country.  Develop Economies frequently references the Gini coefficient when discussing repressive kleptocratic regimes in Africa like Equatorial Guinea.  Only recently, however, has he begun examining poverty in the United States.  And he is not alone – even the hippies have managed to put down their bongs long enough to protest rising inequality in the country in the Occupy Wall Street protests.

People typically think of developing countries as having extraordinary disparities between the rich and poor, simply because, in places like India, Africa, and Asia, the poor are actually very poor.  But in the United States, that gap is just as large or larger than some nations.  It only seems that we are more equal because, as the Heritage Foundation is quick to point out, 99.6% of the so-called “poor” in the United States have a refrigerator (and 27.5% have more than one VCR!).  Here is a more tangible example:

According to newly released data from the Census Bureau, greater Bridgeport has the widest gap between the rich and poor of 516 metropolitan and micropolitan areas included in the survey.

What does that mean in practical terms? The top 20 percent in the Bridgeport area — which includes Fairfield County, one of the wealthiest areas in the United States — took home nearly 60 percent of its income, while the bottom 20 percent took home 2.5 percent of the region’s money. In this nexus of billion-dollar hedge funds and bombed-out housing projects, the top 5 percent raked in a mean income of $685,000, while the bottom 20 percent’s mean income totaled less than $15,000.

To put that in perspective, if the Bridgeport metro area were a country, it would rank 12th from the bottom in the world for economic equality — lower than Mexico, Papua New Guinea and Zimbabwe.

The standard measure for comparisons is the Gini index — a 100-point scale where a 100 score indicates a country where all the income goes to one person and a zero score would be a country that divides up everything equally. Bridgeport’s Gini score is a 54, compared with 47 for the United States as a whole. By comparison, Russia’s score is 42, the United Kingdom’s is 34 and Germany’s is 27.

In other words, our poor don’t typically do not live in slums like Kibera without access to running water, toilets, electricity, or, in many cases, more than one room for entire families.  But that doesn’t mean that southeastern Connecticut isn’t more unequal than Robert Mugabe’s Zimbabwe (it is).

Income inequality is rising, and it is rising fast.  The Social Security Administration just released a report with a some alarming statistics:

The gap between the United States’ rich and poor continued to grow last year, according to new government wage data.

With pay down and fewer jobs available, the Social Security Administration’s figures highlight one of the major issues of the Occupy Wall Street movement – widening income disparity, the Associated Press reported.

The SSA said 50 percent of workers made less than $26,364 last year — and most Americans have fewer job opportunities available to them. But the wealthiest Americans are relatively unscathed, with those earning $1 million or more jumping 18 percent from 2009.

Total employment fell again last year, dropping from 150.9 million in 2009 to 150.4 million in 2010. And in 2007, at the height of the recession, there were still 5.2 million more jobs than in 2010, the AP wrote.

The average income for Americans was $39,959 last year, but the median wage was just $26,364. The SSA wrote that this shows “the distribution of workers by wage level is highly skewed,” the AP reported.

For those unfamiliar with statistics, the median is the middle number in a series – in this case, the median income is $26,364.  In a normal distribution, the median equals the mean.   So when the mean is nearly 33% higher than than the median, as it is in this case, you know that there are lots and lots of people struggling to get by while others continue to do extraordinarily well financially.

Image Credit: Damon Winter/New York Times

This is the issue at the heart of the Occupy Wall Street protests.  But, looking at the chart, the level of polarization in government began back in 1980, with the election of Reagan and the beginning of the conservative revolution.  So, while we are in the midst of an unprecedented failure of democracy, it seems to be precipitated by a lot of different factors that have played out over the last 30 years.  I am not sure why this has happened, but I will venture a few guesses.

Maybe this happened because, as the rich get richer, the plough more money into influencing the political process in their favor.  Lobbyists – an institutionalized and legal form of corruption – gain a disproportionate influence over policy-making, which creates a positive feedback loop of favorable legislation and tax loopholes for the certain industries – agriculture and financial services, to name a few.  But, in a democracy, the people should be able to speak their voice at the ballpt box and ensure that their interests are represented by the politicians they elect to office.  So how does such a small group of very wealthy individuals maintain their influence over the political process?

A few ways.  First and foremost is money.  You can bankroll legislation to marginalize voters, or give tons of money to political campaigns, which are increasingly expensive.  As candidates spend more and more, an arms race develops that gives money greater ability to influence elections.   In an op-ed titled “The Paradox of the New Elite,” Alexander Stille examines the relationship between inequality in the social and economic spheres, and how, in some senses, they are, if not mutually exclusive, at least move along a different trajectory:

Inequality has traditionally been acceptable to Americans if accompanied by mobility. But most recent studies of economic mobility indicate that it is getting even harder for people to jump from one economic class to another in the United States, harder to join the elite. While Americans are used to considering equal opportunity and equality of condition as separate issues, they may need to reconsider. In an era in which money translates into political power, there is a growing feeling, on both left and right, that special interests have their way in Washington. There is growing anger, from the Tea Party to Occupy Wall Street, that the current system is stacked against ordinary citizens. Suddenly, as in the 1930s, the issue of economic equality is back in play.

"You will vote for us."

When people are struggling financially, they tend to spread the blame across different groups – immigrants, minorities, labor unions on the right, and big business on the left.  These baser instincts can then be exploited.  That is why those at the top of the economic pyramid make social issues a part of the political package, bringing in the social conservatives who are unwilling to compromise on issues like abortion and gay marriage.

