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Editor's note: The American Enterprise Institute recently convened a two-day symposium on the future of U.S. development policy and foreign assistance. The nexus between development and enterprise was a recurring theme at the event, and participants discussed how entrepreneurial philanthropy, social entrepreneurship, and base-of-the-pyramid approaches to development will influence U.S. engagement in the developing world. We invite NextBillion.net readers to join the dialogue about foreign assistance under a new presidential administration and also read Apoorva Shah's recent Guest Post on the same topic.

The development discussion in Washington has noticeably shifted. Over the past decade, the conversation has moved beyond large-scale government initiatives to homegrown, entrepreneurial approaches to ending poverty. To be fair, the IFIs, USAID, and other traditional foreign assistance programs are still around, but their centrality is fading. The darling of Washington’s development thinkers is now the private sector, not the public sector. This is a step in the right direction and can be attributed in part to forums like NextBillion.net.  

However, the rush to embrace private-sector solutions to development challenges can lead us to ignore the importance of sound public policy. Innovative development techniques like microfinance and social entrepreneurship have demonstrated their worth but are no substitute for government policies that unleash on a national level the productive power of entrepreneurs.

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My friend David, NextBillion reader and BOPreneur, pinged me last night and rightly asked why NextBillion.net has been slower than usual these days, missing a few of big news pieces that relate to the base of the pyramid and development through enterprise. He's right. The truth is Rob and I have been with our hair on fire testing and working on what will very soon be the new face of this website.

In fact, if everything goes according to plan, this will be the last post I publish in NextBillion as it looks and feels now! Anyhow, it's Friday and I do want to take the opportunity to point you to some relevant media pieces for you to catch up with this weekend, in case you haven't yet.

The first (hat tip, David) is a 14-page special report about the middle classes published in The Economist last week. Why is this relevant to our readers? Well, NextBillion.net is based on the premise that business, enterprise and the profit motive can serve the poor enhancing their dignity and choice so they can climb the ladder up to that level of the pyramid.

I have read it slowly, re-reading many paragraphs. It offers great elements of analysis and a great excuse to slow down for a second and reflect on the various and complex implications (economic, environmental, political and social) of the fact that more and more of the world's population are now part of the middle class. An indepth analysis of that report is in order and I've made a note to make sure that happens some time soon.

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There has been a lot of buzz about new models of foreign aid and the role of social entrepreneurs since our post on President Obama and the NextBillion.net Agenda for the Base of the Pyramid. Guest blogger Apoorva Shah also shared some great points about the important actors in aid reform, including the American Enterprise Institute. 

Iqbal Qadir, a noted social entrepreneur and Founder of MIT's Legatum Center for Development and Entrepreneurship, argued effectively in his opinion piece in the Wall Street Journal for the overhaul of America's current model of international aid and a renewed focus on supporting entrepreneurs in developing countries. Qadir details America's earlier motives in pouring aid into other countries as a way to cement alliance and allegiance to the U.S. and he points out that such models are now sterile and in fact often inhibit the true democratic development of aid recipient countries. While Qadir offers a historical perspective on why such models are in dire need of re-shaping and re-doing, other noted journalists and bloggers have also been focusing on the link between Obama, sustainability, foreign policy, and international aid.

I came across some important materials and entrepreneurs for the NextBillion.net community to ponder and discuss and I hope you'll join in on the dialogue. I will also echo Apoorva's central  question: What role can the NextBillion.net community play in the debate and formation of President Obama's policies on foreign aid? What do you think is the role of entrepreneurs in development and in helping America better support international development?

First, I was thrilled to read in the attached Obama Campaign policy statement that he has plans to create an entitiy that provides seed capital to SMEs and even build "SME Universities" in partnership with American business schools. Based on this policy statement alone, there is clearly thought being put into new approaches to development, including an understanding that the private sector plays a critical role. There is also some talk of there being a new, coordinated Agency to oversee the multiple U.S. agencies for international development, including PEPFAR, USAID, and MCC.  Obama has called for the doubling of foreign aid, but what does that aid look like? Is it charity or investment? And how is the aid being distributed?

