Visionary development aid: more impact for less

What does visionary development aid look like? How can we help a lot of people with little money?

Development aid is controversial at the moment. The right thinks development aid is a waste of money. Pointless utopianism. Development aid is often also wrong on the left. A means to increase the power of the west over the rest of the world. Indeed, development aid is not very effective. And often does not end up where it should. What should visionary development aid look like?

Give a man a fish, and he eats for a day. Teach a person to fish and he will eat all his life.

Chinese proverb

Is visionary development aid necessary?

Development only takes place when there is a thinking revolution. In many cases, the people can get by without outside help. Then it concerns societies with a pragmatic culture. And a high mental level of civilization. The best example of this are countries such as China, India, Japan, Korea and Western European countries.

In countries where this thinking revolution is not taking place, or is being reversed, the outlook is bleak. A good example is Pakistan. That country is now reverting to Sharia. It is better not to spend a cent on any kind of help here. Unless it contributes to a real solution to the problem. A revolution in thinking, then. Like eradicating diseases of the mind. Diseases such as Nazism, caste thinking, racism and Islamism. And spreading productive ways of thinking.

Need for achievement

Research shows that societies that score high on “Need for achievement (N-Ach) ”for that reason grow faster [1]. Although this correlation is less strong than Roger McClelland thought. He came up with the N-Ach concept. East Asia and Europe have traditionally scored high on N-Ach. And the European colonies in North America and Australia. Now we see this attitude more and more in the rest of the world. Think of Africa and South Asia. The consequences are immediately clear. Rapid growth. And less poverty. Welfare. Optimism. Hope and confidence in the future. Instead of despair.

Political stability and anti-corruption

N-Ach does not stand alone. More is needed for growth. A stable political climate. Sufficient freedom to do business. And work must pay. If this is missing, it will soon come to an end. In a corrupt country, you get better with a family member in the government than with hard work or study. In these countries the “need for power” and the “need for affiliation” is therefore more developed. That is more useful in a corrupt country. That way you get a larger share of the cake. Only the total cake remains small. So a good goal is: less meaningless rules. And fight against corruption. For example, with e-government. And a Government Information (Public Access) Act. Better yet: with a transparent platform. As a result, citizens quickly see corruption. Naming and shaming work miracles. Research has shown time and again that low levels of corruption strongly promote economic growth [2].

In some cases, corruption is useful. Namely, if the rules of a country keep the country poor. Communist countries are a good example. Think of North Korea. The rules there make it difficult to make a profit. Thanks to the black market, North Korea remains afloat. See Q. Xiang in [3], who goes into this in detail. So that's where corruption is useful. This is an exception. If the laws and regulations do have a direct use, corruption is disastrous. With most rules, that is useful.

Protection for ownership and redistribution

No economic development without property protection. Without property protection, saving and working don't pay off. So doing business does not pay. You better buy a gun and start robbing. In short: clear and clear management of property encourages investment and saving. That makes society as a whole richer. Slums quickly turn into normal residential areas, when the land where the slums are located becomes the property of the residents [4]. This is a well-known right-hand hobbyhorse. And it is also correct. Research shows. But is this the whole story? No. Visionary development aid continues.

Access to money gives an unfair advantage

It's a lot easier to turn a million into ten million than to make a million from scratch. That means that the rich have a huge advantage over the poor. If the government does not act, this accumulation of more and more assets in fewer and fewer hands will only intensify. This is not only socially unjust. It also means a strong underutilisation of “entrepreneurial talent”. And thus an end to the growth.

Only a small fraction of the wealthy are talented entrepreneurs. Most of the wealthy have inherited and own so much of their wealth that if they invest it in stocks or real estate, for example, their money will work for them. The poor cannot save because almost all their money is spent on the basic necessities of life. If you have a plan that you can implement with, say, $ 10,000, you have billions of potential competitors. If your plan costs a million, then you have less than fifty million competitors. That is a hundred times less. At a billion, you're talking about 2,825 competitors. A million times less.

The rich borrow cheaply and easily ...

It is also much easier for the rich and powerful to get cheap loans than it is for the poor. For example, investment banks and venture capitalists can currently borrow at interest rates of around zero percent, while a small entrepreneur or a private individual without a mortgage security can borrow six percent or more (business investment of 100,000 euros, or loan for solar panels of 10,000 euros, Rabobank's online calculation. resp. ABN Amro January 2021). If she gets a loan at all.

The poor pay the full price

Venture investors easily charge 30-35 percent interest per year [5]. Compare this to a millionaire with collateral. They can invest out of their own pocket. And also borrow huge amounts for much less money, at 1.5% or less [6]. And this is still the situation in the Netherlands. In countries like Nigeria it is virtually impossible to get a loan from the local bank without friends.

Local entrepreneurs are creative, but with little capital they have to do their very best to grow. The rich have a huge lead in that regard. Source: ToyosiOnikosi on Wikipedia Commons

Giving space to the entrepreneurial mindset

In short: the access of poor people with an “entrepreneurial mindset” to capital is very important. Only in this way can we achieve growth and development. Are you lending a shoe shiner or another poor entrepreneur money to implement a realistic, concrete plan? Then the results are often very great. The philosophy behind the success of initiatives such as the Grameen Bank. We do have to be careful that no perverse stimuli arise. Doing good should pay off. Doing wrong and committing fraud should yield nothing.

