One of the widest programs in the world is Development Aid – child
sponsorships promoted by many aid agencies and very popular in the West. Give a few dollars a month to rescue a child – or so the advertising goes. Does it work?
Since 1953 the top eight child sponsorship providers have seen nearly 3.5 million children pass through a sponsorship scheme. Surely one would expect to see a great deal of academic study and research on both the effectiveness and efficiency of these child sponsorship programs? If you don’t have a measure, how do you know if you are making a difference? How do you improve?
Bruce Wydick conducted one of the few independent international studies. Over the last 20 years a combined US $30 billion has been spent through child sponsorship programs. Wydick asked has it made a difference?
Observers of the aid world usually concentrate more on the motivation of an organisation trying to bring about change, rather than the large-scale change itself. They pick individual stories and market them letting you assume they are representative of the work of the entire agency. All that’s needed to gain a continuity of funding for an organisation or program is to create the perception that the organisation is well-meaning and trying to make a difference. For many years the aid world said it was simply too hard to measure the impact of a program so analysis was usually done on process. By this most agencies talk about how much money is spent. That is the process. Rarely do agencies promote the results.
My experience has been similar. For years the aid world said that it is too hard to measure outcomes, so reports measure process. If you pick up almost any United Nations agency report it will say something along the lines of “we were given $100 million to spend on a child literacy program. We spent $97 million. That is 97 per cent implemented and therefore the program is successful.” Rarely will the report go on to say “with that $97 million we saw an increase in child literacy from 13 per cent of the population to 27 per cent of the population, with that 14 per cent change being more efficient than a similar program in country X, but less efficient than in country Y. The lessons that we take away to improve efficiency are…”
Failing to properly evaluate the program fails to measure the impact on the people that the program is intended to serve. Bruce Wydick’s study did find improvements from child sponsorships, but the increase in school attendance as a result of the study was only two years. But is the measurement of time in school the right indicator of success?
It would make a more interesting study to determine the long-term impact of attending school on the future employability and economic well-being of the sponsored child and his or her later family. Surely if the objective of a sponsorship is to break the cycle of poverty, then the only true measure is to ask if the child is or is not now out of poverty? How many children who have passed through child sponsorships are now doctors? How many are teachers? How many are government ministers or business leaders?
More damningly, how many recipients of current child sponsorships are the children of former recipients? We should ask if pumping funds into sponsorship alleviates a problem for only a short time but makes no real difference in the long term. The truth is this is rarely, if ever, measured.
The big question around child sponsorships should be ‘have you lifted a child out of poverty?’ In over 50 years of aid has there been a macro change, or are the cynics right when they say ‘the definition of aid is poor people in rich countries giving money to rich people in poor countries’?
Wydick’s is the most optimistic study of effectiveness, but even his study finds that “we make no claims in this research that child sponsorship represents the most cost-effective path”. Regarding efficiency, his study went on to say that: “…cost of these services (sponsorships) was about $28 per month to the sponsor, and the mean number of years of sponsorship in our sample was 11.33 years. Thus the total cost of sponsoring a single child to the average sponsor was approximately $3,806. Using our more conservative impact estimate of 2.88 additional years of schooling from child sponsorship, this puts the average cost of an additional year of schooling from the program at $1,321 per year, per sponsored child.”
I raise an obvious question: Could you spend $3,806 (this is roughly 10 years average income in the DRC) in a way that achieves a better result than two additional years in school? Is this the optimum use of those funds?
Wydick goes on: “When addressing issues of cost efficiency it is important to understand that the development of international child sponsorship programs fundamentally arose from their usefulness as a marketing tool for mobilizing resources in rich countries to fight poverty in poor countries”.
In academic language Wydick has hit on the elephant in the aid room: Child sponsorships are about marketing. The child is used as a marketing tool to tug at the heart strings of people in rich countries.
There is, in my mind, an inherent dishonesty in this. If an organisation intends to use the money for broader programs, then it should market programs as such.
Perhaps criticising either the effectiveness or efficiency of child sponsorships is a risky business. There is such a feeling of goodwill around child sponsorships that an assumption of a mean, Scrooge-like person is often thrown at anyone who dares raise questions. Hence criticism is rare.
I have another view. If child sponsorships are actually succeeding in bringing families out of poverty then it is a good thing to evaluate and show the success. But is it legitimate to show the opposite? It is legitimate to question if $1,321 is best spent to gain one additional year of schooling, or if that funding should be spent more effectively in another way to break the cycle of poverty?
One must question the sponsorship effectiveness because children are in need. If the child sponsorship doesn’t break the cycle of poverty, then the sponsorship system is in reality a betrayal of those people to not question the system.