Bill Gates has also called for the doubling of funds directed toward foreign aid, but this request is perplexing. Gates is a unique and interesting advocate of innovation in development and he has recently called for a new, "creative capitalism." But calling for a doubling of foreign aid is not the same as a call to embrace creative capitalism. Does this send mixed messages? What do you think?

Peter Beinart, a Senior Fellow at the Council on Foreign Relations, presents an interesting analysis of America's foreign aid policies and points out:

"In the 1990's, American soft power was  based on more than goodwill; it was based on economic and ideological hegemony. There was only one widely accepted path to prosperity--deregulated, American-style capitalism. And there was one central destination for a poor country seeking the investment and aid it needed to travel down that path: Washington."

But, he continues, "That is no longer the case." I agree, and think that countries seeking America's investment should have a more diverse pool of options to choose from. It would probably be a much more empowering exercise to help countries think through several paths to development, before they eagerly accept American dollars. If Obama were to introduce a full-fledged initiative on business at the base of the pyramid, offering struggling MNCs a way forward and at the same time a new approach to improving the lives of the world's 4 billion poor, this would be an amazingly potent initiative and America and its aid recipients might just get what they want: revenue generation and economic growth. Let's call the initiative, "The Committee for Global Development and Entrepreneurship at the Base of the Pyramid" (GDBOP).

Obama could harness the power of entrepreneurs here in the U.S. and in developing countries to collectively brainstorm and decide where and how America's international aid should be distributed. The example of social entrepreneurs has more to offer in the way forward, because, afterall, development entrepreneurs work from the bottom up, with the base of the pyramid, and bottom-up innovation has always been Obama's strong point.

For examples of the building wave of BOP entrepreneurs in developing countries, check out Francisco Noguera's coverage of the attendees at Santa Clara University's 2008 Global Social Benefit Incubator program, including entrepreneurs such as Alfonso Gamboa of the Philippines. Echoing Iqbal Qadir, Mr. Gamboa calls for a drastic paradigm shift in development funding, stating, "The answer to poverty is business development, not charity. . . . Trade, not aid."

The above ventures and dozens of others highlight a new movement of entrepreneurs that connect the interests of America with the democratic development of other countries, which, as Qadir points out, leads to more secure allies for the United States. I believe that our NextBillion community has a huge role to play in alerting not only the Obama Administration, but the development community as a whole, to entrepreneurs in developing countries and here in the U.S. that offer new choices and innovative alternatives to traditional approaches to development and foreign aid.

Such entrepreneurs are young and have broken out of an old world understanding of what makes people and countries grow. They understand the changes that are needed and I would suggest to Obama to keep a close eye on their work.  One of the things that caught my attention when I saw Obama speak in Boston in February of 2008 was him saying that he supports entrepreneurship. He has certainly proven himself receptive to the trends of younger generations with his brilliantly-executed use of new media in his campaign and his hiring of a Facebook Executive to help in that effort.

I hope that he will continue this trend and pay close attention to the building wave of social entrepreneurs both in the U.S. and abroad and adopt their approaches to development in the same way he adopted young people's new media approach to communication. NextBillion.net is certainly part of the new media wave and so are all of you, because of our collective use of the internet to discuss and share analysis instantaneously.

Maybe President Obama is reading this post and all of your comments right at this moment. Here's hoping.

The American Enterprise Institute  recently convened a two-day symposium on the future of U.S. development policy and foreign assistance. The nexus between development and enterprise was a recurring theme at the event, and participants discussed how entrepreneurial philanthropy, social entrepreneurship, and base-of-the-pyramid approaches to development will influence U.S. engagement in the developing world. We invite NextBillion.net readers to join the dialogue about foreign assistance under a new U.S. administration.

