Effectively Effecting Change

It is very common that we see things along the line of Nicaragua will remain backward posted here followed by an assortment of reasons. For those of us who live here, there is certainly a lot of circumstantial evidence that supports this conclusion. But, maybe we are just approaching things wrong.

A paper titled Escaping Capability Traps through Problem Driven Iderative Adaptation from Center for International Development at Harvard University offers a look at how the way we help can significantly change the success rate. Here is the abstract from that paper.

Many reform initiatives in developing countries fail to achieve sustained improvements in performance because they are merely isomorphic mimicry—that is, governments and organizations pretend to reform by changing what policies or organizations look like rather than what they actually do. The flow of development resources and legitimacy without demonstrated improvements in performance, however, undermines the impetus for effective action to build state capability or improve performance. This dynamic facilitates ̳capability traps‘ in which state capability stagnates, or even deteriorates, over long periods of time despite governments remaining engaged in developmental rhetoric and continuing to receive development resources. How can countries escape capability traps? We propose an approach, Problem-Driven Iterative Adaptation (PDIA), based on four core principles, each of which stands in sharp contrast with the standard approaches. First, PDIA focuses on solving locally nominated and defined problems in performance (as opposed to transplanting pre-conceived and packaged ―best practice‖ solutions). Second, it seeks to create an ̳authorizing environment‘ for decision-making that encourages ̳positive deviance‘ and experimentation (as opposed to designing projects and programs and then requiring agents to implement them exactly as designed). Third, it embeds this experimentation in tight feedback loops that facilitate rapid experiential learning (as opposed to enduring long lag times in learning from ex post ―evaluation‖). Fourth, it actively engages broad sets of agents to ensure that reforms are viable, legitimate, relevant and supportable (as opposed to a narrow set of external experts promoting the ―top down‖ diffusion of innovation).

Thanks to Nathalie Cely Suárez for the pointer. She is the Ecuadoran ambassador to the US and, like Ecuador's president, is an Economist.

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Too funny!

At the end, reading this...

"Thanks to Nathalie Cely Suárez for the pointer. She is the Ecuadoran ambassador to the US and, like Ecuador's president, is an Economist."

Have you checked on the economy in Ecuador lately?

You think advice from a source (or sources) with that kind of track record has validity?

Nicaragua has as much chance of improving their economy as Ecuador.

Want a real solution for both Ecuador and Nicaragua?

Tell them both to get rid of the "hand-out" mentality which permeates top to bottom in their countries. From the poorest individual to the head of government. That's when a real solution will take place!

A bit of perspective

While Ecuador (and Nicaragua) have less than perfect economies, suggesting that they are disasters ignores the big picture. Let's plug in a bit of information about the biggest debtor nation in the world, the US.

The current national debt of the US is about $16 trillion. As a number with that many zeros is pretty meaningless for most of us, let's turn that into a per capita debt. That works out to about $50,000 of debt for each man, woman and child. That is far more than the net worth of a very large majority of those people.

To make matters worse, that number only includes national government debt and only the part of that which is currently borrowed. For example, all those currently paying into the social security system are owed benefits but their payments are being used to pay current recipients. When you add in this unfunded future debt just at the national level you get numbers more like $200,000 per man, woman and child.

This does not take into account state, city and other local debt. The life of many of these debts exceeds the life of what they financed. For example, The King Dome in Seattle was demolished before the original bond issue to finance its construction was paid off.

The US has enjoyed cheap and easily available credit to finance its development. It's post-WWII growing work force (baby boom) helped make that possible. Unfortunately, that time is over. The work force is shrinking, costs have become non-competitive in the world market and costs of dealing with both an ageing population and infrastructure is growing.

Ecuador (and Nicaragua) have had their growth restrained by lack of cheap credit. That seems like a good thing as it prevented the same level of spend now, pay it off later economics that the US experienced. While we don't know what the future will look like in either country, there are certainly a lot of potential for a positive outcome.

