Monday, November 26, 2007

The Heat Is On!

THE HEAT IS ON!
A 2-Pager by Ajit Chaudhuri

Introduction: In development, as in life and love, some lessons are learnt only the hard way. One that I particularly remember – anything given free has no value to the recipient – was learnt while running a medical services programme in western Rajasthan. Another – that as long as something affects only the poor, nothing will be done about it – the moment it starts affecting the middle classes and the rich, even in a minor way, and you can be sure that it will move up priority lists, resources will be made available, and action will be taken. And there will subsequently be little need for the Ajit Chaudhuris of the world, the small fry of development, to worry their little heads and/or waste their meagre intellectual, financial and emotional resources in looking at meaningful interventions. Look at action on air pollution as against on basic education services as an example.

And therefore, ladies and gentlemen, I find myself in an interesting conundrum vis-à-vis climate change. I was, until recently, unworried! Sure, the world is warming up – apparently saying that it isn’t is today’s equivalent of holocaust denial. So what? The developed world is going to be affected. And even if this is in a miniscule proportion to the rest of us, fact of life number two has already begun applying. Hit films have been made, Nobel Prizes (for peace??) have been won, and we have to lace our project proposals with a new buzzword to get approvals from the international donor community. And then, a lecture by Sir Nick Stern[1] gave me something to think about.

A Stern Warning: Stern first explained the phenomenon by likening the earth’s atmosphere to a giant warehouse in which there were inflows and outflows of greenhouse gases, and a resultant stock of carbon in the atmosphere. An increase in this stock has led to the phenomenon of global warming – a gradual heating of the atmosphere and climate change. This in turn is changing (and will change) lives through rising temperatures and water – more drought and floods in more extreme forms, changed rain patterns, etc.

Stern says that global warming is a different phenomenon because it is –
· Global – so it cannot be addressed by local action, unlike, say, pollution in Delhi (addressable by converting public transport to CNG through legislation) or vehicle congestion in London (addressable by a congestion charge).
· Long term and irreversible – the last significant global warming phenomenon was experienced when the ice age changed over to today’s climate.
· Uncertain – nobody quite understands the phenomenon, how it works and what the precise consequences will be. The past ten years have seen events on a scale that have never happened before. We know that average temperatures have increased by 0.8 centigrade over the past 50 years, and the pace is increasing. At a 3-centigrade increase, the earth will lose half its species. At a 5-centigrade increase, human settlements will have to move to higher latitudes[2]. If no action is taken – the ‘business as usual’ approach – temperatures will be 5-centigrade higher by the next century.
· The scale is gigantic – if we take strong action, the world could stabilise at a 3-centigrade increase in temperature at a cost of one percent of global GDP. This is considerably less than the cost of inaction, estimated at five percent of global GDP.

Though India is not the source of the problem (and is the only major world economy that has a lower per capita carbon emission average than that necessary to stabilise the temperature at a 3-centigrade increase), it is extremely vulnerable to global warming. We are seeing, and are likely to see –
· Extreme rainfall events
· Retreat of glaciers and snow
· Increased droughts and floods, in more severe forms
· Water scarcity in the long run because of reduced inflows into our river systems
· The effect on the monsoon is not yet understood

Some issues: Stern weakens when he talks about what needs to be done – he speaks of a vague ‘new global deal’ with a key role for India within it. He speaks of the need for developed nations to double aid flows (the standard western response to any problem) to 0.7 percent of their respective GDPs (hey, wasn’t this supposed to be for things unconnected with climate change, like basic health and basic education?) to developing countries (have you heard of the 85 percent corruption out here, Sir Nick? And what happens to poor countries that are not carbon criminals?). He says that carbon emissions do not have a connection with economic growth, which belies all available evidence[3].

So what? We all know that averages mean nothing in this country, and a later Greenpeace report pointed out that Indian families earning over Rs. 30,000 per month are among the most prolific sources of carbon emissions in the world. As long as we have sufficient numbers of poor people who are unable to contribute to global warming, we will get pats on our backs as a nation. And as long as global warming affects only those on the fringes, who contribute least to it, and leaves the fat cats in Delhi and state capitals alone, there will be little incentive for the bureaucrat-politician-contractor nexus (or what is euphemistically called the government – the key player for India in Stern’s global new deal) to do anything other than absorb the increased aid flows and swell bank accounts.

In the short run, we in the development sector will have to adjust to this latest fashion as we have adjusted to previous ones – by cutting ‘HIV/AIDS’ from earlier project proposals and pasting ‘global warming’. The slightly more sincere can indulge in some ‘majboori ka naam Mahatma Gandhi[4]’ and organise carbon credits for tribal farmers we work with, and subsequently convert them into money in the various new carbon exchange mechanisms that have come up and are gradually increasing in sophistication.

But – in the long run – we will as a nation need to choose between the currently in vogue high consumption high growth economic model and one that is based upon more temperance. How many poor people will die before hard choices are made? Your guess is as good as mine! As a sector, if we work towards these choices being made earlier rather than later, we may be able to save more than a few lives.
[1] Sir Nick Stern is the author of the Stern Report that guided the British Government’s policy towards climate change. He is now at the London School of Economics, and spoke to LSE alumni at the British Council during a visit to Delhi last month.
[2] The change from the ice age to today’s climate was a 5-centigrade change. Before this, all human settlements were in the tropics.
[3] The possible reason for Stern saying this would be political. The consequence of saying that economic development is a cause of global warming would be the opening of cans of worms along the us vs. them lines of ‘you cause it and we bear the consequences’, ‘you screwed the earth in enabling your economic development, now why can’t we’ and questioning one of the most basic tenements of the World Bank/IMF cabal that economic growth is the answer to all evils.
[4] This roughly translates to making a virtue out of necessity.

Wednesday, October 10, 2007

The Billionaires

THE BILLIONAIRES
A 2-Pager by Ajit Chaudhuri
October 2007

I had promised myself that, when I made my first billion, I would buy myself a football team – Olympique Marseille was my target at the time (its owner was broke and incarcerated), but any top class side would have done. My dreams of kicking about with Maradona, Platini, et al (I would include their current equivalents if I thought they had any) have yet to fructify, but I notice that others have been treading in my imagined trails twenty or so years later. Yes, according to Forbes.com[1], there are 946 dollar billionaires in the world (178 qualified in the past year[2]) and they are buying things from submarines to football teams. They are also putting money into development philanthropy.

What’s new about this? The Rockefellers and Carnegies had done this long ago. My own employer, the late Paul Hamlyn, put GBP 400m of his personal wealth into philanthropy. In India, the Tata Trusts have been major players in development funding. Is it just the amounts – the $30b plus that the Gates put into the Gates Foundation, Warren Buffet’s $37b addition to it in 2006, and the subsequent scramble among billionaires to give and be seen to give significantly – or is there something more to this phenomenon? I was fortunate to attend a talk by Mathew Bishop, Editor of The Economist, at the Association of Charitable Foundations meeting in London last month on the subject “What’s New About New Philanthropy?” that touched upon these matters.

To make sense of new philanthropy, according to him, it would be useful to understand new philanthropists. Many of today’s billionaires are self-made –highly successful, arrogant, and with a scale of ambition for their philanthropy that matches that of their businesses. They expect their philanthropy to have a global impact, and they transfer their attitudes on business to philanthropy. Interestingly, they do not think that they have much money! They therefore see themselves as innovators and look to use their efforts to leverage resources from governments and MNCs. They are uninterested in approaches that do not have the potential to scale up significantly. They are interested in for-profit ways of addressing social problems because of the possibility of attracting serious resources (brains and money) to the problems. New philanthropists see the need to build quality organisations around the problems they look to address, and they understand the requirement of a long-term perspective. And even though many have made their money by acquisitions, they prefer to build their respective Foundations from scratch rather than to acquire existing organisations. They see old philanthropy as being all about making grants rather than addressing problems, and they are determined not to go down that road.

Why is this of any interest whatsoever? One – because the effects of new philanthropy within the Indian development sector are becoming visible. I work (via the Paul Hamlyn Foundation) along with other ‘old philanthropy’ types[3] with an NGO in Jaipur to universalise elementary education within the city – dealing with governmental capacity constraints, political issues and red tape at every stage and slowly and steadily moving forward. Along comes the Airtel Foundation, which says it will do what it takes to ensure this – set up as many schools as required, manage (and pay all costs for) them, ensure quality, and all of this into the long term – the government just has to give the land for the schools and manage the likely freaking out of the government teachers’ unions. Wow!!

Two, there is something exciting about this whole approach – to identify a serious problem and then work to address it at a district, state or national level – none of these islands-of-excellence-in-ten-villages stuff any more. To bring in the best brains, the latest technology, serious money and a long-term perspective to addressing problems. To develop models that work, and scale up across regions, and excite governments, and attract more resources. This is refreshing when compared with the rather cynical attitudes that currently prevail on most matters relating to the social development sector.

Three, where does this leave the good old NGO? Where does this leave the traditional grant-making organisation? Where does this leave old philanthropy? And, last but not least, where does this leave me? Are we part of the solution in this paradigm, or part of the problem? Are we ants to be crushed, or deadwood to be ignored, or irritants to be brushed aside, or sheep to be co-opted? I am not too sure as yet.