If you look at the most recent Republican presidents prior to 1980, they make today’s GOP politicians look like Barney Frank.  Nixon created the EPA, for Pete’s sake.  Reagan raised taxes 11 times during his administration.  In contrast, when presented with a deficit reduction bill with a 10:1 ratio of spending cuts to tax increases, not a single Republican candidate went for it.

But this marriage of convenience between social and fiscal conservatives was ill-fated.  As the social conservatives gained more power within the movement, they began to make their own demands.  And unlike other voters, they are unwilling to compromise on their core values.  Abortion is murder – period.  Two men getting married is like a man marrying his dog – period.  In an ad posted on YouTube, Bill Kristol posted an ad conflating anti-Semitism and anti-Israel sentiments with protests about income inequality.  If you oppose “too big to fail,” you are anti-Semitic, necessarily.

Abortion is, by far, the biggest political weapon in the arsenal.  The other day, Herman Cain, the hilarious frontrunner, in a moment of honesty, stated he was pro-choice.  12 hours later, he released a one-sentence statement:

I’m 100% pro-life.  End of story.

Even Reagan supported an amnesty policy for illegal immigrants who had made the United States their home for many years.  Today, the party of Reagan passed the harshest immigration law in Alabama in this country’s history.  And now, they are paying the price:

Farmers are already worrying that with the exodus, crops will go unpicked. Like much of the rest of the country, Alabama needs immigrant labor, because too many native-born citizens lack the skill, the stamina and the willingness to work in the fields — even in a time of steep unemployment.

The new law has also added frustrating layers of paperwork for Alabamans who must now prove legal status when enrolling schoolchildren, signing leases and interacting with government. After the law went into effect, the lines at the Department of Motor Vehiclesin Birmingham grew so long that officials had to bring in portable toilets.

Alabama’s reputation has also taken a huge hit just when it is trying to lure international businesses. No matter how officials may try to tempt foreign automakers, say, with low taxes and wages, the state is already infamous as a regional capital of xenophobia.

This trend exemplifies the counterproductive economic effects of socially conservative policies.  Who else is going to pick those onions – Herman Cain?  I don’t think so.

Not as a mobile as we thought

Another thought comes from Scientific American, which tries to understand why support for income redistribution has actually declined during the recession:

What might explain this trend? First, the change is not driven by wealthy white Republicans reacting against President Obama’s agenda: the drop is if anything slightly larger among minorities, and Americans who self-identify as having below average income show the same decrease in support for redistribution as wealthier Americans.

Our recent research suggests that, far from being surprised that many working-class individuals would oppose redistribution, we might actually expect their opposition to rise during times of turmoil – despite the fact that redistribution appears to be in their economic interest. Our work suggests that people exhibit a fundamental loathing for being near or in last place – what we call “last place aversion.” This fear can lead people near the bottom of the income distribution to oppose redistribution because it might allow people at the very bottom to catch up with them or even leapfrog past them.

That is interesting.  There are so many layers of this graph to unpack that I am not even sure what conclusions to draw.  But I chose to title this post “Up and Out” because the first thing I thought of when I saw this chart is the final scene of Charlie and the Chocolate Factory, when Willy Wonka tells Charlie to push the button labeled “Up and Out.”  The glass elevator then accelerates to incredible speeds and bursts through the ceiling and into the atmosphere.  I see the political discourse and income inequality in this country following a similar trajectory.  When does it plateau?  Does it ever plateau?  Have we entered a new era of globalization where 50% of the country is destined to earn less than $27,000 per year for eternity?  Or will we have some kind of revolution where the natural order is restored and we return to the times before what Paul Krugman calls “the Great Divergence”?

The other day, long-time reader Ed, who recently adopted a baby boy (congratulations), commented that I my posts have diverged from the more typical market-driven development topics I previously wrote about.  I certainly haven’t abandoned that angle – I hope to write many more posts about education, energy, microfinance, and social enterprise – but I am exploring other causes of poverty.  That is why my last few posts focused on foreign policy and its effects on the development of different regions of the world.  And the widening income gap in the United States also strikes me as an interesting case study in the role of government in reinforcing the poverty cycle.  Further down the rabbit hole, things get more and more complex.

By venturing into the political discourse, I risk showing my cards.  But these are important issues that fit in the broader context of this blog, which explores the root causes and, more frequently, potential solutions to poverty.  But, in deference to Ed and others, I will soon return to my bread and butter and talk about the role of primary education in expanding opportunities for the poor.

(h/t Andrew Sullivan)


Why DIY Foreign Aid Amateurs are Necessary

This is part two of a two-part post about amateurs vs. professional in aid and development.

In my experience, development professionals tend to be a jaded and cynical bunch, but also eternally optimistic, well-meaning, and principled.  In one post, a blogger who writes “Good Intentions are Not Enough” (another blog I read and respect) explains what it means to be an “aid professional.”  Here are a few:

  • First and foremost – Do No Harm – whether what we do is right or wrong, we are doing it to the people that can least afford for us to fail.
  • There is a need for fresh perspectives and a variety of ideas and approaches. However this must be tempered with knowledge of the factors that led to success and failures in the past so the same mistakes are not constantly repeated.
  • Stick around long enough for projects to have a chance to fail. Then try to stop them from failing and learn from your mistakes.