This is why it is best not to ask an agency ‘what it is they will do for this generation’. It is better to ask ‘what is it that you have done for previous generations?’
Unfortunately, the mentality of analysing effectiveness and efficiency does not exist within many organisations in the aid world. If one questions an aid agency about their effectiveness or efficiency from inside the system it can be career limiting. If criticising from outside the system one tends to be labelled ‘right wing’ and ‘focused on capitalism and money’.
Until recently, no one has ever held the aid industry to account for its results. Only recently have reports, such as the Australian Government Aid Effectiveness Review, begun to ask ‘what is the result for all our spending?’.
Aid: Is It the Only Choice? Dambisa Moyo in her book Dead Aid, put the view that in many circumstances aid has entrenched not helped alleviate poverty. In the worst case scenario, she says, the provision of aid is redirected by host governments away from the funding of development programs and into the mechanism that allows repressive governments to continue to repress their populations.
In her book The Crisis Caravan, Linda Polman points out that “to warring parties as well, humanitarian funds and supplies represent a business opportunity; indeed, aid has become a permanent feature of military strategy”. In his book The End of Charity, Nic Frances puts forward the thesis that charity can never deliver a just and sustainable world. He says that it is only through a value-centred market economy that we will ever see real social change.
When you look at the macro-level indicators between the DRC, a country with enormous resources and access to the ocean, and compare them with countries such as Rwanda, a country with no or few natural resources and no access to ports, the story becomes even more interesting. The Democratic Republic of Congo should be rich, Rwanda more likely to be poor. The reverse is true. While DRC still remains on the ‘Aid Caravan’, Rwanda is pushing for a market-driven mechanism.
There is a clear narrative that the billions of dollars that have been spent on aid in many countries over many years have not worked
. For countries to pull themselves out of poverty, they need to put in place mechanisms that break the cycle of aid and encourage a cycle of investment instead.
I remain hopelessly idealistic that we can bring the world out of poverty, but I am not wedded to the current process. We need well-meaning professionals and we need to encourage consolidation among the thousands of aid organisations that exist. We should look at professional systems, with accountability and a ruthless approach to those in employment in the aid industry who do not deliver that which the world needs delivering. For me, it is no longer good enough to be well meaning and to try, the international community must become well-meaning and succeed.
The Three Convergence Points Giving New Options Today there is a growing awareness that foreign aid must be both effective and efficient. Secondly, there is a growing awareness among some leading private-sector corporations that it is in their interest to improve the lot of the community. Every business is run by people and most people want to leave the world in a better state. While there is a fundamental disparity in wealth across the world, we do have the power to change this. The answer is not to destroy capitalism. It is to continue to regulate and modify capitalism in appropriate ways. Australia just happens to do this very well. There is a growing awareness in corporate responsibility to strengthen the communities and markets that the corporation is part of.
Thirdly, Generation Y, those who are in their late teens to mid-thirties now, are demanding social outcomes as part of their work, not just financial outcomes. Generation Y is manifesting itself in Australia much more sharply now than it is in either North America or Europe. The best graduates in Australia are not hired and fired when they leave university, they hire and fire their employer. If their employer doesn’t satisfy them, the best of them have the ability to fire the employer and get a new one. This dynamic only manifests itself in a market that has low unemployment. Australia’s unemployment rate of around 5 per cent is among the lowest in the world.
Could the private sector really be a legitimate partner in trying to bring the world out of poverty? Recently Australian resource companies have benefitted from improvements in health and education in the developing world and in Australian indigenous populations. Smarter and healthier people have led to better, more productive workforces.
Recently an indigenous group in the Pilbara region of Australia lacked clean drinking water, and the health of the group was so poor that they couldn’t be employed. Once a water supply was built, health improved and the community could be prepared for work and the region was made ready for investment. This success story was initiated by Atlas Iron, a mining company.
Should such a program be implemented from a business perspective, a community perspective, or both? How should programs like this be planned and their success measured?
Companies realise that community investment is often met with public scepticism created by the assumption that corporate gain should not be a motivating factor in community investment. But why not? Why can’t a program have both a community and a corporate benefit? How do we show that a link with profit is a positive and sustainable fact, rather than negative? If developing economy employment can be aligned with long-term corporate interests and positive returns to shareholders, doesn’t this create the often sought after win-win scenario and a long-term sustainable partnership?
Rio Tinto recently signed a landmark deal in Australia to guarantee longterm investment in indigenous health, education and employment creation, in return for access to resources. Rio Tinto took a long-term view to convert an area’s natural resource into a human resource for the benefit of the community, and yes, the shareholders. According to the United Nations, US $1 billion is spent per year through the core funding of the United Nations Development Program to attempt to alleviate global poverty.
