Community Analytics (CA)

About the month of January

2011-01-31T12:53:00.000-08:00

Dear Colleagues

As you probably already know, I am migrating my blog activity from this blogsite to a TrueValueMetrics blogspot site.

There has not been a lot of blogging activity in large part because of my work on upgrading a website to make the TrueValueMetrics.Org database easily accessible to people interested in what we are doing.

The link to the blog is: http://truevaluemetrics.blogspot.com

The TrueValueMetrics database work is located at: http://truevaluemetrics.org

The last few days have seen some very important developments in the global sphere ... first Tunisia and now Egypt.

Most of the international news commentary has been very self serving ... but the raw news is very very important to understand. There is obviously a political dimension to the revolt, but there is also an economic and social dimension that is not the subject of much comment. Egypt ... and many other countries around the world have a much bigger young educated class than at any time in the past ... and in many countries the young graduates have far too little opportunity to engage in economic activity that will build a future.

I am an enthusiast for entrepreneurial activity ... and market economics. But I would argue that the singular focus by the modern global corporate community on profit performance without much balance ... if any ... on the issue of social impact is terribly destabilizing. This is, of course, the central thesis of True Value Metrics (TVM), and it is going to be critical, in my view, that something like TVM gets embraced by forward looking corporate leaders sooner rather than later.

Stay tuned

Peter Burgess

Happy New Year ... and introducing TrueValueMetrics blogspot.

2011-01-06T08:16:00.000-08:00

Dear Colleagues

Happy New Year to all.

Hopefully 2011 will see some important changes in the way in which economic and social metrics are handled.

There is something rather disconcerting about the fact that the New York Stock Market price index is suggesting that the economy is doing as well now as it was in the period before the near catastrophic collapse of Lehman Brothers and the implosion of the financial and housing sectors. The Stock Market closed at the end of 2010, higher then pre-Lehman. As one might say in the vernacular "Go figure!"

Of course a big part of the corporate sector has been able to survive and its stockholders prosper by putting a singular focus on profit performance, ignoring everything else. Employment is not in the corporate performance metrics anywhere, yet this is bigger in socio-economic performance impact than profit. If anyone needs convincing that better metrics are needed, I would argue that this aberration is a good argument.

It is easy to improve profit by moving economic activity from a high wage location to a low wage location ... and to lower a host of regulatory standards at the same time. Big corporations have no loyalty to location ... and maybe they should not ... but they should be measured in some way not only for profit performance but also social behavior.

Corporate owners and the stockmarkets are not the only place to point blame. Unions and workers who have engaged in work rule featherbedding should take some of the blame. Nothing is gained by making a corporate business uneconomic and unprofitable ... yet this has been done over and over again by unions and workers.

And of course managers in the corporate world need to share blame as well ... they are the decision makers, and they have made their choices. The choices made by too many high level managers have been self serving, and in due course there should be metrics that sort out those managers that really deserve their rewards and those that do not.

Some of this will become more apparent as time goes on ... some in 2011.

Most of the blogging that has been on Community Analytics CA will start to appear on a new blog True Value Metrics in 2011. This reflects the way the name change has progressed during 2011 and the need to move away from Community Analytics because of a conflict with another organization using the same name. Though we are in different fields, the potential for confusion is too high and since they were in place first, we must move on! The URL is: http://truevaluemetrics.blogspot.com

All the best for 2011.

Peter Burgess

Responsibility ... high crime ... firing police!

2010-11-30T13:18:00.000-08:00

Dear Colleagues

Thanksgiving is over ... Christmas is coming ... and so is the end of the year. Budgets have to be balanced in most States and Cities around America ... and this means firing workers.

There is something very wrong with the way the economic system works when police are being let go when crime is high. Newark is in a budget bind ... the result of pretty pathetic leadership for decades ... both corporate and political ... but it is what it is. Mayor Cory Booker, the current mayor, is doing a great job of turning this city around, but a 40 year decline cannot be reversed easily ... but he has been doing it.

But now the budget crunch is getting in the way. The checks and balances that are reasonable have now become unreasonable ... Newark has stabilized its crime situation, but it has a long way to go before it will be a low crime city. Newark needs the police to keep police on the payroll ... the crime situation is unfinished business.

Money accounting is not what should be driving public policy. Public policy should be driven by TrueValueMatrics. Money should be allocated so that needs are being satisfied. In Newark, there is a need to reduce crime. Money should be one of the resources available to reduce crime. In Newark, there is a need to have more jobs. Money should be one of the resources available to increase the number of jobs ... maybe good jobs in the Police Department.

With ridiculous situations like the one in Newark, it is no surprise that the economy of the United States remains in trouble with very high unemployment.

But is is also ridiculous that corporate institutions ... banking and others ... are awash in financial liquidity when the needs of society are only getting met at a very very low level.

With wide use of TrueValueMetrics we would be seeing a very different set of behaviors. Money is not a good measure of quality of life and the progress towards a better society.

How is your community doing? Is the quality of life getting better or not?

Peter Burgess

Campaign for Community Change

2010-11-30T13:02:00.000-08:00

Dear Colleagues

I am interested in the betterment of society ... a reasonable thing to want. But the only people that want to talk to me are people who see me as another ATM machine for them to use. Every organization I have ever contacted is now trying to get me to send them money ... and I am really not interested.

What I would like to do is to help some of these organizations use their money more effectively ... but very few are interested in this, even taking the first steps. Here is an example:

From: Deepak Bhargava, Campaign for Community Change to me

Dear Peter,

What a way to ruin the holidays.

800,000 people will lose their unemployment insurance if Congress does not pass an extension TODAY. 2 million total people will lose their benefits between now and January 1, 2011. This means unhappy holidays for families and communities everywhere.

Call Your Senator. Demand extending unemployment benefits for a full year.

These benefits are a critical lifeline for Americans and their families at the mercy of the worst job crisis since the Great Depression. This is not the time for Congress to turn its back on unemployed workers desperately looking for jobs that simply aren’t there. Unemployment stands at 9.6 percent and is in the double digits in communities of color.

Call 866-956-1737: Tell your Senator to do what’s right for workers.

Make your voice heard and tell yuor Senator to put politics aside and come together to do what’s right for Americans who’ve lost their jobs and are fighting to survive in this economy.

In solidarity,

Deepak Bhargava and the CCC Team
Campaign for Community Change

The Campaign for Community Change is the action arm of the Center for Community Change. Connect to thousands of community organizers and leaders in a grassroots struggle for change by joining us today.

Subscription Management:

This is their URL http://www.campaignforcommunities.org/ and some contact info from their website.

home | who we are | what we do | act | contact us | terms of use | donate
Campaign for Community Change |
1536 U Street NW | Washington, DC 20009 |
(202) 339-9300 | toll-free (877) 777-1536 |
info@communitychange.org

I would like to see an organization like this partnering with TrueValueMetrics so that the work that they are doing can be "valued" and compared to what the big organizations in the corporate world are doing that wrecks "value".

I was very proud as I was growing up that fascism had been defeated ... and proud of the socio-economic progress that was being achieved post war in Europe and the United States ... and proud of progress in many aspects of civil rights. But my big disappointment has been the way in which the modern economy tries to make money and in the process "guts" society. I am proud of my education and my training as an accountant ... but disgusted that accountancy is such a power for measuring money and is irrelevant in measuring the value dimensions of society and economy with the result that big profits get made on top of value destruction in society. Wrong measurement ends up with wrong results.

I would imagine that this group could be more important for the United States than Goldman Sachs ... but nobody will ever know unless they do something like TrueValueMetrics (TVM) to measure the impact they are having on society.

Bluntly put ... good people need to wake up and do TVM type reporting so that the world starts to pay attention to people doing good rather than only paying attention to people making profit.

I am not against profit ... I just think it is only half of what should be being measured!

Peter Burgess

American Public Vastly Overestimates Amount of U.S. Foreign Aid

2010-11-30T09:02:00.000-08:00

Dear Colleagues

The fact that the American Public is misinformed on this matter should come as now surprise! It would be interested to know anything that the American Public is informed about ... the role of misinformation dominates politics ... dominates marketing ... dominates the media ... and it is no wonder that the American Public ends up being misinformed.

Frankly the knowledge economy that was anticipated when IT (information technology) emerged ... and promptly fueled the the dot.com bubble ... has been hijacked. Our economy is now driven by super-rich kleptocrats who thrive in a world where misinformation flows freely ... and rule of law serves to make the ethically unacceptable quite legal and impossible to stop through any system of due process.

This is not what the American Founding Fathers had in mind.

Maybe with the application of True Value Metrics some sanity might be possible. This is the text of the note that triggered this responce. The text was at this URL http://www.worldpublicopinion.org/

Peter Burgess

American Public Vastly Overestimates Amount of U.S. Foreign Aid

As debates about how to deal with the budget deficit have heated up in recent weeks, a new WorldPublicOpinion.org/Knowledge Networks poll finds that Americans continue to vastly overestimate the amount of the federal budget that is devoted to foreign aid.

Asked to estimate how much of the federal budget goes to foreign aid the median estimate is 25 percent. Asked how much they thought would be an "appropriate" percentage the median response is 10 percent.

In fact just 1 percent of the federal budget goes to foreign aid. Even if one only includes the discretionary part of the federal budget, foreign aid represents only 2.6 percent.

Solari in 2002 ... I wonder what has happened since then?

2010-11-30T08:48:00.000-08:00

Dear Colleagues

I just "tweeted" the following on @TrueValueMetric

Solari & The Rise of the Rule of Law by Catherine Austin Fitts from 2002 is worth reading see http://www.courtskinner.com/solari/Rise.htm

This connection was sent to me by Mark Roest, a friend in California. I was interested to see the date when this was published ... 2002 ... and now curious about what has happened since then.

One of the issues that I have been concerned about for a very long time is that there is very little "system thinking" in what most people of good will are doing. A lot of effort goes into thinking about what is wrong and what might be a solution ... and then a book or report is produced ... and then rather little happens after that. The end purpose seems to be merely publishing the book or report.

Accountants ... and I am one ... come from a different mindset. There is, to be sure, the duty to product the financial reports every quarter and year ... and internally perhaps monthly ... but the real job is to have all the data organized so that these reports are easy to produce and also to help the organization get better and better results. A successful accountant is not one that simply produces the reports, but one that has the data that helps make the organization successful and getting better and better.

So my question of Catherine Austin Fitts is not so much how many people liked the report, but how much has society improved.

Sadly my perspective is that between 2002 and now (2010) the world has gone through a huge series of economic bubble busts ... housing ... financial services ... public sector finances ... jobs ... and nobody seems to be measuring anything that really matters. Success seems to be simply to get on track to build another bubble. The system and its metrics are insane.

Good news ... there is a better way! We need to use True Value Metrics to supplement regular business corporate accountancy.

Anyway ... thank you Mark for alerting me to the work being done by Catherine.

Peter Burgess

Obituary ... Norman Macrae ... The unacknowledged giant

2010-11-26T21:47:00.000-08:00

Dear Colleagues

This is the text of the Norman Macrae obituary referred to in an earlier post. The Economist URL is http://www.economist.com/node/16374404?story_id=16374404

I am fortunate to know Chris Macrae, Norman Macrae's son who has shared with me many pearls of wisdom that I like to think have improved my work with True Value Metrics and my analysis of important issues. Here is the obituary.

Obituary ... Norman Macrae ... The unacknowledged giant

Few journalists have had as great an influence—or been proved right so often—as the man who, for 23 years, was the deputy editor of The Economist
Jun 17th 2010

WHEN Norman Macrae died on June 11th, aged 89, no major British newspaper published an obituary of him. You could blame The Economist’s tradition of anonymity; you could blame the extraordinary modesty of the man himself who, if you tried to take his photo, would duck down and giggle, convinced that no one could possibly be interested in him.

Yet Norman was one of the intellectual giants of post-war Britain: one of the very few journalists who could bear comparison with the best brains of his time. Like Milton Friedman, he applied free-market principles to public services such as education and council housing. Like Daniel Bell, he charted the shift from the industrial to the post-industrial society. And like Peter Drucker he illuminated the internal workings of companies, the organisations that drove the West’s prosperity and guaranteed its freedoms.

He kept the flame of free-market thinking burning during the long night of collectivism. He predicted the collapse of the Soviet Union, at a time when the CIA was obsessed by Russia’s growing strength, and foresaw the privatisation of industry, when other intellectuals were celebrating the triumph of the “mixed economy”.

Norman was the first journalist to “discover” Japan. In 1962 he wrote a survey predicting that a country most Westerners regarded as synonymous with knick-knacks and knock-offs would become an industrial power-house. He was also the first journalist to “discover” the internet. In 1984 he wrote another survey arguing that life was about to be transformed by “terminals” which would give users access to giant databases. He predicted that the 1973 energy shock would eventually lead to a surge in the supply of energy. He also dismissed the Club of Rome’s prediction that the world was about to run out of food as arrant nonsense.

The Economist was fortunate that Norman decided to park his formidable intellect at 25 St James’s Street. During his almost 40 years here—23 of them, from 1965 to 1988, as deputy editor—he did more than anyone else to provide the intellectual originality of what he liked to describe as “the world’s favourite viewspaper”. He constantly enlivened editorial meetings with proposals to allow Disneyworld to run the West’s cities or to move the British government from London to York. Roy Jenkins rightly described him as the “epitome of the internal spirit of The Economist”.

He could be a brutal editor and a savage critic of flabby ideas. He altered colleagues’ copy with abandon. But he was greatly liked, generous with his time and amiable in conversation. He was also a loyal company man, never allowing his growing renown to go to his head. He frequently slept in his office, his large frame heaped on the floor, and sweated blood to correct errant facts as well as to expunge creeping heresy. More than anyone else, he made sure that The Economist was not blown off course by the winds of ideological fashion or becalmed in routine reporting.

But if The Economist was lucky to find Norman, he was lucky to find The Economist. His website poses a question at the end of each of his essays: “Brilliant? Batty?” and invites readers to join the fray. His undoubted eccentricity was partly a matter of personal style. The words tumbled out in an incoherent jumble interrupted by heaving shoulders and gales of cackling laughter. His handwriting was such a scrawl that only one person in the world, his loyal secretary, Elizabeth Methold, could decipher it—and she could perform this miracle only by holding the script at arm’s length, half-shutting her eyes and (in her words) going into a trance.

The eccentricity extended to his writing. Norman was a punctilious student of statistics. But he was quite happy to illustrate a 1969 article on American productivity with the assertion that a time-and-motion study of housewives at the kitchen sink would “almost certainly find” that the average American housewife was twice as efficient as the average British one. Why? Because the American housewife was capable of instinctively working out in her head, for each chore, “some rough approximation of what modern businessmen call a critical path analysis”.

The Economist provided him with the ideal mixture of freedom and discipline. He could travel to any corner of the world he fancied to produce lengthy reports on anything he wished, from the state of America to the future of mankind. Many of these special reports became books. But he was reined in when he got a bit too wild—as when he advocated writing a cover leader championing a nasal spray to “cure” homosexuals (who, he thought, were driven that way by their aversion to the smell of their mothers). He was passed over three times for the editorship. But, in truth, he was in exactly the right position.

The crystal ball

His greatest gift was his uncanny ability to predict the future. But the problem with the future is that it eventually arrives. Visions that are called from the vasty deep become reality. Ideas that were once pooh-poohed as outlandish become commonplace. “Nobody listened, then everybody did,” Norman wrote ruefully in a 1991 article called “A future history of privatisation, 1992-2022”. To grasp his prescience, it is necessary to return to an era when today’s commonplaces were heresies.

Not so murky to him

During much of the post-war period the market was “out” and the benevolent state was “in”. Public intellectuals such as Kenneth Galbraith argued that the age of the entrepreneur had given way to the age of the giant corporation. Practical politicians poured money into British Steel and the Concorde project. The market meant chaos and unemployment; industrial policy meant smooth growth and jobs for all.

Norman saw this as a recipe for flabby politics and failed economics. In 1954 he coined the term “Butskellism” to describe the portmanteau politics of the Conservative chancellor of the exchequer, R.A. Butler, and a Labour predecessor, Hugh Gaitskell. Throughout the Butskellite era he relentlessly documented the failures of industrial policy and government planning.

This makes it sound as if Norman was nothing more than a prophet of the new right. But the truth is more complicated—and, as befits the man, more idiosyncratic. Even while he embraced the market on micro-economic policy, he remained more or less a Keynesian on macroeconomic policy until the late 1970s. He was a firm believer in pumping up demand with deficit spending and holding down inflation with incomes policy. No deficit was too big and no incomes policy too hopeless. He greeted the first macroeconomic flushes of Reaganism and Thatcherism with sceptical editorials before finally admitting that he had been wrong. It was perhaps the only time he was not ahead of the debate.

Norman also had no time for social conservatism. He worried about broken families and out-of-wedlock births, but entirely from a utilitarian rather than a moral point of view. He dismissed the religious right as vigorously as he dismissed feminists and environmentalists (“both simple and psychotic Americans have too often been dominated by religious liars”). He argued that one of man’s greatest problems in the coming years would be growing life-expectancy—and advocated a “system of planned death” to deal with it. In a survey of America in 1975 he predicted that euthanasia would soon be as acceptable as abortion: “It will not be at all surprising if there is in some quite near decade-and-a-half a similarly swift and equally civilised dash to acceptance of killing off old codgers (by then, like me) as there has been, in so short a twinkling, towards the more emotive act of killing unborn babies.”

In Stalin’s Russia

Why did Norman think as he did? Why did he reject the post-war consensus about the virtues of government? And why did he keep his distance from a new right that embraced so many of his ideas? Part of the answer lies in his personality. Norman was an extraordinarily self-contained figure. He seldom used his telephone to call people, preferring to sit in his office poring over statistics. He had few doubts about the rightness of his opinions. Once he had an idea in his head he pushed it to its logical conclusion—and if he was proved wrong he simply shifted to another idea, which he pursued with equal certainty. Richard Holt Hutton once wrote about Walter Bagehot’s “dash and doubt”. Norman was just dash.

But his outlook was also shaped by his odd adolescence. His father was a British consul in Moscow in 1935-38, and Norman’s summer holidays from school were spent there at the height of Stalin’s purges. He saw members of the embassy staff—including maids his own age—disappearing, probably to be shot. Before and after his posting to Moscow his father also had jobs in Nazi-dominated Europe. Many of his family’s Jewish friends were terrorised and later slaughtered.

When he left school in 1941, Norman wrote later,

my first job was a public-sector one, with public-sector productivity, as a teenager supposed to throw bombs about as an RAF navigator, creating a slum in the heart of the continent. By the time I got there, the Russians were coming in from the other side. All the politicians, including Churchill and Roosevelt, told us these were fine liberating democrats. And of course I knew from those school summer holidays so briefly before that those were astonishing lies. That has given me one advantage in my 40 years as a newspaperman. I have never since then believed a word either politicians or public relations officers have said.

Norman’s early experiences did not just sour him to politicians. They soured him to collectivism in all its many varieties. He had no time for the government-worshipping intellectuals he found when he studied economics at Cambridge in 1945-47. He loathed the feminists and black-power activists he came across in America in the late 1960s and 1970s, smelling in their affection for group rights and their willingness to use intimidation the same intolerance he had smelt in Europe in the 1930s and 1940s. He took his children on trips to eastern Europe in order to teach them the difference between freedom and tyranny. He seldom missed an opportunity to champion the “hard hats” over the “soft heads”.

Norman’s case for market capitalism did not rest merely on its ability to create wealth, but on its capacity to advance individual freedom. He was almost as critical of big-company capitalism as he was of big-government socialism. In a 1976 survey on “The coming entrepreneurial revolution” he argued that big business was as doomed as big government. Hierarchical managers sitting in their skyscrapers could no longer arrange how brain workers should best use their imaginations. The future lay with small firms that could exploit individual creativity and with bigger firms that could split themselves into small centres and encourage competition between them.

Norman’s critique of the welfare state was inspired by a similar belief in individualism. He pointed out that the market had produced a remarkable equalisation in people’s lives. Rich and poor had access to the same consumer goods—the same television programmes, the same comfortable armchairs, the same plethora of goods in supermarkets, which were spreading from the suburbs to the slums. In 1945 the average Englishman had only one pair of trousers; in the swinging 1960s he had access not only to lots of pairs of (tight) trousers but also to holidays in the sun and cheap mortgages.

The great exception to this story of equalisation was the state. The state distributed its largesse disproportionately to the rich—exactly the opposite of what was supposed to happen—allowing them to end up with better schools and better health services. It also trapped the poorest in poverty, in sink estates with lousy schools and soaring crime and in public-sector jobs with little prospect of long-term prosperity. Norman argued that the only way to change this was to empower individuals—to allow them to own their own homes, through privatisation, and to choose their own schools, through vouchers. Give power to the state and you end up with self-serving interest groups. Give power to the individual and you apply the same creative ingenuity to public services as companies have long done to the invention of washing powder.

Norman’s belief in individualism also drove his enthusiasm for technology. This enthusiasm provoked widespread mirth at The Economist. The man who predicted the rise of the internet in 1984 and preached the virtues of telecommuting in articles on almost anything was by far the most incompetent member of the staff when it came to using new (or not so new) inventions. In battles with the office fax machine he usually came off worse. It was rumoured that paper clips baffled him. The staff were amazed when the Atex publishing system was introduced in 1982 and Norman revealed that he could actually type.

But as a techno-visionary he had few equals. He predicted a world in which “books, files, television programmes, computer information and telecommunications will merge”—in which people could explore the world’s knowledge repositories at a touch of a button, and in which readers would have access to custom-made newspapers paid for by targeted advertising (in typical fashion, he imagined this newspaper emerging from a fax machine at the back of the television). He saw that this revolution would have huge implications for the balance of power. Giant organisations such as governments and companies would lose their comparative advantage. Entrepreneurs would be empowered. Taxpayers would flee the coop and telecommute from rural villages—thus putting more pressure on governments to give up their powers and start serving people rather than bossing them about.

The last clue to Norman was that he was a consummate newspaperman. In print—or indeed on the lecture podium—the cackling incoherence of his speech simply vanished, and he was invariably lucid and frequently amusing, even coruscating. (A similar stylishness could be seen on the tennis court, where the immobility of middle age did nothing to inhibit a well-aimed slice that flummoxed younger and nimbler players.) He was one of the best word-coiners of his generation, producing “intrapreneurship” and “telecommuting” (the coinage of “privatisation” and “Eurocrat” is disputed). He littered his prose with memorable phrases. Milton Friedman was “the maddening gnome of Chicago”. American ghettoes exhibited “public squalor amid private non-affluence”. In diagnosing the failure of British firms to get the most out of computers, he likened them to “former slum dwellers who, when promoted into being council-house tenants, tended to keep coal in the bath”. In championing the virtues of entrepreneurship and people working in small teams, he pointed out that “Jesus Christ tried 12, and that proved one too many.”

