Vol.3 Why Should the World Worry About Poverty?—The Case of South Asia (III)

The official aid policy of most countries tends to carry too many, and often conflicting, objectives. A powerful principle for good public policy making is "one instrument, one objective." Exactly the same goes for official development assistance as a public policy instrument. And that singular objective for every donor nation, including Japan, should set the world free from the shackles of poverty.

Dr. Martin Luther King, Jr.--the renowned US civil rights leader who, inspired by Mahatma Gandhi, transformed the struggle of black Americans into a nonviolent resistance movement--wrote a letter that has become legendary. He wrote it from the Birmingham City Jail where he was held, to a group of white American church leaders calling on him to stop his movement. He said:

"Injustice anywhere is a threat to justice everywhere. We are caught in an inescapable network of mutuality, tied in a single garment of destiny. Whatever affects one directly affects all indirectly."

Events since the September 11 terrorist attacks on New York and Washington have taught us the reality of the "network of mutuality" Dr. King spoke of. Looking back on world history, political instability or even failure of the state tended indeed to be rooted in some form of social injustice. And such injustice tended to correlate with widespread poverty caused by bad governance lasting over a long period of time.

As such, poverty is a strategic risk, to be managed strategically. It is a risk every nation needs to manage consciously for its own peace and security at home, interlinked in turn with the same in the rest of the world. Hence poverty eradication should be the singular objective of development assistance. Hence, too, the significance of development assistance that is strategic, deploying scarce resources of donor nations efficiently, and reducing poverty effectively in the developing world.

Another powerful principle for good public policy is to deploy a policy instrument to address the root cause of a problem. Exactly the same, once again, applies to development assistance as a public policy instrument.

As discussed in my previous columns, the root cause of South Asia's poverty is bad governance of public policy and institutions. Unattended for a long time, such poverty can indeed threaten even the integrity of nation states, as in the case of Nepal today. In fact, South Asia is not an exception. The link between bad governance and poverty, and its strategic implications, are common across many developing countries.

Managing the strategic risk of poverty therefore means instituting good governance through reforms to political process and institutions, as well as socio-economic policies and associated institutions. It goes without saying that nurturing good governance ought to frame the overall official development assistance (ODA) and individual assistance strategies for every developing country as country-specific circumstances dictate.

As a practical matter, such good governance reforms cannot begin nor yield fruits unless a good measure of luck can be had in the emergence of good leadership in developing countries themselves. As such, the operational strategy of ODA should be to invest in good leaders. Defining such strategies in terms of sectors or projects, as is often the case, does not get to the heart of the reality of bad governance.

It is a commonly accepted fact that leadership matters for the excellence of private business. Likewise, leadership matters, and matters a great deal, for good governance and poverty reduction of developing nations. Yet, due perhaps to lack of attention, systematic information, or experiential facts, this link appears only theoretical to many, and is certainly not widely accepted.

One needs only to "walk" the grassroots of South Asia to find good examples. Among them are a number of well-established non-governmental organizations with outstanding track records for poverty reduction, serving as the model for NGOs and other development organizations around the world today. They include the Agha Khan Development Network with its Rural Support Programme (Pakistan, northern India, Central Asia), the Bangladesh Rural Advancement Committee's Rural Development Programme (Bangladesh, and more recently Afghanistan and Sri Lanka), and the Orangi Pilot Project (Karachi, Pakistan), just to name a few. Such NGOs have reduced poverty of rural and urban communities at rates far exceeding national averages or expectations of development "experts."

These NGOs have one common operational approach in their work at the community level: they work methodically to identify women and men of leadership quality within the local community, invest heavily in their personal growth as community leaders in assorted ways (including formal leadership training), and facilitate the communities in order to discover and create good democratic governance themselves. Financing for development projects is the secondary means of their assistance. The primary means is instead to provide technical know-how and experienced professional facilitation for the communities to drive their own process of social, economic and political change.

This approach has become so powerful in raising the wellbeing of remote rural communities and urban ghettos that it was recently adopted as a "community-driven development" approach by a number of bilateral and multilateral aid organizations. Agencies such as the UK's Department for International Development (DFID) and the World Bank also drew inspiration for changing the way they work from some of these South Asian NGOs.

I have myself witnessed miraculous transformation of communities, socially, economically and politically: an impoverished Bangladeshi village quadrupling its average household income in about five years; illiterate women in Pakistan learning to read and write, growing into local business leaders or standing for local elections; and a group of village women in India turning a village savings club into a substantial local banking business they manage professionally themselves. In all such instances, there were always outstanding leaders from within the community who played a decisive role in inspiring fellow citizens to mobilize themselves and to transform their unity of vision and values into a positive developmental force and poverty reduction outcomes.

