Over the last couple of years, we have seen a lot of criticism of how international NGOs advertise and fundraise. There’s a new term – “poverty porn” – and a new emphasis on thinking seriously about the true impact of advertising.

I’ve heard three main arguments against oversimplified NGO advertising:

1. These ads make donors stupid by convincing them that development problems have quick and easy answers. They also portray development itself as a rapid, simple process. This encourages donors to choose dumb projects that offer speedy, photogenic, solutions that are unlikely to have any real impact. A classic example is the over-funding of orphanages and fishing boats after the 2004 tsunami.
2. NGO marketing demeans the individuals who benefit from aid efforts. It makes them look like passive victims instead of humans who are partners in making things better. In this social media world, these individuals will actually see the advertising that features them. They’ll know exactly how they are being portrayed, and that portrayal will affect their sense of their own capacities.
3. Oversimplified stories about aid and its impact distort government policy on international development, leading to a focus on aid, and a neglect of other policy choices that support development, like fairer trade policy or allowing more immigration. It also leads politicians to expect unreasonably rapid results and again, to favor photogenic, easy-to-explain projects.

Here’s what NGOs have to say about NGO marketing: It works. Complicated narratives and long explanations don’t attract attention, and they don’t get donations. Heartbreaking pictures and tidy stories do. We need these kinds of ads to raise the money to actually do the complicated and difficult work.

But here is my question: Have we reached the point that it’s not worth it anymore?

I think we can safely say that the fundraising for the earthquake in Japan has led to actual outrage among some aid insiders. And last Tuesday, in response to both a demeaning marketing campaign and a simplistic project with doubtful impact, we saw a Day Without Dignity. Are these signs?

How exactly will we know when the money raised is no longer worth the damage done in raising it?

UPDATE 11:15am March 9: the Negative Subway (see end of post)

I used to drive often from Washington DC to Ohio and would pass fuming through  Breezewood PA, victim of a hijacking. Where there should have been a simple interchange of Interstates 70 and 76, the locals had conspired with the road builders to dump you on a short stretch of a stoplight-heavy road, PA State Highway 30, in between.

This generated a lot of jobs for the locals, of course, in all the motels, gas stations, and fast food places clustered along this road,

I am just in the middle of reading Bourgeois Dignity by Deirdre McCloskey and was amused to learn there what an ancient practice Breezewood was emulating.

The city of Bordeaux in the 1840s demanded that a railroad designed to go from Paris to Madrid break in Bordeaux to create jobs for porters, hotels, and cabs. The great liberal economist Frederic Bastiat pointed out that EVERY city along the way would want the same thing. Taken to extremes, most of the economy of France would consist of “job creation” for porters, hotels, and cabs working every few kilometers of what Bastiat called a “negative railroad,” in lieu of workers producing rather better things like wine, cheese, and railroad cars.

It’s not much of a stretch to apply the metaphor to other forms of protectionism, like protecting inefficient domestic industries against imports to “save jobs.”

Fortunately today, most special interest protectionism is defeated most of the time, so  there are not a huge number of Breezewoods in the US interstate system, or metaphorically, in our rich modern economies as a whole. The political economy of why poor countries stay poor includes Breezewoods.

I no longer do the drive, so I’ve finally escaped Breezewood PA. Next time you pass through, please cuss them out for me.

UPDATE 1:30PM:

Tim Ogden in the comments below identified another on the same PA turnpike. I then checked out the rest of the PA turnpike and found also another one at I-99 and I-76. Moving on to my home territory, the Ohio Turnpike around Toledo used to have something even worse than “Breezewood” to get from I-80 to I-75. I remember long ago my uncle arriving at my home in Bowling Green and launching into a tirade about this. There must have been enough people like my uncle to change things, and now there is a direct interchange. However, there is still a ”Breezewood” to get from I-80 to I-475 south of Toledo.   

Wait, I’m supposed to be writing a paper! get back to work!

UPDATE 11:15am March 9: the Negative Subway. A reader points out another mis-function similar to a Breezewood — public transit systems that don’t reach the airport. This could be explained by the airport being out too far, but there are plenty of examples of nearby airports without transit access. The brilliant designers of the New York subway managed to send no less than 7 separate subway lines near or close to LaGuardia airport (which was built eons ago), but none of them reach it. New York’s taxi drivers are extremely grateful for the Breezewood Subway.

The millions of protestors have been clear: “The people want the fall of the regime! Mubarak leave!”  The responses of the US to unambiguous calls from the Egyptian people for the right to determine their own future have not only been deeply condescending, but also represent a dangerous collusion with the regime.