In general, Ecuador has advantages over Nicaragua. Most of Nicaragua's natural resources were used up during the Somoza years. It is, however, working with what it has. Renewable energy in the forms of wind and geothermal are obvious examples. On the other hand, Ecuador remains rich in natural resources. Used properly, they should offer a serious economic boost to the country.

Finally, a growing level of cooperation (as opposed to competition) within the region will offer an economic boost. What I see is that Ecuador and other countries in the region are actually addressing their economic futures rather that selling it out from under its citizens.

"What I see is that Ecuador

"What I see is that Ecuador and other countries in the region are actually addressing their economic futures rather that selling it out from under its citizens."

Yet the dream for many of the people here is to buy some chunk of Nicaragua and market it, pay their work forces a tenth of what they'd be paying in the US, and "help the Nicaraguan people."

What struck me is that despite the obvious poverty in visual terms, most people in this town at least (and probably in most towns) get on with their lives. Electricity works; my internet connection works; Minsa was out in force to combat the dengue outbreak; and we've got a choice of supermarkets, cabs, bus service to more places than I could have gotten in the US outside of NYC or Philadelphia. I can buy anything I actually need in town, and most of the things I want somewhere in Nicaragua (no carbon fiber tripods, no quinoa). Since I'm obviously not a market by myself and there aren't that many expatriates in the area who'd all want the same thing, most of these things have Nicaraguan buyers. Claro isn't stocking Android smart phones just for me.

Nicaragua basically doesn't have the major mineral resources needed to jumpstart an industrial revolution (gold's only useful rather than valuable when the industrial revolution is far enough along to have computers). It's in an excellent position to be an exporter of electricity, but that requires capital investments that the country may not have (geothermal is in cooperation with Israel, I believe). Oil reserves under the Atlantic require higher tech extraction than do terrestrial oil extraction (early Pennsylvania oil wells basically used water well drilling technology), so that's also something that few Nicaraguan capitalists have the money or training to do.

A lot of the rather crap looking buildings have computers and internet connections. People spend their money on things that matter to them, and getting a business or a small manufacturing facility (the furniture and shoe shops) going means more than superficially looking good.

Some places also have high growth (Ethiopia is a prime example, 10% per annum) because they're starting from almost nothing, so at 10% a year, getting to where Europe is, if that is possible, would take a number of decades.

Rebecca Brown

Hong Kong

doesn`t have the natural resources to jump start an industrial revolution, either. They relied on talent, British and Chinese effort, and British democracy and free enterprize to get going.

"You can avoid reality, but you cannot avoid the consequences of avoiding reality." Ayn Rand

Hong Kong has one of the world's great harbors

Pretty much world wide, having a great harbor in front of a large hinterland with resources (and China did have the natural resources to have early metal crafting, coal used for fuel, and had the world's highest standard of living for its people before the 18th Century).

Hong Kong has been a major trading hub for at leas 2,000 years. Its first export appears to have been salt.

Free enterprise? Basically, they have socialized medicine, good public transportation (90% of the population uses it), and an extremely good public educational system. Some things work best when they work well for everyone, and capitalism tends not to be as good for those things, so Hong Kong has a solid base of public institutions that allow the private enterprise to flourish in its own area of expertise.

China was defeated by the UK in 1839 when the UK wanted markets for its Indian opium and China didn't want addicts, and again in 1860 (Second Opium War). Hong Kong was one of the European concessions. The Europeans and (to a lesser extent) Americans controlled more of China than the official European zones. The British were able to arrest people directly in most of China in the early 20th Century. Most of the factories in China then, probably more than now, produced for export. Hong Kong was the export hub and until the mainland Chinese took over manufacturing, a manufacturing center.

Having no agriculture in the economic mix also raises the average income.

One reason I'm hoping Nicaragua does get its canal is that would provide it with two seaports (entries on the Atlantic and Pacific sides). Nicaragua doesn't make enough things on its own to be a big export country (what made Hong Kong prosperous).

Rebecca Brown

Have you checked their economy?

It's doing better than the US, Canada, Mexico, the UK, Nicaragua, Costa Rica...

Better?

You might want to spend some real time there.

You'd know your claim is silly.

