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.
Wednesday, May 30, 2007
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.
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.
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
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.
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
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
Here Come the BRICs
Here Come The BRICs
By Ajit Chaudhuri
Goldman Sachs, a Wall Street broking and investment firm, came out with a report in October 2003 entitled “Dreaming with BRICs: The Path to 2050” (Global Economics Paper No: 99 by Dominic Wilson and Roopa Purushothaman). This said that Brazil, Russia, India and China (the BRICs) would be among the world’s largest economies by 2050 and the drivers behind world economic growth over the next 30 years. The report did not really catch my attention, apart from wondering how the acronym would look had it been Paraguay or Pakistan instead of Brazil, until it was heavily quoted during the testosterone-filled initial election campaign of the then ruling party in India earlier this year. Are these guys (Goldman Sachs) serious, I remember wondering at the time, or is it another of those 3 monkey reports (see no problems, hear of no problems, speak of no problems) that ultimately aim to sell something to suckers. What does the report say, and what does it not say? What follows is my take on this.
What does the report say? In a nutshell, that the BRICs would be a much larger force in the world economy over the next 50 years. Today, the BRICs are 15 percent of the G6 (US, Japan, Germany, UK, France and Italy) in dollar terms. By 2025, they are likely to be more than 50 percent of the G6, and will overtake the G6 by 2039. Of the G6, only the US and Japan will be among the 6 largest economies in the world in 2050. China will be the second largest economy in the world in 2016 and will overtake the US in 2041. India will be the third largest economy in 2050, and will be about four times larger than the fourth largest, Japan. The attached table lists the world’s large economies in 2050.
The rise in GDP in the BRICs will be most dramatic over the next thirty years before tapering off. The main drivers of the increase will be real growth (accounting for about 67 percent of the increase), capital accumulation and appreciation in currency as real exchange rates converge on the purchasing power parity rates. India will be the only significantly growing economy of the ten in 2050, with GDP growth projected at more than 3 percent at the time. It will also be the only country in which working age population will continue to increase. Per Capita Income (PCY) in the BRICs will still be significantly lower than the G6 countries (see the attached table) with the exception of Russia. India’s PCY will be by far the lowest, about half of China’s and 20 percent of the US’s (which will be by far the richest).
The BRICs will therefore emerge as an engine for economic growth, demand growth and spending power over the next thirty years, and will offset the impact of low growth and ageing populations in advanced countries. In 2050, the largest economies (by GDP) will not be the richest (by PCY), thus making strategic choices for firms more complex.
These predictions are made using demographic projections and a model of capital accumulation that are explained in the paper but are unintelligible to the likes of me, and I am unable to question the mathematics of it all. The key assumptions are that the BRICs will maintain policies that are supportive of growth, i.e. stable monetary and fiscal policies (low inflation, low deficits), fostering of institutions such as legal systems, markets, financial institutions, health and education systems, and openness to trade and FDI. Interestingly, the report attributes an additional 0.3 percent of annual GDP growth over a thirty-year period to every additional year of schooling for the average citizen.
What does the report not say? My feelings upon having read the report are that it is certainly a bold one whose predictions grab attention - the BRICs, with the possible exception of China, don’t look like global economic superpowers of the future today. The predictions come across in the report as more or less inevitable. Are these actually so? Professor Paul Kennedy, a historian from Yale University, was talking about the report at the India Today Conclave earlier this year and was asked what the main threats to the predicted scenario in 2050 would be. He listed three. The first, he said, was that of maintaining social cohesion in a high growth environment. The second was the temptations of superpowerhood that high growth would bring, especially that of increasing expenditure in unproductive areas such as defense. And the third was his doubt whether the Earth’s ecology and environment would be able to handle 3 billion Chinese and Indians having lifestyles and consumption patterns similar to that of Americans today, cars for every two people and all.
The other matter that the report throws little light upon is the nature of spread of GDP within the BRIC societies. The PCY is an average – for India, for example, it gives no indication as to whether we are going to be a nation of 50 or 100 million very rich and a very large number of very poor, or a more egalitarian society. What would the social, economic and geographical fault lines look like during this period of growth? And would the pursuit of policies that spread wealth negate policies that create it? Maybe there are a few things about the India of 2050 that are still open to today’s influence.