Guest blogger Apoorva Shah is a research assistant in Foreign and Defense Policy Studies at the American Enterprise Institute in Washington D.C.

By Apoorva Shah

Jenara Nerenberg's timely post on President Obama and the NextBillion.net agenda reminded readers that the new administration will make substantial changes in America's foreign assistance policies. Obama and his colleagues in Congress, most prominently Rep. Howard Berman (D-CA), chairman of the House Committee on Foreign Affairs, have promised an ambitious and large-scale reform of the U.S. foreign aid system.

In this effort, will they consider the growing influence of entrepreneurial philanthropy, social entrepreneurship, and private sector based development in U.S. policies for engagement with the developing world?  And what role can the NextBillion community play in influencing these decisions?

The existing U.S. foreign assistance system is clearly antiquated, with 20^th century bureaucracies attempting to confront 21^st century challenges, and there has been minimal effort to reshape legislation written almost five decades ago (the 1961 Foreign Assistance Act). At the AEI symposium, discussant Jonathan Greenblatt, CEO of GOOD Magazine and co-founder of Ethos Water, suggested that the United States could become an "investor" like many entrepreneurial philanthropists in the private sector.  "We could use the power of leverage to put one dollar in and get ten dollars out," he noted.  

But panelist Carol Adelman, director of the Center for Global Prosperity at the Hudson Institute, which produces the Index of Global Philanthropy, noted that private American contributions to the developing world - not including remittances - already trump that of official development aid. 

Entrepreneurial approaches to development have flourished because of these private donors - from the individual lender on Kiva.org to large-scale philanthropies like the Skoll Foundation. If the U.S. government were to support private sector led development, would social entrepreneurs have to sacrifice flexibility and independence for oversight?  How would funds be appropriated?  If the government venture fund worked anything like other spending, would bureaucrats in Washington decide which efforts receive funds in Africa or South East Asia?

Nevertheless, NextBillion bloggers frequently discuss the challenge of scaling entrepreneurial approaches to development.  As I wrote in a guest post last year, social entrepreneurs already operate in fields traditionally relegated to the public sector - health care, education, and electrification, for example. The U.S. could use aid money to help governments adopt the proven strategies of social entrepreneurs working in such fields and expand their impact.

In the end, the question is not about more or less aid, but whether our aid money achieves its intended purpose. Panelist Steven Radelet, senior fellow at the Center for Global Development, noted that there is almost unanimous agreement that the U.S. does not provide aid well. If the development through enterprise field can add more value to each aid dollar, then this is an ideal time to bring forth new ideas to the U.S. foreign assistance apparatus.

Unfortunately, too much of the debate in Washington has dwelled on foreign aid organizational structures (see HELP Commission or Modernizing Foreign Assistance Network) rather than best uses for the American aid dollar. In the end, it will not matter if there is a central development agency if the money we spend still does not support local entrepreneurs and private-sector-based approaches to development. Iqbal Quadir is right on the money.

The question now is: how can the NextBillion community get its voice heard in this debate? Partly, its work has already been done by showing rather than telling what works and what doesn't. What should be next?

It was a high profile news day for the development-through-enterprise community today.  First, a report was published at the World Economic Forum in Davos, Switzerland entitled The Next Billions: Unleashing Business Potential in Untapped Markets.  The report was produced by the Boston Consulting Group; Francisco and I were able to see an early version - we encourage everyone to check it out.

Is there much new here?  Yes and no.  There's not much in the way of new data, nor is there much as far as new analysis (if you've been following NextBillion.net at all, most of the points in here are old hat.)  Still, for a report to come out at the World Economic Forum about the BoP and specifically, the "next billions" is huge.  Important people go to Davos.  They listen.  Then they go back home and, in theory, they act.  So this is a huge day for the development through enterprise world.  I got an e-mail from one colleague calling it a "stop the presses" moment.  As we have no actual presses here at NextBillion, perhaps not literally, but you get the idea.