Everything he wrote was compulsively readable—partly because he mixed battiness with brilliance and partly because he came at everything from such unexpected angles. His 1975 survey of “America’s third century” started by posing a surprising public-policy quandary:

Our children will probably “progressively” be able to order their babies with the shape and strength and level of intelligence that they choose, as well as alter existing human beings so as to insert artificial intelligence, retune brains, change personality, modify moods, control behaviour.

That raised troubling ethical issues which would be best decided by a world that was shaped by America rather than “the inexperienced Japanese”.

Yet it was those Japanese who best demonstrated Norman’s skills as a journalist. In 1962 he visited Japan to get a measure of how the country had changed since the second world war. He learned little from talking to British ex-pats. But then, in a Mitsubishi factory, he came across a British machine-tool salesman who told him that Japanese workers were getting three times as much out of their machines as their better paid British counterparts.

The resulting article, “Consider Japan”, sealed his global reputation as a journalist and turned him into a hero in Japan (on his retirement in 1988 he was honoured by the emperor with the Order of the Rising Sun). He argued that the key to Japanese success lay in their plethora of tiny entrepreneurial component-makers and in their ability to break up huge plants into “small but brotherly” profit centres. He predicted that the Japanese productivity miracle would transform the world economy.

IMAGE Arise Sir Norman, knight of the rising sun!

An eternal optimist

But for all his interest in the rest of the world, he was a very English figure. His ideas were rooted in the English liberalism of the 19th century — a liberalism that celebrated the individual over the collective, progress over reaction, free thought over superstition. This set him against both the “over-government” that had triumphed in his youth and the religious conservatism that prospered under Reaganism. But it also turned him into an irrepressible optimist. Few people since Bagehot and Macaulay have been so convinced that life is getting better, and that it will get better still if only a few doltish politicians can be elbowed out of the way.

This commitment to classical liberalism ensures that much of his work continues to sing. Norman devoted his energies to two of the most ephemeral bits of journalism—opinionated leaders and lengthy exercises in futurology. Yet a remarkable amount of what he wrote remains relevant today. His 1975 survey on America’s 200th birthday, in which he chastises the Democrats for flirting with the Fabian cult of government expertise, conservatives for flirting with religious extremism, and business for underinvesting in innovation, might easily be a portrait of Barack Obama’s America. Big government has been on the march for much of the past decade. The Beijing consensus celebrates the alliance of big government and big companies. Much of the public sector has resisted the power of vouchers and internal markets. The battle that Norman fought for so long has still not been won.

Copyright © The Economist Newspaper Limited 2010. All rights reserved.

Norman Macrae ... journalist and visionary

2010-11-26T21:29:00.000-08:00

Dear Colleagues

Norman Macrae died last June at the age of 89. He worked at the Economist for about 40 years, 23 years in the post of Deputy Editor. This is a wonderful description of his contribution to journalism via the Economist ... a must read. http://www.economist.com/node/16374404?story_id=16374404

Peter Burgess

Study study study ... wasting our money!

2010-11-25T11:05:00.000-08:00

Dear Colleagues

I have just read this report titled "Private Delivery Care in Developing Countries: Trends and Determinants" written by Amanda Pomeroy(1), Marge Koblinsky(1) and Soumya Alva(2)
http://www.measuredhs.com/pubs/pdf/WP76/WP76.pdf ... 1 is John Snow Inc. ... 2 is CF Macro. As far as I can see, this study was funded by USAID.

I learned about this report from a list serve that has a dialog about health in Africa ... in the following e-mail:

November, 2010, Washington, DC-- JSI's /Amanda Pomeroy and Marge Koblinksy have authored a DHS working paper entitled, Private Delivery Care in Developing Countries: Trends and Determinants. This article used Demographic and Health Surveys (DHS) data from 16 countries to examine a) trends in growth of delivery care provided by private facilities, and b) determinants of private sector use within the health care system.

For a subset of eight countries, the authors examined determinants of a mother's choice to deliver in a health facility and then, among women delivering in a facility, their decision to use a private provider. Determinants of use were grouped by socioeconomic characteristics, economic and physical access and by actual/perceived need.

Results showed a significant trend toward privatization of delivery care over the 13 years covered in the study, but there was considerable variation in the characteristics driving this increased use across countries. The results warn against making generalizations on the effects of privatization on maternal health use.

Bluntly put ... I am not impressed ... worse I am really very disappointed. The work is almost totally something that we do not need. We need solutions not studies, especially studies that do not have much in them to move the health situation forward. The academic community and consulting community may be happy, but no change of any substance on the ground! I responded to the list serve as follows:

Dear Colleagues

I would like to see a dialog about solutions to the problems of health around the world. In my view this DHS working paper does not contribute very much to a dialog about solutions since it is 90% about "state" rather than "progress" ... and the concept of "performance" is almost totally missing.

Reports like this have been funded by various agencies in the international development community for 40 odd years ... and at the end of this time there are hundreds of reports and essentially no solutions to the core problems.

I was at a conference in New York last week at the New School where some high level people in development assistance talked about the progress that has been made. I tried to ask a question about progress achieved compared to what should have been achieved but did not get much of an answer. The problem is that the dialog is based on a whole lot of study that is subject to enormous potential for statistical interpretation ... and very little of the data has the reliability that one should be getting.

My perspective is that a very different medical care model is needed that recognizes that developing countries have little money but a lot of people ... many of whom have some training ... many of whom could do a lot with a modest amount of training ... etc. In other words there needs to be the best possible use of human capital rather than merely doing things based on welfare money that flows from donors. We also have to look at the dysfunction of the business economy in the development context ... and the resource flows that are making profit
for some while leaving most in continuing poverty.

All of this becomes clear when data a looked at carefully and evaluated with an "accountant's" mindset!

I am appalled at how much development assistance has done so little over a very long time! There is a better way.

Peter Burgess
____________
Peter Burgess
Meaningful Metrics for a Smart Society

It is painful to see scarce funds being used over and over again to do things that have almost no impact on the work needed to improve the health of real people in poor places!

Peter Burgess

There has to be a paradigm change ... we have the metrics to support it!

2010-11-15T18:44:00.000-08:00

Dear Colleagues

A new book "Rebooting the American Dream" by Thom Hartmann has recently been published. I have only read some excerpts and they are quite thought provoking. The following caught my attention:

"... when Ronald Reagan came into office, as the result of 190 years of Hamilton’s plan, the United States was the world’s largest importer of raw materials; the world’s largest exporter of finished, manufactured goods; and the world’s largest creditor.

After 30 years of Reaganomics, we’ve completely flipped this upside down: we’ve become the world’s largest exporter of raw materials, the world’s largest importer of finished goods, and the world’s largest debtor. We now export raw materials to China, and buy from it manufactured goods. And we borrow from China to do it.

Part of the reason why this got my attention is that there was a time when the British economy was very powerful ... importing raw materials and exporting manufactured goods.

In True Value Metrics there can be a good quality of life ... but there cannot be a money wealth redistribution along the lines of what has been happening for the past several decades ... which some eminent economists and business journalists have described as a period of some of the greatest sustained economic growth ever. The money metrics might have given this impression, but the reality is that it was being done on top of what eventually turned out to be a bubble of historic scale!

Peter Burgess

The big risk of polluting groundwater should not be discounted!

2010-11-15T17:47:00.000-08:00

Dear Colleagues

RISK ... something nobody wants to talk about.

I just came across this piece ... text below:
http://environment.change.org/blog/view/halliburton_to_epa_just_trust_us_and_go_away?me=nl

Oil is a big part of the modern profit economy ... water is something most people in rich countries take for granted. The dangerous problem is that there may well be a link between the "frack" process for extracting natural gas and the pollution of groundwater.

This RISK is serious. My approach to risk is not purely mathematical, discounting the danger of an event by a probability ... but considering the danger of the event itself. What would be the impact of groundwater for New York City becoming tainted with toxins ... one can hardly imagine!

I certainly do not want to trust Halliburton with this risk.

Peter Burgess

Halliburton to EPA: Just Trust Us and Go Away
by Jess Leber November 09, 2010 10:49 AM (PT)

Oh, Halliburton. How your arrogance astounds me.

Two months ago, U.S. EPA wrote nine major natural gas drilling companies a letter. It politely asked the recipients to voluntarily tell agency officials the secret brew of chemicals they use to "frack" gas from the shale deposits. EPA wasn't even planning to make the ingredient list public, a policy the industry is fighting tooth-and-nail in Congress.

Instead, it just wanted the information to help with a crucial first-ever federal study of the health and safety risks of hydraulic fracturing, a drilling technique that has already ruined water and air quality in towns across the country and has proceeded unregulated thanks to the Dick Cheney-pushed "Halliburton loophole" passed in 2005. In case anyone's memory fails them, Cheney himself is a former Halliburton executive.

Today, EPA announced that 8 of the 9 companies complied with the request. You can take a wild guess which one refused.

EPA now issued a subpoena to Halliburton to compel the information from them, since it has a tight legal deadline to provide the initial results by the end of 2012, and that will be sort of hard to meet without knowing the chemicals they are studying.

Halliburton's antics do not stop at the federal level.

As the anti-fracking advocacy group EarthWorks points out, its lobbyists have fanned out to weaken or halt public disclosure laws in major fracking states. Against the wishes of the industry, Wyoming recently passed a law to require the first disclosures of drilling toxics. And a proposal now being considered in Pennsylvania has now been successfully weakened at Halliburton's specific behest.

Halliburton argues the chemicals are trade secrets. But when those chemicals risk contaminating public water supplies and producing huge volumes of toxic wastewater that the public must deal with—trade secret or not, we all have the right to know.

As Earthworks writes in a clever headline, "Halliburton to PA govt: "trust us." PA govt to Halliburton: "ok." PA citizens: "What!?!"

Don't let Halliburton get away with this any longer. We don't want to trust them. We want to know.

Tell Halliburton to disclose its fracking chemicals by signing this petition.

For global progress ... what is really important?

2010-11-15T09:55:00.000-08:00

Dear Colleagues

How important are monetary and fiscal policies? How important are Governments and the Central Banks? How important are Capital Markets and the Banking Sector?

I spend a certain amount of time listening to Bloomberg radio, and you would think that these things are really important ... but I would argue that in reality they are not really very important at all.

What is important is the underlying capacity of society to be productive and to be surplus producing. This is a function of what scientists and engineers are able to do to make activity efficient ... to get more output for less input.

It is also a function of people making the investment to deploy high production processes. This is where banking and the capital markets come in ... they are able to facilitate investment. This is where policy can help ... but only modestly. The real driver is entrepreneurial technical innovation way more than it is purely political or financial!

As the system of True Value Metrics is articulated it becomes increasingly clear that sustainable progress is going to be achieved when billions of people are making decisions that move their communities forward with more and more surplus production ... a win-win model. This is a contrast to the zero sum system that has prevailed in the "rich" economies where wealth accumulation has been too much at the expense of some sector of society ... either locally or in the global economy.

Win-win is a better way forward ... but it will only work when the metrics are showing both the money profit dimension and the value dimension

Peter Burgess

Concern USA ... excellent fund raising ... good stories ... no value accounting!

2010-11-12T08:05:00.000-08:00

Dear Colleagues

I really do not know why the big and efficient fund raisers for social progress activities do not embrace a value based accountability system like True Value Metrics. These organizations tell heart rending stories about the problems ... then they tell impressive stories about what they are doing ... but they do it in a way that makes it almost impossible to make any judgement about how well they are doing ... and whether their work is doing much good.

The following is an example from Concern USA ... they send me (and perhaps millions of other people) periodic e-mails for fund raising ... but nothing seems to be accessible about what they have done with the money last week, last month, last year and in fact for the last several decades! This is the fund raising email text:

This Week's Challenge: Winning Back the Water in Ethiopia
Field Challenge Friday Team to me

Winning Back the Water in Ethiopia
Posted on Friday, November 12th, 2010
By Joan Bolger, Communications Officer, Concern NY

IMAGE Abebech Tito, from the village of Fango Bijo, Ethiopia

There’s a saying in southwestern Ethiopia and not surprisingly—in an area ravaged by drought for three months of the year—it relates to water. Loosely translated it goes: it’s impossible to win back your water after the bucket has tipped over.

Abebech Tito, a mother of five, told me this through the school fence near her children’s classroom as she considered how her life might have been different had she not dropped out of school at Grade 8. She delivered the proverb with a smile and a shrug. “It was my own foolishness,” she added.

Her village is located in the Rift Valley in the Southern Nations, Nationalities, and People's Region (SNNPR) of Ethiopia, where recurrent drought and the prevalence of malaria is notoriously high.

When I followed the link to learn more ... the first step to being a donor, I reached the following text:

/////////////////
This week, Joan Bolger, Concern Worldwide US Communications Officer, writes about her visit to the remote village of Fango Bijo in Ethiopia where she spoke to Abebech Tito, a mother who had dropped out of school at Grade 8 and was determined to choose a different path for her children.

Two of Abebech's boys now attend the Concern-supported “non-formal” school that aims to offer the poorest rural kids “alternative basic education.” Many of these children live in very isolated areas where there are few, if any, government schools—they have to walk long distances every day, on their own, to reach them.

Joan challenges you to learn about the barriers that prevent children in rural Ethiopia from having access to basic education – and to share this blog with your friends.

Now I like education as a "development investment" and I am very much aware how little money needs to be involved in running a "non-formal" school that can be a very good investment. I am also very much aware that the way the modern relief and development community does its monitoring and evaluation (M&E) is horrendously expensive are not very useful. For the money that was spent in having Joan Bolger visit this location and write this story, perhaps 100 children could have had a year of "non-formal" education.

In True Value Metrics, part of the core information is to relate the amount of education capacity in the community in the past ... with the amount of education capacity in the community now ... and to estimate how much resources were used to get from state A to state B. A second element is to assess how much additional human capacity has emerged as a result of the education ... how much better educated are people becoming. A third element is to understand whether or not the education has any value in making the community a better place ... in making the family more able to earn more and move modestly forward to a more prosperous (less poor) situation.

When True Value Metrics is done in the community by local people it costs very little ... and when it is studied by visitors ... or communicated to donors, it gets to be very interesting. Top down is very expensive ... bottom up enables a lot of value for a modest cost.

Peter Burgess

Transparency and Accountability ... Kris Dev in India

2010-11-11T12:08:00.000-08:00

Dear Colleagues

I have collaborated with Kris Dev in India for almost a decade. His work in mobilizing IT to improve governance is impressive ... and he keeps on going.

To: Peter Burgess
Seminar on Transparency and Accountability in Public Administration
From: Kris Dev
Thu, Nov 11, 2010 at 2:02 PM

Hi,

When most countries are witnessing a plethora of alleged high level corruption cases in public administration running to millions of dollars the presentation made at the National Seminar on Transparency and Accountability in Public Administration can be seen at: The NDTV-HINDU coverage can be seen at the below link from 2.58 min to 4.27 min.http://www.youtube.com/user/ndtvhindu#p/u/13/4PiTICt-SZo

Kris Dev, e-Gov Consultant, Chennai
_________________________
Gopala Krishnan Devanathan,
President & CEO,
Life Line to Business / Life Line to Citizen,
Chennai, Tamil Nadu, India.
email: krisdev@gmail.com
http://krisdev.wordpress.com/about/
URL: http://ll2b.blogspot.com
Ph: + 91 98 408 52132 / 1 (206) 274 1635
Twitter: @krisdev

- Winner of Innovations Award 2009 for IT Innovation;
- Manthan Awardee 2006 for Rural Grass-Root Initiative in Establishing Unique Biometric Identity for e-Inclusion & Livelihood Creation;
- Selected for World Bank Innovation Fair 2010.

These are also interesting notes

Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. … Article 25 of the Universal Declaration of Human Rights.

"A quick evaluation of the progress we have achieved in the last 20 years shows that in the area of poverty alleviation, we have not done enough. History will judge us harshly, unless we seize the opportunity to do more." - Archbishop Njongo Ndungane, President and Founder, African Monitor.

"When the Power of Love overcomes the Love of Power the World will know peace." Jimi Hendrix.

"Be not afraid of life. Believe that life is worth living, and your belief will help create the fact." - William James

"There is nothing more sacred to a free people than the right to govern themselves and take matters into their own hands when their elected officials have failed them. When the very government which the people have created to secure their liberty and domestic tranquility imposes restraints on their freedom, the people have a duty to try to break the shackles themselves." - Ward Connerly, Chairman of the American Civil Rights Coalition.

"We are powerful before the powerless; and powerless before the powerful"; how sadly true! why not reverse it?!

Practice is better than precept.

At the present time there is the 14th International Anti-Corruption Conference (IACC) in Thailand. It is good that there is now more talk about the problem of corruption than 20 years ago ... but it is sad there is so much corruption to talk about. In fact, what is disconcerting is that corruption is part of the mainstream modern economic system with a lot of influential people and organizations implicated in it. Worse ... the rule of law often contributes to corruption by making it difficult to stop it ... even though it is clear that something untoward is going on!

The implementation of True Value Metrics is a part of a paradigm shift in transparency and accountability that will help ... maybe significantly!

Peter Burgess

Risk ... natural gas production, shale and drinking water

2010-11-11T10:03:00.000-08:00

Dear Colleagues

Natural gas production is one of the boom areas in the energy field ... but there may be risks that are presently "off-the-radar" in the news and the public dialog.

In the aftermath of the BP Gulf oil spill, the matter if risk ought to be high on the agenda for public dialog ... but sadly this does not seem to be so.

While energy is important ... water is even more important. In the main the United States of America has been able to manage the water situation, but it is getting more tenuous as time goes by. The major water infrastructure construction that has taken place in the past would not be allowed today because of rules about "environmental impact" ... so much of the water presently being used is available courtesy of "old" infrastructure.

Potable safe groundwater is a key to water in the United States ... but what is going to happen to groundwater when natural gas is broken out of shale formations. There is some evidence that the groundwater may become polluted ... maybe not a lot of evidence but enough to be concerned.

When asked how to "un-pollute" the groundwater ... engineers tell you that it cannot be done.

At the moment the water in New York City is natural and very pure. The source of this water is many miles North of New York City in formations that may soon be subject to natural gas exploration and eventually production. How much is the "risk" in a situation where New York City no more has potable water?

I would like to see more informed dialog about all aspects of this question. At the moment the dominant part of the dialog is that there are big profits to be made by exploiting natural gas in the shale formations around the United States. But what is the pollution risk for the country's groundwater?

Peter Burgess

UN/World Bank write that natural disaster costs set to rise sharply

2010-11-11T09:01:00.000-08:00

Dear Colleagues

In a new report titled "Natural Hazards, UnNatural Disasters: The Economics of Effective Prevention" the UN/World Bank write that natural disasters are going to cost a lot more. This is from an IRIN news item http://www.irinnews.org/report.aspx?Reportid=91064. The text of this news item is below.

There is something very bothersome about the reports that come out of the UN and the World Bank. In some ways they are simply objectives studies ... and in another way they are terrible indictments of the performance of global leadership, of which they are an important part.

One way to interpret the findings that get published in UN and World Bank reports is to conclude that these organizations are a big part of the reason why the findings are the way they are. The fact that natural disaster costs are set to rise sharply is that these organizations ... and the other organizations associated with natural disaster recovery are incredibly badly managed and have extremely high cost operations largely associated with high salaries, high operational costs and low efficiency.

High salaries, high operational costs and low efficiency are a result of years and years of work without any significant management controls. The UN and the World bank advise ... but like the cobbler of old, they do not mend their own shoes! The management systems in the UN and the World Bank would have looked modern in the stone age ... but that is about it.

True Value Metrics is a response to the missing management information dimension of the international relief and development sector ... and to the lack of metrics in the society we live in. We know a lot about corporate performance and the stock market ... we know rather little about performance of economic activities and society. This needs to change, and we hope that True Value Metrics can be a step towards a way better use of resources in our society.

This report is another call to action to change the status quo where high costs produce little far too little impact ... and nobody seems to be responsible for anything. The UN and the World Bank are responsible parties in the prevailing high costs and low performance in the international relief and development arena!

In Brief: Natural disaster costs set to rise sharply - new report

Costs because of more intense and frequent cyclones will mount
Johannesburg, 11 November 2010 (IRIN) - A new report by the World Bank and the UN says the cost of coping with natural disasters could triple to US$185 billion per year by the end of the century.

The report - compiled mainly by economists over two years - said the projection did not include climate change impact costs. But added more frequent and intense tropical cyclones because of climate change could raise total costs by an additional $28-$68 billion a year by 2100.

Entitled Natural Hazards, UnNatural Disasters: The Economics of Effective Prevention, the report makes four main policy suggestions to governments: make information more easily accessible to prevent disasters; permit land and housing markets to function; provide adequate infrastructure and public services; help develop effective oversight institutions.

Meanwhile, donors need to focus more on prevention: “About a fifth of total humanitarian aid between 2000 and 2008 was devoted to spending on disaster relief and response" but far less was spent on prevention, it said.

jk/cb

The Fed goes one way ... is the economy going the other?

2010-11-05T08:02:00.000-07:00

Dear Colleagues

Some metrics about the US economy ... a few months of new job creation at a rate of more than 100,000 a month, and 10 months of positive private sector job creation. A modest sign of the increased stability of the job situation in the United States ... but the average unemployment rate of 9.5% is way too high ... and the level of better job seekers may be as high as 17%.

The financial and big corporate community has plenty of cash ... and is getting very low cost credit if they want it ... not so much the small business that is struggling on the front line of little aggregate demand.

The US Fed has chosen to launch a new round of quantitative easing ... QE2 ... and when it was announced the US stock market went up a near record amount ... to a level that is about where the stockmarket was before the financial implosion.

Bluntly put ... something is very wrong with the way the markets are working and how the levers of power are being manipulated,

Apparently the German financial minister has described the US Fed's action as "clueless" and many others are looking at the present US situation with increasing concern ... not to mention their view of the US electorate's enthusiasm for the Tea Party and Republican agenda. Serious foreigners seem to have a longer memory than the American voters ... who seem to forget that it was free spending Republicans and an anything goes approach to regulation that precipitated the financial disaster ... and without very responsible government intervention for the past 24 months saved the day. We should never forget!

