“Giving in its purest form expects nothing in return.” – Anonymous

There are a lot of confusing buzzwords being thrown around these days: ending charity, dead aid, patient capitalism, impatient optimists, and investment over aid. What does it all mean?

My initial thoughts on this subject were spurred by zyOyz founder Steve Jennings’ repost of an article titled: “Charity alone not the answer to tackling poverty”. Well I agreed with the article’s basic premise that just giving money is not the only solution or the best, I was troubled by the article’s absolute statements that business models and capitalism will save the world.

The article, reposted from the Financial Times, notes the work of the Acumen Fund founded by Jacqueline Novogratz, which invests in small businesses with a social impact termed as “patient capital.” It has become a highly successful model, however Novogratz is quoted as saying: “We need creative approaches to reinvigorate capitalism and make it more inclusive.” The most inclusive business model that I know, with high degrees of success, is the cooperative model based on needs of those involved, inclusion, and participation. Looking at history, capitalism has generated exclusion: great amounts of wealth for many people, but it has also perpetuated extremely flawed systems that create great degrees of poverty for many people. The evidence is in any major city where the consequences of capitalism lay bare the desperation of good people who are left with nothing.

At the root of the article, “Charity alone not the answer to tackling poverty,” is the long-running debate on whether investment is more effective than aid. Professor Bill Easterly made popular the fact (through his book, “White Man’s Burden”) that over $1 trillion in aid has been given to Africa over the last 50 years with limited positive results, Dambisa Moyo has termed this “dead aid” and calls for a complete end of aid to Africa. Others like Bill and Melinda Gates, who have given vast amounts of aid (which they often call “investment”) to Africa with their foundation, label themselves as “impatient optimists.” They are hopeful for the future and want more done at the present time.

However, there is a problem with their impatience that many have critiqued. Impatience tends to push solutions that are ineffective. Ian Wilhelm gets further into this topic in a blog about “irrational aid.” In the post he writes about Alanna Shaikh’s critique of ineffective aid, such as outdated pharmaceuticals and medical equipment that has no use in the field. This argument is countered by Isaac Holeman’s disagreement that well that aid may be irrational, it provides immediate personal stories of need to bring in more donors. I have to agree with Alanna in saying that this irrational, possibly impatient, aid does more harm and basically no good.

How have we now moved from decrying the failures of charity and aid to highlighting the benefits of business models and the capitalist system back again to smiling about greater benefits of monetary investment in people and ideas? Where is the line drawn between investment and aid? As far as I can tell it is mostly semantic. Isn’t aid when transparent, effective, and driven by best practices an investment? Giving an investment is essentially the same as giving aid or charity.

Investment is the buzzword used by social enterprises, microfinance, and has become the new fad in international development organizations. I think that it is important to make a distinction between what is effective and what is not. Aid can be very effective and investment can be very ineffective. The reverse is also true. Where does effective aid change from being a type of investment? When experts talk about the broken aid system do they forget that the broken aid system is merely a reflection of the broken financial system. The same interests and individuals who have run financial systems have run foreign aid systems.

The real issue in this debate need not be if businesses are better than charities or who’s money is better spent. What is most important needs to be the question of, “How?” The systems, structures, and practices that implement aid and drive investment need to be cooperative, inclusive, needs based, and people-centered – in one word: effective. If you are looking for a return on investment (ROI) or accolades for your donated or invested dollars, then maybe you should reconsider why you give?

Tags: Acumen Fund, aid, Alanna Shaikh, Bill Easterly, capitalism, charity, Dambisa Moyo, dead aid, foreign aid, impatient optimist, investment, Jacqueline Novogratz, patient capital, Steve Jennings, zyOyz