Why Upward Mobility Needs Markets, Not Just Gadgets
Chikoos arrive in many sizes at farmers auctions in Western India, and the fruit must be separated by grade after the bidding ends. My cousin invited me to watch the process recently, and I was struck by what I saw.
Sorting machines, donated by aid organizations to boost local agriculture, sat idle while women did the job by hand.
The technology might have worked well in a different setting, like the automated tomato facility I visited a few years ago in California. But the machines seemed to provide no use in this little village.
Another gadget, however, was working well. As I watched the sorting continue, one worker reached for her state-of-the-art smartphone. Such devices are now nearly ubiquitous in India, often coming with affordable 4G networks suitable for livestreaming cricket matches and running other apps.
Major companies like Airtel, Apple, Google, Reliance, Samsung, Tata, Vodafone and Xiaomi all have financial incentives to keep the telecommunication market going. But local players also have a stake.
Street vendors and shop owners who once provided long-distance calling booths have transformed themselves into sellers of cell phones and prepaid data cards. Diverse contributors work together in a grand ecosystem, each playing a role and adapting to disruption or getting left behind.
Leaders focused on solving poverty and other social challenges can draw important lessons from the tale of two gadgets — the sorting machine set aside in the village market and the smartphone that has become essential to daily Indian life.
Donors with enough money can go into any community in the world, isolate a problem and fix it with existing technology. The success rate is close to 100% when you give stuff away for free. But gadgets introduced in a vacuum will likely have a minimal and short-lived impact.
The developing world is littered with abandoned or misused technology that aid organizations failed to integrate with local enterprise.
Smallholder farmers in Africa, for example, received cold chambers for vegetable storage in the 1980s. The donated equipment worked great until the compressors started breaking. Nobody had an economic incentive to fix them, so the metal hulls turned to junk.
Some were salvaged as sleeping chambers, but that wasn’t the original mission.
Jan Willem Rosenboom from the Bill & Melinda Gates Foundation describes the general frustration. “Pilots never fail, and never scale,” he says.
The prospects for lasting impact improve when the focus shifts from providing gadgets to creating markets. Successful interventions harness the entrepreneurial spirit in the local population to develop robust supply chains that survive the last mile.
The Indian smartphone market provides one example of a sustainable, scalable solution in difficult terrain.
Other success stories from Honduras and Kenya are documented in my new research with Sonali K. Shah and Steven T. Sonka at the University of Illinois. We identify aid efforts that start small, spread to neighboring countries and continue growing after the philanthropy and state subsidies stop.
The key in every case is the introduction of private enterprise at the right time and place.
Aid organizations do better than business in the early stages of an intervention, where lack of infrastructure and other challenges limit the potential for profit. But once a market begins to emerge, business does better at sustaining progress, scaling up and adapting to change.
Successful social sector leaders recognize the reality and plan for the eventual passing of the baton — like succession planners in the corporate world.
From the beginning, they anticipate market gaps and leverage local enterprise. They recruit talent to fill crucial roles, provide necessary training and sometimes seed startup ventures.
In one example from our study, local artisans reinvented themselves as tinsmiths ready to build and repair corn silos. They took their place in a supply chain that would not have existed without aid intervention, but would not have survived or scaled up without profit.
That’s the power of markets.
When gadgets break, somebody fixes them because their livelihood depends on it. People will exert entrepreneurial energy and do what it takes to find sustainable, scalable solutions to problems when the payoff is financial security in the present and a better life for their children in the future.
Success in one village can spread to 10,000 villages with impact that lasts for decades.
Business and nonprofit organizations often clash on the front lines of international development. But when leaders from the various sectors work together to build markets, not just gadgets, they can rewrite Rosenboom’s law.
Pilots never fail, and often scale.