William Fleckenstein who is an expert on the Fed seems to have a better perspective than most about what the Fed should be doing ... others associated with the US capital markets are laughing all the way to the bank because printing money is making their speculation profitable!

The system is very dangerous and needs better metrics ... metrics like True Value Metrics that have a value component for society as well as the money profit for investors.

Peter Burgess

Raising money by NGOs based on disaster news ... obscene!

2010-11-05T07:33:00.000-07:00

Dear Colleagues

The business model of the modern NGO world is obscene ... not much better than the obscene business model of the financial sector that delivered a near catastrophic meltdown of the global economy.

When the earthquake struck in Haiti in January ... within 12 hours most of the big NGOs had deployed websites to solicit donations ... and within days many thousands of other organizations were soliciting donations from the public that really wanted to help.

I have been trying to get some accountability that is worth a damn ... but there is none. The last thing that anyone in the NGO community seems to want is some rigorous accountability, and it becomes very questionable whether these organizations deserve to be funded at all. They do everything to make donors "think" that they are making a big impact on critical humanitarian issues ... but verifiable information is almost totally missing.

I am prompted to write this note today because Haiti has moved back into the news ... first because of a cholera outbreak that has killed an estimated 400 people up to now and several thousand sick. And at this time a tropical storm is very near Haiti and the winds and rain are going to do damage. The email copied below is an example of an NGO using these events to build up its cash reserves.

As far as I am able to discern this NGO is no better than average ... a very low bar ... in its public information about accountability and its performance. Clearly the world has a huge amount of "failed" relief and development ... and interestingly nobody is responsible. Nobody ... or everybody ... nobody knows, and this seems to be the way the executives of these organizations want it to be.

A start on accountability is to know how well the organization is performing ... what impact the organization is having ... but it would appear that this information is almost totally missing. Increasingly, money is being spent on metrics, but from my perspective as a one time accountant/auditor ... and management information specialist ... the money is getting spent and better metrics that have any clarity remain missing.

The need for True Value Metrics (TVM) is obvious ... but having this turn into demand is unlikely. Accordingly, the deployment of TVM may well be done on top of an industry that would really prefer that TVM goes away!

Below is the email from ActionAid ... and please note, this NGO is one of the better ones! It does not name Tomas ... the tropical storm/hurricane approaching Haiti ... but it clearly is using the association! These fund raising people are expert!

Peter Burgess

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Dear Peter,

Global climate change is endangering the world's poorest communities.

But now the Obama Administration has a chance to help.

Tell President Obama to take the steps necessary to help poor nations cope with climate change.

They're called extreme weather events – monsoons or heat waves that result from global climate change. And nowhere are their effects more horrifying than in the world's poorest nations.

But now you and I have a small window of opportunity in which to speak out for the millions impacted each year by these natural disasters.

The Obama administration will participate in a major conference on climate change this month where it will make decisions that will impact the next decade of climate policy. Before they get there, we must make our voices heard and demand the Administration announce how it plans to help the world's poor cope with the brutal impact of climate change and transition to clean energy economies.

Peter, we only have until the end of the month to deliver our call to action – and along with our coalition partners we've set an ambitious goal of 50,000 names in order to make the most effective case possible. Will you join our call and help us reach our goal?

Tell President Obama to take real action to help poor nations adapt to the impacts of climate change.

At the Copenhagen climate conference last year, the United States and other developed countries agreed to jointly mobilize $100 billion per year by 2020 to help developing countries adapt to the impacts of climate change, protect their forests, and promote clean energy.

The tools for raising this money are within reach right now. With enough public support from activists like you, we can convince President Obama to back initiatives that could have real, tangible impacts, such as:

Removing subsidies from the world's biggest commercial polluters to slow the pace of climate change;
Placing a tiny tax on the financial sector's biggest transactions to generate additional funding for life-saving climate adaptation programs; and
Taxing the shipping and aviation industries whose largely unchecked pollution contributes to global warming.
Sign the petition to President Obama now. Tell him to support funding proposals to meet the urgent needs of the world's poor in the face of climate change.

We'll deliver your petitions in person when we meet with key officials in the Administration at the climate conference in Cancun, Mexico in December – all in our concerted effort to get President Obama to act decisively and without delay.

As part of ActionAid's vocal online community, you can be a voice for the world's marginalized poor by helping us reach our coalition's 50,000 petition goal – and by showing President Obama how vital it is to act.

Lend them your voice. Be one of the 50,000 voices standing for the rights of poor people. Sign our petition and tell President Obama to act now.

Thank you for your support and for your continued belief that together – standing up for others – we can all make a difference.

Sincerely,

Ilana Solomon
Policy Analyst
ActionAid USA

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Casino finance ... Stockman does not buy it!

2010-11-04T13:36:00.000-07:00

Dear Colleagues

Stockman was right in the 1980s when he opined that the Reagan economic policy would end up with a government fiscal crisis ... which it did. People have short memories, and history gets rewritten.

By the end of the 2nd term of the Reagan presidency, expectation was that the US economic superpower status was over and it was going to be Japan that dominated the future. Reagan did some good things to restore American confidence in itself post Nixon and post Vietnam, but economic management was not something he did well at all. So much gets forgotten!

Today ... Thursday, November 4th, the stockmarket is going up to high levels in response to the diminished power of the democrats in Washington, good profits from the big business sector, and a large commitment by the US Fed to "QE2" ... shorthand for the 2nd Round of Quantitative Easing.

It appears that Stockman sees the current capital market euphoria as stupidity at its best ... my words, not his, but the idea is the same. The problem with the economy in the United States and in most of Europe is simply a structural mismatch between the jobs that need to be done, the money there is to do them and worker expectations. This is a toxic reality. What is going on in the capital markets is hope sitting on top of a mountain of paper money ... not even paper, really ... just electronic notations in supra-national level bookkeeping.

Stockman describes what is going on as monetary policy that is seriously like heroine addiction ... something that makes you feel good, but is devastating to you in every possible way ... and I could not agree more.

The capital markets ... the banking sector ... are still extremely fragile. This is on top of a US unemployment rate that stubbornly stays at an official level of about 9.5% ... and is way higher in many parts of the country and in certain demographic groups.

The Obama Presidency has delivered two years of stability, and improvement in the numbers that move stock markets higher ... like higher profits for big business. But the core foundation of the economy and society remains mired in depression with few signs that there is going to be much help from the economic elite and political leadership.

The global economy is moving ahead because there is true economic demand in the BRIC economies unlike the "faux demand" in the formerly rich economies with their continuing addiction to growth as the key metric about socio-economic performance. Profits in the corporate sector have been going up ... but now commodity prices (raw material costs) are going up in due course profits will come down ... and it is my guess most big corporations will solve that problem by further reduction in labor.

The big question is how to get the corporate sector to pay some attention to their role in making socio-economic progress as well as capital market progress!

It was a pleasure to hear what Stockman had to say ... on Bloomberg TV ... and I look forward to hearing some more.

Peter Burgess

I like more doing ... less study

2010-10-31T12:53:00.000-07:00

Dear Colleagues

I have a fairly active presence on various websites that concern themselves with various aspects of socio-economic progress and relief and development activities. One of these discussions is at http://www.changemakers.com/node/90625

I have just added the following comment reflecting my concern that so much of the conversation is about doing studies ... and rather little is about doing the hard work. While I have been fairly polite in my posted comment, I am getting increasingly concerned that there is acceleration in the wrong direction in most of the relief and development sector with more and more people wanting to make a career ins "study" of the problem and nobody deeply interested in actually doing the hard work that is needed ... but worse, less and less people actually knowing much about the techniques that are needed to do things ... to build things, to grow things, to maintain things, and so on! It is a scary situation and not enough on the radar!

Dear Colleagues

Some time back I posted a comment indicating that "I liked the project" ... and there have been a number of subsequent comments about the project, mainly indicating a similar sentiment.

A recent comment asking whether it is this project or some other action in society that is the cause of social improvement and has prompted me to write again. It is very difficult to get academically rigorous cause and effect in any social setting ... and in order to do so there is a high cost, and the answers are usually not much use for practical decision making.

My position is very simple. If we had spent the money that has been used studying development performance over the past 60 years and used it instead to "do development" and if we had kept some quite basic simple tracking of community level performance we would (a) know a lot more than we seem to at this time. and (b) we would have progressed a whole lot more than we have.

On the face of it ... I like this project. I want to see lots of other projects that "I like" being implemented at the community level. I am also pretty sure that where there are a lot of initiatives that "I would like" .. there would be a whole lot of socio-economic progress ... that is the quality of life in the community would have improved.

If the quality of life does not improve in a community doing things that seem to be sensible, then the cause/causes are external issues that are too big to handle at the local level alone. Sadly these bad externalities are widespread ... and most would solve quite rapidly if they were clearly identified and easily seen by the interested global public.

I am convinced that meaningful metrics are key to a smart society ... and that my work towards True Value Metrics is a step in right direction.

Sincerely

Peter Burgess

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2010-10-30T13:17:00.003-07:00

Message to come

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2010-10-30T13:17:00.001-07:00

Message to come

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2010-10-30T13:16:00.001-07:00

Message to come

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2010-10-30T13:15:00.006-07:00

Message to come

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2010-10-30T13:15:00.004-07:00

Message to come

Does capacity building have to take a long time?

2010-10-30T13:15:00.000-07:00

Dear Colleagues

This past week I attended a 2 day conference at Columbia University on the Extractive Industries and Sustainability.

One has to wonder how it is possible for extractive industries to be sustainable ... but lawyers and academics seem to have found something to talk about. More on this another time.

But in the course of the conference various panelists suggested that it takes a very long time for human capacity to be built in developing countries ... and it was left at that without much comment. I alerted the audience to the issue in a brief question from the floor, and some of the audience seemed to take note.

The point I tried to make was that over the past several decades there had been huge progress in human capital investment in developing countries. When I first worked in developing countries in the 1970s things were better than they had been 20 years before ... and over the past 40 years human capacity building ... education ... has continued and progress has been made.

But structures to employ well educated young people have not changed very much ... the cultures reflect respect for the elders ... who missed out in many cases on the education that has reached their children and grand-children. International organizations have not helped very much ... and experts have tended to complicate things rather than to facilitate the empowerment of local professionals.

It is not surprising that a huge number of educated professionals from developing countries are employed in rich countries ... and doing well.

The idea that capacity building takes a long time is wrong ... it takes a long time when the things that need to be done never get done. Training people and walking away from the work needed to get structures changed is not the work that will do capacity building successfully, but that is what has happened for the past several decades!

Peter Burgess

Have Cargill, Con-Agra and the like contributed to global hunger?

2010-10-30T13:09:00.000-07:00

Dear Colleagues

Someone recently told me a story about exporting product to Africa ... and then told me something about constraints that emerged from the US Government and major actors in the global food marketing chain that stopped the business.

In turn, this reminded me of my own efforts to export powdered milk to Africa, and the hurdles that I had to overcome in order to do that. What with subsidies ... or not ... from the USA or the European Union ... the export licensing systems ... the international financial rules and regulations ... the local competition, both fair and legitimate and unfair and essentially unlawful ... and what should have been easy became a nightmare. I made one shipment ... lost money ... and gave up.

But the people ... that is corporate organizations and others ... who are on the inside and in control of the trade are doing exceptionally well. The end prices are high ... the source of products are producing large quantities and contract prices are low ... not to mention all sorts of subsidies. The problem for society is that nobody has much of a clue how much these things should cost and how much is a reasonable price.

This information ought to be very easy to see and to analyze. Commodity markets do not add clarity ... in the main, they add speculative confusion ... and another level of cost that has to come from somewhere! The business world ... and many of their partner beneficiaries ... wants this sort of simple information to be difficult or impossible to see. This is unacceptable ... but it is the way things work.

How much big organizations ... organizations like Cargill. Con-Agra and the like have contributed to global hunger is difficult to assess. My guess would be that these companies have produced good profits over the years without moving the global hunger index very much in the right direction. Compared to what they could have done, I would argue that they have performance very poorly. It would be great to see true value metrics applied to their activities!

Peter Burgess

Better metrics about relief and development interventions are needed

2010-10-26T19:22:00.000-07:00

Dear Colleagues

There is a need for paradigm shift in the way data are acquired and the way data are used. CordAid is one of the largest international NGOs with an excellent reputation and a lot of experience ... but they use independently prepared "studies" about their work to help them with management as for example as follows:

CLIENT SATISFACTION AND OUT-OF-POCKET EXPENDITURES ON MATERNAL HEALTH AND MALARIA HEALTH SERVICES
"This study has been carried out on request of Cordaid. Cordaid wished to better understand the effect of their Pay for Performance Programme (P4P) and the introduction of a flat rate fee system introduced in 2007 in some of the health facilities which Cordaid supports. The effect of the intervention has been measured in terms of client satisfaction and out-of-pocket spending on maternal and malaria health services of households in the Catholic Diocese Bukoba in Muleba, Missenyi and Bukoba Districts in North West Tanzania. A population-based cluster-sampled survey was carried out July-Aug 2007 and included 1946 households with members using all types of health service providers. Two main research questions were addressed: (1) to what extend are health services from the various providers in the area being utilized and how much has been paid for these services by households out-of-pocket, and (2) to what extend are people satisfied with the health services that are being provided in terms of perceptions on quality, access and affordability? The results of the survey are presented in this report and should be regarded as mid-2007 baseline for a follow-up survey in 2-3 years time. Therefore, the report is limited in analysing effects of the P4P and introduction of flat rates, though efforts have been put into comparing faith-based and government health facilities."

Client Satisfaction and Out-of-Pocket Expenditures on Maternal Health and Malaria Health Services. A population-based survey in North-West Tanzania 2007. By Ronald Horstman et al., August 2009. Paper commissioned by Cordaid. Download as PDF from cordaidpartners.com

The report referred to is located at: http://www.phc-amsterdam.nl/artikelen/CL-OOPE_Study_Tanzania_-_final_26Aug2009.pdf

The study works for the commissioning organization ... they have a document that reports that they have done something more or less according to what they planned on doing ... and the work looks good and sounds convincing.

It is, however, almost impossible to verify at moderate cost ... and really does not help with the big question of whether scarce relief and development resources are being deployed in an effective way. The issue of whether or not services are better free or paid is certainly interesting ... but a bigger question might be the question of the value of the service relative to the cost of service independent of the issue of pay or free. In poor communities, it is clear that affordability is a challenge ... but that is no issue when there is no service. At the same time ... the value destruction associated with inadequate service is a very big issue.

A new paradigm for assessing the performance of international relief and development assistance interventions needs to be deployed ... the sooner the better.

Peter Burgess

Land grabbing after natural disasters

2010-10-26T18:59:00.000-07:00

Dear Colleagues

IRIN ... humanitarian news and analysis ... a project of the UN Office for the Coordination of Humanitarian Affairs publishes some interesting articles. It is a pity that there is no obvious mechanism for follow up and initiating something to address the issues being raised. Having said that, I like to read their reports and then move as best one can to take action.

This report is about land grabbing after natural disasters. It was a disgrace in the aftermath of the Indian Ocean tsunami, and is likely to be an issue in Haiti now. The article can be found at:
http://www.irinnews.org/Report.aspx?Reportid=90885

GLOBAL: Taking on the land-grabbers

LONDON, 26 October 2010 (IRIN) - Property developers in Indonesia and Thailand moved in quickly after the 2004 Tsunami, snapping up land from those relocated into resettlement camps to build luxury resorts, further squeezing the livelihoods of the poor.

Land grabbing happened after Hurricane Katrina in New Orleans, the Haiti earthquake, and after cyclones and floods in the Philippines, according to the World Disasters Report 2010 (WDR).

It can involve outright violence, or carefully orchestrated legislative measures - as after Katrina - says David Satterthwaite of the International Institute for Environment and Development (IIED), and one of the WDR report’s authors.

In New Orleans, public officials pushed through planning and zoning legislation which changed housing ownership patterns across the city, orchestrating what Sara Pantuliano, head of the Humanitarian Policy Group at UK think-tank the Overseas Development Institute (ODI), describes as “one of the starkest examples of a disaster accentuating inequalities between city residents”.

Deepening inequality

Displaced residents may lack land tenure, or have no identity card or documentation demonstrating their right to land, making it difficult for housing associations and NGOs to help them, says WDR.

“Unless disaster aid quickly learns to work with the untitled, the unregistered, the unlisted and the undocumented, it can support and even reinforce the inequalities that existed prior to the disaster,” said the Asian Coalition for Housing Rights in WDR.

Shifting the power balance in favour of the vulnerable is notoriously difficult, admits Pantuliano, but is a cause that NGOs should take up more forcefully. “Too often we focus on the quality of shelter we can provide, but struggle to get past the more challenging questions of how to shift power balances in emergencies, and how not to exacerbate the vulnerability of the worst-off.”

Some 2.57 billion urban dwellers in low and middle-income countries are vulnerable to unacceptable levels of risk, fuelled by rapid urbanization, poor local governance, poor services, rapid population growth and rising urban violence, said WDR.

A team of researchers at the ODI is looking at the impact of displacement and urbanization in Sudan, Kenya Afghanistan, Syria, Yemen, Gaza, Somalia and possibly Iraq.

Depression, isolation

Governments often overlook the social implications of forcing people to move, said Pantuliano. “Planned settlement can isolate communities; it can lead people to depression, to isolation and more vulnerability... driving youths to join gangs or to take up prostitution” she told IRIN.

It can also cut them off from jobs: Displaced communities in Manila, the Philippines capital, for instance, were pushed out of the city centre, meaning thousands could not easily access their jobs servicing the many businesses in the area.

In Haiti, reconstruction plans to move communities to “new, safe cities”, meant moving people to distant camps, outside the capital, Port-au-Prince, where they did not want to be, said Alfredo Stein, an urban planning expert at the Global Urban Research Centre at the University of Manchester. Ex-residents continually attempt to return to the centre to try to re-claim their land.

Response challenges

Local authorities often struggle to respond quickly to resettlement challenges because of strict land-use regulations; lack of money to fund relocation; delays in getting official permission from regional or national authorities; and the high cost of building materials, said the IIED’s Satterthwaite.

After a disaster the national government may decide to improve building standards, as was the case in Pakistan following the 2005 earthquake, which can further delay rebuilding.

Local advocacy groups and housing associations are often best-placed to help communities, said ODI’s Pantuliano, as international NGOs often get confused about what role to play in resettlement.

But international agencies can also play an important role, she said. “We do not propose NGOs get involved in land reform, but they should intervene in issues that fall squarely in the protection mandate, such as documenting land rights or advocating for access to temporary and permanent land.” This work may involve land surveys, research, advocacy, and providing legal aid to vulnerable people to avoid land grabs, she told IRIN.

“We are trying to put this more at the heart of humanitarian organizations’ work... Post-tsunami NGOs woke up too late to these issues, despite local organizations pushing them to do something,” said Pantuliano.

What works

Cassidy Johnson, a lecturer in building and urban design in development at University College London, identifies two factors that can help displaced people exercise their right to their land: the presence of strong community action groups, such as slum-dwellers’ associations, which collectively rebuild and which have strong links to local government to enable them to lobby for their rights; and the existence of residents’ joint savings schemes which means there are funds to draw on for rebuilding.

This was the case in the Philippines, which is regularly affected by earthquakes, volcanic eruptions, typhoons, storm surges, landslides, floods and droughts. Here the Homeless Peoples Federation has helped communities resettle following five disasters from 2000 to 2008: Its 70,000 individual members collectively saved to rebuild post-crisis, and swiftly organized themselves into rebuilding committees, post-crisis, said WDR.

Local branches of the Red Cross and Red Crescent, with support from the British Red Cross, have also been active in securing land tenure rights for families post-disaster in the Philippines, said Pete Garatt, disaster response manager at the British Red Cross.

“The most successful [land rights] work is done by local groups - we have seen this in Democratic Republic of Congo, Burundi and Khartoum - as these issues were already on communities’ radar screens,” he told IRIN at the launch of WDR.

Wherever possible, communities should be encouraged to take the lead themselves, rather than waiting for others to respond, said Pantuliano. After the 2001 Gujarat earthquake, communities successfully reoccupied their old land because they got on with rebuilding permanent houses themselves, rather than waiting for government permission. “They left the government with little choice but to allow them to stay put,” she said.

Moving forward, the idea of “building back better” which has become standard government parlance after an emergency, must be redefined, said WDR. Rather than addressing purely better quality infrastructure, it should describe “land for the landless and homes for the homeless”.

And building back better must also stress that resettlements, if they must occur, are well-placed, added Pantuliano.

[This report does not necessarily reflect the views of the United Nations]

This report has some important messages including the powerful role of community in the process of rebuilding. From the True Value Metrics perspective, it is clear that knowledge about the community before a disaster will help enormously in guiding equitable rebuilding afterwards. The report also mentions the use of "rule of law" to facilitate land grabbing and benefits for those with social, economic and political power!

Sincerely

Peter Burgess

Global Health ... NGOs and community level initiatives

2010-10-26T18:28:00.000-07:00

Dear Colleagues

The problems of global health are substantial ... and the decision making process about the allocation of financial resources to fund health sector activities is pretty much dysfunctional. I think most observers would conclude that the available resources could be used considerably more effectively.

This issue came to the to the front of my TO DO list with the following e-mail:

[afro-nets] NGOs and health systems strengthening (or weakening)

What sounds to be obvious – nongovernmental organizations working in the field of international health cooperation support and strengthen health systems – is not taken for granted. NGOs, “if not careful and vigilant, can undermine the public sector and even the health system as a whole, by diverting health workers, managers and leaders into privatized operations that create parallel structures to government and that tend to worsen the isolation of communities from formal health systems (…)”

This assessment is, at least, the starting point of the “NGO Code of Conduct for Health Systems Strengthening” first published in May 2008. The code intends to offer guidance on how international non-governmental organizations can work in host countries in a way that respects and supports the primacy of the government’s responsibility for organizing health system delivery.

A matter of course? Well, you can test it yourself, right now, if you like: How many of the following statements taken from the NGO code correspond with your organization’s standard?

1. “In areas where trained personnel are scarce, we will make every effort to refrain from hiring health or managerial professional staff away from the public sector, thus depleting ministries and their clinical operations of talent and expertise.” (yes? no? not sure? not relevant for you?)

2. “We commit to limiting pay and benefits inequity between expatriate and national, rural and urban, and ministry and NGO workers. We encourage compensation structures that provide incentives for rural service and disallow gender-related disparities.” (yes? no? not sure? not relevant for you?)

