Thursday, October 25, 2007

Lots of Silver Bullets

People sometimes ask me if we need official aid institutions or big foundations if GlobalGiving exists. They say GlobalGiving is much more efficient, open, transparent, and direct, and that it has much better feedback loops. I am flattered by their question. But after nodding smugly to them, I have to be honest. Improving economic, social, and environmental conditions requires a plethora of different organizations mobilizing ideas, energy, and money in many different ways for many different activities.

This morning a reporter called me to ask my opinion on eBay's new Microplace, and how it compares to Kiva. He was breathless about the potential of micro-credit and at the same time was breathlessly hoping to stir up a battle between Microplace and Kiva. At the end, he asked me "Which one would you recommend I personally use?"

"They both have a role," I replied. "They do different things in somewhat different ways. Microplace gives you a financial return, but provides at first glance seems to provide less of a direct connection to the borrower than Kiva. Kiva provides no financial return to the lender but seems to provide a more direct connection to the borrower. Both go through intermediaries to actually lend out your money, but they work with their intermediaries in different ways."

"And what about micro-credit in general?" he said. "Should I only do micro-credit? Is that all it takes to improve lives?"

"Well," I replied, "improving lives requires a wide range of things. In general, good jobs are by far the best way to pull people out of poverty. But getting people into good jobs requires different things in different circumstances. First, basic literacy is a huge factor (especially for women) in being productively employed in the modern economy. So you may want to support education.

"The same with health: it is hard to be productive or hold down a job if you are constantly sick because you drink dirty water or if you suffer from malaria, or if all your assets were wiped out in a flood. If you have a basic education and are healthy, in some cases you can increase your income by taking out small loans and starting your own business.

"In other cases you are better off taking a job with a growing company. And the pace at which companies can grow and offer employment is in part also dependent on a country's trade and other macro policies, along with their roads and other infrastructure.

"So improving lives requires a mosaic of different things that you can help with. Some of those activities, especially basic education and health require donations, since they do not directly produce revenue. Other activities are more appropriately financed by credit or even equity. And other activities require no money but they do require activism to change things such as trade policy in the developed world (which reduces incomes in many poorer countries because it suppresses crop prices.)

"The bad news is that there is no silver bullet -- not philanthropy, not microcredit, not policy reform, or anything else for that matter.

"The good news is that you now have multiple avenues for getting directly involved to a degree that was never before possible. Pick whichever one is most gratifying to you personally and go for it, whether it be GlobalGiving, Kiva, Microplace, or domestic alternatives such as DonorsChoose or Modest Needs."

The paradox is this: to take action, individuals often have to fall in love with a specific organization, initiative, or idea, and become almost fanatic in their support for it - sometimes to the exclusion of other things. But real change happens when a lot of different people fall in love with a lot of different things.

It happens, in other words, when you have well functioning marketplace.

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