Omar Suleiman, spy-chief turned VP, has pledged to steward an “orderly transition,” but has refused to begin dismantling a political system that has for thirty years bolstered kleptocracy and oppression.  He has postponed meeting with a group of prominent intellectuals, businessmen, and analysts who have reached out to negotiate a transition.

Instead, he has told the protestors to go home; even more disdainfully, he has told the parents of protestors to tell their children to go home.  In other words, the massive protests that are a revolution unfolding should not be taken seriously; they are merely instances of adolescent acting-out.  Obama, perhaps unwittingly, has fed that spin: “To the people of Egypt, particularly the young people of Egypt, I want to be clear: We hear your voices” he said on February 1.   We hear your voices, but we will not listen.  Instead, the US government will continue to back a dictatorship and the security apparatus that has made it possible. “Transition takes some time… There are certain things that have to be done in order to prepare,” said Clinton today, presenting her recommendations as so eminently reasonable, so adult and measured in contrast to the protestors’ demands for Mubarak to resign immediately, now spun as rash and destabilizing.

Meanwhile, Suleiman refused today to repeal the Emergency Law that has been in force in Egypt since 1981 and which gives the authorities legal right to hold anyone without cause, to detain those arrested indefinitely, and to prevent public assembly (protests!).  “At a time like this?” responded Suleiman when Abdel-Nour, the secretary general of the meek opposition Wafd Party, suggested its repeal.  Yes, time is precisely what is at stake. There are seven months between now and the elections that Suleiman still maintains will be held in September, and that is plenty of time to detain, torture, and disappear anyone who has defended this revolution.  It is more than enough time to recast the millions who flooded the streets of all of Egypt’s major cities to demand an end to dictatorship and the right to elect their leaders as enemies of the people who need to be eliminated.

If the US continues to feign naivite and argue that transition is indeed happening, it will — under the guise of adult reasonableness — have gifted the regime with the time to brutalize citizens who have peacefully and respectfully voiced their demands to be treated as adults with the right to determine their own futures in a country that has consistently and strategically infantilized them.

The radical brainchild of Stanford economist Paul Romer, the Charter Cities concept is based on the idea that good rules make good societies. Accordingly, poor countries should be able to galvanize their own development by building foreign-financed and foreign-run cities governed by a new, better set of rules.  It has been lauded as a bold, innovative idea (so crazy it just might work) and criticized as historically inaccurate or representing a new strain of colonialism (just plain crazy).

That debate just got a lot less theoretical in Honduras, as President Porfirio Lobo announced that 1000 square kilometers* currently “doing nothing” could become a “Honduran Dream” if only Congress and the Honduran people would take a risk in the name of progress.

The substitution of the new “Honduran Dream” for the old American one represents Lobo’s solution to the immigration problem too. Hondurans in search of a better life could choose the new Charter City, where they would find jobs created by new export industries, with no crime, first-class education and health care, clear property rights, and a fair courts system, instead of the US “where they suffer all sorts of situations at odds with human dignity,” said the President.

Opponents say the plan will undermine Honduran sovereignty and destroy natural resources in uninhabited areas. One backwards-looking editorial, entitled Another enclave or another utopia, argues that large-scale foreign investments and interventions in Honduras have historically tended to turn out badly for Hondurans.

*UPDATE 12:15 pm: Professor Romer wrote to say that the Honduran press misunderstood President Lobos when they reported that the Charter City would be 33 square kilometers. The proposed territory would actually be 33 kilometers on each side, or 1000 square kilometers. The third paragraph was edited to reflect this.

On the Guardian Global Development blog, I tell Paul Collier that he’s crazy to recommend a coup in Cote d’Ivoire. But the use of complexity theory allows me to be very nice about it.

We have one conventional and one unconventional definition of artificial states, both of them continuous measures of “artificiality.” The conventional one measures the frequency of ethnic groups split in two by a border (usually one that colonizers had mindlessly created).  The unconventional one measures the “squiggliness” of country borders, on the theory that colonizers drawing artificial borders were prone to drawing straight lines (see Sudan in picture), while” natural” states rarely had straight borders (see France).

We identified countries that were “most artificial” on both measures:

Chad, Ecuador, Equatorial Guinea, Eritrea, Guatemala, Jordan, Mali, Morocco, Namibia, Niger, Pakistan,Sudan, and Zimbabwe.

We also described some illustrative country cases:

Pakistan wound up as a collection of Balochistan, NWFP, Sindh (all of whom entertained secession at various times), East Bengal (which successfully seceded in 1971 to become Bangladesh, although only after a genocidal repression by West Pakistani troops), Mohajir migrants from India (many of whom regretted the whole thing), and West Punjab (which had its own micro-secessionist movement by the Seraiki linguistic minority).