3. “We recognize that management capacity in Ministries of Health is often limited. Rather than building parallel or circuitous structures around inadequate capacity, we commit to strengthening governments’ ability to operate effectively and efficiently.” (yes? no? not sure? not relevant for you?)

4. “We strengthen the capacity of communities to take responsibility for and ownership of their health development, and to become partners with government in the health system, while holding governments accountable for their human rights obligations.” (yes? no? not sure? not relevant for you?)

5. “We actively advocate with civil society, local institutions and donors for policies and programs that strengthen health systems overall.” (yes? no? not sure? not relevant for you?)

6. “We commit to designing their activities and programs so that they reinforce primary health care, foster equity and community involvement, and are generally replicable and financially sustainable over time.” (yes? no? not sure? not relevant for you?)

So, are you happy with your score? 6 out of 6? Congratulations! But nevertheless, you might be interested to further discuss the task of contributing to building public health systems and doing no harm. The members of the MMI Network members will meet on 5th November in Amsterdam in a workshop on "Health systems strengthening", reflecting about the role of NGOs and of their particular organization in health systems strengthening.

Join us, if you like!

Thomas Schwarz,
Medicus Mundi International Network

My interest was further stimulated with this additional e-mail.

There is room for reflection in this message.

I appreciate the concern of Medicus Mundi International that raised this sensitive point.

I would suggest to them to broaden their discussion when they'll meet in Amsterdam. A 'new' aspect of health care delivery in many poor countries is the role played by the *Private* *sector*. It is widespread, day by day,rapidly. A vivid example is here in Nyala where one can see plenty of private doctors,local healers, private clinics,private hospitals,private pharmacies,plenty of drugs and plumpynut....but still children do die from malnutrition and common diseases . A drug for any illness is not the correct approach,I think you agree.

We should be together to declare with one voice that : children under fives and pregnant women should receive FREE SERVICE. Under any circumstances, by the government clinics or by the non for profit clinics:always,always FREE! including medical consultation and drugs prescribed. As it is for vaccination.

Dr. Massimo Serventi
Nyala Pediatric Centre
Italian Hospital

I have added to the conversation with the following message:

Dear Colleagues

I am glad this subject has come up.

Work that I have been doing over the last five years to understand the progress and performance of the global health malaria control sub-sector suggests that way too much of the global health money is being consumed at the "top" of the sector and far too little funding is getting to strengthen community level healthcare. This is the same issue in many different parts of the health sector ... many different diseases ... and in both rich developed countries and poor developing countries. Most decision making about resource allocation is driven by the goals of management, whether it is a big NGO, pharmaceutical company, a health ministry, a hospital or a network of doctors.

The needs of beneficiaries are poorly represented in part because the prevailing systems of metrics do not include any metrics about the "value loss" associated with poor health status of a single individual and in aggregate for the community. This gets addressed in The Burgess Method of True Value Metrics.

The good news is that there are thousands of NGOs interested in health care activities ... but they are not delivering their services very effectively where they are most wanted. Bottom line, nobody knows where they are working and what they are doing. Nobody seems to know where they would be most needed and could be doing the most good. If there were metrics that showed at the community level what the needs are, and what health care services including government and NGOs are present ... and what they are doing ... and what still is left needing to be done, we might make some meaningful progress.

This should not be an idealogical argument about public or private sector ... free or paid ... but about needs, resources and how to get the best possible outcomes.

As it is ... there will be a meeting in Amsterdam of this network of NGOs. I hope that they enjoy themselves ... and look forward to learning of any steps forward to better performance that they are able to make!

Sincerely

Peter Burgess

There is a pervasive problem throughout the field of socio-economic development ... a widening gap between those that are at the "bottom" with very limited education and skills and those that are experts giving advice and planning solutions. Unless the people at the "bottom" are part of the solution ... and help to satisfy their own critical needs ... a welfare system of development assistance rapidly runs out of resources. This should be obvious ... but it is not the way assistance is being programmed!

Peter Burgess

Haiti ... the cholera outbreak

2010-10-25T08:41:00.000-07:00

Dear Colleagues

The news of cholera in Haiti is very bad news ... and we have to hope that the outbreak will be contained. I am not optimistic, however. It seems that the pace of everything in Haiti has slowed down in the past six months ... certainly relative to the urgency in the first weeks after the earthquake.

Up to now my efforts to see more transparency and accountability in Haiti have come to nothing ... almost nothing, shall we say! Some of the slow-down may be attributed to the need to have elections, but by no means all of the apparent lethargy is because of this. Some of the slowness is because it takes time to remove the constraints on progress that are part of the general governance situation in the country. Whether or not this will get any better after an election is not at all clear.

I am really disturbed by the statistic quoted in news stories that there are more than a million people living under canvas in Port-au-Prince and the surrounding area ... and not too many stories coming out of Haiti about much practical rebuilding yet!

There is still a case to be made for accountability in this society.

Peter Burgess

Microfinance ... Is it moving in a dangerous direction?

2010-10-24T16:19:00.000-07:00

Dear Colleagues

I have been very concerned about the evolving nature of the global microfinance industry for quite a long time ... perhaps about five years. This is about the time the mainstream banking and finance sector became interested in microfinance, as they identified the possibility of profit in a new asset class.

The bankers and financial experts argued that the microfinance sector's need for capital could only be satisfied by significant access to the capital markets ... and for this, microfinance institutions needed to be profitable.

It is clear to me ... and it is the very foundation of the business model for microfinance championed by people like Muhammad Yunus, founder of the Grameen organization ... that microfinance uses money as a part of a program that aims to improve the quality of life of poor people. When the Grameen initiatives started in the 1970s ... together with BRAC and others ... the work was clearly "social" in nature and it was "sustainable" because the money being used did not simply disappear as it did in every other of the development initiatives being funded.

My own perspective was that microfinance was a palliative ... making poverty more livable, but not enough to make a difference to the community as a whole. I saw microfinance as a positive intervention, but not a sufficient intervention. I argued then, and argue today that microfinance in the Grameen mode is desirable as part of a portfolio of development interventions in a community.

I have never argued for growth of microfinance in a "for profit" mode as a desirable development intervention. For me this is an institutionalized version of the "money lender" that the Grameen model interventions sought to eliminate. I have argued for more development investment, because most communities are sadly lacking in a lot of the underlying infrastructure that would help people to progress out of poverty.

I have also argued that there needs to be better socio-economic performance metrics so that the performance of society can be tracked and the impact of various interventions seen in an objective way. Without metrics about value, the big banks and their money are going to swamp initiatives that are merely trying to get more economic benefit into the hands of poor people who are doing all they can to work themselves on to the bottom rungs of the socio-economic ladder!

The following was written by a colleague a couple of days ago ... following up on an essay he wrote for Microfinance Focus Magazine a year before!

Editorial: AP Microfinance Crisis – a signpost ignored
Saturday, October 23, 2010,

Microfinance Focus, Oct. 23, 2010 : A year ago, Microfinance Focus Senior Analyst, Daniel Rozas, published an article raising a warning flag about a developing bubble in Andhra Pradesh. Rozas wrote:

“The spark that sets off a large-scale delinquency crisis can be anything and could come at any time – a rapid drop in economic growth, a populist political movement, a religious decree, or a collections effort gone bad. One can’t control the spark, but one can control how much fuel that spark can ignite.”

That spark has now been ignited. Whether the flames can be put out quickly enough to prevent disaster is by no means assured. We hope they will be. But it is also deeply disappointing to see the sector having come to this point. After all, there was no lack of recent examples to learn from: the US financial market, Bosnia, Nicaragua, Morocco, Pakistan, Kolar, and even Andhra Pradesh back in 2007. So why are we here?

At the surface, it seems that Indian MFIs were taking steps, having formed MFIN earlier this year with the explicit objective of developing lending standards, including caps on total debt levels for clients. It sounded reasonable. But whether these actions were driven by real recognition of the risks, or simply visible motions to quell concerns raised by RBI and others, it’s apparent that they were not driven by any sense of urgency. MFIs were simply too busy to implement real changes.

SKS was too busy with its IPO. Other large NBFCs were too busy trying to catch up to SKS. Regulators were too busy worrying about profits and interest rates. Meanwhile, growth has continued unabated, including in Andhra Pradesh. Seems everyone was so preoccupied trying to win the race that they failed to see the cliff up ahead.

We are hopeful. Disaster may yet be avoided. And as soon as it is, we hope that – finally – MFIs will grow up and realize that the status quo is no longer tenable. And we hope they will seriously sit down with real regulators (as opposed to wolves disguised as state politicians) and find solutions that will finally put an end to fly-by-night operations, unconscionable collections practices, and dangerously weak lending standards. For if they fail to heed even this signpost, MFIs will deserve the fate that will undoubtedly await them next time around.

This is the year old article. Since this article was written there has been the SKS IPO and it is going to be interesting to see whether this proves to be a "last hurrah" for the hard profit wave of microfinance or is the beginning of something that ends up rather like the global sub-prime mortgage fiasco that still has a long way to go before it gets cleaned up.

Is There a Microfinance Bubble in South India?
Tuesday, November 17, 2009,
By, Daniel Rozas , Microfinance Consultant

By most standards, microfinance is a young sector, and in many countries it can be said to still be in its infancy. Yet its continuing spectacular growth, especially in India, should give one pause – every time promoters celebrate another multi-million-client threshold, I wonder – how many more such thresholds are left? How do we know when we’ve arrived?

This is not a philosophical question – normally, markets send signals. New customer demand drops. Prices fall. Margins decrease. However, credit markets are funny animals – the hopeful, exuberant part of our human nature dictates that, when presented with the opportunity, we tend to overestimate our repayment capacities and borrow beyond our means. And when we can borrow from one lender to repay another, we can stretch the cycle out even further. The market signal gets delayed, while a bubble builds – when the signal does come, it is in the form of the bubble bursting. Students of the US housing crisis can tell you – it is a most unpleasant signal to receive. I vividly remember the day in January 2007, when I first learned of the unusual delinquency patterns emerging in the US subprime market – at the time this affected only a small proportion of loans within a relatively small subsector of the mortgage market, and few thought then that this presaged a crisis that would engulf the entire mortgage market, let alone the global economy. Yet even though subprime lending had subsequently all but vanished by spring of 2007, it could not prevent the worldwide tsunami from crashing down nearly two years later. Such is the nature of bubbles.

The trouble is, determining whether we are actually in a bubble is no easy task. A look at the US stock bubble of the late 90s and the housing bubble of ’04-07 shows a familiar pattern – the eager participants are hypnotized by the glitter of their apparent success, the “wise seers” seek ways to explain visible deviations from the norm, while the few lone voices calling for a time-out are made outcasts of society. Yet when the bubble finally bursts, everyone adopts the common refrain: why didn’t “they” (the government, the corporations, the media) do something – the bubble was so obvious!

Estimating Microfinance Market Capacity

One way to determine whether there is a bubble in microfinance is to ascertain market capacity (number of potential microfinance clients), then compare that to actual penetration. However, determining capacity is hardly an obvious task. In 2006, in outlining their vision for the next ten years, Rhyne and Otero included a table with a simple ratio of borrowers/population. Back then, Bangladesh had a 9.2% penetration, and the authors suggested that that may be “an upper bound for very large national penetration of microfinance.” Here’s the same table three years later. Note that since then Bangladesh has grown over 60% in penetration, while three additional countries have either reached or breached the boundary suggested by Rhyne and Otero. But what do these numbers tell us? If 9% penetration is not the upper bound, maybe 16% is? Or perhaps 30%? To get a better idea, I created a simple model for estimating the upper bound of market capacity. This is only a crude model – a more robust version would require more detailed market data, however it still provides useful insight.

The model is presented below – it uses the same borrower/population metric as above, with additional adjustments for three factors (the full sourcing and description of the assumptions is provided in the excel file, at the end of the article# :

1) Gender – since microfinance lending is mostly to women,
2) Age – to exclude the very young and very old, and
3) Wealth/financial access level – to exclude those outside the MFI target market. The $1.50/day measure is a close equivalent of the widely used figure of 600 million poor in India.

In addition to the assumptions buried in these three components, there are two additional issues that the model doesn’t capture: first, not all potential borrowers can be actual borrowers, i.e. not everyone needs to borrow all the time; and second, multiple borrowing skews the numbers as well, since the same customer gets counted multiple times. Despite these issues, the model can serve as an indicator about what’s happening in the markets and as a tool for identifying potential bubbles.

My calculations show that Bangladesh is fairly saturated, with market penetration approaching capacity. India, on the other hand, is a much more complex picture. It’s well-known that microfinance penetration in India has an extremely uneven geographic distribution – while its largest state, Uttar Pradesh (and a number of others, mostly in the north), is relatively unserved, the southern state of Andhra Pradesh (AP) and its neighbors show a very different story. Frankly, the numbers there concern me – AP has more microfinance clients than any other country in the world except for Bangladesh; it shares the distinction as the most penetrated market in the world, on par with Bangladesh; and most disquieting, the state was already at 6% over-capacity a year ago (the table uses 2008 data). Explaining these numbers without allowing for extensive multiple borrowing is indeed a challenge.

Frankly, I think this is about the strongest evidence of a bubble one could hope to find using publicly available data. When coupled with the current repayment crisis in several districts in the neighboring state of Karnataka (which has similar penetration numbers as AP), it also becomes difficult to ignore. The most commonly used arguments against the bubble theory in south India – that the isolated districts in Karnataka represent only a slither of the microfinance market and repayment rates remain otherwise high – shows only that the bubble hasn’t yet burst, not that it doesn’t exist in the first place. Another argument that has been advanced by Vikram Akula in his letter to the editor of the Wall Street Journal is that multiple borrowing is not a cause for concern, citing as evidence the Karuna Krishnaswamy 2007 study that found multiple borrowers have equal or better repayment rates compared to their single-borrower counterparts. Since multiple borrowing is a core element of what I argue is an existing bubble, a bit of discussion on the subject is warranted.

Conducted during a period of high economic growth in India, the Krishnaswamy study found that multiple borrowers, representing 7-10% of clients in his sample, consisted primarily of highly motivated entrepreneurs seeking to raise more capital than what was offered by any one MFI. This is unsurprising – due to the nature of their cycle-based lending model, MFIs knowingly underfund their borrowers, thus assembling funds from multiple MFIs is a logical strategy that Krishnaswamy suggests is simply a replacement for the informal funding sources the individuals would have tapped otherwise. This is also consistent with the money management practices documented by Collins et. al. in Portfolios of the Poor. However, as the market heats up and multiple borrowing becomes increasingly widespread, the number of multiple borrowers grows beyond these stand-out individuals – just a few months ago on the CGAP blog, N. Srinivasan stated that 25% of borrowers in urban and peri-urban areas have 5+ loans, while 3 loans is the average for all borrowers. The immediate risk is that some of these borrowers may be falling into a debt spiral, borrowing from one MFI to repay another. However, the less immediate but greater risk is that increasingly many clients are carrying debts that leave little room for absorbing even relatively moderate economic shocks. Multiple lending on such a large scale has a minimal track-record, and the examples that exist (e.g. Bolivia in 1999) should not inspire imitation. By ignoring clients’ outstanding debts, MFIs in India and elsewhere are abandoning their responsibility for prudential lending.

What Does the Future Hold?

Let me state upfront that even if one accepts the existence of a significant microfinance bubble in South India, that doesn’t guarantee that Andhra Pradesh or any other geographic area is bound to have a crisis. However, I would argue that these areas show vastly increased sector-wide risk, and thus, significant probability of a large-scale crisis. In fact, the Krishna district in AP already had a repayment crisis in 2006, and though many attribute it to political interference, a number of voices have pointed out that politicians were tapping into existing borrower resentment towards the MFIs – after all, it’s hard to inflame a happy crowd. Moreover, among the other countries with high microfinance penetration, Bosnia and Nicaragua are already undergoing repayment crises. Given these examples, risk managers should heed carefully the community aspect of microfinance, which makes the sector so effective during normal times yet can also turn what otherwise would manifest as default spikes into en masse defaults that can engulf entire countries. The normal rules of risk management don’t apply then – of all their problems, the one US banks don’t have to deal with is heavily distressed American borrowers taking to the streets demanding cancellation of their debts.

As I had stated earlier on, it is impossible to prove that a bubble exists while one is still in it – the best one can do is point to data that suggests it may be happening. I can’t predict whether the microfinance bubble I believe exists and continues to grow in Andhra Pradesh and other south Indian states will deflate quietly or burst spectacularly. The outcome depends partly on luck and exigent circumstances, and partly on the actions of the MFIs themselves. In their pursuit of growth, many MFIs have continued to add large numbers of new customers in Andhra Pradesh and other highly saturated regions – I believe that is irresponsible. While rapid growth in the north is a commendable strategy for continuing expansion of financial access, pursuing the same in the south (with the exception of remote, still unserved areas) puts short-term gain not only above the long-term financial soundness of the sector, but, more importantly, above the long-term interests of the very poor the MFIs are seeking to serve. The spark that sets off a large-scale delinquency crisis can be anything and could come at any time – a rapid drop in economic growth, a populist political movement, a religious decree, or a collections effort gone bad. One can’t control the spark, but one can control how much fuel that spark can ignite.

With microfinance, we can’t afford to hope that there will be no spark. For when it does come, I’ll shed no tears for investor losses, nor for MFI managers’ pain – it’ll be the global unbanked poor who I fear will find themselves without financial access once again. India is no Bolivia – if the bubble bursts there, the entire global microfinance sector will find itself reeling. When the media swoop in for their favorite headline buzzwords, and the killer banes of illiquidity and capital flight seize the sector, there will be no rescue from development agencies then. Instead, one will hear the righteous indignations of politicians decrying “deceptions” and “manipulations”. And they will be right – microfinance rests on its reputation as a socially motivated industry, and when the biggest market in the sector comes crashing down from a crisis of its own making, it’ll bury that reputation and the rest of the industry with it.

***

About the Author : Daniel Rozas is a microfinance consultant based in Brussels. He worked in the US mortgage finance market for most of the past decade, including during the peak of the crisis last year. More recently he has been providing consulting for microfinance and development finance companies around the world, and has just published an in-depth study of MFI liquidations. Daniel’s background in finance spans a number of areas, including risk management, business strategy, and IT. Currently he is also associated with Microfinance Focus .

Risk ... maybe increasing faster than corporate profits

2010-10-23T15:50:00.000-07:00

Dear Colleagues

Risk is not an inconsequential matter ... the failure to understand risk brought the global economy to the brink of complete disaster with the financial sector meltdown, and only some exceptional moves by government and central banks in the US and around the world kept the system working ... albeit on life support. What lessons have been learned ... if any?

I learned accountancy in an era when audit certification required an opinion about the reported financial results being "true and fair" and reflecting the records of the company which had been kept according to prevailing standards ... I forget the exact words ... but the concept was simple ... the reported results were right and could be relied upon. Behind the accounting there was a simple set of principles ... accountancy principles ... which meant that ALL assets and liabilities were included in the accounts and the reporting. This required a judgement call by professional accountants as to what had to be included ... not simply rules that were subject to lobbying and manipulation ... and one liability was "contingency" ... in other words "risk"!

Perhaps the biggest liability that now exists in the modern economy and in the typical balance sheet of a big corporate organization is risk ... and modern accounting tends to ignore risk as a liability to be recorded ... until it is way too late. Modern accounting law, rules and regulations argues against including something like risk in the liabilities of the organization ... yet it is fairly clear that very big corporations are now exposed to huge risks AND in broad terms the top management does not have a very clear idea of what these risks are.

The use of complex models to make decisions in the financial sector is clearly widespread ... and maybe there is a high and unacceptable risk associated with this practice. The CEO of CitiGroup testified, I believe that the models being used were never run with a house price decline of more than 15%, so it came as a surprise when house prices declined by more than this and the sub-prime mortgage disaster burst on the scene. What risks are implicit in this approach to managing a business, and the business being so huge that mistakes can break the world economy?

It seems as if BP's top management was caught flat-footed when their oil well in the Gulf exploded and a huge oil spill followed ... they could have been prepared but top management never allocated resources to engineers to be prepared ... they took a risk that they would not need to be prepared, and did not prepare ... and were unprepared. The profit hit was huge and the damage to the environment and society maybe bigger! Big initiatives have the prospect of huge profit ... but the risk associated with these huge initiatives should be put into the accounts as tangible contingencies.

It seems that the telecom sector is going in the same direction. I think I am right ... Verizon just reported record profits on top of higher revenues and lower costs. But while this was being reported my own personal Verizon service was malfunctioning ... FIOS TV, telephone and Internet ... all not working! The problem was reported Tuesday ... and today is Saturday, and the problem is still not fixed. The maintenance crew seems to be tiny and the problems to be handled are considerable ... the system seems to have been cost-reduced almost to extinction. What risk does this represent for the company Verizon ... but more important, what risk does this represent for our society as a whole? Imagine what would happen if there were to be a substantial "event" that knocked out a big part of their network! How long would it take to get the system back into a functioning state again ... and yes ... could they do it? Maybe not!

Risk is going to be ignored as long as there are no metrics about risk ... and it is allowed that risk may be ignored in making financial reports about corporate business. Risk is quite small in a small organization ... but in very big organizations, those that are too big to fail ... the risk may be catastrophic. The trouble with modern money accountancy is that risks like this are "off balance sheet" and off the radar. How big these risks are is anybody's guess ... but I would expect that some of these risks are big enough to pull down the US economy or more. The idea that huge systemic risks are outside the prevailing system of metrics is disturbing ... in fact downright scary!

Peter Burgess

Can the Profit Motive Improve Microfinance?

2010-10-19T17:13:00.000-07:00

Dear Colleagues

In my view, the idea that the profit motive will improve microfinance is patently absurd ... but the idea is gaining traction because bankers and the financial community have discovered a new asset class to exploit.

I do not question the fact that more money can improve the microfinance sector simply by enabling it to expand ... but making microfinance bankable and suited to profit seeking investment most likely means that the real value of microfinance ... the education and training and mentoring that has nothing to do with profit but everything to do with quality of life and perhaps progress out of poverty ... is at extreme risk.

The economic elite that inhabit the higher reaches of the financial and banking sector have little or no idea of risk ... whether it is to do with their own institutions, or more seriously at the individual and family level. Building another financial pyramid on top of the very poor is a bad idea ... maybe even a crime against humanity in the making! I realize these are strong words, but this is really what is at stake.