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Not much has been written here on NextBillion.net about the election of Barack Obama to the American Presidency, as our news scope centers on base of the pyramid approaches to development in developing countries. However, I felt compelled to link the two together as we near Inauguration day tomorrow, January 20th, so here it goes.

Obama has a huge opportunity to transform how international aid is designated and distributed and I hope that he will convene a dedicated and experienced team to re-think and re-do the United States' current model of foreign aid. The most recent statistics from the Organization for Economic Cooperation and Development (OECD) indicate that in 2005 the United States issued 27.6 billion dollars in official development assistance. While the U.S. funnels much-needed money into developing countries to assist with meeting basic needs such as water sanitation, education, and healthcare services, I'm always left wondering how we can better direct funds. What would happen if the U.S. channeled more funds into microfinance initiatives and small and medium enterprises and made BoP economies more attractive to multinational companies? Wouldn't our stated goals of helping developing countries develop be better achieved by adjusting how and to which agencies we distribute funds?  Meeting basic needs is undoubtedly important and should remain, but for countries to develop beyond meeting basic needs, or to empower local people to help meet those basic needs sustainably and profitably, a shift in paradigm is needed.

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Aneel Karnani, a Professor at the University of Michigan and a Managing Director at FSG Social Impact Advisors, is a long-time critic of market-based approaches to poverty alleviation and the "base of the pyramid" concept in general.

His latest article, Romanticizing the Poor, appears in the Winter 2009 issue of the Stanford Social Innovation Review.  A brief excerpt:

Market solutions to poverty are very much in vogue. These solutions, which include services and products targeting consumers at the "bottom of the pyramid," portray poor people as creative entrepreneurs and discerning consumers. Yet this rosy view of poverty-stricken people is not only wrong, but also harmful. It allows corporations, governments, and nonprofits to deny this vulnerable population the protections it needs. Romanticizing the poor also hobbles realistic interventions for alleviating poverty.

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Although we in the BoP sector often talk about the role of the informal sector as an important factor (both as a competitor and as an ally) when crafting sustainable models for low income communities, precious little has gone into analyzing it. One of the most important reasons for this lack of analysis is because of the shortage of data referring to it. By definition, informal businesses are hidden from the eyes of the state and so most of what we have relies on estimations and very micro-level studies.

A recent cross-country report that appeared in the Brookings Papers on August 2008 aims to improve the understanding of the relationship between economic development and the informal economy. The report, entitled "The Unofficial Economy and Economic Development" is authored by Rafael La Porta and Andrei Schleifer, two renowned professors and scholars in the development studies field.

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Francisco and I have been remiss in not posting more news & notes roundups here on NextBillion, so here's a shot at redemption - at least for today.  Without further ado, some news and notes within the Base of the Pyramid community:

The Aspen Network of Development Entrepreneurs - ANDE - just announced the hiring of its first Executive Director.  Randall Kempner will be based at the Aspen Institute; he starts January 6.  ANDE, which we've written about before, is basically a trade association for organizations working with small and growing businesses in low-income communities.  (Full disclosure: both Acumen Fund and World Resources Institute, who sponsor NextBillion.net, are members of ANDE.)

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I'm writing from Cartagena, Colombia, where "The Business of Inclusion" conference will take place later this week. The conference is organized by the Inter-American Development Bank, and the Multilateral Investment Fund (FOMIN) and NextBillion has been invited to cover the discussions that will take place during the next few days as a media sponsor. As someone whose interest is contributing to a stronger and more meaningful development-through-enterprise movement in Latin America, I am grateful for this opportunity.

There are two aspects of the conference I am particularly excited about. First, WRI will co-host a panel on Friday, in which we want to highlight creative and entrepreneurial solutions to some of the most pressing challenges faced by our society. Also hosting the panel will be AVINA, one of the largest private foundations in the region, and FUNDES, a key actor in the local enterprise development space.

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