While I agree with these principles, I don’t think the status quo promotes them.  In Algoso’s article, he explains how failed projects sap money from potentially successful projects.  Yet Good Intentions is right – we need to learn from mistakes.  Some of my good friends in Ghana worked for Engineers Without Borders Canada.  One was a mechatronics engineer, another a geoscientist (by training, not profession).  The amateurs at EWB Canada even created a website called “Admitting Failure” and held a conference called FailFaire, which is cited by professional development workers as a step in the right direction.  To fault “amateurs” for their mistakes, while saying experts should learn from theirs is a bit hypocritical in my opinion.

Regarding the second point – how can experts bring a fresh perspective if they all draw from the same pool of knowledge?  Successful projects bring expertise and best practices from many different fields and apply them to development.  This is how you bring fresh ideas.

And, most importantly, regarding “do no harm,” I have seen aid projects literally destroy the rural banking sector of a country.  In this particular case, it was a multi-million dollar government aid project.  Not to mention, the amount of collaboration between aid agencies from different countries is appalling.  I once sat in a meeting between aid officials from two governments who found out that they had been training the same group of farmers on the same skills for the past six months and didn’t even know it.  Of course, do no harm.  But don’t assume that amateurs will do more harm than “professionals”.

In my personal experience, the organizations I have worked with run the gamut from large-scale bureaucratic government aid projects to the one of the most capitalist social enterprises around.  And, frankly, the most innovative and effective are the ones founded by development amateurs with a professional background in other fields – the self-taught warriors who bring their insight and skills from other industries to bear on the social sector.

My intention isn’t to say that everyone with a masters degree in international development and a resume overflowing with public sector and development experience is wrong about everything.  Clearly, that experience is valuable in understanding context and knowing what has worked and not worked in the past.  It is particularly relevant in the policy sphere – designing programs like Bolsa Familia or advising governments on legislation and policy.

Rather, I want them to recognize the critical role amateurs play in this work.  They bring new ideas, enthusiasm, optimism, and much-needed skills.  They may not always succeed, but, if history is a guide, applications of traditional development theory haven’t produced overwhelming results either.  If the CEO of a company had the same track record of results as the development experts during the past four decades, he would have been fired without a second thought.

The second and more important point is that this “leave it to the experts” mentality is far more destructive in the long-run than the trial-and-error nature of DIY foreign aid.   Algoso explains that failed ventures take money away from other projects and ventures that might work.  This, to me, is a recipe for the status quo – an approach to poverty alleviation and economic development marked by a lack of innovation, fresh ideas, and competition for funding dollars.

Take the Millenium Villages Project – a massive top-down development project thought up by a bunch of “experts” at the Earth Institute at Columbia University.  The brainchild of Jeffrey Sachs – one the most influential economist in the world whose commitment to the cause no one can deny – the MVP has been criticized for its high costs and limited impacts.  At a cost of $300,000 per village per year, the project achieves modest gains that, frankly, will do nothing to solve the much larger problem of food security in the regions it serves.  This, to me, is a good example of an unsustainable project and a waste of money in development.

Among the amateurs, on the other hand, the failure rate may be high, but successes can be far greater. Play Pumps may have been a failure, but what about Kiva?  Kiva – an online peer-to-peer lending organization that uses the Internet to connect lenders with borrowers around the world – might the most successful and effective non-profit in modern history.  It has more than one million users and has distributed over $250 million in loans to borrowers in 216 countries.  The video above, titled “Intercontinental Ballistic Microfinance,” shows a stunning visual displays the movement of Kiva loans around the world.  More importantly, unlike Millenium Villages, it is fully financially sustainable – something that is paramount to the founders, who cut their teeth at PayPal.  It is a good thing that Matt Flannery and Premal Shah didn’t decide to return to their day jobs and leave it to the experts.

World Vision

For a more tangible example, the first comment on the article is illuminating.  It is from someone who works for WorldVision.  For those who do not know, World Vision is the organization that distributes the Super Bowl t-shirts in Zambia, and is responsible for undermining the local cotton industry throughout sub-Saharan Africa.  This practice is widely reviled by the “professionals,” and resulted in the online castigation of a poor sole from Florida named Jason Stadler who tried to get donations of one million shirts.  Apparently, the irony is lost on experts.  In any case, here is what the World Vision employee has to say:

This is not something amateurs should be meddling in but unfortunately starting your own non-profit is the new “starting your own business”.It is absolutely petrifying to me that independants are starting nonprofits, especially the often open access some are giving donors to vunerable children. They are also fostering a mentality of donor needs before community desires.

The next comment comes from someone who works in a rural village in Lesotho, who isn’t a fan of World Vision and raises very specific criticisms of the organization:

World Vision! This is one of the worst organizations with the least understanding of local conditions, cultures and solutions; they chase huge amounts of money in the name of religion.

The World Vision employee then gives a puzzling response:

I think you point out something really valid – INGOs make mistakes. We have made mistakes, which we are bound to do after 60 years of working in communities. We are after all a human organization and humans make mistakes and in some circumstances, get everything wrong.

We are encouraged not to hide those mistakes. To talk about them, learn from them and to try not to repeat them. I think that’s why I find it scary to think of a bunch of rouge nonprofits coming in without having lessons learned. Its more about the experience than it it is about credentials.