Country
GDP in 2050 (2003 US$ b)
PCY in 2050 (2003 US$)
China
45,000
31,000
US
35,000
84,000
India
28,000
17,000
Japan
7,000
67,000
Brazil
6,000
27,000
Russia
6,000
50,000
UK
4,000
59,000
Germany
4,000
49,000
France
3,000
53,000
Italy
2,000
41,000
Acronyms
BRICs Brazil, Russia, India and China
FDI Foreign Direct Investment
G6 US, UK, Japan, Italy, Germany and France
GDP Gross Domestic Product
PCY Per Capita Income
By Ajit Chaudhuri
Goldman Sachs, a Wall Street broking and investment firm, came out with a report in October 2003 entitled “Dreaming with BRICs: The Path to 2050” (Global Economics Paper No: 99 by Dominic Wilson and Roopa Purushothaman). This said that Brazil, Russia, India and China (the BRICs) would be among the world’s largest economies by 2050 and the drivers behind world economic growth over the next 30 years. The report did not really catch my attention, apart from wondering how the acronym would look had it been Paraguay or Pakistan instead of Brazil, until it was heavily quoted during the testosterone-filled initial election campaign of the then ruling party in India earlier this year. Are these guys (Goldman Sachs) serious, I remember wondering at the time, or is it another of those 3 monkey reports (see no problems, hear of no problems, speak of no problems) that ultimately aim to sell something to suckers. What does the report say, and what does it not say? What follows is my take on this.
What does the report say? In a nutshell, that the BRICs would be a much larger force in the world economy over the next 50 years. Today, the BRICs are 15 percent of the G6 (US, Japan, Germany, UK, France and Italy) in dollar terms. By 2025, they are likely to be more than 50 percent of the G6, and will overtake the G6 by 2039. Of the G6, only the US and Japan will be among the 6 largest economies in the world in 2050. China will be the second largest economy in the world in 2016 and will overtake the US in 2041. India will be the third largest economy in 2050, and will be about four times larger than the fourth largest, Japan. The attached table lists the world’s large economies in 2050.
The rise in GDP in the BRICs will be most dramatic over the next thirty years before tapering off. The main drivers of the increase will be real growth (accounting for about 67 percent of the increase), capital accumulation and appreciation in currency as real exchange rates converge on the purchasing power parity rates. India will be the only significantly growing economy of the ten in 2050, with GDP growth projected at more than 3 percent at the time. It will also be the only country in which working age population will continue to increase. Per Capita Income (PCY) in the BRICs will still be significantly lower than the G6 countries (see the attached table) with the exception of Russia. India’s PCY will be by far the lowest, about half of China’s and 20 percent of the US’s (which will be by far the richest).
The BRICs will therefore emerge as an engine for economic growth, demand growth and spending power over the next thirty years, and will offset the impact of low growth and ageing populations in advanced countries. In 2050, the largest economies (by GDP) will not be the richest (by PCY), thus making strategic choices for firms more complex.
These predictions are made using demographic projections and a model of capital accumulation that are explained in the paper but are unintelligible to the likes of me, and I am unable to question the mathematics of it all. The key assumptions are that the BRICs will maintain policies that are supportive of growth, i.e. stable monetary and fiscal policies (low inflation, low deficits), fostering of institutions such as legal systems, markets, financial institutions, health and education systems, and openness to trade and FDI. Interestingly, the report attributes an additional 0.3 percent of annual GDP growth over a thirty-year period to every additional year of schooling for the average citizen.
What does the report not say? My feelings upon having read the report are that it is certainly a bold one whose predictions grab attention - the BRICs, with the possible exception of China, don’t look like global economic superpowers of the future today. The predictions come across in the report as more or less inevitable. Are these actually so? Professor Paul Kennedy, a historian from Yale University, was talking about the report at the India Today Conclave earlier this year and was asked what the main threats to the predicted scenario in 2050 would be. He listed three. The first, he said, was that of maintaining social cohesion in a high growth environment. The second was the temptations of superpowerhood that high growth would bring, especially that of increasing expenditure in unproductive areas such as defense. And the third was his doubt whether the Earth’s ecology and environment would be able to handle 3 billion Chinese and Indians having lifestyles and consumption patterns similar to that of Americans today, cars for every two people and all.
The other matter that the report throws little light upon is the nature of spread of GDP within the BRIC societies. The PCY is an average – for India, for example, it gives no indication as to whether we are going to be a nation of 50 or 100 million very rich and a very large number of very poor, or a more egalitarian society. What would the social, economic and geographical fault lines look like during this period of growth? And would the pursuit of policies that spread wealth negate policies that create it? Maybe there are a few things about the India of 2050 that are still open to today’s influence.
Country
GDP in 2050 (2003 US$ b)
PCY in 2050 (2003 US$)
China
45,000
31,000
US
35,000
84,000
India
28,000
17,000
Japan
7,000
67,000
Brazil
6,000
27,000
Russia
6,000
50,000
UK
4,000
59,000
Germany
4,000
49,000
France
3,000
53,000
Italy
2,000
41,000
Acronyms
BRICs Brazil, Russia, India and China
FDI Foreign Direct Investment
G6 US, UK, Japan, Italy, Germany and France
GDP Gross Domestic Product
PCY Per Capita Income
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