At the national level too there are good examples. India's rapid economic growth since the early 1990s can be traced to a small group of statesmen who initiated major economic reforms, shifting the paradigm of India's economy away from Soviet-inspired socialism to a more market-based one. (Prime Minister Dr. Manmohan Singh was one of the principal leaders of this reform.)

Irrespective of one's political views on military regimes, General Pervez Musharraf, president of Pakistan, is another example of a remarkable national leader functioning as the catalyst for the nation's socio-economic and political change. Having inherited a bankrupt economy, he set poverty reduction as his singular reform objective, and good governance as the strategy in reforming every sector of the society, economy and the polity of Pakistan. Whether reforming tax system that harass taxpayers, a sick banking system burdened with fictitious political loans, or an education system littered with "ghost teachers", the positive impact of better governance was keenly felt by individual citizens within a year or two, and the economy began its recovery in a few years, generating growth and employment.

Perhaps the single most remarkable example in South Asia, and possibly in the entire world, is the case of Bhutan. An enlightened leader, King Jigme Singye Wangchuck, has guided the nation's development process by an unconventional philosophy of "Gross National Happiness", setting the singular and real objective of public policy as enabling individual citizens' pursuit of happiness. Consequently, good governance has long been the norm not the exception, rapid economic growth has been sustained over three decades while protecting the nation's natural environment and cultural heritage, and a peaceful political transformation has shifted an absolute monarchy and centralized public administration to a participatory democracy and a highly decentralized system of governance.

Investing in good leaders as the operational strategy for development assistance means a paradigm shift from what has been the normal practice for most. Official aid anywhere tends to carry a "Christmas list", devoid of any meaningful strategy. And, in rare instances where assistance "strategies" exist, they are inevitably defined in terms of specific sectors (e.g., education, health, infrastructure) or mega projects (e.g., dams, railway systems).

Investing in good leaders would also mean financing development projects in specific sectors, or mega-projects. The difference is that when such investments are led by people of leadership quality, they are truly "homegrown" and naturally have a high likelihood of sustainability. Investing in such projects also tends to serve as the catalyst for introducing good governance.

First of all, we must always remember that development does not happen by "sectors" or "projects", however high the socio-economic returns of such investments. Through the eyes of the poor people, development needs are holistic. For example, the singularly most lethal cause of death among the poor of South Asia is not any particular disease but indoor pollution from burning unclean energy. Clean energy such as electricity reduces mortality rates among the poor from various respiratory illnesses, especially women and children. Investing in better public health means investing in clean energy poor people can afford, such as efficient and well-governed electricity generation and distribution systems. Such holistic needs do not naturally come from government ministries with their own vertically vested interests, but from good leaders who are in touch with the people's perspective.

Secondly, we must remember money is fungible. Just as financing "good projects" which ignore national fiscal framework does not lead to good development outcomes, ignoring bad governance always ends up sending good money after bad. Regardless of specific development activities or projects in which good leadership is engaged, choosing to assist those with the will to introduce good governance minimizes such risks in the long term.

Thirdly, we must also remind ourselves that money is power and carries unexpected dangers. Pervasive bad governance of the kind discussed in earlier columns creates powerful vested interests that are dangerous, often linked to the criminal underworld. To those who want change, acting on one's conviction could mean risking one's professional reputation, livelihood or even one's own life. Whether fighting corruption in national education system, or refusing to pay "speed money" for public healthcare or electricity, doing the right thing in such circumstances takes courage that cannot easily be imagined. Those leaders need credible and independent "political protection" in sustaining their work, and external aid is about the only politically neutral source of such protection they can ask for.

It is not very well understood that what we call "development" is actually "reforms" from the perspectives of the citizens of developing countries. The development process for any nation amounts to nothing other than the process of social, economic and political transformation, i.e., reforms.

There is no escaping for donor nations--their decision to provide assistance means a decision to become involved in the reform process of aid recipient nations. Therefore, Japan's decision to provide assistance means putting Japan's national reputation at stake. One cannot shy away from facing this fact squarely and articulating good assistance strategy as a matter of national interest. As such, one had better do the right thing and do it right.

In doing so, one must never forget the power of saying "No" for the right reasons. Ignoring or compromising on bad governance not only means giving more power to the root cause of poverty, but also implies risking one's own reputation as a donor country by association. Saying "No" to assistance requests because of bad governance is always far more influential than compromising in order to meet such bureaucratic objectives as digesting the annual aid budget.

With or without the involvement of mass media, saying "No" is newsworthy, and always brings out more good leaders and more requests for assistance than one could possibly have imagined otherwise. And it makes the "face" of a particular aid agency or donor country far more visible in the eyes of the population of the recipient country.

Principled stances of external aid agencies translate immediately into external support for good leaders and the people they represent who want positive change. Sadly, such stances are rarely observed in practice. It is my hope that Japan's ODA can begin to act differently, and show the way for other donor nations around the world.