The Occupy Movement and the need for a new model

As the Occupy movements are now facing bad and cold weather and the excitement from the first couple of weeks has waned, the big question is, how much of an impact will they have and how sustained will it be

The Occupy – “Indignados” movements will only succeed if ordinary people who are not activists do get involved. The usual suspects in those demonstrations and protest movements are the pacifists, the trade unions folks, etc. They certainly know something about organizing and mobilizing but I don’t think they have a lot of credibility in the general public – especially with those who do not share their political opinions. The young people whose mobilization on campuses across the US has been impressive also lack credibility because they are mostly viewed as inexperienced and idealistic. Activists who form the core of the Occupy movement have been dissenting for a long time, proclaiming that our system was flawed (and they were probably right about that). But ironically, they do not represent change since they have been at it for so long.

They are however capturing the “zeitgeist” as their anti-globalization / anti-capitalism rhetoric and agenda resonate with people angry about the current economic situation and consequently about our system that supposedly has created that mess. Americans – usually among the most disciplined ones and those who believe in the benefits of capitalism - are upset about high unemployment that, contrary to prior recession or slow growth periods, is barely going down and about rocky stock markets that experience large swings from one day to the next.

The Occupy – “Indignados” movements will have a long-term and significant impact if they can lead or actively participate in the reflection about the changes needed in our system. Despite the growing consensus that our system needs to be fixed there hasn’t been a concerted effort so far to carry out that thinking process.

The Occupy folks will probably have a more radical view than I on the question but I don’t believe that fighting capitalism all the way and making it evil, responsible for all the injustice and the suffering in this world, is the solution. The emergence of the middle class after World War II in Western societies, which meant that millions got out of poverty over these couple of decades, took place in a mostly capitalist society – but one that was more just and balanced.

In the 80’s a shift occurred as a result of the “Reaganomics”, the conservative economic policy that Reagan and Thatcher implemented for a number of years, and the gap between the rich and the poor started widening again and the middle class increasingly felt the squeeze. Real salaries (adjusted for inflation) have been flat on average in most Western countries since that time while wealth is increasingly concentrated in fewer hands.

The average difference in salary between lowest paid workers and CEOs were 1 to 8 in 1980. Things are slightly different today – for instance, the CEO of CBS, the US media company, made an astounding 60 million last year. If folks in the CBS mailroom made say $20k, the 1 to 8 ratio skyrockets to 1 to 3000!!!

Thus, in richer nations inequalities have been on the rise while some populations have been stuck in poverty for years. In the meantime, the situation in the Global South is not tremendously better. Even in China, India, and Brazil which are rightly viewed as success stories, significant inequalities persist. And a lot of other nations are still struggling with poverty even though they have received development cooperation aid and benefited from foreign direct investment for a long time, often have a talented work force, and, in some cases, enjoy natural resources that constitute a major source of income.

I will write more on ideas to reform our system in my next post, with a focus on industrialized countries as emerging / developing countries have to contend with particular issues that make their situation even more complex.

People Waking Up - Finally...

October 15^th was a great day!! I loved the mobilization around the world aiming at making our system better… It is good to see that people are waking up finally – especially Americans who happen to have an incredible resilience in face of adversity but are just used to keeping their heads low. Ordinary Americans conform – they don’t protest. They are docile – but that may be changing.

More on a possible groundswell in America and how the Occupy / Indignados movement could effect systemic change later…

Impressions from Africa - Flaws in Development Cooperation

I was in West Africa last week for my work and I interacted with folks from the government, foreign donor agencies, and an international NGO. In that short week I saw a number of symptoms of what I consider to be flaws of development cooperation.

First symptom, there may be too much money channeled to a developing country at once. On the surface, there is no such thing as too much money for a poor country. In reality, donor agencies agree with national governments on the destination of the money beforehand. Even though there has been improved coordination among donor agencies and other development actors with respect to their cooperation with national governments, the emergence of several programs focused on the same sector at the same time is far from rare.

The problem with that is one of absorptive capacity as developing countries’ entities receiving the funds have to be in a position to use them efficiently and effectively. The realization of an insufficient capacity may lead the donor agency to agree with the recipient country to put together a sort of program management unit, in addition to the existing structure, the job of which is to make sure that the program is well executed. Setting up such a program unit costs money and thus presents a dilemma: should the program be initiated with the extra costs incurred (money that could be used elsewhere) or should nothing be done until the national capacity has improved?

I can’t help but think however that local resources, such as the donor agency’s country office if there is one or some dedicated team within the recipient entity that would be trained or short-term local consultants, would afford more economical solutions for an acceptable result.

The irony of the ill-timed convergence of funding is that donor agencies and other development actors getting involved are persuaded to do so because they see those other guys committing money. Match funding is often the magic word, donors being much more comfortable, including towards their own leadership, engaging in a program or with an organization when others do the same. This is certainly not a rule that only applies to development cooperation as in the private sector prospective investors often look for cues such as other investors getting involved to make the jump themselves.