I hope to attend an upcoming dialog in New York between Alex Counts and Vikram Akula who are potentially on very different sides of the argument. My expectation is that Vikram Akula, who is the CEO of SKS that has recently done a very successful IPO in India, will make the case that profit does not mean losing the value or microfinance ... and access to funding is way more important for the microfinance industry as a whole. Alex Counts, head of the Grameen Foundation in the USA and closely associated with Muhammad Yunus and the Grameen Bank movement is likely to argue that the value of microfinance comes from a range of activities that have high costs but deliver high social benefit but make a microfinance organization seem to be inefficient.

My position is that without strong metrics about value performance as well as money performance, nobody will ever know what is going on until it is too late. The amount of money profit earned in the run-up to the sub-prime mortgage fisco and the subsequent financial implosion of the banks ought to have taught us something ... but people have short memories especially when memory is inconvenient!

This is the abridged notice of the meeting that I just received.

Can the Profit Motive Improve Microfinance?

Asia Society, Schwab Foundation, and WAM-NY, are pleased to invite you to a debate on whether the profit motive can improve microfinance.

SKS, the largest microfinance company in India, successfully went public this summer, becoming the second such business to do so. Is the creation of a large, publicly owned and profit-making enterprise the best-or the only-way to take the benefits of microfinance to the millions of poor people who really need it? Are such businesses more or less likely to maximize public good by giving vital and affordable financial services to those currently living outside the retail banking system?

In his new book, A Fistful of Rice: My Unexpected Quest to End Poverty Through Profitability, SKS chairperson and founder, Vikram Akula, has written a powerful brief answering this question in the affirmative. Microfinance pioneer, Nobel Prize laureate and founder of Grameen Bank Muhammad Yunus, disagrees, as does Alex Counts, President and CEO of Grameen Foundation, and author of Small Loans, Big Dreams: How Nobel Prize Winner Muhammad Yunus and Microfinance are Changing the World.

Join Alex Counts and Vikram Akula as they debate whether public companies and a forprofit approach are the best ways to take microlending affordably to scale. The debate will be moderated by Niki Armacost, Co-Founder, Arc Finance.

This has the potential to be an interesting debate!

Peter Burgess

Money ... does anyone know what it is?

2010-10-18T13:05:00.001-07:00

Dear Colleagues

Bill Sharon has a blog which is worth perusing ... but the recent post about money got my attention ... and a comment from me. The URL is:
http://sorms.blogspot.com/2010/10/means-of-exchange.html

The text of Bill's post is as follows:

The Means of Exchange

The past several weeks have seen new revelations about the complexity of the mortgage industry and the astonishing level of sloppy work done to document that complexity. We are on the verge of massive lawsuits and a good deal of wailing and gnashing of teeth on the part of the banks that issued the loans and the entities that processed, repackaged and sold them as securities. According to William D. Cohan’s piece in the New York Times the banks not only knew about the problem, they hired a company to tell them all about it and then apparently ignored their report.

This is but the latest revelation in the unwinding of our monetary system. It is a symptom of a fundamental underlying problem. Much of the debate has been and is seems will continue to be whether or not we should ignore moral hazard or root out and punish the greedy. Viewed in terms of the current argument, there doesn’t seem to be a solution. People are living in houses that they couldn’t afford and now are worth less than the debt that encumbers them. Banks extended loans with the knowledge they were unlikely to be paid and then failed to comply with the legal requirements which simply mirror the complexity of the securities that were created. A fine mess.

Last night a nameless spokesperson for the Bank of America insisted that even if the bank hadn’t obeyed the law, the underlying facts were accurate. In other words, people had taken out mortgages, weren’t paying and should lose their homes. As the AG’s of forty states join together to halt foreclosures and the debate rages about what should be done we will not doubt hear more of the same. But the laws were written so that the banks could resell, package and securitize the mortgages. Which set of rules should apply? Eventually we will reach a compromise on this issue. People can’t own homes for free and banks can’t decide which part of the law they want to obey. But even as we develop a solution that no one will like we will not have addressed the core issue.

For the last thousand years we have had a debt based monetary system in one form or another. Where money comes from remains a mystery to most people. We teach very little about how our economy works and how we get money into that economic system in our public and private schools – even at the high school level. When people do educate themselves it seems that many of them feel compelled to write about what they have learned in capital letters on the Internet. It’s difficult to have a dispassionate discussion about money when more and more people don’t have any, but we really don’t have much choice in the matter.

It is not new that we have very large issues that we choose not to address. As anyone who has lived through a failed marriage knows, ignoring problems doesn’t make them go away – they simply get bigger. That’s what is happening now. The drive to address the demands of interest on the debt exploits a human trait that we call greed – not the other way around. Those who insist that our solutions lie in the thoughts of the 18th century minds who created the US Constitution, brilliant though they may have been, are missing the point.

Money is a means of exchange. It is developed as cultures become more complex. Accumulating money gives individuals and organizations power, but only up to a point. In the past, disproportionate accumulation has met with societal resistance sometimes manifesting in revolution. An increasingly vocal minority seem to be insisting that we are at this point again. But returning to simpler times is not really a viable solution. We are hopelessly interconnected (or perhaps hopefully) with each other across national borders. We have to begin to discuss and address the issue of money, interest and debt. It could be argued that the current debt-based system has served us well and perhaps, on balance, it has. But nothing is forever and it would be useful if we began to think about whether the level of complexity in our means of exchange can reasonably be expected to serve us in the future.
posted by Bill Sharon at 9:06 AM on Oct 15, 2010

The following is the comment I posted on the SORMS blog:

Dear Bill

This is a very good post ... and much appreciated. My own views have much in common with what you have written.

The implosion of the financial sector over the past few years should not have come as a surprise. The incentives are all wrong, and the financial reporting systems are inadequate to ensure that risk is handled correctly.

Very little of the "education" system deals with important matters like the basic workings of an economic system ... yet the players in the financial and economic game walk away with million dollar annual remuneration ... while contributing absolutely nothing of value to society.

It is a disgraceful situation.

Peter Burgess

The media is being decidedly unhelpful in the way they present issues related to foreclosure and the performance of the banks. The financial and corporate community seems to be very comfortable with the doctrine of "caveat emptor" or "let the buyer beware" ... but the playing field and the legal framework is stacked against ordinary little buyers who are systematically misinformed by vendors. For a very long time "mortgages" were a product that was being sold to people who had little or no idea what they were being sold ... but who cared ... everyone on the feed chain was doing well, the land developers, the builders, the mortgage originators, the community banks, the lawyers, the real estate industry, the title industry, the appraisers, the big banks, the investment banks and ultimately Fannie and Freddie! All of these profits on top of the earning power of people who were economically strapped is a stupid pyramid ... and everyone in the pyramid shares blame for the fiasco. The fact that the media did not see a problem is also hard to swallow ... not to mention the accounting profession and the regulators.

I do not like a lot of regulation ... but freedom without responsibility has proven to be worse in the context of an "anything goes" US entrepreneurial economy ... going all the way back to the frauds of the Reagan deregulation, which should have been a wake-up call but was pushed back and then made worse and worse!

Peter Burgess

Foreclosure fiasco ... can the US banks do anything right?

2010-10-18T12:18:00.000-07:00

Dear Colleagues

According to Bloomberg News there is a lot of news from the banking sector today ... but some of it relates to the foreclosure fiasco.

There are many things wrong with the US banking system ... and the global banking system as well. The idea that making profit was the driver of rotten banking practices for a good number of years before the system imploded was bad enough.

Now getting the system back so that it works in a manner that has utility for society is also going wrong. The revelations that banks have computerized the "review" of their foreclosure files and is doing "robo-signing" of file reviews is disgusting.

Statistically, the system may be quite accurate ... but for the people who are having to resolve errors, quite accurate is not good enough. Banking ought to be a business where there is a high degree of "human contact" and not something that is devalued to a computer procedure.

As long as profit is the only metric of interest to decision makers and the economic elite, then society is in deep trouble. This must not be allowed to continue into the future ... the planet will not be able to stand it.

I continue to work to have The Burgess Method available as a system of value accounting so that there will be a rigorous system to complement money GAAP accounting.

Peter Burgess

Leadership Lessons from Dancing Guy

2010-10-17T14:51:00.000-07:00

Dear Colleagues

This a about a lone nut who is an effective leader and builds a movement. A great lesson!

http://www.youtube.com/watch?v=fW8amMCVAJQ

Every community needs a lone leader to stand up and dance around with True Value Metrics ... and for the community of economic actors to join in just like in this YouTube!

Peter Burgess

About the energy crisis, forest cover and fuelwood!

2010-10-10T20:03:00.000-07:00

Dear Colleagues

This is part of some discussion from the LinkedIn group Biochar Haiti

Otto Formo makes the case for better metrics along the lines of The Burgess Method (TBM) with great clarity. My response is what you might expect!

Group: Biochar Haiti
Discussion: Vetiver as a biofuel for Biochar

Dear Peter,

I very much agree that the costs of this activities has to be "sustainable" and to compete with the most common fuel of to day on Haiti, charcoal.

But when you know that the remaining forest of Haiti is lower than 3% of the original forestcover, there is no choice and the production of charcoal for household enrgy has to stop NOW.

Therefore,0 in short terms, we have to subsidize the change of fuel from charcoal to any type of pellets made out of dry biomass, even if it will "cost" more of to day it will benefit the people of Haiti in the long run.

This "turnover" process has to start to DAY, before its to late for the forest to recover and it will take decades to complete.

"The battle of Haiti" has just begun and one of the main focus should be to restore the forest cover "as soon as possible" and bring the people of Haiti back to the rural areas to cultivate their land in a sustainable manner using methods involveing biochar, if you like.

Even in the western world we seems to "forget" that we need to produce our own food and preferable based on local common knowledge and manpower.

"Small is beautiful", seems to be a usefull slogan from now on and in the future to come.

Posted by Otto Formo

This is my comment.

Dear Colleagues ... Otto

You make the case for value accounting very well. The Burgess Method (TBM) is all about getting some balance between making money and creating value. When TBM value chain analysis is done it is apparent that charcoal may be profitable but there is substantial value destruction.

I have worked in many developing countries ... more than 50 over almost as many years ... and the energy crisis is not that petroleum resources will run out in the future, but that firewood has already run out. Your figure of 3% of the forest cover left in Haiti is bigger than the 2% number I have been using!

The value chain analysis in TBM suggests that bringing back forest cover has huge value ... but not very much of the activities needed are able to make short run monetized profit. This means that the modern and quite foolish system of project analysis based on money return on investment will fail to allocate resources to activities that build forest cover ... at the same time that they will fund forest projects that extract timber from the forests!

The prevailing system of metrics is a global disgrace and must be changed. My hope is that TBM will help this to happen.

Peter Burgess

Posted by Peter Burgess

A World Bank competition to create apps that will use the data they have

2010-10-10T17:38:00.000-07:00

Dear Colleagues

The World Bank has spent several decades working on "development" and has built a huge collection of data. I am impressed by the amount of data ... but I am appalled at how little use these data are for meaningful decision making.

Maybe this is going to change! I have been alerted to a World Bank competition that challenges people to develop software applications in support of the Millennium Development Goals (MDGs) ... and with the conditionality that the applications use one or more of the World Bank datasets. When I look at the available datasets it confirms that there is an abundance of data ... and probably not much that is particularly useful for what interests me.

Specifically, I want to see data that have an ability to be disaggregated to the community level. Most of the data of the World Bank has been aggregated to a national level without any ability to get the data related to a place and time. There are data by "project" in some of the available datasets ... but these project data have no drill-down to progress and performance in any real location. The World Bank has been a source of employment for economists for decades and the data show it ... meanwhile the data that are needed to manage anything are missing.

Anyone that manages resources wants something more than weak correlation ... decision makers need specific cause and effect ... and if it is difficult to predict an outcome, decision makers want meaningful metrics about progress and performance as soon as possible after resources are deployed. I have not met a World Bank official (in the period from 1978 to now) that really understands this idea ... and it is no surprise that so much money has been disbursed with so little success.

It is possible that The Burgess Method (TBM) of value accounting at the community level could use some of the World Bank data as rather crude benchmarks against which community progress is measured ... whether or not this would be enough to satisfy the competition rules, I do not know.

The following is the message that alerted me to the competition.

Peter Burgess

//////////////////////////////
http://developmentmatters.ning.com
Apps for Development - competition by the World Bank
Posted by Narendran T on October 10, 2010 at 9:46am

The Competition challenges participants to develop software applications related to one or more of the Millennium Development Goals (MDGs). Submissions may be any kind of software application, be it for the web, a personal computer, a mobile handheld device, console, SMS, or any software platform broadly available to the public. The only other requirement is that the proposed application use one or more datasets from the World Bank Data Catalog available at data.worldbank.org

More information at: http://appsfordevelopment.challengepost.com/

Putting The Burgess Method (TBM) on stage

2010-10-10T14:16:00.000-07:00

Dear Colleagues

What to do? TEDxEast has sent a e-mail with the subject line "Do you dream of giving your own TED talk?" to interested TED followers and I am thinking about what to do!

I have drafted a response, immediately below, but not yet sent ... I have a little time to think about it. The text of the original TEDxEast message is below at the end.

What do you think I should do? How should my work with The Burgess Method be positioned in this context?

Peter Burgess

DRAFT REPLY TO TEDxEast

Dear Colleagues

Do you dream of giving your own TED talk? Actually no! For me this is more a nightmare!

And the subject ... interconnectivity ... is more than likely to make me hyper-mad, rather than my normal state of just plain mad!

My issue is simple ... during my career lifetime there has been something like a million-fold increase in the power of the technology used for "interconnectivity". That is a lot.

Better ... technological power is accelerating. In the past five years ... or is it perhaps five months ... there have been increases in this power by another order of magnitude ... or two!

There are some very impressive things going on ... every single page of print is likely to be "a click away" very soon courtesy of Google, and I can get millions of items about almost anything in less than a second, again courtesy of Google. I can access all of this on an I-something courtesy of Apple anytime and anywhere.

All of this is exciting ... but from my perspective completely begs the question. Why, given all this technological power, are some 4.5 billion people on this planet poor and hungry? Why? Why are so many other things wrong with our local and global society?

What are the elements of a solution?

I am an accountant. The big firms in my profession gave up the ghost some time in the 1980s and have made themselves rich by making profit a priority. The idea that "numbers don't lie" is dead ... and nobody remembers the old idea of "true and fair". I am pretty disgusted with the way these things have evolved ... and the good news is that I am not the only one!

As a foundation, the double entry accounting construct is very powerful ... and I want to get this back on track as the core system of some meaningful metrics for society.

The Burgess Method (TBM) is simply this ... business accounting but with both money and value measures, and done with community (that is the place we live and work) as the reporting entity and not just the organization.

There are three main ideas: (1) State of the community ... which is like a business balance sheet with money and value elements; (2) Progress ... which is the change in state from the beginning of a period to the end of a period; and (3) Performance which is (a) efficiency, or the cost of an activity relative to what it should have cost; and (b) effectiveness, or the amount of progress for the cost (or resources consumed).

When you change the way the game is scored you change the way the game is played. TBM is scorekeeping ... and to the extent possible there will also be "stats" so that granular performance of the elements of society may also be available.

And there will also be value chain analysis ... because in so many business activities there are profits for some and losses for others. In optimized socio-economic performance there is more win-win than zero-sum.

If these metrics are on everyones i-phone ... and in the cloud ... I argue that there will be a new era of socio-economic progress ... and a paradigm change for inclusion.

Peter Burgess

And this is the TEDxEast email message!

///////////////////////////
October 10, 2010

This may be your chance to take the stage...

We are inviting our community to pitch their ideas for 3-minute talks and we are going to pick the most intriguing, unusual, spell-binding and quirky ideas (and their speakers) to become part of our program on November 11, 2010.

So, if you have been inspired by others and even rehearsed your own TED talk in your head... now is the time to think about sharing it.

How this will work:

1. Remember, the theme is "Interconnectivity". This should be used to frame your talks so they fit with the overall program.
2. The max time slot will be 3 minutes- but we want you to send us a 1-minute video with your pitch- why your idea, why you? We will watch all of them and then reach out to those who make us want more.
3. We are a team of volunteers- so once you make your submission you will have to be patient. We will contact the folks we choose but will not likely have time to communicate with everyone who sends in an idea. So, take a leap of faith, give it a try...but please do not send us a bunch of emails asking about the status because we will not be able to respond.
4. The absolute drop-dead cut off for submissions is midnight of Sunday, October 24, 2010.

If you think this sounds good, come up with something unique, inspiring and delightful and send us a link to your video pitch. Please embed the link of your pitch within the body of your email. Send all pitches to tedxeast@gmail.com.

We are excited to put our community on the stage!

Warmly,

Julianne, Marisa, Connie, Vico, Lucy, Rona, Tommy, Susanna, Ofelia, Jennifer.

//////////////////////////////////
You are receiving this email because you have applied to or attended TEDxEast.
Our mailing address is:
TEDxEast
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Copyright (C) 2010 TEDxEast All rights reserved.

World Bank and IMF ... Ministers of Finance ... Single Treasury Account

2010-10-10T13:11:00.000-07:00

Dear Colleagues

A long text follows ... but, in my view, worth discussing. There are many issues that were covered both in the International Monetary Fund and World Bank Group Annual Meetings and in the various related events. Sadly ... many items get mentioned ... but most issues remain a point of discussion for ever and ever, and rather little of meaningful change gets done.

But my broad observation is, in itself, dangerous. There are good things that are happening ... some very good things. There are also a lot of bad things that continue unabated. One has to be careful not to "throw out the baby with the bathwater".

I will mention now just one issue that I consider very important .. and relevant in connection with meetings of Ministers of Finance. Other questions that arise based on the transcript of this press conference will be handled separately.

Getting accountability in government has been an issue for many centuries ... and it was improved significantly about 400 years ago with the advent of a system called the Single Treasury Account. The idea was quite simple ... that all the revenues of government would be put in this one account, and nothing would come out of this account until the elected representatives voted for its disbursement. In other words, the Monarch did not have sole control over the funds raised from the subjects. This idea is still the foundation of government accounting in almost every country in the world. This is the reason what the budget legislation is so important because it is this vote that allows the government to disburse moneys including civil service salaries and everything else.

The problem of government bribery and corruption in developing countries and the mis-use of government resources could have been mitigated enormously if the single treasury account concept had been actively supported by the official development assistance (ODA) community and especially organizations like the World Bank, the IMF, the UN and bilateral donors. Instead these organizations supported a "project" management and control model that has proved to be a bonanza to the corrupt while totally sidelining the control mechanisms of the Ministry of Finance.

As a professionally trained accountant, I am appalled at the way this has all played out. The Ministry of Finance has an important responsibility ... and it is disgusting the way rich donors have subverted this core financial control mechanism of government and the public sector.

What is worse is that most development experts do not even realize this has been going on for decades ... essentially since many of these countries became independent around 50 years ago!

The following is the text of the Press Conference given by four African Ministers of Finance last Friday, October 9.

Peter Burgess

/////////////////////
http://www.imf.org/external/np/tr/2010/tr101010.htm
Transcript of a Press Conference by African Finance Ministers at the International Monetary Fund and World Bank Group Annual Meetings
Washington DC
October 9, 2010