Are there grounds for cynicism? I have read of the times, in the 1950s, when humankind had just gone into space, when cures for TB and malaria had been discovered, and when we were going to eradicate disease, misery and poverty. TB and malaria continue to be major killers fifty years later, and the less said about misery and poverty the better. What will happen when the billionaires get bored, or when they discover that some problems defy solution, or when they die and their successors show signs typical of second-generation wealth? And, let us not forget, some of these billionaires have reasons for getting into philanthropy that are not exactly philanthropic. There are significant tax breaks involved. And I remember the aftermath of the Kutch earthquake, when the Ambanis grandly announced to the world that they would be rebuilding Anjar town. They then made a quiet request to the Gujarat government for permission to build a private port in the vicinity as well. No port, no philanthropy! Neither happened!

To conclude! There is certainly something exciting happening in the Indian development sector courtesy the billionaires, and it is happening away from the usual terrain of NGOs, panchayats, donors and government. I for one see huge potential here, and want to engage and take advantage of the resources – human, technical and financial – that are available. How much will I have to change, in skills and attitude, to be able to do so? I am not too sure. And will I be able to? Maybe not! But the younger generations in the sector will. At the least, new philanthropy will provide a space for and the ability to absorb the brilliant and committed. For this in itself, I welcome the billionaires!
[1] This is in a special report by Luisa Kroll and Alison Fass on 3rd August 2007.
[2] Some among us will be proud to note that India is the land of the fastest rising number of billionaires, 36 in total of whom 14 joined in the past year, and the most in Asia (Japan comes next with 24).
[3] These include the Aga Khan Foundation, the American India Foundation and the Bunyan Tree Foundation. I am not sure whether AIF would qualify as ‘old philanthropy’, and as they are on this reading list I hope that they will enlighten me on this matter.

Thursday, August 9, 2007

LONG LIVE THE KING!

LONG LIVE THE KING!

A 2-Pager by Ajit Chaudhuri: August 2007

Regime changes are rarely pleasant – ask the Iraqis and Afghans. This applies in organisations as well – a change of Big Boss has consequences for those down the line. Especially so for those directly reporting to her/him, but please do not feel that you will be spared the reverberations by virtue of being lower down the organisational food chain. Your career will now depend upon the views of a person you may not know, and your history of success and failures may not count for much. Stories of what happens to executive teams during CEO transitions are not comforting – firings, cancelled strategies, organisational reshuffles, and abrupt and unwelcome career changes for senior managers.

So if you are not working for an African dictatorship or a local NGO, chances are that you will have to survive a regime change or two in the course of your career. At these times, you will be faced with three questions – how worried should I be, what will happen to me if I get pushed out, and how do I maximise my chances of prospering under the new Big Boss. A recent article in the HBR entitled “Surviving Your New CEO” [1] has some answers pertaining to managers in large firms in the US. Despite difficulties in translating the implications to the Indian scenario, there are some interesting pointers to those of us who are facing, will face, or have faced a regime change. Please read on!

How worried should you be? Very worried! A typical firm has a 16 percent turnover of managers every year, of which 8.5 percent is voluntary (retirement, or health/family issues) and 7.5 percent is involuntary (including firings and unplanned early retirements). When a new CEO is in place and has been promoted internally, involuntary turnover increases to 12.5 percent and combined turnover is about 1 in 5. When a new CEO has been brought in from outside, involuntary turnover increases to 24 percent in mid and 31 percent in poor performing firms. To put it bluntly, if you are a senior manager in a sub-par performing firm, you have a 40 percent chance of leaving if the CEO changes and a new one has been brought from outside.

What will happen if you get pushed out? Some people think that losing their job would be the best thing that could happen to them – they could get out of the rat race and do all those things they’ve been dying to do; spend more time with the kids, explore an alternative career, shift to the rural wilderness, write a book, whatever. Such transformations are rarely successful. Competent people also assume that, if they are asked to leave, they will find a better or at least equal job elsewhere – and they are relaxed about their fate under their new Big Boss. Beware! The data does not support this optimistic outlook. Only 4 percent of managers leaving due to a regime change get a better job, and another 28 percent experience lateral movement. Only 3 percent accept significantly worse jobs in similar-sized firms. 22 percent leave to join a much smaller firm or start a small business of their own, and 43 percent disappear from the source database altogether (a euphemism, I suspect, for ending their careers). Given these outcomes, sweetening up the new Big Boss is an advisable strategy.

How to prosper under a new CEO? New CEOs have certain characteristics. They are under tremendous pressure, as their own survival on the job is heavily dependent upon the firm’s performance in their first year. They therefore tend to make people decisions quickly, even when they have publicly vowed to take their time. They do not seek inputs from their predecessors, and place little weight on the inputs that they do receive – so do not expect your good relationship with the ex-Big Boss and the professional respect s/he accorded you to continue on momentum. They tend to rely on their instincts, and early impressions count significantly. And finally, they tend not to have restrictions from their Boards on changing management teams. Assuming no force majeure that makes your exit inevitable (you are a CFO and the new CEO brings his/her own CFO, for example), a good first impression is critical to your chances of survival and success.

The authors have interviewed successful CEOs and asked them to look back at the earliest days of their new jobs – what did executives do to turn negative impressions into positive ones? Did otherwise smart people do, or fail to do, something that brought about their downfall? Here is a summary of their recommendations.
1. Show your goodwill
a. It may be tempting to adopt a wait and see policy rather than taking the initiative to talk about your role and responsibilities with the new CEO, but many executives doomed themselves by failing to demonstrate eagerness and willingness to be part of the new team early.
b. It is dangerous to assume that your new CEO already understands that you want to cooperate. Those who oppose the new agenda do not announce their opposition, and new leaders do not equate silence with agreement.
c. If you plan to stay on, let the new CEO know proactively but without being sycophantic, and follow up with actions that demonstrate your willingness.
2. Leave your baggage at the door
a. Do not talk about salary issues, even if you were grossly mistreated by the previous regime. The new CEO does not want to deal with these as yet.
b. Do not talk about your own long term plans with the firm. The new CEO has not yet decided whether you still have a career here.
c. Do not raise issues of difficulties you are having with your colleagues.
d. Get your spouse to be diplomatic – anything s/he says will filter back and be construed as a reflection of your real views.
3. Study the new CEO’s working style – how approachable and participatory s/he is in functioning, how comfortable s/he is with dissent, how rigid s/he is on ethical or behavioural matters, etc. Opinions are divided on whether you should contact your counterparts in the new CEO’s former division or firm to enquire into these matters.
4. Understand the new CEO’s agenda. S/he is under tremendous pressure to perform. 75 percent of new CEOs whose stock performance rose in their first year of tenure were still in place two years later, and 83 percent whose stock fell were gone by that time. S/he will be looking for constructive suggestions and realistic and honest game plans. Offer objective options and explanations, and do not come across as self-serving.
5. Be on your ‘A’ game
a. Show positive results, and soon! You cannot afford to let things slip into paralysis because of confusion caused by the regime change. It is critical to demonstrate that you are active and competent.
b. Show political awareness during the ‘honeymoon weeks’. Do not assume that you are invaluable – be available to the new Big Boss, and cancel that long-planned vacation if it coincides with his/her joining. S/he will not have the time to coach you or even to warn you that you are going wrong.

To conclude: Regime changes are stressful for everyone. The danger of being pushed out is real, and the difficulty of landing on your feet is severe. However, opportunities to invigorate your career are real too; others find fulfilment away from the professional world. You need to make your own decision as to whether the new Big Boss’s style, vision and business practices are ones you want to live with. Then commit or get out! Otherwise, everyone’s life will be hell – and the result will be the same anyway.

Acronyms:
CEO Chief Executive Officer
HBR Harvard Business Review
NGO Non-Governmental Organisation
[1] “Surviving Your New CEO”, Kevin and Edward Coyne, HBR of May 2007.

Wednesday, July 18, 2007

Are Things Getting Better?

ARE THINGS GETTING BETTER?
by
Ajit Chaudhuri

Written in 1996 in response to a question posed to me by my Father
Published in Lokayan Journal (Bulletin 13, 1997)

I am constantly asked the question - are things in India getting better? The temptation would be to give a resounding yes in reply. After all, there are more cars on the roads, owned by a wider variety of people and looking increasingly (but not yet quite) what our role models in the west are driving. The shops have their shelves full, the variety available is far wider than, say, ten years back, and people are buying. Most homes have TVs, and the choice of what to watch is huge. The various indicators of progress such as GDP and Per Capita Income, when compared over time (though not with the figures for other countries) also point towards change for the better. Why, then, does one not feel completely comfortable with the answer.

To Indians of my generation and background, there are four pillars that have formed the India that we have lived and been brought up in. They are democracy, socialism, secularism and non-alignment *. It would be interesting to see how these have changed in the recent past, and how this change has affected the well-being of the vast majority of people in India.

Non alignment is dead. The less said about it the better. Suffice to say that it did not bother the ordinary person then, and the lack of it does not bother him/her now. Secularism is in the process of dying. People are dividing themselves into caste and communal lines, with a gradual erosion of the middle ground which is so necessary for one side to be able to talk to the other. The resultant social turmoil is taking place, along with a hardening of views and respectabilization (for want of a better word) of the likes of Thakeray and Singhal. This says a lot for the manner in which things have changed.