This, to me, is the essence of the professional aid workers mentality.  They condone mistakes made by professionals and condemn them from amateurs.  If the professional fails, it is a learning experience.  If the amateur fails, it is destructive.

An amateur at work, with Auntie Agnes, a rice trader in Ghana

So here is my advice to anyone who is thinking about quitting their job and taking up the cause of making the world a better place: do it.  Don’t hire a professional.  Don’t even try to become a professional.  Should you read a book or two about what works and think about how you can maximize your impact without being detrimental?  Definitely.  But be wary of what they tell you, because, for the last 40 years, they have largely gotten it wrong.  You don’t need an MBA to start a business, and you don’t need a degree in international development or a job at an aid organization to make a difference.

Ignore the “professionals” telling you to leave this work to the experts.  Try something.  If you fail, learn from it.  If you succeed, share it, and help others to scale.  Don’t be deterred by people telling you that you don’t have the experience.  Just go out and do it.

Over the past two years, I have seen innovative and creative minds building great things.  When I do, I am reminded how refreshing it is to be one of the amateurs.


The Roots – What They Do by The-Roots

Advice to the Amateurs: Ignore the Professionals

This is part one of a two-part post about the role of amateurs and professionals in aid and development.

The other day, Develop Economies was asked to move to a different table at the iHub because a European government aid agency would be holding a workshop on gender equality.  Grudgingly, he moved.  They spent the next few hours coming up with ideas on how to “engage the private sector” to develop programs that would empower women to increase their incomes while turning a profit.  If I had to venture a guess, less than a third of the people brainstorming ideas had ever actually held a job outside the civil service.  Needless to say, their ideas didn’t seem grounded in practical reality.

If you read development blogs, as I do from time to time, one consistent theme is animosity among “experts” toward to amateurish do-gooders.  In 2011, Nicholas Kristof, the voice for the voiceless, wrote a long piece in the New York Times magazine titled “The DIY Foreign-Aid Revolution,” in which he highlights the good works of people who decided to give up their day jobs to come up with solutions to problems in the developing world.  The centerpiece is a young lady who develops a low-cost sanitary pad made from local materials for girls who cannot afford or do not have access to other products.  It is a great idea and, if executed well, has the potential to prevent girls from dropping out of school.

One of the major criticisms of articles like this is that Kristof typically focuses on a young American protagonist, and fails to acknowledge the local staff and community-based organizations that making the biggest difference.  It is a fair point, and this development blogger, for one, has defended Nick Kristof on that very issue on multiple occasions.  Yet, this criticism took a backseat to the concept of “do-it-yourself,” amateur foreign aid.  The notion that anyone can change the world caused a backlash among a great many bloggers within the development community.

In an article from Foreign Policy magazine titled “Don’t Try This Abroad,” Dave Algoso, a development worker and blogger who writes “Find What Works,” responded with criticism:

Yet Kristof’s headline is: Do it yourself. Bring the same attitude you would have toward re-painting the living room or installing a new faucet. After all, how hard can it be? The developing world is like your buddy’s garage. Why not just pop in, figure things out, and start hammering away?

But in this field, amateurs don’t just hurt themselves. A project that misunderstands the community or mismanages that crucial relationship can undermine local leaders, ultimately doing harm to the very people it was meant to help. There are also opportunity costs when funding could have been used better. Every dollar spent on PlayPumps or an unnecessary orphanage could be spent on other, better interventions in the same communities. My advice is to hire a professional. And if you want to do this work yourself, become a professional.

Despite all my complaints, I think Kristof’s article does some good if it convinces more people to pursue international development as a career. We all start as amateurs. The difference is whether we seek to learn more or assume that we can just start doing something, muddling through as we go. The “DIY foreign aid” concept might spur a few people to launch ill-advised ventures that eat up scarce resources and get in the way of better efforts, but it might also convince a few others to read a couple books, go to graduate school, get jobs with professional aid organizations, and spend their whole careers making a real impact.

I enjoy Algoso’s blog and admire the fact that he has committed himself to this work, but I have to disagree with his main points.  He cites the example of PlayPumps, an infamous example of how DIY foreign aid projects can go awry.  A South African billboard advertising executive and couple of engineers developed a playwheel to be placed in rural communities that would actually pump water out of the ground as kids played.  A huge amount of money was invested in developing Play Pumps and installing them in villages around Africa.  Unfortunately, they were expensive and, as with most aid projects, once the funding dried up, so did the maintenance, causing them to lie idle and break down frequently.  By most accounts, the organization, while well-intentioned, was a failure.

While many of my loyal readers may have never heard of Play Pumps, the organization actually relates to how I became involved in this work.  Back in 2006, when I was 22 and living at home after college, I sat down to watch an episode of Frontline World with my mom.  In this episode, Frontline highlighted the works of two fledgling social enterprises that had the potential to put a real dent in poverty in Africa.  One of them was Play Pumps.  The other was a small tech non-profit based in San Francisco called Kiva.  The latter organization was founded by Matt Flannery, a programmer at PayPal, and Jessica Jackley, an MBA student at Stanford – hardly the profile of microfinance or international development experts.  At the time, they had a handful of partners in Africa and had built a platform to allow their friends and extended network to lend money to women who did not have access to banks.