Both measures predict that more artificial states are prone to worse development outcomes than less artifical ones, although the conventional measure is much more statistically robust as a development determinant than the “squiggliness” measure.

We don’t draw any policy conclusions in the paper, nor will I do so in this blog post… but you can if you want.

It’s official: Indian politicians have agreed to regulate the private microfinance sector…by choking it in a tangle of bureaucracy and corruption.

As everyone from David Roodman (on this blog) to the Cambridge randomistas (in the FT) has been saying, Indian microfinance needs reform, not a roundhouse kick to the face. But now the state of Andhra Pradesh has passed an overbearing law which makes it illegal for MFIs to lend to people with multiple loans (which is 70% of rural households), or to lend to members of Self Help Groups without permission. State regulators may also shut down MFIs at any time for vaguely defined “sufficient reasons,” and lenders can only collect payments at government centers – an open corridor for corruption.

The head of Microfinance Institutions Network said: “The bill will make it impossible for microlenders to operate in the state and effectively put us out of business there.”

Soon these ladies will no longer be smiling. Okay, just kidding, I don’t actually know that. But still!

Private microlending in Andhra Pradesh was successful because there was excess demand for credit that government-backed programs and non-profits were not satisfying. But with the for-profits squeezed out, their six million clients will be forced to return to more informal lenders such as village loan sharks.

In 2009 a similar incident happened in Nicaragua with uncanny parallels to Andhra, right down to the multiple lending and political involvement. The “No Pago,” or No Payment, movement resulted in the judge-ordered liquidation of a top microlender and a dragged-out microcredit crisis.

India was like a Petri dish for microfinance experiments, which meant that initiatives like self-help groups, mobile banking, and MFIs played off each other’s shortfalls. Eventually, the competition between the agents – if mixed with a healthy dose of regulation – might’ve fostered better, more effective systems of microcredit.

But this legislation is a discouraging blow to would-be microfinance entrepreneurs, who’ve been basically told that at any time the government might decide to shut down their businesses – and their ideas.

Investors in for-profit ventures might also be frightened away by the idea of losing money when politicians decide to tighten their grip around microfinance’s throat. In a worst case scenario, the new law could legitimize similar actions by politicians in other countries who are pandering for votes or have their own personal beef with microfinance. Some countries, like Peru, already have stable, well-organized regulation in place, but they’re exceptions.

On the other hand, what happened in India could be a wake-up call, as Tim Ogden argues, about the unrealistic expectations that donors, supporters and governments maintain about microfinance. If that’s the case, then clear-headed thinking about its flaws and benefits could pave the way for better regulation, better financial literacy programs and more effective, more diverse microfinance products.

Next week, Indian politicians plan to ban all Bollywood movies for “sucking the blood from the poor” because they charge for movie tickets.

———

Photo credit: flickr

As Vivek Nemana reported here, the Indian microcredit industry has pitched into what appears to be a replay of the American subprime debacle. I just spent a week in India, talking to nearly everyone. I learned there were so many complexities—history, politics, institutional rivalries— that to just view events through the foreign lens of the subprime crisis is…actually about right.

The microcredit industry indeed appears to have grown irresponsibly fast, partly out of pursuit of profit. But this is not a simple morality play. The state government’s response (an October 14 ordinance) is draconian, tantamount to banning mortgages after a mortgage crisis. Why such a crackdown? The rise of private microcredit threatened a big, World Bank–financed government program that provides credit and other services.

Until last month, India was home to the fastest microcredit expansion the word has seen. Between 2003 and 2009, the number of microloans shot from 1.0 million to 26.7 million. Unlike in Bangladesh, which India recently surpassed in number of microloans, investor-owned, for-profit companies do most of lending in India. SKS Microfinance went public in July, earning tens of millions of dollars for founder Vikram Akula, venture capitalist Vinod Khosla, and others. This inevitably led many to blame the hypergrowth on pure greed. I don’t doubt that pursuit of profit played a big role, but Akula’s new book also persuades me that he concluded—along with most of the Indian microcredit industry—that reaching the poor required being profitable enough to attract serious venture capital.

Nipping at SKS’s heels were other microcreditors, also based in Hyderabad, which helped make Andhra Pradesh India’s microcredit hotbed. Villagers experienced the arrival of 2, 3, 4, even 8 or 10 microcreditors within the last few years, all eager to press loans into the hands of women. Loan officers learned that they could line up customers more quickly in villages where their competitors already operated, for there the women would have been educated in the mechanics of microcredit—and might want new loans to service old ones. So loans were heaped on top of loans.