Democracy - it is without doubt still vibrant. Most people, of all castes, creeds and educational backgrounds, believe in it. Major changes, however, have taken place in India’s democratic process, most noticeable being the need for money and muscle to fight elections. And while money is available from several places, there is only one source for muscle - criminals. Criminalization of politics has led to a deterioration in the quality of politicians, who today have questionable antecedents and motives. It can safely be said that a majority of those sitting in the country’s parliament and legislative assemblies should actually be sitting in the country’s jails. And these are the people to whom have been entrusted the right to represent the people and decide the course of India’s future.

Socialism - this has been demolished over the course of the recent past in a systematic manner under the auspices of the New Economic Policy and the Structural Adjustment Programme. The NEP and the SAP were formulated by economists in the government and IMF/World Bank at a time when India was going through a budgetary crisis, its aims were to boost industrial production and exports, control trade deficits and revitalize the economy. The measures adopted were trade liberalization, devaluation, privatization and cutbacks in government expenditure.

A word about IMF advocated structural adjustment programmes in general - they are known not to succeed because the underlying philosophy behind them is that the rich are not rich enough and the poor are too rich and because the austerity measures are too harsh for too long to too many. In India the cutbacks have taken place in health and education and have come in tandem with privatization. The constitution still maintains that it is the government’s responsibility to provide basic health and education services to citizens, and the government still mouths this, but the fact is that while Apollo hospitals are coming up with top quality facilities for those who can pay, the majority of us have to go to understaffed, ill equipped Primary Health Centers where the quality of care, if available at all, is pathetic and rapidly deteriorating.

This has two inherent dangers. Firstly, people will naturally enquire as to why two percent of the country’s population should have these facilities while they go without (and this is already under way), and once this achieves a critical mass it is likely to boomerang into a movement. This may take a political form, leading to a change towards more equitable distribution of the resources and facilities available in the country through law and policy making institutions in India. On the other hand, given the poor quality of politicians and their inability to represent people, it is likely that such a movement will form outside of the political system leading to large scale social turmoil, increased crime, or terrorism. Some parts of the country have preceded others along these lines and the results are there for all to see.

The second danger is as serious - withdrawal of government responsibilities in an area such as health and privatization of the health care system would lead to a concentration on curative facilities and less attention to prevention, such as public health, immunization, etc. TB, the single largest killer in India and one which fifty percent of Indians are carriers to, costs approximately Rs. 6,000/- to cure in medicine alone. Can a country where forty percent of the population earn at levels below the minimum needed for survival afford a private health care system? And can a private health care system deal with malaria or TB in epidemic proportions? If the trend of a deteriorating government health system continues, we are all (and I mean all) likely to see a resurgence of such diseases in the country.

The accent on privatization has changed social systems within the country. While earlier there were strong community norms governing most activities, this has gradually broken down in favour of individualism. This has its good points - people are able to rise beyond the restrictions of caste, creed and community. The shit cleaner’s son can become a collector (though not yet vice-versa). It also has its negative ones - it is the powerful, the rich and the educated who are able to grab the benefits on offer, with nothing for those left out. An example at the family level is the breaking down of the joint family system. This leaves no mechanism for the care of the aged, widows, disabled and orphans. The conversion of common lands in villages into private property is another case in point - the poor are much more dependant upon common lands for their household fodder, fuel and water requirements, and these lands are getting less and less because of land grabs by the powerful (or the giving of these lands to institutions/industry by the government). Strong community norms acted as a restraint upon crimes and a judicial mechanism in case of disputes. Reduction of these norms has led to the need for people to turn to police and courts, both of which (as they are also ‘privatized’) are beyond the reach of the poor and the weak.

Have incomes really risen under NEP and SAP? Do people have better purchasing power than they had? Undoubtedly some people have gained. But what about others? What about small and marginal farmers, who are not able to derive the benefits of the country’s massive investments in irrigation and subsidized power and fertilizers, and are gradually selling their lands to large farmers, thereby becoming wage labourers without any assets of their own. What about traditional artisans and craftsmen, weavers and entertainers, whose markets have been eroded and who do not have the skills to change occupations. What about tribals, whose forest habitat, upon which they have traditionally been dependant for survival, is being destroyed in the name of development. What about migrant cattle herders, for whom common grazing pastures are being encroached upon by large farmers. What about unskilled labourers, who have migrated into urban areas and stay in shanty towns without basic sanitation, living on the wrong side of the laws of supply and demand. Have they gained in the recent past? Absolutely not. And are they some small minority who can be ignored in the name of general progress? No, they are only over eighty percent of India’s population.

Increased levels of awareness (different from education) undoubtedly exist, thanks to the spread of media. Aspirations have changed. But the means to realize these aspirations are still closed to those without education or capital, except in the areas of sports, films and crime. And entry level barriers are high in the former two.

To conclude! Change is a fact of life. Some gain more, some gain less, and some do not gain at all. It is beyond the purview of this paper to suggest remedies for the problems cited above. But it is necessary for some emphasis on the part of the government towards enabling people to withstand change, or to use change to their advantage. And this is not served by it ducking its responsibilities on the fronts of health and education. Or encouraging differentials in society through policies decided behind closed doors by people whose credentials are debatable.
* An article by Prof. T.K Ray in the India Today of May 15, 1996

Saturday, June 30, 2007

A Neo Perspective

A NEO PERSPECTIVE

“A little knowledge is a dangerous thing, drink deep, or taste not the Pierian spring.”[1]

Economics, let’s face it, has a soporific effect on most of us – recent attempts by the likes of Thomas Friedman[2], Paul Krugman[3] and Steven Levitt[4] to sex up the subject notwithstanding. It is, however, difficult to avoid – we all deal with inflation, we face globalisation, and when revenues do not match expenditure we are in deep s***. It is equally difficult to get information that makes sense on economic issues – does, for example, growth matter more and lead to a trickle-down a la CII, or are the comrades right in demanding a focus on equity – and this results in debates that are high on rhetoric and low on substance, and viewpoints that invariably become a dominion of scoundrels.

Strong? Here are some scattered examples of this from my personal experience in the development sector.

A colleague of mine went on a tour of Europe about seven years ago with a group of Indian farmers – they were brought by national farmers’ associations of European countries to protest and demonstrate at some EU summit. I enquired further, and it was obvious that the policies they were brought to protest against were actually in the interests of Indian farmers, and that these guys were just pawns in a retrograde agenda.

A meeting on tsunami relief in Sri Lanka in 2005 degenerated into a harangue against neo-liberalism. What was neo-liberalism? I did not know, so I asked the others. Nobody in the meeting could tell me, but they did know that it was an official villain. What did they think of its direct opposite, neo-conservatism? The invariable answer – ‘Neo-what?’

Back in my days in Rajasthan in the early 1990s, many of my colleagues did not drink Coke or Pepsi. Why? They did not want to contribute to the profits of American companies. And they were sincere about this – it wasn’t a health campaign in disguise. The same colleagues were using Windows on their computers and had no objection to American aid contributing to the financial health of their respective institutions.

It was therefore illuminating to read an article on economic growth by Shankar Acharya[5] (SA) that, among other things, explained those much-reviled terms neo-liberalism and the Washington Consensus to the layman. SA begins with a short history of economic growth, and says that it is a recent phenomenon. Global GDP per capita did not change much between 1000 and 1800 AD, and increased by about 200 and 900 percent in the 19th and 20th centuries respectively. In 1820, income inequality was within countries – there was little difference in average incomes between countries. By 1950, there was massive disparity in average incomes across countries.

Growth per capita in advanced countries was steady (with exceptions during the world wars and a few busts and booms), and gains in living standards came from prolonged and sustained growth and not from occasional bursts of rapid growth. The growth experience of developing countries, however, has been varied, with the sustained growth over decades required to raise living standards being rare.

In the 1950s, development thinking favoured government-led import substituting industrialisation. It had its effects – in India, the Hindu growth rate of 3.5[6] percent per annum between 1950 and 1980 was much more than the 0.8 percent annual growth of the last 50 years of British rule. But, over time, problems arising from this approach mounted. These included –
· South Asian growth was plagued by foreign exchange scarcity.
· In Latin America, growth halted with a series of debt crises in the 1980s.
· East Asia, with outward looking foreign trade policies, enjoyed ‘miracle growth’.
· There were increasing incidences of government failure.

The resultant disillusionment led to the evolution of the Washington Consensus, which was driven by neo-liberals with the backing of the World Bank and the International Monetary Fund. Its tenements were stabilisation, deregulation, liberalisation and privatisation, and it drove ten policies down the throats of client nations. These were –
1. Fiscal discipline
2. Reordering public investment towards economic, health and education infrastructure
3. Tax reform
4. Financial liberalisation
5. Competitive exchange rates
6. Trade liberalisation
7. Liberalisation of foreign direct investment
8. Privatisation
9. Deregulation
10. Property rights

Cracks in the consensus appeared when it was obvious that countries that took the reforms in full had modest growth and those that did not, such as China and India, had high growth. A newer view accepts that the uniform prescription along ten fronts for everybody does not work. Property rights, rule of law, market-oriented incentives, sound money and sustainable public finances are desirable factors everywhere in driving growth, and the others (such as, for example, privatisation and liberalisation of trade and FDI) need to be adjusted for the specific circumstances of the country.