Second symptom, some incentives can have perverse consequences. I lament the use of per-diems in the world of development cooperation. It is easy for me to say certainly, writing from my kitchen in Boston and having an easy life compared to the vast majority of the world population. What I mean by per-diem in this particular case is compensation often paid by donor agencies and other development actors to nationals of the country where they work (those can be government officials, scientists, etc.) for completing a given task, most often to attend a specific meeting or series of meetings or be part of a task force.

From the outside, the concept may seem strange as those invited to participate in these meetings do so in the context of their work, so why pay them extra? They already receive a salary or some compensation for their daily work. The reality in Africa in particular is that salaries are low, especially in some sectors such as civil service or academia, and providing that extra compensation gives those folks an incentive to show up but also represents a fair practice as it reduces the income disparity that those people often suffer relative to representatives of development cooperation actors or their own country’s private sector executives for instance.

So yes, it is totally understandable. Where I start having problem with this practice however is when those per-diems create perverse incentives. It happens when members of an ad-hoc task force formed to work with some government entity and donor agency for instance do whatever it takes to keep that working group alive, keen to continue to receive their per-diems and other benefits or perks that may come with those, and thus losing sight of the primary objective, i.e. for the task force to fulfill its initial objective before disbanding.

Of course, there will be a fair amount of jockeying and pretending about why the working group should continue to exist because no one can say openly that per-diems have become a bigger motivation than the substance of the work per se. But it is easy to see through that pretending and schmoozing.

At the systemic level the whole salary scale of under-paid jobs should be revamped so that disparities are reduced. In that particular case of per-diems the problem often arises from the fact that folks sitting in the same room, representing the national government, local universities, donor agencies, and international NGOs may have salaries that range from 1 to 5 or even more. That can only cause resentment. While some disparities are to be expected, that salary gap should be looked at seriously with a view to being cut down.

Third symptom, talent is being squandered. I can think of one guy in particular who is smart and has clear potential but seems to spend most of his time trying to figure out how to “play the system” in order to increase his level of influence and make more money. He is a government official, so again how to blame someone whose income is probably disconnected with his own abilities? Granted. But then I would say that in most African countries the civil service is far from being the only professional option for highly educated folks. Working for the government supposes an interest in serving – if it is not the case, why choose that career? And remember, I am talking about highly skilled folks whose professional outlook is not as limited as that of most of their countrymen.

When providing for one’s family is such a struggle, how can the general interest be a strong motivator for anyone? I don’t know. It is a tough one. I do know however that a lot of folks in Africa decide to serve their countries by working for their government and, also increasingly, by trying to create social value in the private sector. Maybe those are the true unsung heroes – they are never mentioned, but given the hardship they have to endure their commitment is remarkable.

Again, there is only a macro response to that problem of wasted human potential. Government agencies will never be able to attract and retain talent and tap into their people’s full potential if they don’t pay them decently (again reducing disparities with other sectors is key) and don’t get them to work on interesting and impactful initiatives.

Come to think of it, this is what development cooperation should focus on. What are the elements of Africa’s environment that inherently impede its progress and development? I hear talks about promoting an enabling environment. That is fine and well but the short week that I spent in Africa only showed that such fundamental aspects of an enabling environment as coordination of efforts among funders, a decent local capacity, fair compensation, and a dynamic governmental sector, are far from being in place.

It is difficult for me to be optimistic. Maybe this is my nature or just an immediate reaction to what I witnessed. Two non-African colleagues who have lived on the continent for 20+ years told me last week that they are optimistic about the region - because the new generation is different from the older ones and training and capacity building pay off eventually.

At any rate, it is only by addressing the fundamental flaws hampering progress in African economies and societies and plaguing the effectiveness of development aid that Africa will reach its potential.

I am Back + The Meaning of Blogging...

It is interesting to go back into writing or blogging mode after a long silence. It got me to think about how disciplined I should be about writing regularly, what regularly means (every day, once a week, every time something newsworthy happens, “newsworthy” meaning what exactly), and what topics I should focus on, if any.

I have kept my blogging routine very loose evidently, having started with the intention to focus on social sector issues (more narrowly even on social enterprise or social investing) and actually writing more often than not about politics or social justice, sometimes both. For a “non-natural” writer like myself for whom writing is enjoyable yet not exactly easy there has to be an impetus for me to want to sit down and write. The impetus is often a reaction that I have to an event and that gets my juices flowing.

In that case, the blog plays its role of outlet, giving me a voice to express my opinion. When I get to write about a topic that centers on the social sector and is thus more closely related to my work, even though what I do is a passion of mine, I have more muted reactions to whatever happens in the sector that I want to write about.

Going forward, I’d like to keep the “spontaneity of intention”, i.e. waiting for an inspiration so to speak rather than forcing myself to write on some event because I feel I should. That being said, if I believe that my voice is valuable, among millions of others who express themselves through blogs (all is relative, right?), then I should make more of a sustained effort to write, bearing in mind that not every post should be a thoughtful – or what I try to be a thoughtful – analysis of or reaction to something that I care about.

Coming up… I was in Africa last week and the trip gave me some food for thought regarding development aid. Stay tuned!!