Participants:
Mr. Hon. Albert Besse, Central African Republic
Minister of Finance
Mr. Mohamed Bacar Dossar, Comoros
Minister of Finance, Budget and Investments
Mr. Uhuru Kenyatta, Kenya
Deputy Prime Minister, Minister of Finance
Mr. Samura Kamara, Sierra Leone
Minister of Finance and Economic Development
Webcast of the press conference
MR. DIENG: Good afternoon, everybody, and welcome to the African Finance Ministers press conference. Joining us today, we have four ministers: Minister Samura Kamara from Sierra Leone, Uhuru Kenyatta, Deputy Prime Minister and Minister of Finance of Kenya, Mohamed Bacar Dossar from the Comoros and Minister Albert Besse from the Central African Republic. Each of our ministers will have a very short opening statement, and then we’ll open it to questions. So, without further ado, I’ll hand over to Minister Kamara.
Minister KAMARA: Thank you. As we are seated here, we are representing firstly our respective countries. We are also representing Africa. And at the same time, we are looking at this through the country level, but the regional and global perspective. So we are part of the global economy. Some recognize my name, Minister of Finance for Economic Development in Sierra Leone. Sierra Leone is a post-conflict country. Of course, we are recovering. We’re coming away from humanitarian emergency assistance. We’re now trying to move towards achieving sustainable development as well as deepening our intervention on human development, in particular health and education.
There are serious challenges. We have an agenda for change which is a five-year program, and hopefully we want to look at a successful program. In the agenda, we’re trying to address two things. For the first time, like many other countries in the Third World, we’re addressing the drivers of growth because these economies have never been able to grow substantially, and therefore we want to give a lot of our resources towards achievement of growth. And by so doing, we are looking at infrastructure development; we are also addressing agriculture and food security. Energy is a great challenge, and water supply and sanitation are challenges. On health and education, it’s a question of increasing access to health, access to educational services. So these are very big challenges at the national level. I think we are turning around. We hope the economy will continue to survive and to grow through the implementation of our agenda for change.
From the African perspective, I’m sure we all have commonalities. We do not quite represent a homogenous group, but in terms of the challenges that face Africa we’re very, very close--challenges of growth, challenges of poverty reduction, these sorts of things. And I think we all have the same agenda, especially relating to food security and agricultural productivity.
Now what is happening to us in the context of the global economy is that there is a widening and deepening of global resource in Africa. Africa has never been in this particular situation. It was not part of the cause of the crisis, but today Africa is part of the solution, and therefore we cannot ignore that. And that’s why at our meetings we all try to exchange ideas, and try and have consensus on how we think we should approach the Bretton Woods institutions in particular since these institutions are at the center of trying to look out for solutions in the crisis that is affecting the world.
At our level, we have taken a position. We are doing correspondence through both we have a memorandum, writing to the IMF Funding Director and to the World Bank President. Tomorrow, we will be meeting them separately to present our case. I hope from there we’ll be able to move.
In terms of the challenges that are facing the global economy at the moment, perhaps you can say one of them is the reform of the IMF. Africa has taken a position. We quite agree with what is imagined. What is imagined is really if we are to follow what happened in [inaudible] some time back. Of course, the quota reform as well as representation, these are two critical issues.
On quota reform, we have a position that we need to have PRGT countries protected substantially, and at the same time we had one country that suffered during the second round, South Africa. We think South Africa also needs to be protected, so that’s a good move forward. But the idea is not to let any other African countries suffer during the third round. So that’s why we are following closely with the permutations that I imagine.
In the case of the World Bank, we are happy that we will now have a third chair in the World Bank, and we have done our permutation, our reconstitution of member countries. We have now filled that chair. The good thing is even though perhaps we may not have been all happy with the outcomes, but the good thing is we have maintained the third chair. There’s a third chair in the World Bank Executive Board now for Africa. In the Fund, we have a second alternate. Hopefully, as the time goes on, we’ll start pushing for another third chair. I think I can stop there.
MR. DIENG: Thank you, Minister Kamara. Minister Kenyatta.
Minister KENYATTA: Thank you. Maybe I begin by joining my colleague in saying that as much as we speak for our respective countries we are also speaking for our entire constituency in the African continent.
And may I begin also by just giving a short overview of the situation in Kenya and say that as many of you are aware we have now passed a new constitution which is now being implemented--a constitution that has resulted in an increase in optimism in terms of our economic outlook, going forward, and a constitution that helps us strengthen our government structures, helps us in terms of establishing firmer and stronger institutions. And all of these, we believe in the medium to long term will result in greater growth in Kenya.
With regard the economic outlook, as many of you are aware, as a result of both the post-election violence and the situation that prevailed with a major drought that affected the Kenyan economy, this was added to by other factors that were well beyond the control of Kenya, largely reflecting the financial or the global financial crisis, and resulted in a downturn from the year 2007, from a growth of approximately about 7 percent. This was reduced to about 1.7 percent in the year 2008-2009, but we are now seeing a strong rebound, and we are expecting a growth trajectory of approximately 5 percent in the year 2010.
This said, we are still faced with a number of challenges--challenges especially with regard to food security, challenges with regard to expectations as a result of the implementation of the passage of the new constitution. But we have addressed ourselves through a number of stimulus programs, as a government that we have instituted.
We have had, and managed to have, the necessary fiscal space in order to create a number of incentives largely targeted at the social sectors, at the health sector, at the education sector, also trying to deal with our issues of food security through increased budgetary allocations towards irrigation, as well as job creation in terms of a number of measures that we are instituting as a government to support our private sector.
As a country, we are strongly and firmly on the path that growth must be private sector led, and towards this regard we also acknowledge statements made yesterday by both the IMF Managing Director and the President of the World Bank, recognizing that the potential that the African continent has and a potential that can only be realized through increased investment, through increased flows of FDI into the African continent.
And towards this end, we as a country, as a continent, are appreciative of the initiative being undertaken by the government of South Korea, who are now going to assume the chairmanship of the G-20, and the agenda of propelling investment and job creation as being part and parcel of the global economic recovery, with a realization that unless we are able to deal with the issues of job creation, food security, climate change, that the recovery still ultimately remains very fragile.
With regard reforms in the World Bank, as my colleague has said, as much as they are challenges, we must say that indeed we are happy with the creation of the third constituency for ourselves, and we believe that this will result in greater representation for the African continent.
We are also looking forward and actively, as a continent, working towards the next replenishment of IDA where we do hope that the larger players, the more developed and emerging markets, will realize the need for not just a replenishment of IDA but an increase in the replenishment of the upcoming IDA, given the fact that yes, while Africa may be a very small percentage of the overall global GDP the fact that we have been able to achieve the kind of growth rates that we have achieved goes to show the increased potential of Africa becoming a much larger player in the world market. And we need also to acknowledge, as indeed has been accepted by some countries, that global recovery is going to be largely intertwined with increased growth in the developing countries.
With regard to the issue around both governance and indeed the quota with the IMFC, the position that we hold as an African continent is that yes, we do agree that there is need for an increase in quota in order to enable the IMF to intervene as it has. And we are grateful indeed for the quick response that they took in the aftermath of the global financial crisis.
But for this to be able to continue, we do agree that there is need to increase the quota. But that quota should not be at the expense of the poorer countries, especially those on the African continent, and there is need to ensure that the quota of the poorest countries in the world is indeed protected as we move on.
With regard to voice, we must also recognize that voice must not be a factor of shares alone. Voice must also recognize the fact that Africa represents a large number of countries, and we need to look at the voice issue both from a perspective of shares, but also from a perspective of number of countries.
And that is why I support what my colleague has said, that as a continent we continue to support the reforms to protect the quota of the poorest countries, but at the same time to ensure that we preserve a voice also for the countries on the African continent. And towards that end we will continue to push as we go forward for a third chair in order for that representation to be seen through.
Minister DOSSAR: [Interpreted from French.] Good morning. First of all, a few words to give you some background information about the Comoros. We’re in a set of islands off Mozambique between the African coast and Madagascar. The Comoros are a small island state, a small developing island state with some instability in the 90s that ultimately resolved itself in 2001 with the adoption of a new constitution that grants considerable autonomy to the various islands that make up the Union of Comoros, while preserving national unity through a federal system.
Since then, the country has recovered growth and stability back. We witnessed in 2001 democratic change, with free and transparent elections, and a change of government. We’re in the process now of organizing new presidential elections, and we hope that these too will be free, transparent and democratic.
In other words, over the last 10 years or so, our country has experienced relative stability in political terms. Clearly, this has also helped us improve our financial situation, in particularly through our accession to a decision point last June 29. Our country was one of the very last of the continent to reach that stage and gain access to the program which is a very significant challenge for us. We’re supposed to reach the end point, completion, in 2012.
Economic activity, although not very strong, has nevertheless recovered, and GNP growth has grown from 1 percent to 2.8 percent. It’s not very high yet, but it’s on the right path, and we hope that in the months and years to come this trend will be further confirmed.
We’ve also engaged in a campaign to promote our country and open it ever more to FDI, especially from Arab states because we have cultural and historical links to that part of the world.
All of this culminated in the organization last year of a donor conference for our country, with pledges of over $350 million in development projects to be implemented in our country, and this opens up new vistas in terms of improving infrastructure, in terms of developing the private sector and also in terms of boosting the health and education sectors of our country.
Globally, in other words, our situation has improved although there is very much that we still have to do. As I said earlier, our greatest hope now is to witness further democratic change in December because the new president-elect will have a five-year mandate, and we hope that through this change we will be able to consolidate the progress that we have made, not only from a political standpoint but also economically and financially. So that is where we currently stand.
I wish to add my voice to those of my colleagues who spoke just before me about Africa’s representation in these institutions because there are interests that require representation.
Minister BESSE: [Interpreted from French.] Thank you for this opportunity you’re giving us to address the situation in which we find ourselves today, especially in light of what’s happening in the world. I am the Minister of Finance of C.A.R., a country in the economic and monetary area CEMAC. We are at the center of the continent--623,000 square kilometers north of Congo and to the west of Cameroon.
We have had recurrent crises in the C.A.R. over the last years, both economically and politically. And as of 2003, with the help of the international financial community and of CEMAC, we gradually reviewed our macroeconomic policy framework, rebalanced that totally and negotiated a program with the international financial institutions that gave us access to a decision point within the HIPC initiative. Thanks to that, we gained a clearer understanding of what we needed to do, part of our debt was cancelled, and we mobilized further resources in order to begin our combat against poverty.
As you know, we’re a post-conflict country with a tremendous lot of challenges. We need tremendous investment in infrastructure, but I think that with our closer links and programs managed by international financial institutions we have made tremendous progress. Although the financial crisis reduced our growth from 4 to 2 percent, we’re hoping to be close to 3 percent at the end of the year.
As regards the financial crisis, we did suffer quite a bit because our main exports are timber, diamonds and some coffee, and demand for these goods sagged somewhat with the crisis. And with the impact of a drop in exports, we also witnessed a rise in unemployment.
Politically, we’re in the process of preparing elections that are currently scheduled to be held early next year. We hope they will be democratic and transparent, so that we can resume what work needs doing in order to ensure the development of our country.
At the subregional level in CEMAC, the issues are somewhat the same. CEMAC regroups six countries, but there are five among these six that are oil producers. But they also export other commodities and suffered to some extent because of variations in commodity prices worldwide. But on the whole, growth has resumed. Growth has not been durably impaired by the financial crisis, and things seem to be moving slowly forward.
Prospects for C.A.R., as I said, are linked to major investment projects focusing on infrastructure. As you know, we were recently a conflict country, and there’s a lot to be repaired. But as you know, we’re also suffering the impact of another conflict out of Darfur which borders our country, and local populations from Darfur have resettled on our territory. But today I think with the help of other CEMAC countries the situation on that front has somewhat stabilized, and I think we can view the preparation of the 2011 elections more confidently than we did in the past.
I think that the issue of representation of Africa within the IFIs is extremely significant. The third seat strikes me as being extremely important. I have the feeling that discussions are going in the right direction and will probably further good governance in political terms.
As far as the economy is concerned, I would like to say that in C.A.R. all the reforms that we’ve undertaken with the help of IFIs have yielded good outcomes, and we’re continuing to cooperate with the institutions and looking forward to these elections.
MR. DIENG: We will now take questions. Please identify yourself and your organization.
QUESTIONER: [Interpreted from French.] I would just like to know how you think we should take advantage of the considerable rebound of the economic activity on the African continent as a whole.
And secondly, what are the African positions as to the reform of the World Bank? Not only the representation and the seats within the World Bank, but what about the debt relief, what about climate change and also what about job creation?
Minister KAMARA: As far as the World Bank is concerned, we do--we appreciate the reforms that have come so far. We are looking for deeper representation. We’ve got it, and it is now with us. We protected our chair. And the Bank also has enough programs that will support Africa. They’ve gone ahead in the debt relief. We got a lot from debt relief. We also got a lot from climate change.
And at the moment, the Bank is developing a strategy for Africa, and we have been consulted more than once. The Vice President visited Freetown when we had our African caucus meeting. She made a presentation last year. She also made a presentation. So we’re working with that to develop this African strategy.
But the challenge there is how do we get together and convince the advanced countries to put more money in IDA because that is our window of opportunity. So that’s what we do.
Minister BESSE: [Interpreted from French.] I would just like to add some elements to what was said earlier. We know that we are working in the subregion. I was talking about CEMAC earlier. We have a regional economic program within CEMAC to work on investments, for example, and we believe that today whichever country we are dealing with--of course, the situations vary from one country to another, but we have to take this into account in our regional structures. But we do know how to adapt things to each particular country in terms of investments. And of course if we have surpluses we want to use them in different fields--health, education and so on.
A question was raised about our involvement in the program. When we have reached the decision point of HIPC, it’s true that when we reached the completion point the debt was totally cancelled for some countries. The question is how to encourage development in those countries where the debt relief was not full. So this is in a way an answer to the question, and yesterday we were talking about different possibilities to relaunch development in those countries. In terms of climate change, we have been able to set up a fund to fight against climate change, and I think that this is an issue that is being dealt with. A number of investments have been made in this respect.
Let me come back to the Central African Republic. We have the Congo Basin that covers just about the five countries of CEMAC, and the six countries of CEMAC. Of course, the question is how to get, how to find the appropriate funds in order to carry out those innovative projects, in order to have new financial initiatives in order to finance this fight against climate change. This is what I had to say about the question raised.
MR. DIENG: Thank you. We’ll take another question, at the back of the room.
Patrick.
QUESTIONER: Last year, news broke of a crisis within the Bank of Central Africa that is in charge of the safer denomination for Central Africa, with the result that in May the IMF suspended disbursements to that bank. I understand that it has quite recently resumed those, and I wondered if Minister Besse could comment on the effects of this crisis. I understand two officials have been forced to leave the employ of the bank, and whether there are going to be any more actions against them. And what structural reforms and other reforms and measures have you taken to assure the people of Central Africa, the Central African region, of the effectiveness and accountability of systems within that bank?
Minister BESSE: [Interpreted from French.] Yes, thank you. Yes, this has also been covered by the media, and it’s a real issue. But you have to remember that as of January 2010, when there was a summit of the heads of state of CEMAC in Bangui. So this is a matter that has been followed by the highest authorities of the state.
So what happened at the central bank in terms of governance since then? I personally chair the Monetary and Economic Union for Central Africa, and I took part in various decision-making summits that concern this matter, and we have tried to change the whole team at the head of the bank. The IMF was quite right in its approach to safeguarding our major institutions. They intervened with great rigor. But we had a major program of reform in force even before December 2009 that had been negotiated with them, and some number of prerequisites were defined.
I was mandated after the suspension of disbursements to meet the Managing Director of the IMF with two other ministers and the governor, and we really answered all of the specific questions that were raised regarding the connection between the central bank and its international partners. And as you know, the program for CMAC on the IMF part was restored.
We have, by now, covered 97 percent of what was required of us, and I think that we now need to go on closely--we’re going to go on closely monitoring the whole issue at the ministerial level, and we’re going to further strengthen control structures within the central bank. We have strengthened the capacity of the internal controls. We’re still extremely attentive to the situation, to make sure that there are no further incidents like the ones that happened last year, and we hope that we will therefore in a position to avoid further program suspensions because let me say that that was a bit of a shock to us.
QUESTIONER: Three questions: One, with regard to the ongoing reconfiguration of representation of countries on the IMF/World Bank Board, please help us understand how will this affect disbursements to African countries, and especially with regard to concessionary lending that most Sub-Saharan African countries have been getting.
My second question is on growth and employment in Africa. We are talking about growth rebounding in Africa, but we do not seem to be putting emphasis on, or rather, even when we do, we’re not giving figures of employment.
I was looking at the World Economic Outlook report that the IMF released on Wednesday, and many African countries do not have unemployment figures indicated. And when I asked the IMF they said the respective countries, including my country, Kenya, did not have figures of unemployment. So how are we going to tackle this problem of joblessness in Africa if we do not even have the numbers, if we do not know the unemployment rates in Africa?
My third question is Kenya-centric. The World Economic Outlook report projects that Kenya’s economy will grow by 4.1 percent. Finance Minister Uhuru Kenyatta just said that the projection is over 5 percent growth rate. Kindly help me understand why there’s a difference in these projections. Thank you.
Minister KENYATTA: Thank you, and as I address that question I’d like just to make a brief comment on one of the issues that was raised earlier by a colleague.
That is to say that indeed I want to agree that one of the ways in which we can address ourselves to the kind of rebound that we’re seeing in the region is through increased regional trade, and to say that if we take a look at the East African Community for example, one of the reasons why we were able to be resilient, despite the downturn in terms of demand for our products from the developed countries, was the increase in regional trade that took place.
Towards that end, we are working as a region towards further strengthening this. We have now the Common Market which is in place as of the end of July 2010, and we are also working in order to improve infrastructure, so that this increased inter-regional trade can continue to play the role that it has played. There is that recognition, and therefore the need to further develop and strengthen the infrastructure in the region.
With regard the issue of disbursements, this is one of the key issues why we are saying we need to protect the quota of the poorest countries in the world, because we need to also ensure that with regard to disbursements and access to much needed finance is indeed protected, and that is not reduced with the ongoing discussions with regard both quota and voice reform.
Voice reform is also important to ensure that the voice of Africa continues to be heard, and I think that is the position we have taken as an African continent. And therefore the need for another chair to ensure that the voice of Africa continues to be heard, not necessarily in terms of representation, in terms of quota, but in terms of both size, population, but more importantly number of countries that are on the African continent.
With regard to the issue of growth and employment, I think I mentioned in my own statement that there is a recognition that growth will continue to be fragile unless we are able to equally handle the major challenges of unemployment and food security. This continues to be an emphasis. Let me speak especially for the Kenyan government, that a lot of the programs that we’ve been trying to initiate are programs that are aimed first and foremost at increasing opportunities for job creation. This is the reason we are focusing a lot in terms of infrastructure, in terms of the energy sector, in terms of expanded infrastructure with regard to technology, the fiber cables that we are laying. All this is aimed at reducing the cost of doing business, increasing the attractiveness of both Kenya, East Africa and indeed of the African continent, and as an investment destination because, like I said, we are great believers that the ultimate sustainability of our economies must be based on private sector-driven economy and hence the investment in some of those sectors.
With regard the projections that we have, you will recall growth projections. We did have in our fiscal year 2010-11 a projection of 4.1 percent. But the kind of trends that we are seeing in terms of both the tourism subsector, the agricultural subsector as well, the manufacturing and construction, give us an indication that if that kind of trend continues through the third and fourth quarters, we are likely to see a growth rate of around 5 percent. So we are hoping that we will be able to achieve a much higher level than we had previously anticipating, assuming the third and fourth quarters continue as along the same path we saw in the first and second.
QUESTIONER: What is the unemployment rate in Kenya?
Minister KENYATTA: Well, sorry, that was another. Indeed, we have a need to strengthen our own statistics, and that’s another area that we are all looking at. We need to be able to strengthen our ability to gather these statistics and we are investing in that particular side as well.
But we must also recognize that as we strengthen the gathering of these statistics the formal sector in many African countries--and let me be more Kenya-specific, the formal sector that is normally captured does not take into account the informal sector which is today one of the largest single employers in Kenya. And this is why together with the central bank, together we are working on a process of financial inclusion by bringing a lot of the people in the informal sector and mainstreaming them into the formal sector. This will enable us to capture a lot of people who are currently not being captured through the formal statistics that we currently are using.
So we believe strongly that financial inclusion will help us in achieving a much greater level of capturing those who are actively engaged in the informal sector and are currently not being captured, as we go about our statistics collection, as well as strengthening the capacity of, for example, the Kenyan Bureau of Statistics in being able to capture some of this data that had previously not been captured.
Minister BESSE: I’d like to add something regarding employment because jobless growth corresponds to what? You can do all sorts of computations, but what does it mean for the population? It means that there are no prospects. We need to work for our population, but employment has a [inaudible] training. For countries that are post-conflict countries, such as mine, this is a major issue. But quite clearly the government is working to try to resolve this and in essential sectors such as education, health care and agriculture as well, which is another extremely important sector for us. A country such as mine experienced famine in 2008. So we need to strengthen intervention in these areas.
And there is real employment in these sectors, although very often the actual extent of employment is not covered by statistics. The innovative initiatives are normally taken into account in modern statistics.
But you have to understand that our government is working to make sure that our whole population benefits from the improved economic situation, to better job prospects that have to be supported by training initiatives, but the government can’t be the sole employer. The private sector has to intervene as well, so as to support the work undertaken by the public authorities and industry. Thank you.
MR. DIENG: Thank you, Minister Kenyatta. We are running out of time, so we’ll take two or three questions at a time now. Here, at the end of the room.
QUESTIONER: The question is regarding the resource sector of the whole African continent. What we are seeing is that more and more countries are coming at a different sort of resource taxes. Like in Australia, they recently introduced a resource tax, and Canada is also following the same way. In 2007, Zambia came up with a copper tax which was taken off the next year. What are the chances, or how do you guys see that this trend is going to be more and more evident in the African continent, number one? And question number two, what sort of impact do you think it may have on FDIs or foreign investors?
MR. DIENG: Thank you. We’ll take a second question.
QUESTIONER: [Interpreted from French.] Let me say something, introduce some clarification. It’s true that the third seat has been granted, but what is the actual trend at the IMF because there is talk of going down from 24 seats to 20, and we’re talking about a third seat for Africa. So could you tell us a bit more about what trends are at play?
MR. DIENG: Maybe you can take that one, Minister Dossar.
Minister DOSSAR: [Interpreted from French.] Yes, you know that in the past there was an arrangement that allowed to increase the number of seats from 20 to 24. This was an agreement that was extended year after year, but this time around the United States opposed the extension, and they requested that legal counsel look into this and that the Europeans renounce one or two seats in favor of French-speaking Africa. As far as we can tell today, the Europeans seem willing to do something along those lines. So we do hope that our European partners will free seats to allow for permanent representation of French-speaking Africa rather than have to live through year after year the negotiation of a transitional situation.
MR. DIENG: I will ask Minister Kamara to say something on the tax issue.
Minister KAMARA: Yes, I’m not sure whether the situation in Zambia is replicated in other countries, but I think the general challenge for our economies, as we try to attract quality investment--mind you, you want to avoid these fly-by-nighters. You want quality investment. What type of fiscal regimes? What incentives, incentives package? Many of them come and request incentives packages, this sort of thing. Now that is a delicate balance in taxation for investment.
The other choice as a country is to get your taxes up-front. You frontload your taxes, or you backload? If you frontload, you might just deter, you might discourage investors. Investors will go away, this sort of thing, especially when many times the accruals are not very certain.
The business plans that are drawn by investors, many of them do look into these national stock exchanges. They develop a very robust business plan to sell shares, to sort of marry a lot of shareholders, irrespective of what the resources are on the ground. We have seen that happening. And of course in the end the interest in making capital is very good there. Therefore, tax incentives should be reflected in that cash plan, that business plan, and make the project look so, so, so impressive for outside investors.
So this is the challenge that we have--how to create this balanced between them. You don’t want to lose revenues and fall out at the formative stage. But a good thing is that African capacity for negotiated investment is now improving considerably. So in the case of Sierra Leon, where we don’t have the capacity we seek international technical assistance to help us in negotiating. So I think this is where we are.
I don’t think I can talk for Zambia. Now I read about it, so that it will not be replicated in Sierra Leone.
MR. DIENG: Thank you. We’ll take a final round of questions. Here, at the back of the room.
QUESTIONER: The problem of statistics is one of the major problems, to know the number of, the rate of jobs and joblessness. So how do you really calculate real growth?
And the second thing is that Africa has said there is growth, but on the ground the poverty level is a big challenge. So how do you explain the two situations?
Minister KENYATTA: Let me put it this way. I appreciate what my colleague is saying there, and I appreciate the question, but at the same time we also have to recognize the fact that as much as the quality of statistics may not necessarily be the best in fact. If you heard the debate that was going on in the IMFC today, there was a big argument between developed and emerging countries as to how do we, and are they, going to calculate the size of the global economy and hence the quotas that should be assigned by each, with the emerging markets having a different perspective to the numbers that had been tabled.
But ultimately, we have to have a base that we use, and the base that we have is indeed based on the formal economy that we currently have registered, on the exports that we have, on the manufacturing and services sectors that we have.
But I would tend to believe a little bit opposite from what you said because if we were to take into account the informal sector, and I wanted to use the example of Kenya.
If we were to take on board the informal sector, I believe the growth projections that we would show would be much large than is actually projected by the formal numbers because there are a lot of people involved in the informal sector that are not captured. If you take a look, for example, at our farming community--and this is a debate that we were having yesterday--we would normally consider our small-scale farmers to be peasant farmers living from hand to mouth. Yet, we do have a large number of farmers who are actually commercial farmers, with tea, with coffee and other products that they take to market, and they actually farm on a commercial basis. These again are numbers that are not fully captured. So I believe that once we continue strengthening of our own data, improving and strengthening the agencies assigned with the statistical data collection, we may see that the kind of projections that we’re showing are actually not lower, but rather higher, than we had previously projected.
MR. DIENG: [Interpreted from French.] Thank you. Minister Dossar, you could maybe take the question on the connection between growth and poverty.
Minister BACAR DOSSAR: [Interpreted from French.] This question is related to employment. We all want growth that is emerging in our countries that leads to better and higher employment. This is a slow process. We are just feeling the growth in our countries. So we have to be patient. And as my colleagues who just talked before me said, we have to make efforts in order to support the private sector, so that he can come and replace the public sector. And also we have to further encourage the private sector to promote jobs and job creation in our countries. I think this is the best way to fight poverty, to give opportunities to the populations. I believe that we do have a strong potential in our countries. Africa’s attractiveness adds to further improving the future, so as to attract capital inflows and greater, much greater investments on the African continent.
Minister BESSE: [Interpreted from French.] Let me add a few words here. I would like to thank the lady who asked this question on statistics. It’s of extreme importance. We have to count, and then we have to measure. If we don’t count, we can’t measure. You have here finance ministers from African countries, and when you go into the informal sector it’s very difficult to count. So it’s a good thing to try and further improve our statistics, so that really everything can be taken into account.
My colleagues talked about one particular sector which is of major importance and where efforts are being made. When you go through our countries and you see that there is some improvement in the quality of life, but it’s difficult to measure. So this is why we need these better statistics, in order to find answers to all the problems we are faced with.
It’s difficult for a statistician to go and see a farmer and ask him or her to count the number of baskets that he harvested, for example. This is difficult, but we will further increase our work in this respect, so that we are soon able to both count and measure.
MR. DIENG: Thank you. We have run out of time. I will give the floor to Mr. Kamara for the concluding remarks of this press conference.
Minister KAMARA: Well, on behalf of my colleagues, and certainly of Africa as a whole, I will need to thank you for this opportunity. We hope you will go back and help us sell Africa to the rest of the world because we need it. The media is a very important partner in development, and therefore what you write, what you perceive in development, the type of information that you quote I think means a lot to us. It also means a lot to the outside world because you want to inform them, this sort of thing.
Therefore, I will only urge you that we are all open. As ministers of finance, we are open. Our ministries are open. All of our ministers are open for information. I’m sure you can get our email addresses from the coordinator here. So we want to thank you very much for the opportunity.
MR. DIENG: Thank you. This brings an end to our press conference, and we’ll post the transcript later on the IMF web site.