Between BHP Billiton, ANZ, NAB and Rio Tinto nearly US $500 million per year is spent on community investment programs. This is half of the UNDP core budget from just four companies with community investment heads based in Melbourne, Australia.
When you add in the rest of the world, it is estimated that corporate community investment is worth in excess of $59 billion per annum. The entire UN system, including peace-keeping and political affairs has a budget of around US $15 billion.
Surely then we need to reassess the private sector role in development? We should look to synergies with private sector development investment not just public sector development aid that would improve both community benefit and return to shareholders?
Do we or don’t we accept the profit motive as part of the development solution?
In the 50 countries in which the Australian government has an aid program, nearly US $5 billion is spent annually in aid, and nearly $90 billion is earned bilaterally in trade. Most of this trade is in resource-rich countries where Australian resource companies are among the leading players. Perhaps it is time to look at linking the aid and trade agendas for benefits to companies, communities and governments. In areas without natural resources, are there ways to tap other private sector skills for their development?
Is it possible to foster a culture that not only celebrates and encourages business involvement within social development? Why not look for social return on investment partnered with financial return on investment when planning corporate programs?
Given the breadth of resources and strength of dynamism wielded by the private sphere, there exists incredible potential for significant social impact in conjunction with enhanced shareholder returns. In many instances, social return may work in conjunction with achieving a commercial return when measured. This measurement is an innovative and emergent new space. Australian resource companies are among the global leaders in this space.
Do Australian companies that cut their teeth learning lessons of intercultural workings in indigenous communities have an unexploited comparative advantage in expanding work into developing economies? Have Australian companies maximised their advantage?
If good business is to engage development and environmental concerns in a productive manner, then there exists an enormous potential for positive action beyond what has so far been explored. The most successful companies are looking to align these win-win opportunities with their business models.
BHP Billiton, Rio Tinto, ANZ bank and National Australia Bank are four companies that the community at times likes to pillory in the press. They’re often accused of making massive profits, particularly by the Occupy Movement. While I agree that we should kick someone when kicking is due, do we pat on the back when a patting is due?
When one analyses some major corporate approaches to community investment programs we see the desire to do programs well, measure their impact and justify that impact in both community and financial terms. One can see a change evolving in the corporate landscape. Australia is playing a significant role in the evolution.
BHP Billiton, Rio Tinto, ANZ and National Australia Bank have significant footprints in Australia. Surely the nature of the Australian economy and its position in the economic cycle gives this country a great opportunity to understand and maximise that three-way global convergence point before other economies. If Australia grasps the opportunity to understand how these three convergence points work, not only can the country create a new global leadership position, it can provide itself and those in need with a brighter future. Maybe Australia can lead the way in taking ‘Shared Value’ to the next level – to be a ‘Grand Prix model’ not a ‘Billboard model’?
Maybe the key is in building new partnerships? Maybe we could create a new model for private-sector-based community development?
Drive down a typical highway and you’ll see a succession of billboards, each one a stand-alone advertisement for a single brand. Watch a Grand Prix race, on the other hand, and you note a different approach: every car carries a multitude of brands. These complicated, high-performance machines are expensive to build and maintain. With just one sponsor, a car wouldn’t amount to mu
ch.
Now think about how companies approach their community development and Corporate Social Responsibility programs. Much like billboards, today’s community-oriented efforts are undertaken independently, and proudly associated with single company names. What if companies thought of community programs more like Grand Prix cars? What if they recognized the vast support communities often need, and partnered up to provide it? Presumably it would serve the communities better if CSR programs adopted the Grand Prix rather than the billboard model. Probably it would also be more profitable for the firms.
Rio Tinto and BHP Billiton are in the resource extraction business, and have learnt that communities and corporate interests can go hand in hand.
In some parts of the world government mismanagement of community development (deliberate or otherwise) has led to civil strife, sometimes resulting in armed conflict, creating a security scenario where business simply cannot continue to operate. Even when peace has returned, post-conflict nationalisation has been seen in many countries, with business losing billions in operational assets. Looking at history, business cannot afford to be not interested in community development. A company simply has too much to lose if things go wrong.
Increasingly, we’ve seen other companies recognise equitable community development as a critical business activity to reduce risk. This is a major change. In decades past, it would not have been uncommon for business leaders to say that it is a government’s responsibility to ensure long-term sustainable economic growth for a community, and that a company’s contribution would be through tax, employment, and royalties. Move forward to 2012, and those days are long gone. Most now recognise that business can’t legitimately claim that socio-economic development is not a business concern.
A Life Half Lived Page 26