The article goes into other interesting matters, such as the relationship between growth, poverty, employment and equity and the importance of economic policies to spur and sustain economic growth. SA makes two important points –
· Rapid and sustained growth is the most effective way of reducing poverty – that, on average, growth of income among the poor is very similar to growth of mean income.
· There is substantial variation around this average. Economic growth can be more or less pro-poor, and the policy environment is a key determinant to this.

I am not going to dwell on these matters, and would like to return to the issue of neo-liberalism. As mentioned earlier, it is considered an official villain within NGO circles. Why exactly this is so is not clear to me – the various analyses that I have been subjected to appear to have been developed in some donor agency’s boardroom, possibly with Africa and Latin America in mind. Theories with a global perspective, as we all know (and, for us in foreign donor agencies, as we constantly and invariably unsuccessfully try to communicate to our masters) do not apply very well to the Indian situation. And many of us who profess a deep antipathy to neo-liberalism can be seen in actuality to be proponents of its principles, as the popularity of user-fees for NGO-provided development services (even though, in most cases, some donor is meeting the costs in full) and other widely practised neo-liberal tenements indicate. There is clearly a need for clarity on this matter – is neo-liberalism a good thing, a bad one, a necessary evil, what?

Why so? For one, because crumbling public services are a fact of life! Creating demand for services and pressure upon the state to undertake its constitutional responsibility and provide them a la the ‘rights mode’ approach has not resulted in improvement[7] – the Indian state is good at resisting pressure to perform. It is unlikely, in my lifetime, that I will see an acceptable quality of service in health and education for the poor, and that the taxes and cesses that we pay will aim to provide this rather than contribute to our politicians’, bureaucrats’ and contractors’ personal wealth. People looking to by-pass the state and set up parallel systems for today’s sick and today’s children have a point.

And yet, by creating parallel outlets for the demand, we contribute to a vicious circle of reduced pressure on public systems, poorer public services and governance, increased donor dependence, and zero options for those unable to pay. It is one thing to have toll taxes every 20 km.s on every road (as does Gujarat, where I write this) and quite another to have the most privatised health system in the world (which India does) when health expenditure is the single largest cause of households slipping below the poverty line.

I do not claim to have answers – I would merely like to see good information and an educated and non-partisan debate on these matters. In my lifetime? I certainly hope so!

Acronyms:
CII Confederation of Indian Industry
EPW Economic and Political Weekly
EU European Union
FDI Foreign Direct Investment
GDP Gross Domestic Product
[1] From “An Essay on Criticism” by Alexander Pope in 1709
[2] Famous for finding the world flat!
[3] Famous for being a one-handed economist – he is not constantly saying ‘on the other hand’.
[4] He achieved the impossible by writing a popular best seller about Economics, the book “Freakonomics”.
[5] “Economic Growth: Some Reflections” by Shankar Acharya in the EPW of 4th November 2006.
[6] Apparently the term’s origin is in the similarity of 3.5 to the symbol for ‘Om’.
[7] Anyone doubting this is welcome to look at DFID’s recent evaluation of its work in India.

Sunday, June 17, 2007

INTRODUCTION

INTRODUCTION - WRITTEN IN MARCH 2004


Dear Friends and Colleagues,

As some of you know, I turned forty last year and am thus facing the usual conundrum of men hitting the middle ages – of wondering how (and whether) to change my life. The simple stuff has already been initiated – of avoiding social evenings in which the food is not great and/or the women not beautiful, of cutting out vegetables from the daily diet, and of upping my football sessions to twice (and maybe thrice, family permitting) a week. But the monumental changes that mark the watershed of one’s life haven’t happened. My wife still looks pretty good to me, and I have no intention of dumping her for some anorexic 22 year old (maybe fifty is a better time to implement this one). I still enjoy my work, so not much point in taking off to some lonely spot to do organic farming. And my reading habits, puerile though they are, will be inhibited by my lack of time, poor concentration and deep disinterest to take a sudden inclination towards Kafka or the classics. And therefore, there is this grave void in my life that requires fulfillment.

Well so what, I can hear you all saying, and how does this concern you?

Well, so I have decided that I will write a monthly paper on some topic of my professional interest and foist it on to all of you to read. And my request to you would be – please do read it. And, if you have something to add, subtract, multiply or divide, please do respond.

In the process, I make the following promises to you. First, that each paper will be no longer than two pages. Second, that it will be ready and circulated on the 15th of every month. Third, that I will stay away from my usual interests, which I have already been published on, such as herding goats in cold desert regions and football.

Love me, hate me, but please don’t ignore me!

With best wishes,

Ajit Chaudhuri

Wednesday, May 30, 2007

Return of the Jedi

THE RETURN OF THE JEDI
A Two-Pager by Ajit Chaudhuri

Introduction: Some of you know that I had recently spent three months as a Visiting Fellow at the Institute of Rural Management (IRMA) in Anand, Gujarat. IRMA is an institution that I owe big time – for two wonderful football-filled years in the late 1980s, for a piece of paper that says that I am a post-graduate, for some lifelong friends, and for that lovely lady I met there who wakes up next to me every morning – yet I have been back only once since leaving and that was in 1999. And so, when Neelima Khetan (the Director of IRMA until very recently) popped the question, I agreed with an alacrity that must have made her think I was desperate. Luckily for me, she (and IRMA) followed through, my various bosses came around, and there I was with a car full of wife, children, maid, dog and 3 months necessities driving into the familiar campus in beginning November 2007. This paper looks to describe what it was like to return to the alma mater.

Jurassic Park: Early impressions were that not much had changed – the buildings and campus layout were the same except for an ugly monstrosity in front of the office building that belted out ‘Saare Jahaan se Achcha’ in chimes and, come sundown, transformed into a (very) poor man’s aurora borealis. The debates brought out a sense of déjà vu – I hadn’t heard ‘sector versus non-sector’ for 17 plus years, and it was nice to know that there is still a corner of the country where cooperatives are seen in a positive light. But – there were many more female students and ‘B’ block, where I stayed, is now a Ladies residence. And Jagnath is not a hub of activity any more – Dawoodbhai’s shop was burnt down in the 2002 riots, and there is now a shorter route into Anand town. And the students’ mess did not serve Kentucky Fried Chicken on Sunday nights.

The Students: As a student, I did not realise how central we were to IRMA. I came in this time when both batches were off campus – the senior batch was at their management-training segment and would return only in January, and the junior batch was at fieldwork and would return in December. Faculty and staff alike roamed around with long faces and desultory attitudes for my whole first month, brightening up only one Sunday late in November and saying ‘They’re back!!’ The whole place changed! It was almost like the relationship between the garden and the children in the old folk tale ‘The Selfish Giant’.

I have heard many people from the NGO sector, including IRMAns of my generation, bleating on about young people not being sufficiently dedicated, motivated and committed, blah, blah, blah, to make a career in development. My time spent with the students here was an eye-opener. They are completely different from our times, and they face different pressures. Most of them are older, and with work experience[1], and they don’t ask their parents to shell out the now considerable fees and living expenses – and so most of them have a never-never on their heads as soon as they walk out of the institute. The salary differentials between the development sector and the other places from where they get job offers is now huge, unlike the late 1980s when the starting differentials were minimal[2]. And the non-financial attractions of the development sector are not as apparent to current students as they were to us – they see NGOs as being unaccountable fiefdoms that do very little and spend a lot of aid money doing it, and their experiences during their fieldwork segment at IRMA do not contradict this viewpoint. Are they lacking in social values? No – the senior batch ran a slum development programme on their own time and money (both of which, as all postgraduate students in professional courses will know, are scarce commodities), the same slum outside the campus that our generation of students used to pass but chose not to notice. Current students are looking to make a difference to society through modern means, such as making the Internet work for the poor, or getting financial services to reach the needy, and not by joining NGOs and starving.

As I hope is obvious to the reader, I enjoyed my interaction with the students very much, both the formal interaction in the classrooms and the informal ones in my office, at the mess, and over cigarettes. They were challenging and stimulating and occasionally exasperating (especially so on Monday at 0900). I learnt a lot from them, and I will never listen to cribbing about young people’s lack of value systems and greed for money again.

The Faculty: IRMA was in a state of flux during my stay, mostly from the aftermath of an internecine struggle for control within the board of directors. One bunch of professors had just left the institute, another bunch was in the process of leaving, and there was a bit of an atmosphere of whispers, cliques and coteries that I wanted none of. I avoided the faculty lounges as a result, and had my tea, cigarettes and gossip sessions at the common facilities. I found, 3 months later, that I had really interacted with very few of my colleagues and, looking back, I wish that I had got to know some of them better.

Comparing from my time as a student, the professors now were mostly PhD-types whereas in the 1980s they were mostly fellows from management institutes. There was the usual mix of those who were liked, those who were respected, and a few who were liked and respected. I didn’t get the impression that anybody was disliked and/or disrespected, unlike our time when there were candidates for both, including the combination. Though old timers said that the earlier interaction between professors and students was closer, I did not personally notice this.