Energy ... relevant knowledge and its utility

2010-10-10T11:46:00.000-07:00

Dear Colleagues

There is a huge amount of knowledge on this planet ... rather little of it being used to best effect. Recently I came across this message at http://www.linkedin.com/groupItem?view=&srchtype=discussedNews&gid=2695251&item=31120346&type=member&trk=EML_anet_qa_ttle-d7hOon0JumNFomgJt7dBpSBA ... a LinkedIn group where I am a member. The group is Biochar Haiti, a subgroup of Biochar Offsets. I do not know whether this link will work for non-members of LinkedIn.

The challenge is for good knowledge to be used more ... and for bad knowledge to be sidelined. As far as I can see there is no easy mechanism to differentiate between good information and misinformation. The modern political process, especially in the United States, is now dominated by money, advertising and misinformation. This is not much different from corporate advertising and PR that aims to sell product and the corporate image no matter what level of misinformation is involved. Corporate advertising is almost always legal ... but its societal value is often highly questionable.

The knowledge in this message is about vegetation that may be used for various valuable purposes ... in this case specifically in Haiti. I am not sure at all how good this information is ... and I do not know how to get a reading on how valuable this is. There ought to be a way.

This is another area where The Burgess Method can help. If a specific instance of the use of this knowledge is documented quite simply using the concepts of value accounting ... then the cost and the progress can be on the record, and the ideas replicated if they work, and ignored if they don't. If what appears to be a good idea based on credible knowledge does not work, it should be possible to learn about it and fix what needs fixing.

There are two information feeds that are needed. There is the one that is purely technical and operational to get the thing working as well as possible. There is another that is simply about progress and performance. TBM starts off with a beginning "state" ... then there is a period of activity ... and then an ending "state". If the ending "state" is better than the beginning "state" there is progress. Performance is the relationship between the cost of the activities and the value of the progress.

My guess is that the following is a good idea. However, I would really like to see some quantified facts about this at a specific time and place to see whether it is really a good idea or not.

Peter Burgess

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Vetiver as a biofuel for Biochar
First let me say that I have no claims to being a Biochar expert but I do like what I hear and read. The Vetiver Network International promotes various applications of the Vetiver System (VS) that is dependent on the the use of the unique plant vetiver grass - Chrysopogon zizanioides.

Its taken us some 20 years to get the world to take notice of the VS, due partly because of the very extensive reporting and library archives at TVNI's website at http://www.vetiver.org and also to many many users and enthusiasts around the world and the networking that goes with it.. Today a lot of people are using vetiver for all sorts of applications based on proven project work under all sorts of conditions in the tropics and semi tropics.

For those of you involved in Haiti VS does provides one of a number of technologies necessary for the rehabilitation of land and agriculture. That is why Mike Mahowald, the WINNER project and others are expanding the use of vetiver applications. The more vetiver applications that a Haitian farmer can benefit from, the more likely he is to use it. That is why I am excited about the new use of vetiver for composting toilets. It is also why I encourage you Biochar folks to seriously work to find ways of using vetiver as a fuel for cooking. Remember about 200 meters of vetiver hedgerow will provide sufficient fuel for a family of six for one year. Most farmers on sloping lands in Haiti could eventually have much more than 200 meters. Far better to cut vetiver, located on ones doors step for fuel than trudge miles to cut fuel from the fast disappearing forests! I hope that those of you who work in Haiti might partner with Mike and WINNER and move this process forward.

The following comments have been made ... mine will appear also in due course!

From Criss Juliard •
I support Dick Grimshaw's vision of seeing Vetiver used not only for soil erosion control and as a pioneer plant to retain soil humidity in reforestation areas, and compost toilets but also as an ideal plant that households are encouraged to multiply and plant to delimit their farm plots. Haitians in several zones have been using vetiver for that. However, most Haitians know the plant for its roots, which are used in the essential oil sector (but mostly in the in the South/Les Cayes area).

What is not harvested are Vetiver's tall leaves, which when trimmed regularly regrow quickly and can be easily turned into Biochar pellets. A person to contact at WINNER project who coordinates Vetiver activities and who can lead you to sources of vetiver plants is Luders "Junior" Luc (Vetiver Coordinator) at WINNER: email: lluc@winner.ht With the advent of Biochar, we can increase Vetiver's value through a legitimate use of its massive leaf system.

///////////////////////
From Otto Formo •
Any type of dry biomass, inclusive Vetiver gras can be used as fuel in a TLUD for cooking. We are planning to bring in moblie units of equipment to make those different types of biomass into pellets to fuel the TLUD ND Peko Pe Energy Unit. One "standard" of fuel need only one "standard" of TLUD`s, thats our philosophy. Just bring Mike to us and we will give it a try, we belive in cooperation. Dont forget that the Peko Pe Energy Unit was introduced by Paal Wendelbo in Uganda in the early 1990`s as the "Grasburner" to be used in Adjumani refugee camp. We will soon release a short documentary from Kampala made in 1996. Criss, I dont get you when you are talking about biochar pellets? You dont mean to make the char into pellets? I have seen some have mentioned that as an option, but why not make the biomass into pellets from the beginning?
Your end product will be "biochar-pellets".

Urban sprawl ... commuting ... and quality of life

2010-10-09T20:38:00.000-07:00

Dear Colleagues

The ideas expressed in the opinion piece by Anthony DiMaggio have been part of the foundation for the development of The Burgess Method (TBM) metrics. See http://www.truth-out.org/suburban-sprawl-and-decline-social-capital62465 and the text below.

My experience is that metrics are very powerful ... and it would appear that there is plenty of empirical evidence to support this. This includes ideas like "what gets measured gets done" and "you cannot manage what you do not measure" and others!

The way in which investors have invested in the United States has been all about profit and little about the resulting quality of life. This piece cites various ways in which investment in suburban sprawl and more and more suburbs has ended up diminishing quality of life.

I argue that with better metrics about socio-economic progress and performance along the lines of TBM would have made it possible to build profitably and progress society. I was interested to see that one of the books cited by the author of this essay is a book by Jane Jacobs.

The profit performance of the entities that make up the US economy would be a lot worse if there was accounting for the damage done to society ... something completely ignored in mainstream GAAP money accounting, but taken into account in TBM metrics and reporting.

Peter Burgess

/////////////////
Suburban Sprawl and the Decline of Social Capital
Sunday 22 August 2010
by: Anthony DiMaggio, t r u t h o u t | Op-Ed

Why Long Commutes Are Bad for the American Body and Mind

Suburban sprawl has long been criticized by urban scholars and intellectuals as damaging to the American mind and environment. On the psychological level, it is seen as damaging to communities, preventing the development of closer relations between residents of suburbs who spend more and more of their time commuting to jobs, and suffer from living within "subdivisions" with little in terms of civic cultural experiences.

Sprawl, simply defined, consists of the outward expansion of metropolitan areas, accompanied by the rise of communities with lower population density. These new communities (suburbs) are heavily car-reliant, and often characterized by large home lots and other expansive uses of land such as golf courses, corporate industrial parks, and large mall complexes.

Sprawling suburban subdivisions are notorious for separating residences from other aspects of community life. The farthest of the outlying metropolitan suburbs - also known as exurbs, are typically are often referred to as "bed in" communities, since they are seen as places to live, while their inhabitants commute to middle and inner ring suburbs (in proximity to major cities) for work. These exurbs are often very far from individual bread earners' sources of occupational income, requiring commutes of between 30 to 60 minutes or longer. Exurbs have been implicated in further perpetuating metropolitan racial and economic segregation, as prosperous middle and middle upper income families flee from older "inner ring" suburbs that are experiencing increased racial integration, and move toward far off "outer ring" suburbs characterized by heavy sprawl.[1] Exurbs are merely intensifying an already-existing problem. In the case of Chicago, for example, more than 80 percent of metropolitan school districts for Cook County (the city's major county) are already segregated - defining segregation as the existence of black or Hispanic populations that are 20 percent higher or lower than the metropolitan average.[2]

Recent empirical evidence suggests that the sprawling suburbs may be exacting a negative effect on the public in ways that were entirely predictable, but rarely discussed by national (and many local) policy leaders. This data raises serious questions about the decline of "social capital," defined in the scholarly arena as the "social connections and the attendant norms and trust" that are vital to community-based living.[3] The Gallup polling organization reports that the "well being" of metropolitan Americans is apparently "lower among workers with long commutes." The study, released this month, finds that "lengthy commuters are more likely to experience a range of physical and emotional conditions," including "severe health problems," such as neck or back pain (especially for those commuting more than 20 minutes) and higher cholesterol and larger "body mass index(es)," due, no doubt, to over-consumption of fattening fast foods. This last finding is not surprising.[4] In a day and age where a commuter can buy fries, a sandwich, and a soda for less than $3 dollars, those spending long amounts of time commuting are more likely to be tempted with such unhealthy options over healthier eating of (less available) fruits and vegetables.

Emotional effects of sprawl are felt in many ways as well. Those with longer commutes are generally less likely to "experience enjoyment for much of the previous day or to say they felt well-rested" in their daily routines. Gallup warns that significant societal changes are needed in order to combat the harmful effects of America's sprawling social system. "The results imply that many employers may need to reevaluate their options for helping workers manage those effects, particularly in light of the costs associated with low wellbeing. Those who are hesitant to allow telecommuting, for example, may need to consider balancing the physical and emotional toll of long commutes against the social benefits of having employees together in the workplace. Employers should also recognize that it's not just the time lost in commuting that may have adverse effects. Particularly in tough economic times, commuting expenses - whether they go to gas and parking or mass transit fees - may contribute to elevated worry levels. Helping defray those costs may help employees make the long trek to and from work with greater peace of mind."

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Proponents of "new urbanism," in which metropolitan towns and communities are constructed so as to allow work, living, and community civics to be more closely integrated,[5] have pointed to the need to spatially (geographically) reorganize suburban and urban living in order to reduce commute times, promote public transportation, and allow more time for individuals to ensure their physical and emotional health. Integrating shopping, community civic life, and residential living within individual communities pursuing new development projects may do much - when pursued alongside the Gallup suggestions above - in promoting a healthier lifestyle for America's increasingly exhausted work force. Such changes will represent a dramatic change, however, from current practices that increasingly isolate American suburbanites from friends, family, and themselves.
-----
End Notes:
[1] Danielle Gordon, "White Flight Taking Off in Chicago Suburbs," Chicago Reporter, 31 August 2007, http://www.chicagoreporter.com/index.php/c/Cover_Stories/d/%E2%80%98White_Flight%E2%80%99_Taking_Off_in_Chicago_Suburbs

[2] These calculations were arrived at by the author after examining the state of Illinois' report card documents for 2008, which provide data on the racial demographics of metropolitan schools for the Chicago land area. These data were then compared with metropolitan averages for the total white, Hispanic, and black populations for the city and its suburbs.

[3] Robert Putnam, "Tuning in, Tuning Out: The Strange Disappearance of Social Capital in America," PS: Political Science & Politics (Vol. 38, no. 4) December 1995; also see: Robert D. Putnam, Bowling Alone: The Collapse and Revival of American Community (New York: Simon & Schuster, 2000).

[4] Steve Crabtree, "Well Being Lower Among Americans with a Longer Commute," Gallup, 13 August 2010, http://www.gallup.com/poll/142142/Wellbeing-Lower-Among-Workers-Long-Commutes.aspx

[5] Jane Jacobs, The Death and Life of Great American Cities (New York: The Modern Library, 1993).

This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

Food prices, hunger and food security

2010-10-09T17:45:00.000-07:00

Dear Colleagues

The matter of food security is very important ... and it is good to see global food security being made a priority in the US administration.

Hopefully the initiative, the Global Agriculture and Food Security Program will be adequately funded, but more important, hopefully it will be implemented in a manner that works.

On this score the signs are not good. I am no fan of the World Bank and its usual implementing modalities ... some of the issues are related to its mandate and what it is allowed to do, and some are of its own choosing. My experience suggests that the World Bank makes projects too big and too complicated and then expects government agencies that are underfunded and lacking in capacity to be in charge. Compounding the design and implementation issues, the World Bank has amazingly weak accounting for performance, even though the procedural overhead is immense. The World Bank has had the mandate to do work on agriculture and food security for a very long time ... and a priority sector since the 1970s ... and results have been poor.

My experience in many developing countries suggests that agricultural production will be significantly improved when development investment is based on multi-sector development analysis with community focus and there are strong local metrics about progress and performance. This is about as different from the infamous World Bank project cycle management as it can be ... and it is not at all clear whether the World Bank has a mandate to support such a development approach.

The Global Agriculture and Food Security Program sounds like a good idea. It came about in 2008 when food prices in many developing countries were rising dramatically and the poor were becoming hungrier. I am not at all satisfied that the commitment to this new program was made with much understanding of why food shortages were developing and prices were rising. My work suggests that the food sector is a lot like the banking sector ... essentially all about profit and very little about value.

If poor hungry people who are economically unemployed or underemployed were able to grow some food for themselves and the local market ... a lot would be different ... and food security would be a whole lot better than it is at the moment. Large scale industrial agriculture is very productive in terms of yield per acre and per person employed ... but the value chain of this food source is unsustainable when perhaps as many as 4 billion people cannot afford to buy the food. It would make a whole lot more sense for these billions to be engaged in food production so that they have their local food sources.

Modern science can help distributed micro-farming ... and investment can help distributed micro-farming. The Global Agriculture and Food Security Program would be really worthwhile if it can be used to fundamentally restructure the production, distribution and storage of food along lines that result in more socio-economic value for all concerned.

Below is the text of the message that provoked these thoughts.

Peter Burgess

////////////////////////////
U.S. Seeks Supporters for $1 Billion Global Food Security Fund, Lago Says By Rebecca Christie - Oct 6, 2010 5:44 AM GMT+0530
Posted by Murugan K on October 9, 2010 at 8:48am

The U.S. wants to raise $1 billion for a global food security fund by appealing to countries that will meet in Washington this weekend to discuss world financial issues, an Obama administration official said today.

Marisa Lago, the Treasury Department’s assistant secretary for international affairs, said the U.S. will ask for money to help farmers in the world’s poorest countries at International Monetary Fund and World Bank meetings beginning Oct. 8. The same pitch will be made to Group of 20 finance ministers, central bankers and world leaders when they meet over the next few weeks, she said.

At stake is the Global Agriculture and Food Security Program, an international effort to deliver rapid and dependable financing for farmers. Supported by the Bill & Melinda Gates Foundation, the fund was created following a G-20 meeting in Pittsburgh in 2009, and is administered by the World Bank.

Food prices spiked in 2008, triggering unrest in poorer countries such as Haiti and Egypt. The United Nations said at the time that some governments had not invested enough in the production of food crops for local markets.

The new fund, so far, has $880 million in pledges but only $120 million remaining in the bank, Lago said. Five grants were recently approved -- totaling $224 million -- to Bangladesh, Haiti, Rwanda, Sierra Leone and Togo to help enhance productivity and train farmers. Lago said the fund has received requests for close to $1 billion more in aid.

Initial Donors

The United States, Canada, South Korea and Spain were among the initial donors. This weekend, the Obama administration, which has pursued food security in poor countries as an initiative, will approach European nations and other developed countries, she said.

“Unless new donors come forward, we’re going to have to turn away or push off strong applicants,” Lago told reporters at a press briefing in Washington today. “We don’t kid ourselves about the challenge.”

World Bank President Robert Zoellick yesterday said the developing world continues to struggle with a food crisis that has gone on since 2008.

“Recent prices are a serious cause for concern,” he said in a conference call with reporters. “ The rise in wheat prices over the last few months is affecting the price of other staples due to increased demand for substitutes. So, we’ll have to find a way to avoid food crises becoming the new normal.”

Wheat futures are up 38 percent since the end of June. Wheat futures for December delivery rose today 16.25 cents, or 2.5 percent, to settle at $6.635 a bushel at 1:15 p.m. on the Chicago Board of Trade, the first gain since Sept. 24. During the previous six sessions, the grain dropped 10 percent in part as drought-damaged crops in Russia and Eastern Europe received rain.

To contact the reporters on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net;

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

About ethical behavior in resource exploitation

2010-10-08T14:02:00.000-07:00

Dear Colleagues

The good news in this message is that the United Stets and the European Union are interest in the issue of raw materials and community violence. In the case of the United States it is good to have a framework of law in which to regulate ... but how good?

This is the URL: http://www.ethicalcorp.com/content.asp?ContentID=7100&utm_source=http://communicator.ethicalcorp.com/lz/&utm_medium=email&utm_campaign=1679+USA+Oct+E2&utm_term=Some+insightful+reading+for+a+Friday&utm_content=130209

This is the text of the post on the Ethical Corporation's website:

OPINION:
Politics column: Make phones, not war
Initiatives by the US and the OECD have the potential to clean up mineral production, says Peter Davis, politics editor

It is said that each of us carries around a piece of the Democratic Republic of Congo (DRC) in our pocket. DRC is one of the few sources in the world of coltan, the rare mineral that is a key element in the manufacture of mobile phones. Does this mean that each of us is at least a little bit responsible for the ongoing conflict in the region?

As diamonds were associated with the continuation of the west African wars of the late 1990s, so coltan and a range of other rare elements are associated with funding conflict in DRC.

In August the US Senate passed Barack Obama’s financial reform bill. Under the new law, the US government will be given the power to seize control of a failing bank to avoid a collapse that could threaten the financial sector, and derivatives trading will be subject to new controls.

The act also contains section 1502, which requires manufacturing companies to report annually to the Securities and Exchange Commission if their products contain conflict minerals from the DRC. The new law will apply to manufactured goods containing tin, tantalum, gold and tungsten, used in electronics manufacturing.

Companies will also be required to submit a due diligence plan with the annual SEC report. The SEC has 270 days to finalise regulations to implement these requirements.

I am deeply sceptical. Regulation is expensive and regulation is not very powerful ... and as we have seen in the past decade a perfectly workable framework of regulation in the US can easily be trumped by a political agenda that favors weak regulation.

The problem of governance and corruption has been around a very long time, and in the life of my career rather little has been done that makes much of a difference. In some ways the situation is significantly worse today than a few decades back. Bottom line, bribery and corruption is an efficient way of getting agreements and making profits ... the payment amounts may be huge, but they are small relative to the profits to be earned. The fact that this wealth transfer from the location of the raw material to the stockholders of an international is going on ... while the local people stay in abject poverty ... is deeply immoral and offensive.

Some of us are aware of the power of money to corrupt ... and it is this issue that in part has driven the development of The Burgess Method (TBM) of value accounting. The value chains in most resource extraction initiatives leave a lot to be desired.

The good news is that an increasing number of people are aware of the issues involved ... and soon there will be value metrics ... and soon there will be cocktail party talk about both profit and value in peoples' investment portfolios! This would have been a silly dream a few years ago ... but not anymore!

Peter Burgess

Professor Laura Tyson seems very sensible ... and an economist!

2010-10-05T14:18:00.000-07:00

Dear Colleagues

Professor Laura Tyson said a few words on Bloomberg TV on Tuesday (October 5). It was such a pleasure to hear someone articulate the economic issues with a very meaningful perspective ... and to get some talk going that went beyond the market movements today and the last few days. It was good to get beyond the knee-jerk one liners so beloved by many of those that populate Wall Street and its neighborhood.

This is a short presentation she made recently: http://www.cbpp.org/files/tyson.pdf

I have heard very little in the Bloomberg dialog around capital markets ... almost nothing ... about the substantive issues being faced by the larger population. Professor Tyson pointed out that since 2001 the balance sheet of most families in the country has deteriorated massively ... easy credit resulted in excessive borrowing. Now the families are doing all they can to get their financial situation sorted out. As a result aggregate demand which drives GDP and therefore also corporate and market performance is down and not about to rebound. Obviously this is not being helped by the general lack of employment growth and the lack of corporate commitment to putting people to work and investment.