I thought it was an amazing idea and, at the time, I thought to my unemployed self: “I’m going to work for them.” Unfortunately, I didn’t know anything about finance, business, computer science, or anything else that might be useful for an organization like Kiva.  Plus, I didn’t have any money and couldn’t afford to volunteer.  So I took a job in what one might call the private sector and, after three years, applied for a fellowship with Kiva, where I would represent Kiva on the ground at one of their partner institutions.  By that time, they had grown to over $100 million in loans and over 100 partners.  I flew to San Francisco for a one-week training on microfinance, quit my job, and moved to the Philippines.

Since then, I spent nine months working in microfinance in the Philippines and another six months working in agriculture in Ghana before moving to Nairobi to work for an education company.  There is no doubt in my mind that, had I tried to work for Kiva in 2006, I would never have learned certain things that are valued by the organizations I have worked with in Asia and Africa.  If I had gone back to school and gotten my masters degree in international development with no real substantive job experience, I would have been all but worthless to the microfinance institution I was sent to work with.

My story is hardly unique.  Out here in Kenya, I see former lawyers, software programmers, investment bankers, management consultants, journalists, engineers, college students, product managers, teachers, physicians, and tech entrepreneurs starting and working for very cool companies that are making a difference.  None of them are “experts” – in fact, nearly all of them come from the private sector in their previous lives.  And if they had taken the advice of some development bloggers, they, like me, would still be at home.

These people are what the development economist Bill Easterly calls “searchers.”

In foreign aid, we see the follies of planners manifest in numerous ways. Mosquito nets, medicine, and food are often traded away to support non-necessities or vices. On-the-ground habits, lifestyles, and environmental conditions often spread diseases faster than medicine or recommended methods can contain them. Even when real, entrepreneurial spirit is successfully channeled, there is often no infrastructure to competitively bring certain products to market.

At the end of the day, the clearest and most simple demonstration of the failure of planners is that after billions of dollars in aid and systematic tweaking, there appears to be no real or lasting change in the developing countries in question (at least, not attributable to aid). In fact, many countries appear to be getting worse.

It seems reasonable, then, that the answers for developing countries can be found by tapping the searchers therein — the entrepreneurs, the missionaries, the workers, the teachers, and the students. Instead of seeing the people in these countries as victims, our policies need to focus on empowering them as individuals. We need to focus on their potential, not their limitations.

The searchers don’t necessarily listen to the professionals.   Instead, they came out here – just as the “amateurs” criticized by the community of aid bloggers did – and got to work implementing their own ideas and vision.  They seek inspiration and guidance from a broader range of sources.   And, for the most part, they have pretty successful, picking up the requisite anthropological knowledge along the way.

In my next post, I will discuss why amateurs bring a fresh perspective to development, and why that is so important.


The Obama Doctrine and Smart Power, Pt. 2

This is part two of a two-part post about the Obama administration’s approach to foreign policy and military intervention in Africa and the Middle East.

The other day I discussed the first four points of Obama’s approach to military intervention – be effective, follow international law, put no American troops on the ground, and multilateralism.  Today I will talk about the last one: having a clearly-defined goal.

This is the most important tenet of all.  In Iraq, the U.S. overthrew Saddam and remarkably never planned for phase two.   In Libya, all possible post-Gaddafi scenarios were taken into account to understand exactly what we were getting ourselves into.  Not too far from where I live in Kenya, Obama just deployed 100 special forces “advisers” to hunt for Joseph Kony, the terrible leader of the Lord’s Resistance Army, a Ugandan paramilitary organization that has killed 30,000 people throughout Central Africa over the last two years.  The objective is simple: find and kill Joseph Kony and eliminate the LRA forever.  Unlike Islamic extremists, they have little support from the local population, and most of the world agrees that the world will be a much better place with Joseph Kony no longer among the living.

Some argue that deploying more troops in yet another war with little strategic interest to the United States is a bad idea.  In one sense, these people are right – Joseph Kony and the LRA pose no direct threat to the United States.  They may have a nightmarish record of human rights violations, but their wrath is confined to the unfortunate villages that happen to reside between point A and point B on the LRA’s marching path.  But these detractors don’t really see the big picture.

Ugandan peacekeepers in Somalia

Al Shabab, unlike the LRA, and Somalia in general are potentially very big problems for the United States.  It is the most failed state in the world and is a stone’s throw from Yemen and the Arabian Peninsula – a hotbed of terrorist activity.  The only thing preventing Somalia from completely collapsing (as opposed to almost completely collapsing, which is where it is now) and falling entirely into the hands of Al Shabab is the Ugandan peacekeeping force fighting in Mogadishu (with significant help from the U.S. and Europe).  Ingratiating ourselves to the Ugandan people by helping to eradicate the group that has caused so much suffering, and eliminating a destructive force – the LRA – will help stabilize the region, helping to prevent the turmoil in Somalia from spilling into other nations.  So, at the end of the day, destroying the LRA is probably as much about fighting terrorism as it is a humanitarian mission.

This is smart power.  In the chess match of foreign policy, Obama thinks several steps ahead of his opponents, recognizing the link between Joseph Kony terrorizing Uganda and Somalia becoming the new Waziristan.  He assesses the potential sacrifices, in blood and treasure, and carefully considers the outcomes.  In an op-ed titled “Stop Searching for an Obama Doctrine,” Fareed Zakaria explains why pragmatism trumps blind ideology in the way Obama views the world:

God bless the President

So what is the Obama Doctrine?