What did I do? Looking back, I seem to have spent a lot of time during work hours smoking, drinking coffee and discussing life with Professors DPM and Jayapadma, who were great company. In between that, I managed to take a few sessions with the senior batch on looking at project proposals and setting up monitoring and evaluation systems.

One of the projects I initiated was to get IRMAns of 15-20 years vintage to come back to IRMA and talk to the current students about their own careers – this was to address common fears that an IRMA degree is not sufficient to make it in life, and to get students to look ahead and think careers rather than jobs. The key fringe benefit was that I met some old friends again, Sinha, Gouthami, Chadha. I did one of the talks myself. I was very happy to learn that IRMA is planning to continue the ‘Journeys’ project.

I also did a research on the sort of contact IRMA had with the organisations it interacts with. The conclusions provided a bit of shock value – IRMA had an all-round long-term relationship with few organisations and one-off contact with many. If IRMA were a woman, I would want to know her. I still wonder what the policy makers made of that.

There were other things. Some were hatchet jobs that were passed on to me, I suspect, because of the duration of my tenure and therefore my lack of a need to invest in the long-term goodwill of my colleagues in the faculty. Some were the tasks of sitting on committees of various sorts. I think I came away with an appreciation of the difficulties of getting work done in a flat organisation structure.

My Family: My family joined me for two of the three months. IRMA made us very welcome, and made it as easy as possible to adjust. Accommodation was ready and liveable upon our arrival, with even many of the small things (linen, towels, cutlery) provided for with care and thought. Everyone made allowances for my noisy children and boisterous dog. Washing, cleaning and cooking support was organised almost immediately. IRMA even provided my wife with ‘visiting scholar’ status, and with it an office, computer and Internet. We have much to be grateful for to Professor DPM, who was coordinating the visiting fellows programme, the administration team of Mr.s Patnaik and Solanki, and Mr. BC Patel from the estates department. If there were any cribs, it was that one toilet was too few for all of us (if any of you are planning something similar, negotiate a B-type residence), and that the local school (yes, the much acclaimed Anandalaya) was pathetic – we pulled the kids out in the second week.

The Highlights: Three months in Gujarat, no booze or football, not much flesh in the diet, not exactly an ornithologist’s paradise, how on earth did I survive?
· The students, and the interaction with them that I have already described.
· My colleagues Gazala and Akhil coming over from Ahmedabad on our first Sunday in Anand with two bottles of whisky and huge quantities of mutton.
· My Dad, sister, brother, brother-in-law and nephew congregating here from Bangalore and Delhi, all seeing IRMA for the first time. The accommodation at the guesthouse was great, and we had a wonderful time. We took an expedition to Lothal, the Indus valley civilisation site just about 100 km away.
· I finally managed to take my family to Kutch, and to see the bird sanctuary in the wetlands around the rann. Winter was the perfect time for this – we saw the cranes, and the staying facilities at the indigenous tourism project at Hodka were great.
· The students had a festival for the alumni towards the end of January. I got to hear Indian Ocean play live in a near-perfect setting – the IRMA lawns – and I participated in, completed, and finished creditably in the Anand Run (a 5 kilometre road race).
· Professor Jayapadma’s daughter, Karuna, who had my wife and me seeing first hand what we were missing by not having a little girl in the house.
[1] Though the admissions policy of having a few Delhi babes straight from university to brighten the place up continues.
[2] ITC and ICICI start people at Rs. 50,000 per month. NGOs start at about Rs. 12-15,000. In the late 1980s, the hot NDDB job started at Rs. 2,700 and the NGOs at about Rs. 2,000.

Saturday, April 28, 2007

Money For Nothing!

MONEY FOR NOTHING!

A 2-pager by Ajit Chaudhuri
April 2007

“Those who forget the past are doomed to repeat it!”[1]

It was just a little while back that the word ‘aid fatigue’ had crept into our lexicon – the result of the perception that all that money and effort for so long was not doing very much. The starving children and crying women were still there and in numbers, their leaders were living better and better and fighting each other more and more, and NGOs and the Swiss banking system were flourishing. ‘Screw the whole bloody lot of them!’ the givers seemed to be saying, ‘They’re not getting any more of our money!’

And then, quite suddenly, the scenario changed – and aid became fashionable again. There appear to have been three drivers. The first was Afghanistan, where first-world living rooms saw the consequences to them of a failed state. The second was Mrs. and Mr. Gates jumping a stage in Maslow’s hierarchy of needs[2]. And the third was the Millennium Declaration – a desperate effort by the UN to sex aid up and reduce problems down into easily understandable goals, targets and indicators.

Are things going to be different this time around, I wonder, and will we see real change? Or is it going to be more of the same – the bloody conflicts, pathetic women and children, and that tired but pretty blonde lady from some INGO or the other telling us on TV that ‘there is so much more to be done’ – you know the scenario – with more hot air in conferences on trade vs. aid, teaching people to fish and that %*# EU agriculture subsidy.

It was therefore a pleasant surprise to read an insightful paper questioning the holy cows of trade and aid and looking at how to really help poor countries. This is by Nancy Birdsall, Dani Rodrik and Arvind Subramanian, was published in the Journal of Foreign Affairs of July/August 2005, and is imaginatively entitled ‘How to Help Poor Countries’.

The paper begins by saying that the key areas of thrust in the current international development scenario – the MDGs, the focus on increasing rich countries’ aid outflows to 0.7 percent of GDP, and the attempts in global trade circles to open first-world markets to exports from developing countries – make two implicit assumptions. First, that rich countries can shape development in poor countries. Second, that the key requirements for this are money and trading opportunities. These assumptions, the paper says, ignore some key lessons of the past four decades; that poor countries themselves largely determine their development status, and that financial aid and opening of rich countries’ markets have a limited ability to trigger growth, especially in the poorest countries. And therefore, that energy and political capital concentrated on these efforts should not draw attention away from other methods by which ‘rich countries can do less harm’.

Lets have a look at some examples –
· The two current darlings of development are India and China. Both have prospered and reduced poverty without benefit from trade preferences and without much aid[3]. Sub-Saharan Africa, on the other hand, received on average 12 percent of GDP in aid in the 1990s, a period when per capita growth declined by 0.6 percent every year.
· Nicaragua and Vietnam are poor countries with primarily agricultural economies, and both have benefited from substantial foreign aid. Yet, only Vietnam has experienced steady growth and poverty reduction, despite not being a member of WTO and Nicaragua having loans written off and having preferential access to US markets.

Global Trade: There is little doubt that the international trade system is iniquitous.
· Rich countries place highest tariffs on imports that are important to developing countries, such as garments and agricultural produce.
· Tariffs escalate as the level of processing increases, discouraging industrialization.
· Trade negotiations lack transparency and exclude poor countries.
· Using WTO procedures require money and technical expertise.
And yet, there are remarkable success stories; China and Vietnam in manufactured goods, India in services, Chile in wines, and many more. It is therefore useful to understand the effect of tariffs, subsidies and barriers in rich countries on poverty in poor countries.

Suppose, for example, the much-reviled agricultural subsidy in the EU was reduced and there was a rise in world agricultural prices. The big gainers would be large agricultural exporting nations such as the US, Canada and Argentina, and possibly EU citizens (less taxes but increased food prices). Poor countries, however, are usually net importers of food, and their urban poor will be hugely negatively affected. Net poverty may reduce because of gains to local farmers, but this is complicated to ascertain[4]. Agricultural liberalization may or may not reduce poverty, but its net impact either way is limited. And a reduction in trade barriers in rich countries may well leave poor countries worse off – many enjoy favorable conditions of access under preferential trade arrangements.

More Aid: International aid has done many things – eradicated small pox, reduced infant mortality rates, restored peace and order after conflict, etc. – more so when it has been targeted at specific objectives and when recipient countries have had leadership and capacity and done the right things. But aid has not been associated with sustained growth.

There are many reasons for this! Primarily, on the donors’ side, there has been a multiplicity of donors pursuing many, often inconsistent, objectives, disbursing to innumerable projects and imposing onerous conditions. On the recipients’ side, those that are most in need have been least able to use aid well due to institutional deficiencies.

The paper goes on into how rich countries can do less harm – interesting, maybe useful, and also easily accessible on the net via a google search on ‘birdsall help poor countries’.

To conclude: Many of us already know that aid money is not a driver of economic growth and poverty alleviation – certainly not in India. But we do tend to adhere to mantras on the benefits of freer trade and the evils of first-world protectionism. I have myself had arguments with European counterparts along the lines of ‘if you were serious about ending poverty and hunger you would dismantle your common agricultural policy instead of creating the problems first and then throwing a few lollipops around’[5]. The viewpoint expressed here, not ‘trade or aid’ or ‘trade and aid’ but ‘neither trade nor aid’, does provide food for thought. I am not sure if I subscribe completely as yet and, if I did, what invective would be thrown at me. Neo-liberal? Neo-conservative? Neo-classical?