Even Vijay Mahajan, the president of the microfinance industry association, has been bluntly critical:

In their quest to grow, they kept piling on more loans in the same geographies…That led to more indebtedness, and in some cases it led to suicides.

Unfortunately, while loan disbursement became irrationally exuberant, loan collection remained insistent. Microcredit is about mass-producing low-quality services in order to keep costs in line with the small amounts transacted. For the machine to run efficiently, clients must keep up on their payments. Microlenders also pounce on delinquency to prevent it from snowballing, so that women will not ask, “Why should I pay if she is not?” Loan officers now stand widely accused of harassing borrowers, yelling at them outside their homes, even threatening violence. The pressure has been blamed for at least 54 suicides. While the allegations are individually dubious, arising as they do in a politically charged, media-scrutinized environment, the link to suicide is plausible. Microcredit is the least flexible, least forgiving form of credit available to the poor of Andhra Pradesh, thus most likely to push them over the edge.

So the Andhra Pradesh government responded to a real problem. However, its response is also a real problem. As I explain on my blog, the October 14 law has frozen microcredit in across the state; it contains provisions that would be unconstitutional in many countries; and it could bankrupt several lenders. The law is defending a rival government program that provides credit and other services to millions of women in self-help groups. Because these groups are communal rather than corporate, they tend to be more lenient than microcreditors. When cornered, women with multiple loans default on self-help group loans first. Thus did the public and private programs collide.

These events should be cause for introspection at the World Bank, which has financed both sides, but especially the government’s self-help group support program (with $1 billion or so). The latter may well be doing much good. But World Bank money has also beefed up a political economy hostile to private sector solutions.

Perhaps the heedlessly expanding Indian microcredit industry deserved a smackdown. But what matters most is not what is fair to the microcreditors but what is best for the poor. The Indian government has built an impressive 50-year track record failing to meet the financial service needs of the poor. Under the right circumstances the private sector can help fill the gap. The goal should be to reform microfinance, not kill it.

A few months ago I organized a conference in Bologna on the topic of humanitarian emergencies and communication. I invited the communication manager of one of Italy’s most famous and most influential NGOs, called Emergency. He accepted but told me, “You should know that we do not deal with emergency, but rather than with development and health.”

According to their website, Emergency is “an independent NGO, founded in Italy to provide high quality and free of charge health care to war and poverty victims.”

As they admitted, their concern is not emergency. So why did they name their NGO Emergency?

I believe their choice (consciously or not) reflects the way discourse in the humanitarian space has increasingly come to describe global problems as “emergencies.”

A hallmark of mainstream economic and political thought in the West is the optimistic belief in Development as a more or less steady, linear progress towards a clear goal.  But a combination of factors in the post-Cold War era has made the deviations from this narrative increasingly visible. For one, the media’s increasing ability to confront us with shocking images of suffering from places previously too remote to be imagined have created a demand that “something be done” urgently in the face of that suffering. For another, shifting international norms and commitments have generated an obligation to help distant strangers. At the same time, charities and NGOs have grown and proliferated, professionalizing their fundraising and marketing efforts.

As a result, we find ourselves living in a world of constant emergencies.

Nowadays, issues of human rights, governance, gender inequality, conflict, and poverty are all packaged and sold to us as humanitarian emergencies! Don’t agree? Watch this video from the UK’s umbrella organization for funding NGO appeals. As sirens wail, the compelling voice recites: “It is not about the right and wrong of the conflict. This people simply need your help.” But under what definition of the word is the 60-year Israeli-Palestinian conflict rightly called an emergency? In Algeria, 200,000 Sahrawis are waiting out a 36-year stalemate in refugee camps. Is it an emergency or a long-term political problem? Does the concept of “emergency” help us to grasp or solve these problems?

The title of this blog post is also the name of a new documentary about the NGO Doctors Without Borders.

Emergencies by definition are sudden, unexpected exceptions to the natural order of things. They are an aberration, a tear in the fabric of normalcy, a disease in an otherwise healthy body. As such they demand urgent action, a quick cure. As NYU social sciences professor Craig Calhoun has written, “The term emergency became a sort of counterpoint to the idea of global order. Things usually worked well, it was implied, but occasionally went wrong….Where there is a discontinuity, there must be intervention to restore linearity and predictable functioning.”

With your donation, NGOs and aid agencies will rush in to set things right.

What is at stake? The rhetoric of emergencies creates a powerful illusion that shapes both perception and action. Intractable problems that reveal the contradictions and limits of development are framed as emergencies, and NGOs as low cost managers that can intervene to solve these “exceptions” to the global order and put things right again.

If only it were so simple.