Fifty-Eight Million

I was in New York over the past few days for meetings related to one of my projects. Half of those were with people working in various parts of the United Nations system and the other half was with colleagues involved in the rest of the social sector, on the operating (NGO) or funding side. The message that I heard most consistently is that money is tight. Very tight. The general funding context for anything that seeks to create social or societal value seems incredibly depressed. The 2008 financial meltdown hit the social sector hard and it appears – based on these few conservations - that we are far from having returned to pre-crisis funding levels.

This occurs while in the US we all have in mind the incredibly hard battle that was fought over the next budget, the threat to shut down government operations for a while, and all the cuts that are going to occur (and luckily some to social programs that were avoided). I am all for chasing waste and redundancies - but the poor, the marginalized, and the elderly will likely suffer as a consequence of the new budget and of the probable changes to come in Medicaid and Medicare financing.

It seems as though we are all struggling and it is just damn hard for everyone these days…

Well – maybe not for everyone. Last week the compensation of the CEO of CBS was revealed for the year 2010. Leslie Moonves made a whopping 58 million – Fifty Eight Million, People. I am sure Leslie is a hard worker and did not steal his money. The CBS Board argued the increase in shareholder value (CBS stock has nearly doubled in the past year) that “outpaced both the industry and the company's internal targets" was the main justification for Moonves’ big payday. But the LA Times article (see hyperlink) is quick to point out that CBS’ total revenues in 2010 were largely unchanged from 2007 and that the company is not as profitable. Basically, CBS has recovered from the slump it went through along with most of its competitors.

Who else at CBS was as lucky as Leslie? CBS Chairman Sumner Redstone received a package valued at $20.3m and Viacom’s CEO Philippe Dauman pocketed nearly $85 million (!!!!), which included a $31.65m signing bonus.

That is about 165 million dollars overall, Folks!! How about the rest of the company’s executives and employees?

It boggles my mind that the question of allocation of profits is too often left aside. Too few among us are questioning our system. How much did CBS’ rank-and-file employees receive for the company’s supposedly vastly improved situation (well, don’t look as far back as 2007 though)? How much will shareholders get in dividends? How much will CBS reinvest in its own growth?

I am writing about Leslie’s (and the Other Philippe’s) Big Payday because I just cannot understand how we find it ok that a few individuals make millions of dollars while hundreds of millions of folks live in poverty around the world, including in our richer countries. We have to fundamentally re-think how income is distributed in our society. Granted, some folks making crazy amounts of dough may give some of it away and thereby create social value. But why be so enamored with redistribution and philanthropy when our distribution model is so flawed?

Friends out there – if you have ideas about how to fix our distribution model, please contribute by making a comment. Also, tell me if you know of any initiatives that are focusing on these systemic questions (income distribution, reducing disparities, etc.). We have to do it ourselves, People. Not much has been done since the Lehman meltdown in 2008 though so many in government and in the business world said that the “systemic crisis” that we went through would fundamentally change the way our society and economy work. Our future is in our hands – let’s do this.

Different Takes on Death Penalty

Last week, before the terrible tragedy in Japan, two pieces of news went totally unnoticed amidst the Charlie Sheen craziness... The Governor of Illinois abolished the death penalty in his state (only the 14^th state in the US) while the next day a new drug was experimented in the execution of an inmate in nearby Ohio.

What a country…

NGO and BOP – a Shared Ignorance

I was in Dakar last month ahead of the World Social Forum and on my way back I attended a one-day workshop in Paris on the Base of the Pyramid whose keynote speaker was Cornell professor Stuart Hart who coined the term in the early 2000’s with CK Prahalad who passed away prematurely last year. As I was telling my colleagues in Dakar about the BOP conference in Paris, none of them – yes, none of them – was familiar with the concept of Base of the Pyramid… They all happen to work for national platforms (i.e. country-wide associations) of NGOs, most of which are involved in social and economic development issues, so they know something about those who live at the base of the pyramid - even though the BOP notion is foreign to them…

I found that disconnect truly extraordinary. Those working on BOP-related issues firmly believe that the key to a sustainable social and economic development lies with BOP strategies. Thus, their “theory of change” is that through products or services that they will have jointly designed BOP populations will rise out of poverty.

The NGO community has similar beliefs about the need to empower developing nations’ populations and “teach them how to fish”, while making sure that the enabling context in the form of a democratic government and the essentials for development (infrastructure, education, healthcare, functioning institutions) are in place.

Therefore, two very large constituencies working on development issues, the NGO world and the business and academic sectors (mostly corporate folks, academics, and students attended the BOP workshop in Paris) seem to ignore each other’s strategies for poverty alleviation and sustainable development though – and this makes it even more striking - those are not that different from each other…

And, do not think that the NGO people are more narrow-minded and ignorant than their academic and corporate colleagues. None of the people with whom I spoke in Paris had attended the World Social Forum and, if they knew exactly what the World Economic Forum in Davos was (I used the reference to Davos to help them understand what Dakar was about, i.e. the “counter-Davos” so to speak), very few knew that something big was going on in Dakar (where over 50,000 people from around the world gathered), let alone took the time to visit.