Acronyms / Jargon Watch
DFID Department for International Development, the Government of UK
EU European Union
GDP Gross Domestic Product
INGO International NGO
MDG Millennium Development Goal
NGO Non-governmental Organization
TRIPS Trade related aspects of intellectual property rights
UN United Nations
WTO World Trade Organization
[1] This is credited to the Spanish-American intellectual George Santayana, though various versions have appeared in different places including in William Shirer’s ‘Rise and Fall of the Third Reich’.
[2] Management students would remember Maslow and the movement from basic needs to self-actualization.
[3] According to DFID, assistance to India stands at about 0.2 percent of GDP. China’s would be even less.
[4] Factors such as the extent of skew in landholdings, the effect of higher prices on agricultural wages, the ability of the agricultural sector to drive the economy, inter alia, would be critical here.
[5] One of these, incidentally, at the WTO headquarters in Geneva, where I had spent a day in 2001 as part of the Chevening Gurukul scholarship.

Thursday, March 29, 2007

Time Out

TIME OUT
A 2-Pager by Ajit Chaudhuri
March 2007

Most of us do not have smooth career paths. There are negative slopes, dotted lines and blank spaces in our achievement versus time graphs, and periods when cynicism levels are high, when completing sudoku puzzles become a major objective, and when we are particularly susceptible to proposals from friends to walk across the Himalayas. Some of us have dropped out completely or moved off-track to do something different, and some have searched for stimulation through extra-marital misadventures or other self-destructive behaviour. Such are the effects of the ‘outs’.

Those of us plodding away within an organization are familiar with the ‘outs’, we see them often enough and experience them occasionally. Frozen out when stylistic idiosyncrasies clash with a superior’s personality or an organization’s culture. Burned out by the toxic triad of an overwhelming workload, the inability to see the positive impacts of one’s labours, and the failure to achieve one’s career ambitions. Psyched out by biological or psychological changes that trigger a midlife crisis. Flaming out from a fundamental incompatibility between one’s abilities and the requirements of the job.

There are some alpha plus types, one had always assumed, who do not have these problems – who have a smooth, short and inexorable rise to the top, whose career graphs turn sharply upwards from their late twenties and plateau out only in the stratosphere – the supercharged ones who exult in winning, in mastering new skills and in surpassing previous benchmarks of excellence. It was therefore interesting to read an article in a recent HBR[1] of a problem that is exclusive to these types that the authors have called the Summit Syndrome (SS – with due apologies to Adolf). Interesting because it says something about the career paths of the highly successful, and interesting because it explains the gaps we sometimes see between perceived potential and actual achievement.

The first point the authors make is that a successful career is not a straight line to the top; it is more like a series of northeast pointing S-curves with each S representing a job or task. Stage 1 at the bottom of the S represents the beginning of a new role, of assessing and assembling the requirements for the climb (building a new network, forming relationships with one’s team, developing a strategy, etc.). Stage 2 represents the ascent up the slope, a period of learning and adapting to the role, of developing the appropriate levels of skill and proficiency, of figuring out how to navigate the organizational territory and the external competitive environment. Stage 3 represents the approach to the summit, which is when the onset of SS occurs – mastering the work triggers discomfort and is the harbinger of a crisis. Stage 4 represents the plateau, when the challenge has been conquered and the requirement is to coast along until the next task – super-achievers have difficulty in negotiating flat terrain and this is a time of inner turmoil and mounting confusion about career direction. Stage 5 represents the descent and is characterized by an obvious drop in performance and career-limiting behaviour.

SUMMIT PHASE
INTERNAL SYMPTOMS
EXTERNAL SYMPTOMS
Approaching
· Low level discontent
· “What happened to the excitement?”
· Subtle loss of edge
· Emerging distractions
o Hobby obsessions
o Heightened appetite for stimulation
o Daydreaming
· Attraction to unsolicited offers
Plateauing
· Loss of enthusiasm
· Fearing loss of career momentum and legacy
· ‘What happened to my goals?”
· Working harder to do the basics
· More serious distractions
o Fancier adventures
o Curiosity about alternate lifestyles
o More vacations
· Unorthodox career choices attract disproportionate consideration
Descending
· Feeling lost
· Cynicism, anger, frustration are near the surface
· “What happened to my career?”
· Working harder to conceal disengagement
· Severe distractions
o Substance abuse
o Sexual indiscretions
o Unconscious career sabotage
· Bailing out

SS is quite unlike the other “outs”. This is not a once-in-a-lifetime event like a mid-life crisis. Those in the initial phases of SS have not been frozen out or marginalized – they reside in the inner circles. They rarely burn out – they see the impact of their work and welcome big demands. Their capabilities are not merely aligned with organizational purpose, they are admired and celebrated by superiors, peers and subordinates alike. In short, they are the superstars – they do not have the insecurity and inferiority complexes of the victims of the “outs”. And SS is more profound for the more proficient – it causes superstars to leave the fast track, drift from one job to another, and ultimately be among those highly promising men and women who never manage to achieve the positions and goals that friends and colleagues had assumed they would. For their organizations, this uncharacteristic behaviour from those least expected to disappoint comes as a shock. Getting them back in the saddle is expensive in terms of lost contribution, organization disruption and the price of counseling – but that’s the best-case scenario. The worst is surprise departures that rob organizations of their most promising talents.

The rest of the article is about recognizing and handling SS. I am going to move from the international corporate sector to the Indian development sector, as usual. We need to attract good people in and retain them to survive. Getting them in is comparatively easy – a nice pep talk about motivation, commitment, the need to give back to the country, etc., etc., tends to suffice. Retaining them is much more difficult, organizations in the sector have little knowledge of the frustrations such people face and are constantly and continuously surprised by the sudden departures of their prodigies. Making do with the ordinary is not enough – we need to engage with the brilliant to keep this sector vibrant and in tune with the challenges faced. Bleating on about their fickle nature, their capriciousness and their turbo-charged ambition is pointless. Maybe we can learn from those with experience in dealing with them, such as the international corporate sector.

I would like to conclude by returning to the subject of the ‘outs’. There is little understanding of this phenomenon within the development sector, especially the ‘outs’ faced by the brilliant. The first ‘outs’ occur before they actually land up at the NGO’s doorstep. Their parents freak out, and they contemplate a life out of pocket. Nothing new with the former, plenty with the latter! Salary differentials, even at entry levels, between the development sector and outside are now humungous. And today’s youth do not ask Mom and Dad for money, they prefer a bank loan for their post-graduation. And yet, despite poor salaries, despite EMIs, despite parental, peer and to-be-spouse pressure, and despite plenty of options, some brilliant people do come into the sector.

The mismatch between the organization’s requirements and the individual’s abilities invariably occurs from the beginning. A best-case scenario is when the recruit is given responsibilities that include the hurly-burly of dealing with communities (something that no post-graduate degree prepares one for), forcing her/him to sink or swim. If s/he sinks – good riddance! If not, you have somebody worth keeping. The worst is when the organization dumps all its English-writing requirements (proposals, reports, blah, blah, blah!) on this person – a quick flame out happens. Bosses, such people have not come to be glorified translators and candy floss for donor visits. The disservice you do to the sector far outweighs the immediate relief from meeting writing deadlines.

Empirical evidence points to the first burn out happening 2 to 3 years after the person joins. And while the results of our work are right in front of us, the other elements of the toxic triad are joined by a third – that city kids working in the boondocks miss the lights, sound and action and feel that life is passing them by. Cynicism and faultfinding set in, and they pick the wrong fights and create tension. What should the organization do? One, recognize it for what it is – a burnout and not some fundamental deficiency in either the individual or the organization. Two, provide space for introspective thinking (facilitate long term training, for example). Three, if it comes to losing the person, make sure that the process is pleasant and positive. Use your contacts within the sector to place the person suitably and ensure that your recommendations are not coloured by the recent past. And four, maintain the relationship – the brilliant will always rise in the world.

The most dangerous of the ‘outs’ happens to the brilliant in mid-life, because those that have stayed in the sector are now leaders and policy-makers. Many re-evaluate their objectives at this stage, weigh them up against financial and physical security concerns[2], and get psyched out. Organizations lose their way when this happens to the boss – the bricks and mortar, vehicles and salaries become more important than the communities served and problems addressed. The donors become kings, and others within the organization, especially the other brilliant, become threats. Everything works to enable this one person to stay in position. Vision, mission and values turn into more jargon.

Some survive the ‘outs’ and go on to do their best work later in their careers. But the unrealized potential and overall loss to the sector of those who don’t is huge. It would be useful for development organizations to work out ways of dealing with the ‘outs’.



[1] “Crisis at the Summit”, George Parsons and Richard Pascale, Harvard Business Review of March 2007
2. An old saying goes - men, when they turn 40, rethink the value of honesty, and women of virtue.

Wednesday, March 14, 2007

A Business Trip

A BUSINESS TRIP

A 2-Pager by Ajit Chaudhuri

Introduction: An article in a management journal that does not leave you with a headache! Development writing in a management journal! Something on the development scene in the US of A being relevant to India! The paper “Should Non-Profits Seek Profits” by William Foster and Jeffrey Bradach in the Harvard Business Review of February 2005 was all these things, and would qualify as a must-read to those like me who have never seen an NGO run a successful income generating venture and wonder why this is so, and why so many continue to want to do so.