In fact, the search itself is misguided. The doctrinal approach to foreign policy doesn’t make much sense anymore. Every American foreign policy “doctrine” but one was formulated during the Cold War, for a bipolar world, when American policy toward one country — the Soviet Union — dominated all U.S. strategy and was the defining aspect of global affairs. (The Monroe Doctrine is the exception.) In today’s multipolar, multilayered world, there is no central hinge upon which all American foreign policy rests. Policymaking looks more varied, and inconsistent, as regions require approaches that don’t necessarily apply elsewhere.

Obama does, however, have a worldview, a well-considered approach to international affairs. His views have been straightforward and consistent. From the earliest days of his presidential campaign he said that he sees the basic argument in American foreign policy as “between ideology and realism” and placed himself squarely on one side.

What marks administration policy is a careful calculation of costs and benefits. The great temptation of modern American foreign policy, from Versailles to Vietnam to Iraq, has been to make grand declarations — enunciate doctrines — that then produce huge commitments and costs. We are coming off a decade of such rhetoric and interventions and are still paying the price: more than $2?trillion, not to mention the massive cost in human lives. In that context, a foreign policy that emphasizes strategic restraint is appropriate and wise.

I agree with Fareed on all of his points except one (which makes me nervous, since I agree with 100% of what he usually says, which means that, if history is a guide, I am wrong).  I think that the five points above collectively comprise the Obama doctrine, or at least something close to it.  Just because the Bush Doctrine was particularly jingoistic doesn’t mean a doctrine based on “strategic restraint” – one marked by define goals, multilateralism, limited U.S. involvement, etc. – isn’t a doctrine.   In fact, Obama received a lot of criticism for “leading from behind.”  But not only is a strategy – contrary to what some believe – it is an effective one.  Back to theRolling Stone article:

“It isn’t leading from behind,” says Anne-Marie Slaughter, the former head of policy planning at the State Department, rejecting a quote in The New Yorker by an unnamed Obama adviser that came to dominate the debate over Libya. “We created the conditions for others to step up. That exemplifies Obama’s leadership at its best. The world is not going to get there without us – and we did it in a way where we’re not stuck, or bearing all the costs.”

If Obama gets another four years – Insha’allah – I would expect that all future military interventions stand up to the test of these five points – a retroactive rubric, of sorts.   And that, I think, is what a doctrine is all about.


The Obama Doctrine and Smart Power, Pt. 1

This is part one of a two-part post about the Obama administration’s approach to foreign policy and military intervention in Africa and the Middle East.

In an article titled “Inside Obama’s War Room” published in Rolling Stone this month, Michael Hasting discusses the series of decisions and actions that preceded the intervention in Libya.  In classic form, Obama appears to have been measured, deliberative, and exhaustive with respect to planning for the next steps, asking key questions that were absent from the debate leading up to the invasion of Iraq.

Hastings describes Obama’s thought process in deciding to set up the no-fly zone in Libya and protect the rebels in Benghazi:

As he analyzed the crisis, Obama kept his own cards close – so much so that even those deeply engaged in the strategy sessions found it hard to get an accurate impression of where he came down on the issue. But in a move that seemed squarely aimed at avoiding the mistakes of Afghanistan and Iraq, Obama also laid down what insiders say was a set of five guiding principles for any intervention in Libya: that it be effective, multilateral, follow international law, put no American boots on the ground, and pursue a well-defined, achievable goal.

These five principles, to me, make a lot of sense, both in how one should make major foreign policy decisions and in the fact Obama himself uses them to make those decisions (I voted for Obama).  To be effective seems self-evident, but, given that the last two trillion-dollar wars have been largely ineffective, it still needs to be stated.

Follow international law

Following international law is also critical, given the modern enemies we face today.  Unlike sovereign nations, which countries typically bomb into submission, most of today’s wars are fuelled by ideology.  Specifically, Islamic extremism does not offer the convenience of being confined to a specific region or group of people.  And violating international law in waging war on extremists (think Abu Ghraib) has the counterproductive side effect of radicalizing young Muslims, increasing the size and strength of the enemy.  In Libya, this was particularly important, as it is a Muslim country and the uprising occurred during the Arab Spring.  So keeping any intervention within the bounds of international law is critical to avoid alienating potential enemies.

Put no American troops on the ground seems like an offshoot of the Biden strategy to fight these new guerrilla-style counter-insurgencies with a lethal combination of drones and special forces.   With the death of Gaddafi yesterday, you can see that in action:

The death of Gaddafi immediately raised speculation in the US that the same military model – the use of US air power combined with rebel forces on the ground and special forces from Europe – could be used again in Syria.

Vice-president Joe Biden described the military model as a “prescription” for the future, while White House spokesman Jay Carney, when asked about Syria, said Assad had lost his legitimacy to rule.

Obama’s approach to Libya was to provide US air power in support of the rebels but not putting US troops on the ground, leaving that to other countries, mainly France and Britain.

In the Rose Garden, he basked in his success: “Without putting a single US service member on the ground, we achieved our objectives, and our Nato mission will soon come to an end.”

In the 90’s, the U.S. deployed 28,000 troops in Somalia, retreating after the battle of Mogadishu killed any remaining political will.  Today, we are battling the Al Shabab militia – a nihilistic group of Islamic extremists that have terrorized Somalia for a decade – with predator drones and military advisers from a company called Bancroft Global Development, who are training the UN Peacekeepers from Burundi and Uganda.  Without explicitly endangering American troops, we are still able to effectively keep Al Shabab contained while simultaneously keeping our fingerprints off any successes, which could serve to create sympathy for the cause.