Visionary Development Aid: Mobilizing Local Resources

In a low-trust, corrupt environment, it is unwise to resort to state institutions. Unless to help eradicate corruption in these organizations. These are mainly a business model for local politicians, high officials and other potentials. Here it is more sensible to work online or through small local initiatives.

So no solar park for a few million. Instead, panels on the roof of every house. This is already possible for a few hundred euros per family. No expensive water purification, but a private filter for a few bucks. Plus well, and rain barrel. Not elite institutions, but an online school or university. Or a local or online marketplace.

More room for brains and local talent, less gaudy “white elephants“. In short: more room for local visions from local entrepreneurs. So that they grow into the Jack Ma's and Elon Musks of tomorrow. And less for the vision imposed from above from the distant capital. Or, worse, from here.

Visionary development aid: projects with proven global impact

Yet there are projects that fall outside the scope of local projects and entrepreneurs. A good example is the fight against a disease such as malaria. Developing an effective drug or vaccine against malaria costs many millions. But this greatly advances humanity as a whole. That is why Western countries must focus on, for example, eradicating these diseases.

Eradicate malaria

Just take the Dutch budget for this development cooperation. In 2020 this will be approx. EUR 4.5 billion [7]. We can do that malaria (“good” for 228 million cases and 400,000 deaths per year in 2018). Worldwide.

Certainly, if from now on all asylum applications and family reunification are rejected. This saves half a billion per year. Thus, the full blow can be allocated for this purpose. The poor who now die like flies from malaria are more pathetic than the rich asylum seekers. Asylum costs the Netherlands 500 million per year. Divided by 25,000 asylum applicants, that is 20,000 euros. These now cost us 20,000 euros per person per year. That amount of 20,000 euros is one thing Fablab cost. Or 2000 mosquito nets against malaria.

Visionary development aid: local technology

We can also help effectively with research. With small-scale, open source tech. Together with the local population. That speaks. With this we tackle poverty. Especially when the locals use this tech through local maker spaces creates, adapts and distributes. This way they can also benefit extra. Thousands of jobs. Jobs for good and useful work. Research is the best development aid.

Sources
1. R. Scott Frey, Does n-Achievement Cause Economic Development? A Cross-Lagged Panel Analysis of the McClelland Thesis, The Journal of Social Psychology Volume 122, 1984 - Issue 1, https://doi.org/10.1080/00224545.1984.9713458
2. Shang-Yin Wei, Corruption in Economic Development: Beneficial Grease, Minor Annoyance, or Major Obstacle ?, Worldbank (curated), 1998 or later
3. Xiang, QF (2019) The Black Markets of North Korea. Mod-ern Economy, 10, 1759-1768. https://doi.org/10.4236/me.2019.107113
4. Erica Field, Property Rights and Investment in Urban Slums, Journal of the European Economic Association, Volume 3, Issue 2-3, 1 May 2005, Pages 279–290, https://doi.org/10.1162/jeea.2005.3.2-3.279
5. C. Bellavitis and N. Matanova, Do Interest Rates Affect VC Fundraising and Investments ?, EFMA Annual Meeting Athens, 2017
6. 13 Business loans from 1% interest to 52%, Geldreview.nl
7. The budget for development cooperation has never been this low in the past 50 years, ONE Nederland press release, 2019

1 thought on “Visionaire ontwikkelingshulp: meer impact voor minder”

  1. I think development aid starts from naive thoughts. If you look at the countries that have become rich besides the West, they are all countries that have attracted many wealthy Westerners and in which the West has actively invested. There are also few rich countries in the world. This should make you think that the Western system is apparently not set up in such a way that everyone can benefit from it. In fact, many western economies, such as ours, run on cheaply obtaining services and materials from developing countries. This is a direct cause of why those countries remain poor. For every dollar they make from us, they pay $ 10 for the import from the west. After all, the West is where the knowledge and development are located, so everything is more expensive. What is strange if we are so much further technologically, we must also be able to produce cheaper than a developing country? Instead, the credo has long been that we are a knowledge society and production should take place in poorer countries. But does this give them a chance? Can they make a quarter out of that dime? I doubt it.

    Corruption and laziness are seen as the cause of poverty in those countries, while corruption is also very present in the west. It is more present in kind here. Something is wrong in the whole story. The fact is that establishing a new thriving, successful state seems almost impossible without permanent relations with the West. However benevolent the people are.

    Several actions need to be taken:

    Let poorer countries live and let live more, as the rule of law advocates. Interference from a more enlightened vision only produces a sense of pushiness, however well-intentioned. This results in withdrawal movements, anticipation of goods and less national unity and thus organization within a country. It is precisely what Westerners have been doing in those countries for centuries. Let them come and build something themselves. If you look in Africa, a large part of the population is only busy making money from Westerners, digitally or otherwise. People are not concerned with themselves and only look over the fence.

    In the west it is fundamental to think if one were to found a new colony on, for example, Mars or the Moon, to what extent it can then become rich with self-maintenance. Is our current financial climate made for an environment outside our home country. Isn't it common that all resources have gone there over the centuries? Isn't it just a matter of owning the best possible land and pulling everything towards it through organization instead of reaching a certain organizational level?

    Micro loans are a good idea. But it shouldn't go any further.

    Poorer countries must have a way of creating an internal economy without external companies breaking open and determining the domestic economy, determining the demand, supply and prices of a country.

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