The Situation: Apparently, today it is routine for non-profit organizations (read NGOs) to run a business venture and most believe that earned income will play an important role in bolstering an organization’s future revenues. Revenue generating initiatives are being launched or considered in almost every non-profit domain, and a flood of publications, events and experts have sprung up, including how-to books with titles like “Selling Social Change (Without Selling Out)”. The Yale School of Management, in a paper entitled “Enterprising Non-Profits: Revenue Generation in the Non-Profit Sector” reports that half to two-thirds of the ventures they examined were profitable or breaking even – a claim that Foster and Bradach viciously trash by casting doubts on the sampling and enquiry methodology and the analysis – have inter-university rivalries replaced the cold war?

Why is this so? First, the obvious – given the way philanthropy (i.e. funding) is practiced today, mostly small short-lived grants restricted to specific uses that are hard and frustrating to attract, the allure of earned income is understandable because it comes with no strings attached. Second, the general enthusiasm for business in the booming 1990s percolated into the non-profit sector, with managers wanting to be active entrepreneurs rather than passive bureaucrats and with organizations keen to be viewed as disciplined, businesslike and innovative to stakeholders. And third, financial self-sufficiency is a goal to non-profits and earned income is a means to attaining ‘sustainability’.

Skepticism! Foster and Bradach claim that there are reasons for skepticism; that few ventures actually make money, that most ventures are badly evaluated, with potential financial returns exaggerated and challenges routinely discounted, and that commercial ventures can distract non-profit managers from their core social missions, and even subvert those missions. Earned income ventures, they say, have a role in the non-profit sector, but unrealistic expectations are distorting decisions, wasting precious resources and leaving important social needs unmet. They conducted a survey (and a fair bit of effort goes into explaining how their sampling methodology, etc., unlike Yale’s, is correct and the results therefore applicable) that indicated that 71 percent of ventures were unprofitable, 24 percent profitable and 5 percent breaking even. Of the profitable, half did not fully account for indirect costs. “Simply put,” they conclude, “there is every reason to believe that the lion’s share of earned income ventures do not succeed in generating revenues beyond their costs.”

The disadvantages of non-profits: Running a business is challenging under the best of circumstances, and only 39 percent of small businesses are profitable. The odds are stacked even higher against non-profits because –
· Conflicting priorities – non-profits focus on both financial and non-financial concerns, such as paying a ‘living wage’ (I think this means not squeezing your employees sufficiently), hiring from some disadvantaged pool of people, pricing products lower so that they are affordable to low-income groups, or offering products that are ‘better’ or ‘healthier’ than market norms – all appropriate social objectives, but they put non-profits at a disadvantage in a highly competitive market.
· Lack of business perspective – non-profits tend to overlook the difference between revenues and profits, unremarkable when revenues are in the form of grants that have a negligible cost attached to raising them but critical in the viability of a business venture. They also invariably do not include the cost of holding inventory, or indirect costs, or overheads, or top management time, in their costing structure. Start-up costs, too, tend to be overlooked as these are invariably met from philanthropic funding and thus leave the organization without investors clamouring for returns.
· Philanthropic capital and escalation of commitment – when they realize that a venture is unprofitable, managers rarely pull the plug and instead opt to throw good money after bad in the hope of turning the venture around and thus avoiding the embarrassment of failure.

A question of mission: A cold look at any venture will conclude that it won’t yield any real revenues – does this mean that all should be abandoned? Foster and Bradach feel that a venture can be attractive without breaking even if it contributes to the core mission of the organization (the example they give is of a catering operation for an organization that works on training the unemployed, in which the primary objective is to provide valuable on-the-job training). Research reveals that many ventures fail the mission as well as the financial test (often the two compete with each other), and the lure of potential profits tend to distort an impartial evaluation of a venture’s mission contribution. A good assessment of a venture’s mission contribution would return the non-profit sector to its fundamental principles, as non-profits are non-profits because the marketplace does not take adequate care of the needs they address.

In conclusion: The situation in India is, no doubt, different. There are donor organizations with a long-term perspective and an interest in seeing a non-profit organization develop. Many Indian non-profits, too, are highly capable organizations with a clear sense of mission and an ability to understand what contributes to this and what does not. And yet, successful income generating ventures in the NGO sector are few (I have yet to see one) for the reasons outlined above and some more – an inability to distinguish between money to the community and money to the organization and an ability to attract only people like me who are genetically unable to do business (else they would!) come to mind. Happily, many do pass the mission test.

Acronyms / Jargon Watch
HBR Harvard Business Review
Mission Core objectives of an organization
Non-profits The equivalent of non-governmental organizations

References:
“Should Non-Profits Seek Profits”, William Foster and Jeffrey Bradach, Harvard Business Review of February 2005
“Enterprising Non-Profits: Revenue Generation in the Non-Profit Sector”, Cynthia Massarski and Samantha Beinhacker, The Yale School of Management - The Goldman Sachs Foundation partnership on Non-profit Ventures

Decline & Fall of the NGO

THE DECLINE AND FALL OF THE INDIAN NGO[i]
A 2-pager by Ajit Chaudhuri

Back in the early 1990s, the Indian non-governmental development sector (referred to hereafter as the NGO sector) was a source of pride to me. In most underdeveloped countries, international donor agencies would have to set up their own implementing operations; this meant that plans were formulated in London, New York, Geneva, Stockholm, etc., that significant sums were spent on expatriate staff and administration, and that local communities were reduced to the status of recipients. Not in India! Here, there was a small, vibrant and independent NGO sector that linked donors and communities, carried the aspirations and requirements of one to the other, and was cost effective in its operations. Here, donors did not work directly.

They still, for the most part, don’t. And it is a strange time to be talking of the NGO sector in terms such as decline and fall – the sector receives Rs. 7,000 crore annually in grants from abroad, a number that has been shooting up rapidly in the recent past, and the number of organizations with governmental permission to receive foreign funds (what is called the FCRA) stands at about 35,000[ii]. The sector continues to be a prime customer of vehicle manufacturers and the international travel industry, as well as to occupy some great real estate and provide employment to a large number of otherwise unemployable people (such as me). So what’s the problem?

I’m not too sure, but I do see some disquieting trends.

The first is that I have not come across any great new ideas from the NGO sector for a long time. The business of creating buzz in development is back with the government, with exciting initiatives such as the NREGA and Panchayati Raj that a) have the ability to address root causes of problems and b) have no or at best peripheral roles for NGOs. The NGO sector is not driving the nation’s development agenda or the debate on poverty any more – it is in ‘business as usual’ mode.

The second is that brilliant young people are not coming into the NGO sector. The developmentally inclined among them see NGOs as part of the problem, not a solution, and are looking at other forms of organizations and activities to address matters including for-profits and financial services. The mediocre young, to whom development is a career option rather than a calling, are more inclined towards the various layers of touting organizations in the sector because they are based in cities and salaries are higher.

The third is that, like ideas, I have not come across too many great young NGOs[iii] for a long time as well – and I am in the business of looking. It seems that good new organizations dealing with development, like people, are taking new forms such as for-profits, Internet start-ups and non-banking financial companies. And those NGOs that are being set up tend to have the limited ambition of emulating their role models in the NGO sector – which are either the public service contractors, the fancy infrastructure, lifestyle and talk-wallahs seen making loud sucking sounds in the corridors of power, or the downright venal and corrupt. Nothing original here!

The fourth is that the skeletons in the NGO sector’s collective cupboard – the dirt, corruption and the egregious practices – are finally hitting the public space[iv]. At the same time, the inability of anyone within to see, hear, or speak of wrongdoing (what I refer to as the 3-Monkeys Syndrome) continues unabated. While there has been some cursory action from within the sector[v], it seems a case of too little too late. Nobody in the NGO sector, it appears, is willing to take a strong stand. The government has no such compunctions, however, and we are slowly seeing a tightening of regulations that address some of these issues but make it difficult for the honest (and silent) minority.

The fifth is that the role of mobilizing people and providing a forum for opposition and protest has moved from the NGO sector to the extreme right and left. A look at the movements against land acquisition for SEZs, or the one against mining in Vth Schedule areas, all of which seem obvious cases for NGO action, and they are conspicuous by their absence. Those that should have been in the forefront, who claim to speak for small farmers and tribals, appear to be on the side of the corporates involved. I wonder why!

These trends point to larger problems within the NGO sector, and while there is much ranting and raving about the obvious ones, government corruption, the lack of dedicated, motivated, etc., people coming in, the lure of the Mammon and so on, some critical internal issues are being papered over, including –

The individuals and organizations that blazed a trail in the 70s and 80s are ageing, and neither is being replaced. The old bosses continue to rule their empires, with cynicism and self-aggrandizement replacing fire and zeal. They also make it impossible for second lines to develop (unless it is their progeny) while simultaneously lamenting the lack of committed and capable people who can ‘stay on to take over’. Most of their organizations are sad and tired, and exist because they exist and not so as to address critical problems of the poor and marginalized. Yet, such individuals are effective at protecting their own short-term interests to the general detriment of their organizations and the NGO sector.