Professor Tyson did not add my little factoid that building over-indebtedness of the family was encouraged simply because a lot of the corporate business world was making a lot of profit indulging in this nonsense. I have described this separately as the corporate sector profiting mightily while gutting the heart of America!

Getting aggregate demand to increase means getting people back to work. Professor Tyson called the excessive unemployment a huge hole in the US economy ... I think she said "a trillion dollar hole", which is substantial and important to address.

I argue that there are structural problems in the economic structure of the United States that have been aggravated hugely over the past ten years by the banking and finance sector, the capital markets and as well the Washington entities that have become huge components of the financial sector ... the Treasury, the Federal Reserve, enabling legislators, Fannie, Freddy and Sally Mae and regulators. Profits are made when unemployment is aggravated in the US and work is outsourced to India and China ... and taxation is avoided when profits "arise" on all sorts of little islands round the world and the moneys are not repatriated to the United States. No wonder governments have insufficient revenues to fund critical programs.

In the Bush Republican administration the corporate community prospered while workers in the country fared quite badly. Deficits soared and no effort whatsoever was made to get them under control ... regulation was "lite" and business abuse flourished. In the end there was a bubble burst that was felt everywhere on the planet. To his credit President Obama and a team of credible financial experts have pulled the financial sector back from "over the cliff" and there has been a surprisingly robust business performance in the USA by the corporate sector now for some 18 months. The bad news, the profits of the corporate sector have been high and the unemployment levels have remained high as well. Business has made its profits with fewer employees in the USA.

In turn this low level of employment is now impacting aggregate demand ... and business will soon be faced with more tough choices ... which could end up with a double dip outcome in Bloomberg speak!

A goal of TheBurgessMethod (TBM) is to have people talk about value as much as profit. High unemployment is a value destroyer! It is not as if there are not big "needs" in the USA ... catching up on deficits in infrastructure, rehabilitating the country's building stock to 2010 standards for energy use, sorting out the water needs of the country, upgrading health, upgrading education, retraining to rebuild human capacity, and so on. A whole lot to be done ... and neither the institutions nor the financing to set about getting these things done. If the capital markets really worked as the market advocates say, then there would be allocation of resources to all these things ... but they a financially sucking wind! With TBM type metrics maybe there would be a different market.

Professor Tyson was a breath of fresh air ... but there are hundreds of others who seem to think that what happened two years back was just a perfectly ordinary blip in the market. In my judgement, what happened two years ago was as near a calamity as anything in history ... and we are incredibly lucky to be where we are today ... and with the potential to be on track for a prosperous future. I cannot believe how many people want to get us back to the same old same old that created the calamitous situation in the first place.

I thought my memory was weak ... but by the standards of those who speak a lot on Bloomberg, my memory is pretty strong!

Very concerned

Peter Burgess

New Issues and Opportunities in Resource-based Development

2010-10-05T11:25:00.000-07:00

Dear Colleagues

I like to see dialog about issues in international development ... and to be a part of it. The problem is that I often take issue with the main conclusions from the dialog.

A big reason for my disagreement is that performance in the international development area has been ... in my view ... unacceptable, and there has been too little discussion about the causes and action to correct the issues arising. This raises the question of WHY has there been so little discussion and action ... so much avoidance of the issue.

The nasty conclusion is, of course, that many of the high profile institutions and people are part of the problem. They are heavily invested in the prevailing methodologies for development and it is tough to change when all of this is at stake. This is a common problem in "management" everywhere, and in my own corporate career I always used metrics to make the case. In the situation with international development, the metrics are inadequate ... or unavailable.

It would have been interesting to participate in this meeting in Washington:

Dear Colleagues,

During the World Bank Group Annual Meetings in Washington DC this week, the Vale Columbia Center is co-hosting a side-event on Wednesday October 6, 10:00-11:30am entitled “New Issues and Opportunities in Resource-based Development,” featuring a talk and discussion with Jeffrey Sachs, Director of the Earth Institute at Columbia University.

The global economy faces a new wave of resource-based investments in low-income countries. The rising global prices of minerals, food grains, and hydrocarbons have led to greatly up-scaled investment activity in low-income Africa, Latin America, and Asia. Once again the specter of the resource-curse looms. This talk will address the ongoing challenge of converting resource-based investments into successful sustainable development in low-income countries, including the design of tools for that purpose, such as special-purpose natural-resource funds, public-private infrastructure partnerships, and extractive-industry transparency initiatives. A Q&A and discussion following the talk will be moderated by Karin Lissakers, former US Executive Director to the IMF and currently the Director of The Revenue Watch Institute.

Please circulate widely to any of your friends and colleagues who may be interested.

The discussion will be at the World Bank in room MCC-C2. Accreditation is required for non-Bank staff.

This is a unique opportunity to discuss resource development with one of the foremost economists working in the sector at a critical time. There will be significant time for questions and answers in a smaller setting conducive to good discussion.

We hope you can join us.

Regards,

Karl Sauvant

Karl P. Sauvant, Ph.D.
Executive Director
Vale Columbia Center on Sustainable International Investment
Columbia Law School - Earth Institute
Columbia University
435 West 116th Street, Rm. JGH 638
New York, NY 10027
Ph: (212) 854-0689
Fax: (212) 854-7946

The "resource curse" referred to in this message is a terrible indictment of high level officials in government and high level executives in the corporate world. Bottom line, neither of these groups have done much that they can be proud of to benefit society at large but both government officials and corporate stakeholders have done extremely well financially ... wealth that rightfully should have been the driver of progress out of poverty for many of the poor in developing countries.

TheBurgessMethod (TBM) has drawn on my experience in many developing countries ... including work in Government Financial Management. Big people and powerful organizations have done everything they can over a very long time to avoid the accounting and accountability that is basic to the management of resources.

I am still owed remuneration from a World Bank assignment almost 30 years ago ... unpaid because I refused to lie about project performance ... the country government officials were mad, and so were the World Bank officials. My analysis was solid ... my conclusions were right ... the ethical correctness of my decision was quite clear. Subsequently the government and the World Bank ignored what our team had reported ... and essentially went on to lose millions of dollars. High cost ... no development!

The "resource curse" is really bribery and corruption totally out of control ... and nobody prepared to stand up to high level wrong-doing!

Peter Burgess

Management ... do they have responsibility? Accountability?

2010-10-05T08:30:00.000-07:00

Dear Colleagues

The 2008 Societe Generale court case about a rogue trader has now been adjudicated in the French courts. Why am I not surprised at the outcome ... a rogue trader is culpable and the banking organization is judged to have had absolutely no knowledge of or responsibility for what he was doing!

In the USA, General Electric is widely considered to be a very well managed company, but twice they have failed to manage their financial unit and have been caught short. In one case it was their own version of a rogue trader, and the other case was the general sub-prime implosion and their lack of appropriate risk management.

Financial people seem to be only interested in profit ... and nothing must get in the way ... nothing! Ethics and such ideas are anathema to this group ... it seems!

Corporate management seems to be perfectly capable of managing when they need to ... but they seem to turn a blind eye when there is high profit performance. A good management system should be asking why there are high profits just as they ask questions when profit performance is inadequate.

I did audit work early in my career ... and learned that if you do not understand where the profits are coming from, you probably have a problem. Management, in my view, has responsibility to understand how profits are being created ... and should be fully accountable. But my idea of management responsibility went obsolete decades ago, with perfectly predicable consequences.

The recent French court decision is not good news ... but will be popular with a lot of people in management at the top of financial institutions of various sorts! Bad news indeed!

There needs to be a strong system of external accountability so that big organizations and their management do not have excessive concentration of economic power ... a system that is independent of the organizations, professional and accountable to the public. In some ways this was the role of the press ... the 4th estate ... and in many ways the press continues in that role, except that in the press there is also a high level of concentration of economic power within media ownership that is inconsistent with their status as an independent 4th estate!

It seems that value accounting and accountability is needed to step up to support the function of the 4th estate in some meaningful way!

Peter Burgess

SOCAP10 ... The Challenge of Moving Beyond Metrics

2010-10-04T21:29:00.000-07:00

Dear Colleagues

The SOCAP10 Conference in San Francisco has started. I am disappointed not to be there ... I am in New York, and still trying to do something useful by progressing the development of The Burgess Method (TBM).

One of the tracks at the conference is The Challenge of Moving Beyond Metrics. Below I reproduce some material in one of the blogs about this aspect of the SOCAP10 Conference.

While I am very pleased that the issue of metrics is getting more attention, I am not enthusiastic at all about the progress being made towards meaningful metrics that will actually achieve the objectives that society needs.

From what I know at the moment, TBM has a different approach from what is emerging from the available material I have seen so far. Specifically TBM is aiming (1) to have profit and value adding equally important in progress and performance analysis; (2) to have the impact on the community as the main focus of progress and performance; and (3) to measure progress as a change in state of the community ... where state is similar to a balance sheet in money accountancy except also including quality of life measures.

TBM is conceptually similar to money accountancy ... except with value elements that relate to all quality of life issues as well as merely money wealth.

As far as I can see, the SOCAP10 blog post material below is not moving much towards the concepts of TBM ... but the good news is that it does talk about the need for such metrics. There will be more on this in due course!

SOCAP10: The Challenge of Moving Beyond Metrics – Part I
Posted Fri, 08/20/2010 - 6:28am by Adin Miller

On December 1, 2009, a major shift in assessing nonprofits was announced by Charity Navigator, GuideStar, GiveWell, GreatNonprofits, and Philanthropedia. The announcement aimed to repudiate the myopic focus on nonprofit overhead ratios and executive compensation as metrics to measure their effectiveness. The five oversight organizations also set out a course to establish and embrace new ways to evaluate nonprofits and identify nonprofits.

The announcement was greeted with wide support by those who advocated for such a change. Sean Stannard-Stock, the curator of the Tactical Philanthropy track at SOCAP10, noted that the change would help move more capital to effective nonprofits. Dan Pallotta applauded the change on the Harvard Business Review blog, while also noting that the future challenge of applying new evaluative measures “consistently to hundreds of thousands of organizations."

The new assessment frameworks will be discussed at a SOCAP10 session led by Ken Berger of Charity Navigator, Andrew Wolk of Root Cause, and Elie Hassenfeld of GiveWell. That session will review three analytical approaches to assessing a still unnamed nonprofit. In Ken’s case, for example, the session will allow him to clarify the new approach to rates a nonprofit on its financial strength, accountability, and effectiveness.

While I look forward to learning more the three assessment models, I also want them to reflect on two ongoing challenges. The first challenge deals with the unintended consequences of the past focus on financials indicators. The second challenge, which I’ll address in a follow-up post, examines the ongoing challenges of assessing nonprofit performance in the absence of full information.

The first challenge reflects the reality that we’re still left with the remnants of the previous assessment system that focused largely on overhead ratios and compensation levels. While the blogging community moved to embrace new assessment approaches, many nonprofits are still wrestling to understand how to explain and embrace these new assessment approaches.

Perhaps even more importantly, not all nonprofits are aware that a shift took place. Nor have some of their donors and board leaders – who have in some weird Pavlovian manner become fixated on overhead rations and compensation rates – learned that new assessment models are now emerging.

So, my first set of questions to the panel would be: how do we better inform nonprofits, donors, and nonprofit leaders that a significant change has taken place and that it’s actually OK not to be completely obsessed with overhead ratios and executive compensation? Where are the marketing and dissemination efforts to explain and educate nonprofits and their respective donors and leaders?

Next post: assessing nonprofit performance in the absence of full information.

This is the first post on this subject. The second follows:

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SOCAP10: The Challenge of Moving Beyond Metrics – Part II
Friday, September 10, 2010 at 2:31pm

In my first post on moving beyond metrics, I reflected on the challenge of moving beyond the fixation of assessing nonprofits based on their overhead ratios and executive compensation. New assessment frameworks, championed by organizations such as Charity Navigator, GuideStar, GiveWell, GreatNonprofits, and Philanthropedia, will promote and embrace new ways to evaluate nonprofits and identify nonprofits.

These new assessment frameworks will be discussed and used at a SOCAP10 session led by Ken Berger of Charity Navigator, Andrew Wolk of Root Cause, and Elie Hassenfeld of GiveWell. That session will review three analytical approaches to assessing DC Central Kitchen (per this post by Sean Stannard-Stockton). In Ken’s case, for example, the session will allow him to clarify the new approach to rate a nonprofit on its financial strength, accountability, and effectiveness.

The first challenge I noted deals with educating the nonprofit community, its leaders, and donors about the shift in focus away from financial metrics. To my disappointment, I keep hearing about organizations struggling to address overhead concerns. My second challenge deals with assessing nonprofit performance in the absence of full and real-time information.

I’ve been in the business of reviewing nonprofits as potential grant recipients for most of my career. As a grantmaker and steward of public and private funds, I’ve had to make sound recommendations and decisions on how to best allocate scarce resources while maximizing impact. To that end, I’ve had access to a lot of data related to nonprofit performance and financial positions – often data not readily available in the public domain. And yet, I’ve never felt fully comfortable that the data at my disposal provided an accurate and current assessment of the organizations and that the investments I was going to recommend would maximize community impact.

Most financial indicators fail to provide a real-time picture of organization. For example, most financial indicators available online reflect data that are 18 – 24 months old. As such, the data presented online – whether it is an organization’s Form 990 or an assessment of that data – reflects inputs that are somewhat stale. For example, much of the current data online reflect 2008 information. The economic recession’s impact – the loss of donors, the drop in fundraising, the massive staff layoffs and transitions – is not yet fully reflected in the data.

Similarly, performance outcomes are also a look back and don’t provide a full real-time overview of the organization. For example, let’s take an organization that has had a tremendous success in delivering services and has generated a track record of success. One could presume that an investment in that organization will generate additional high community impact. But that organization’s track history and performance outcomes won’t reveal that it is a dysfunctional internal mess that managed to achieve strong performance metrics despite its limitations. Nor will it tell you if those achievements were attained because of a visionary and talented person at the organization who has since left that nonprofit for a new enterprise.

In both examples, I could make a funding recommendation that would end up failing to generate the expected community impact.

How can we reasonably expect that an individual donor looking to make a charitable gift to an organization would be in a position to identify the best performing nonprofit organizations? Whether in looking at only financial metrics or examining a nonprofit’s effectiveness in achieving outcomes or a combination of both, the prospective individual donor still faces three major issues:
The data tend to be old;
The data don’t provide a complete informative picture of the organization; and
They lack simple, digestible information to inform their decisions (see “Money for Good” report (PDF) by Hope Consulting). We still need to translate the performance outcomes into information that can be used easily by individual donors – regardless of their aptitude or interest to research nonprofits.

Without real-time context and information that effectively communicates the organization’s data, financial indicators and performance outcomes will continue to serve as imperfect proxies for identifying high impact nonprofits. To quote an excellent post by Jeff Stanger, “data are not information.” They need context and information to be truly useful.

So, while I applaud the move toward performance outcomes as assessment tool to identify high performing and impactful nonprofits, that move does not represent the ultimate panacea for identifying worthwhile organizations to support. Many individual donors and grantmaking institutions want to reduce the risk exposure of their investments by funding organizations that would most likely have strong performance in delivering expected outcomes. And yet, to paraphrase a famous stock market adage: past performance by a nonprofit is no guarantee of future result.

Perhaps what we ultimately need is a well-informed and real-time crowdsourcing operation to support donor looking to provide funds to high impact nonprofits. Moving from financial metrics to performance outcomes might be a step in that direction, but only a step. Hopefully, the SOCAP10 panel on Beyond Metrics would be able to comment on this challenge as well.

By Adin Miller (Cross Post from Adin Miller Consulting)

Disclaimer: This post is part of a series of posts on the SOCAP10 conference. As part of the blogging coverage for the conference, I was able to register to attend at a discounted rate. A version of this post appears on the SOCAP10 blog.

I am happy to see dialog about movement beyond money metrics ... but really quite disappointed that SOCAP10 is not embracing metrics yet that are along the lines of TBM!

It will happen!

Peter Burgess

Financial sector ... in trouble again!

2010-10-04T20:00:00.000-07:00

Dear Colleagues

Can you believe it ... some of the big financial sector "names" in trouble again. This time as I understand it, the names are American Express, Visa and MasterCard.

The good news is that the government authorities have eventually caught up with some of the abuses that have been going on for a very long time. For a very long time the financial sector has not had to worry that the government regulators and law enforcement would do anything about abuse. All that has mattered for a long time has been profits and doing good for the stockholders ... and the rest of the economy be damned!

In this case, in contention are the business practices associated with the fees being charged to process a credit card transaction. It seems that about $35 billion are paid each year in such fees ... which ultimately increase the cost of doing business and the price of purchases. Apparently Visa and MasterCard, seven state attorneys general, and the Department of Justice have agreed to settle an antitrust lawsuit. It appears that American Express is planning to challenge the charges.

Visa has said that: "as part of the settlement, Visa will allow U.S. merchants to offer discounts or other incentives to steer customers to a particular form of payment including to a specific network brand or to any card product, such as a "non-reward" Visa credit card."

MasterCard indicates that "the terms of the settlement are consistent with the Company's long standing business practices and will require MasterCard only to modify its rules to more specifically conform to its business practices."

American Express intends to fight the case and has said "the antitrust lawsuit filed today against the company is a significant retreat from previous Department of Justice efforts to promote competition in the payment industry ... The new approach would ultimately limit consumer choice, reduce competition and curtail innovation."

Using The Burgess Method (TBM) of value analysis ... the question is about all about cost and profit and value ... and whether there has been positive or negative increment to the quality of life in society.

At a news conference, Attorney General Eric Holder has explained that "every time a consumer uses one of their credit cards to buy something from a merchant, that merchant pays a fee — a fee that is passed on to consumers through higher prices."

Using TBM value analysis it should be argued that every time the card is used there is a convenience to the consumer that has value. Whether or not there is a reasonable positioning of the price being paid by the consumer is complex ... and whether or not the financial institutions are charging excessively high prices depends on the relationship between cost and price, and the investment ... assets employed ... in providing the service. These data are not easily found!

The Attorney General went on to say that "Visa, MasterCard and American Express don’t just impose fees, however — they also prevent merchants from offering consumers any cost saving options such as discounts or rewards for using less expensive forms of payment."

The general behavior of the credit card industry, of which American Express, Visa and Master Card are a part, over a very long time has been disgusting. This is a small part of the obnoxious behavior of the industry ... but it is good that the authorities are looking at the industry and using the law to hold the industry to account.

I am glad that American Express has chosen to stand up to the charges ... I like the argument that there is space for competition and they are different from Visa and Master Card. That does not mean I think they are right or wrong in their arguments ... but at least they seem to think they are behaving correctly.

Visa and Master Card on the other hand have chosen to settle. They know that by settling the costs will be quite modest compared to their profits ... and the news media will soon move on and leave them alone. I am disgusted. The credit card industry has turned itself into a money machine for the benefit of the owners of the credit card industry, and in the process has extracted an enormous amount of interest and fees from many people who are struggling financially. The industry argues that customers choose to use their credit and "agree" to the terms. Yes ... but the process of "agreeing" is one of those processes that I characterize as "gotcha" agreement. I tried to get a copy of a credit card agreement in full size print that was readable from a credit card institution ... and you know, of course, how much success I had. ZERO!

And then there is the matter of running credit card operations from States where credit card and banking rules are lax or non-existent. And the fact that there is a law on the books that allows these operations to do business in other States where there are banking and credit card rules ... but these local rules do not apply! This makes a mockery of rule of law ... and this is the sort of behavior that has made profit for banks, and sucked out wealth from people who should be getting benefit from their use of credit cards.

The financial sector remains a dangerous ... profitable maybe, but totally lacking in value. It will take time for it to reform itself ... in the meantime I welcome the attention of the authorities, and hope there will more attention to come.

Peter Burgess

Living Capital Metrics ... some excellent perspective on metrics

2010-10-04T14:55:00.000-07:00

Dear Colleagues

I will not try to summarize the work that is on the web at the following URL ... it is an excellent perspective on metrics. http://www.livingcapitalmetrics.com

As I understand it, the driver of this work is William Fisher ... his web bio is:

William P. Fisher, Jr., Ph.D., shows how improved psychosocial measurement, standards, and data quality can lead to new and exciting possibilities for communicating quantitative information more clearly and meaningfully. His articulation of the dynamics of living capital metrics in the management of human, social, and natural assets brings new standards of scientific rigor, practicality, and convenience to these domains.

As a result of Dr. Fisher’s consultation and teaching, hundreds of managers, educators, clinicians, students, and researchers have experienced the “jaw-dropping effect” produced when they see their data anew in the light of scientifically rigorous, yet practical and flexible, probabilistic conjoint models for measurement.

Dr. Fisher was previously a Professor in the Departments of Public Health & Preventive Medicine, and Biometry & Genetics, at LSU Health Sciences Center in New Orleans, Louisiana. For six years before joining LSU, he was Senior Research Scientist for Program Evaluation at Marianjoy Rehabilitation Hospital & Clinics in Wheaton, IL, serving on the Management Team, and on the Clinical Programs and Quality Assessment & Improvement Committees.

After completing the University of Chicago’s Social Sciences Divisional Master’s degree in 1984, William was a Spencer Foundation Dissertation Fellow, earning a Ph.D. in Chicago’s Department of Education in 1988, concentrating in Measurement, Evaluation, and Statistical Analysis (MESA).

William is currently on the staff of the National Center for Special Education Accountability Monitoring, and on the Editorial Boards of Quality of Life Research (where he recently received special recognition for the quality of his peer reviews), and the Journal of Applied Measurement. He organized and hosted International Objective Measurement Workshops in 2000 and 2002, while at LSU HSC. His research has been presented in over 50 peer-reviewed journal articles and in over 150 presentations at professional society meetings and academic lectures all over North America, as well as in Great Britain, France, Australia, and Hong Kong.

Simply put the Living Capital Metrics are very much compatible with the work that has been done in the development of The Burgess Method (TBM).

The Living Capital Metrics description of the nature of metrics is very clear ... very elegant.

TBM is not quite in the same space. TBM is looking to see better socio-economic performance through better management and decision making using metrics that are relevant in a living society that is made up of many people, many places, many organizations, many sectors and utterly chaotic ... a mathematical nightmare!

TBM is not looking to use more and more mathematics but rather more and more understanding ... not only by big decision makers, but also by little decision makers that are more numerous and in aggregate more important. But TBM wants to relate to and associate with systems of metrics that are rigorous and relevant in every area where the activities have impact on the state of the socio-economic system and the quality of life.

Peter Burgess

PLACE HOLDER 19

2010-09-30T07:29:00.005-07:00