#4: Multilateralism

This brings me to the next tenet: multilateralism.  In Libya, the rest of the Arab world and the rebels themselves asked the U.S. to intervene.  We provided air support, but left the heavy-lifting to the other NATO forces and, more importantly, the rebels on the ground.  This gives the rebels legitimacy, having overthrown the Gaddafi government instead of riding the coattails of “international aggressors.” By pushing France to provide ground support and lead the NATO efforts, we allowed Western Europe, which has an even greater interest in the stability of North Africa, to take ownership of the invasion, and simultaneously get them to start carrying their weight in the NATO alliance, as we prepare to cut our defense budget over the next decade.  John Kerry, a strong voice in foreign policy, sums this up:

The Democratic chairman of the Senate foreign relations committee, John Kerry, a close ally of the president, said the US had “demonstrated clear-eyed leadership, patience and foresight by pushing the international community into action.”

Maybe it is a symptom of American exceptionalism, but war hawks in the U.S. always want to claim credit for all military victories, and show contempt for the opinions of the international community.  George W. Bush’s most recent ambassador to the United Nations, John Bolton, famously said of the institution: There’s no such thing as the United Nations. “If the U.N. secretary building in New York lost 10 stories, it wouldn’t make a bit of difference.”  What Obama understands that Bolton doesn’t is that humility – allowing others to take credit for victory – serves American interests in the long-run by promoting a sense of ownership among the victors (in this case, the rebels) and stability in the region.

In my next post, I will discuss the last and most important point – having a  clearly-defined goal – and put all of these points in the context of current and future conflicts.


The Tea Party and American Foreign Policy

The Pew Research Center just released a report detailing the foreign policy views of democrats, republicans, and tea partiers.  Much of it is what you would expect.  For tea partiers the U.S. needs to be strong on defense and Israel, tough on China, say no to illegal immigration (94% support the Arizona immigration law!).  Non-tea party republicans share similar views, though tempered a bit on most issues.  For democrats, it is a relatively simple equation: one minus the percentage of tea party republicans who support an issue equals the percentage of democrats who support an issue.

Foreign policy views never seem to change much on party lines.  But something interesting is happening today.  The defense hawks used to enjoy a disproportionate influence on shaping the foreign policy views of the GOP.  But with the country preoccupied with the debt ceiling and domestic spending and the rising influence of Tea Party, foreign policy has become as much a question of economics as it has of international relations.  The question is no longer should we do it, but rather can we afford it.  From the Washington Post:

With the exception of Israel’s security, the blank check of Republican support once afforded U.S. military operations, freer international trade and the spread of global democracy are facing the constraints of limited spending power and an overwhelming pressure among voters to refocus America’s energy at home.

Aside from the fact that most foreign policy decisions based on economic concerns tend to lead down a road that is bad for everyone.  It leads to isolationism and protectionism – two things an increasingly flat world does not need right now.  And in this question, the distinction between the Tea Party the rest of the GOP (like my old man) becomes apparent.  Because the Tea Party is, at its core, more rooted in populism than it is conservative economic theory, you can see opinions that are fundamentally at odds.

The first question in the Pew survey asks for the best way to ensure peace.  60% of the Tea Partiers say military strength, rather than good diplomacy, compared with only 38% of the non-Tea Party Republicans.  Among Democrats, 20% cite military strength.  This really cuts to the philosophical core of all the other debates – peace through strength, rather than peace through a combination of defense, diplomacy, and development.  And, most interestingly, the gap between the typical Republican and the typical Tea Partier is larger than the gap between the Republican and the Democrat.

This theme appears through the survey.  For example, more than two-thirds of the Tea Party believes we need to get tougher with China.  I assume that means trade barriers, sanctions for keeping their currency artificially low, etc.  In comparison, only 42% of other Republicans and 32% of Democrats hold this view.  A remarkable 68% of Tea Partiers believe Obama favors Palestine too much, compared with 23% among other Republicans and 8% among Democrats.  This, in spite of the fact that Obama is going to veto the Palestinian bid for statehood at the United Nations.

This is what a populist foreign policy platform among an easily manipulated group looks like.  A disparate set of whimsical, contradictory, and often counterproductive views that reflect a concern over outsourcing, immigration, and broadly what Fareed Zakaria calls “the rise of the rest.”

I call these views counterproductive because the policy prescriptions literally do more harm than good.  Georgia just passed a law mandating that all businesses with more than 10 employees must demand to see indentification to prove that the workers are not here illegally.  So what happened?  All the illegal immigrants who used to be the backbone of the agriculture sector simply moved elsewhere, leaving farmers without laborers to harvest their crops.  Here is the New York Times:

The simple-sounding plan that resulted — hire more local people and fewer foreign workers — left Mr. Harold and others who took a similar path adrift in a predicament worthy of Kafka.

The more they tried to do something concrete to address immigration and joblessness, the worse off they found themselves.

“It is not an easy job,” said Kerry Mattics, 49, another H-2A farmer here in Olathe, who brought in only a third of his usual Mexican crew of 12 workers for his 50-acre fruit and vegetable farm, then struggled to make it through the season. “It’s outside, so if it’s wet, you’re wet, and if it’s hot you’re hot,” he said.

Still, Mr. Mattics said, he can’t help feeling that people have gotten soft.