The role and importance of touts within the NGO sector, in the form of resource organizations, nodal NGOs, training institutions, research and documentation setups, development consulting businesses, etc., has increased considerably. There are now layers upon layers of these between the donor and the NGO that actually uses the money, sitting in Delhi and state capitals, knowing donorspeak, writing proposals to formulas, and providing a variety of services to donors on a 20 (or whatever) percent commission. They are the new patrons of the Indian NGO and now claim to speak for and on behalf of the NGO sector[vi]. I have yet to see evidence of a mandate for them for this role.

With a now widespread belief in the mainstream that NGOs are irrelevant combined with little evidence to show that NGOs have been more effective than the state (for all its inefficiency and corruption) in providing development, there is a growing move to scuttle the NGO sector through restrictions and controls and let it sink in its own quagmire. But, before you start saying ‘to hell with the whole bloody lot of them’ and before, if you are a young professional within, you start retraining and looking around for opportunities, take a minute to think of the consequences to the country of a dormant NGO sector.

First, NGOs form an important component of civil society and thereby a forum for debate and action that is out of government circles. Without NGOs, the state would become much more powerful. Non-state opposition would move to the fringes. We are already seeing this with the government and the private sector cozying up to the detriment of vulnerable sections of society. And the extreme left groups that are now active in more than 100 districts in the country have an agenda that is similar to that of NGOs (other than the violence and overthrow of the state). Not coincidentally, the parts of the country facing the problem of insurgency are also the parts with little genuine NGO activity.

And second, who will focus on the very poor, the marginalized, etc.? The government? The new genre of development organizations? In both cases, unlikely! The state can pass high-minded laws, but would always require grassroots support and pressure to implement them effectively. And the new guys would be lost in a world without Internet connectivity, where proposed beneficiaries have little education and no marketable skills.

To conclude – most people would agree that NGOs are in a state of decline despite some glitzy statistics on foreign contributions. It is my contention that it is not in the country’s interest that they die out. Can we, on the inside, do something? As a beginning, and at the very least, we need to give less respect to a bunch of has-beens and touts who have built empires on public money raised in the name of poor people. And we need to stop behaving like the 3 monkeys – there is little disconnect between others’ bad practice and our own futures. The impetus for reform has to come from within – let us not merely react to government and public scrutiny. Or else, better brush up those CVs.

Acronyms / Jargon watch
Vth Schedule Areas Areas that have a tribal majority
Donorspeak That peculiar language of donor organizations
FCRA Foreign Contribution (Regulation) Act
NGO Non-governmental Organization
NREGA National Rural Employment Guarantee Act
SEZ Special Economic Zone
[i] With apologies to Edward Gibbon
[ii] “The Noose Tightens”, an article by Neeraj Mishra in India Today issue of 29th January 2007
[iii] I should protect myself here by mentioning that there are exceptions
[iv] There have been three articles I have read in the past month in the mainstream press with headlines combining the words corruption and NGOs.
[v] One such is the formation of the Credibility Alliance – purely voluntary with no checking system in place and no means of expelling members who are not complying with the standards.
[vi] A recent example is a meeting that a group of these touts had on behalf of the NGO sector with the Home Minister on the new FCRA bill. They had not done Mr. Shivraj Patil the courtesy of reading the new bill – so when he asked them specifically which passages were objectionable to NGOs there was a flummoxed silence followed by hemming and hawing. You can be sure that the NGO sector’s purpose was not served.

Health for Sum

THE NEXT BIG IDEA by Ajit Chaudhuri

This two-pager is the result of a series of coincidences. Buried away in a pompous piece in India Today on ways to make our country a better place was a tiny, completely unsubstantiated but yet interesting statistic - that a health insurance scheme for the poor would cost Rs. 248 per poor family per year (way number 13, for the superstitious). A little before this, EPW had one article outlining community health insurance in general and another detailing the CHI scheme managed by an NGO in southern India. Somewhere in-between was the request made to me by India Today’s watchman, a daily wager called Hira Lal, for a loan to help meet the costs of his brother’s son’s operation in AIIMS – connecting the articles to a problem faced by a real person.

We all know a Hira Lal, and we all know the financial problems caused by serious illness within the family. We all know that identifying the poorest ten percent in any community is simply a matter of finding the women headed households and those which have or had a long term illness within the family. We all see that the public health system has collapsed, and is now accessible only to government servants, politicians (the lower ones on the pecking order, who can’t leverage the public exchequer to push off to the US) and their friends and relatives. We all see that most private hospitals would give leeches and bloodsuckers an inferiority complex. We all see that the poor avoid getting healthcare and, when they do, go broke in trying to pay for it – in fact, the families of 24 percent of all Indians hospitalized fall below the poverty line as a direct result of hospitalization, and expenditure on healthcare is the single biggest cause for a non-BPL household to go BPL. There is a need for radical new ideas in the field of healthcare for the poor.

What is CHI? The definition, for the definitionally inclined, is: any not-for-profit insurance scheme that is aimed primarily at the informal sector and is formed on the collective pooling of health risks in which members participate in its management. CHI schemes (should) aim to provide low cost healthcare, protect participants from high hospitalization costs and encourage participation by communities in their own healthcare. A CHI scheme has three basic stakeholders - the community, the insurer and the health maintenance organization or healthcare provider. The former EPW article studied 12 existing CHI schemes in India and identified three basic designs –
· HMO-led, where an NGO/hospital provides healthcare, purchases insurance from an insurance company and runs the insurance programme, i.e. generates awareness within the community, collects premium, submits claims, manages reimbursements and monitors for fraud.
· Insurer-led, where an NGO is the insurer, runs the insurance programme and purchases healthcare from independent providers.
· Intermediate, where the NGO runs the programme and plays the role of an agent, purchasing healthcare from providers and insurance from insurance companies.

Some of the characteristics of the CHI schemes studied were –
· The communities insured included tribal populations, dalits, farmers, women SHG members, self-employed women, etc. Some used existing CBOs to piggyback the scheme upon, such as SHGs, unions, cooperatives, etc. In some the unit of enrollment was individual and membership in the scheme voluntary and in others, enrollment was in groups or families and membership mandatory. Enrollment ranged from 1000 to 17 lakh members. Premiums per person per annum were always under Rs. 100.
· Many schemes had important exclusions such as pre-existing illnesses, self-inflicted injuries, chronic ailments, TB, HIV, pregnancies. Most reimbursed the direct cost of treatment, while some reimbursed the loss of wages as well. Some, especially the HMO-led ones, were cashless, while others had the patients paying bills and getting compensated later. Most schemes had a fixed upper limit ranging from Rs. 1250 to Rs. 1 lakh per person per annum.
· The problem of adverse selection (only the old/sick enrolling in the scheme) could be prevented by mandatory enrollment or having a larger enrollment unit. The problem of moral hazard (the health provider sticking you for as much as they can) could be prevented by capping fee structures and ensuring standard treatment guidelines.
· The subscription rates to CHI schemes varied from 10 to 50 percent of the target community when enrollment was voluntary. The reasons for this being low were – no immediate benefit perceived, premium too high, family size too high, confidence in own well-being and the source of healthcare too far.
· Utilisation rates ranged from 1.4/1000 to 240/1000. The low rates were usually because of non-financial barriers to accessing health care (hospital too far, loss of wages), while adverse selection caused the high rates.
· Some were run purely from premiums raised from the community, some relied completely upon external resources such as government or donors, and most supplemented local resources with external ones.

In the authors’ opinion, good CHI schemes protect the community by covering 100 percent of the direct cost of illness and some of the indirect one’s as well. They cover all illnesses and provide the financial benefit at the source of healthcare, thus ensuring that there are no waiting periods which patients have to cover. In addition, the premium needs to be affordable, the NGO and CBO credible and the administrative load of the scheme minimal. The insurer has to be involved hands-on. The main pitfall is the lack of good providers as the Indian private healthcare sector is unregulated and unaccountable.

The second article was of particular interest to me because it described the efforts of Ashwini, an NGO that I visit about once a year, in the field of CHI and it was to Dr. Nandakumar Menon of Ashwini, one of the authors of the paper, that I was able to address specific questions on the practicalities. He said that, in addition to all the above, CHI is viable only when all stakeholders to the scheme have an interest in reduced costs, and this is possible only in an HMO-led design in which preventive health care and a decentralized outreach programme are part of the package. Including all costs, i.e. in-patient, referral and community outreach, a CHI would come to Rs. 150 per person per annum or about 15 lakhs a year for a population of 10,000.

There is a gradual realization that access to healthcare is a serious problem, that access to medical insurance is available only to the middle class and above, that platitudes about the importance of public sector health care remain what they are, and that something needs to be done. Community health insurance schemes could be the next big idea.

References
Point 13, “57 Ways to Make a Better Place”, India Today issue of August 23 2004
Devadasan, Van Damme, Ransom and Criel, “Community Health Insurance in India: An Overview”, Economic and Political Weekly of 10-16 July 2004.
Devadasan, Manoharan, Menon, et al, “Accord Community Health Insurance: Increasing Access to Hospital Care”, Economic and Political Weekly of 10-16 July 2004.

Acronyms
BPL Below the Poverty Line
CBO Community Based Organisation
CHI Community Health Insurance
EPW Economic and Political Weekly
HMO Health Maintenance Organization
NGO Non-governmental Organization
WHO World Health Organization