“People have gotten soft.”  Ironically, the current president of the United States, Barack Obama, has been lambasted for suggesting the same thing.  Yet anyone who honestly thought that laid-off American workers were going to jump at the opportunity to work 12 hours a day picking onions in the burning sun were out of their minds.

In terms of defense, it is even more backwards.  At the same time we seek to alienate our economic allies, there is a belief that the brute show of force that toppled the Soviet Union more than two decades ago is still somehow relevant in today’s globalized world.   Honestly – who are we going to fight?  The wars that we are engaged in right now are effectively guerrilla battles with insurgents, in Afghanistan and Iraq, but also Yemen and Somalia.  We deposed a dictator in Libya without a troop on the ground.  Are we going to really going to attack Iran or Syria?  But despite all this, when the time comes to cut defense spending, you can guarantee that foreign aid and diplomacy are going to be the hardest hit if a Tea Party Republican is elected to office.  And that – just like draconian immigration policies, tariffs that almost certainly will lead to a  trade war with China, and supporting the expansion of settlements in the West Bank – would be a mistake:

For the sake of national security, this country cannot afford to retreat from the world. Its investment in the State Department and foreign aid helps advance peace and stability by feeding starving people, providing access to doctors and medicines, opening new markets, promoting democracy, curbing nuclear arms and strengthening allies with military and economic assistance. It also gives Washington leverage.

Savings squeezed from the State Department and foreign aid — which together are less than a tenth of the basic Pentagon budget — would be a tiny share of the $3.8 trillion federal budget. Yet the effects would be hugely damaging to American foreign policy. Washington needs resources to support new democracy movements in Tunisia, Egypt and Libya. This is also a critical time in Iraq and Afghanistan, where demands for diplomatic resources are growing. National security has always depended on more than military strength. We need diplomats to anticipate problems and find nonmilitary solutions. The drive to cut diplomatic resources and foreign aid seriously harms our ability to do just that.

The partisan gridlock that makes government seem so ineffective right now is due to the fact that the Tea Party – an outlier faction within its own party – has such radically different views than alienate even people like my dad, a card-carrying Reagan-ite who is secretly praying that tornado will carry all of the Republican candidates right now, leaving only Jon Huntsman behind.

Constructive feedback

A healthy political debate in America looks like the two rightmost columns in each of these survey tables.  The Tea Party represents a minority – 40% of Republicans and right-leaning independents.  Yet their views define the debate.  Of course, the voter turnout among self-identified Tea Partiers is probably orders of magnitude larger than other groups, which is why these foreign policy views seem to dominate.  The idea that a xenophobic and isolationist leanings of a small minority of the country could potentially come to dictate our foreign policy in 2012 is a scary one indeed.


Africa Rising: Venture Capital on the Continent

This is a guest post from Ben Lyon, co-founder and VP of business development of Kopo-Kopo, a Nairobi-based software company enabling enterprises to accept mobile payments.

Technology hubs around Africa

A scan of tech investor blogs reveals two conflicting sentiments: 1) when the bubble bursts, the industry will come to a grinding halt, and 2) valuations are skyrocketing because of what Mark Suster calls FOMO (fear of missing out).  They also reveal that an abundance of capital is chasing a scarcity of good ideas, which may be one reason why companies like ColorThe Melt, and The Naturally Curly Network have collectively raised over $50M.

But that’s in the US.

Africa is the opposite story: there’s an abundance of good ideas chasing a scarcity of capital.

Not only are there ample investment opportunities in Africa, but many of the tech companies behind them are capital efficient, have realistic valuations, and have first-mover advantage.  With three fiber cables, anetwork of tech labs, a vicious price war between mobile operators, and the arrival of affordable smart phones, tech companies in East Africa in particular are positioned to capitalize on an exploding market.

Companies in East Africa are taking best practices and successful business models from Silicon Valley, too.  Just look at some the consumer web companies popping up across the region:

  1. Rupu (Groupon)
  2. Mocality (Yellow Pages)
  3. Dealfish (Craigslist)
  4. PesaPal (PayPal)
  5. Niko Hapa (Foursquare)

Even though LinkedIn, Groupon, and a looming host of other companies (Facebook, Twitter, Zynga, etc) are IPOing in the US, the IPO vs. M&A ratio is still 10:1.  In East Africa, that ratio is even higher on the side of M&A (only 55 companies are listed on the Nairobi Stock Exchange).  That said, tech companies in East Africa are being made to be sold.  When multi-national companies decide to enter the East African market, as MasterCard and Visa are planning to do in Q3 2011, their first step will likely be via strategic acquisition.

For example, Visa recently acquired Fundamo, a mobile money platform provider, for $110M.  Visa’s move, not only validated the mobile money industry in Africa, but signaled that Visa considers the Sub-Saharan African market critical to its success.  As Fred WilsonMark Suster, and Seth Levine – all prominent VCs – have all been writing about, a $100M+ exit is nothing to laugh at.

Conclusion: Africa is rising.  The continent’s 1B+ people are largely young, urban, tech savvy, and brand / status conscious.  Pockets of the continent – Accra, Cairo, Lagos, Nairobi, etc. – are globally-connected.  They read Mashable and New York Times.  They demand accountability and transparency.  And they are the future.

As the perception-reality gap continues to close, investors would be wise to start exploring the market now, because, before we know it, everyone will be investing in Africa.