Your time there

How much time have you spent there since Correa was elected? If that is a reasonable number, how does it compare to pre-Correa Ecuador?

I have never been there (yet) but the people I know there are either very positive about what the government is doing for the people or concerned that while things are better it could/should be doing more.

I'm going by

GDP growth rates. What are you using?

I'm going by real life.

If you start with 1 egg and you end up with 3 eggs you're still going to starve if that's all you have to eat for a year even though you had a two hundred percent increase.

Growth rates are typical numbers which can be massaged to make anything look better than it really is.

People in Ecuador suffer the same as in Nicaragua. No real opportunity and crushing poverty.

No super highways and no constant power throughout the country.

Toss in their government which has a similar mentality to Nicaragua...everyone loses.

More like make believe

From the Center for Economic and Policy Research...May 2012

“The Ecuadorian government has gotten its economic policies right,” CEPR Co-Director Mark Weisbrot said.

Poverty has fallen dramatically since 2009, and by about one-fourth over the last five years. Urban poverty has fallen by about one-third, to 17.4 percent since mid-2009, and had fallen to 22 percent before the recession. Rural poverty fell to 50.9 percent by the end of 2011, after rising from 58 to 59.7 percent during the recession.

Highlights of the paper.

Really?

You celebrate 50 percent rural poverty as a win?

You've proven my point!

Thanks!

It's just like Nicaragua!

Where are your numbers?

Where are your numbers?

Certainly a good trend

Again, you need to put things into perspective. As the majority of NL readers live in the US, US numbers are a good reference point. From the USDA we have the following:

During the 1990s, the nonmetro poverty rate declined fairly steadily from a high of 17.2 percent in 1993 to a record-low rate of 13.4 percent in 2000. The decline in poverty during the 1990s was mirrored by growth in the economy overall. Between 1993 and 2000, the economy grew by 4 percent per year, significantly higher than the average growth rate of 2.7 percent during the 20 years prior to 1993. Nonmetro poverty rose during the 2001 recession to 14.2 percent and increased slowly until the 2007-09 recession when the nonmetro poverty rate grew by 1.5 percentage points from 2008 (15.1 percent) to 2009 (16.6 percent), reaching its highest rate since 1993 when it was 17.2 percent.

So, the rural poverty rate in Ecuador is three times that of the US with a trend that looks pretty good. The same cannot be said about the trend in the US.

Let's Be Fair

in defining poverty. $22K in the lower US, $28K in Alaska for a family of four.

Most living-in-poverty families in the US have AC, a wide screen TV, a vehicle, a computer, and other amenities. Few live in a dwelling with a dirt floor and an outhouse.

Food stamps can add almost $1K /month for a qualified family of six. Medical care is free, as are many other discounted social services, such as meals at school. Unfortunately, that nutritional aid often doesn't make it to the children, so we still have hungry kids who look forward to their free school lunch as the primary meal of the day.

Some poverty can be attributed to external circumstances, such as disability or unavailability of work. Much is due to drug addiction and its consequences. An estimated 30% of the US population is saddled with a substance abuse problem.

Reality

I didn't pick the numbers but $22k for a family of four today in the US sounds realistic. You can't live in most of the US without something that alters the inside temperature for part of the year, in general dirt floors won't work, ...

If I had to be "poor" somewhere, I would much rather do that in Nicaragua. While I don't, I could live here on $100/mo (if I tossed my Internet connection). It just costs less to live in rural areas in the tropics.

To me, that's an advantage Ecuador has as it moves out of poverty --it's easier than in temperate climates.

What none of this changes are the trends. The trend seems to be positive in Ecuador, not so in the US.

Trends?

Listen, I'm not trying to get into a silly insult discussion...just a little fun...with respect for you always.

But trends? I have to smile because my sales friends for media outlets have a saying. "If you don't have numbers, you sell trends."

In other words, if you don't have an audience then you try and sell the idea that "it's getting better"...which is never more important than real results.

The people of Ecuador are, for the most part, fine people. Like anyone trying to do better but they have a long way to go. Silly, early claims they have achieved some victory over poverty with a roaring economy are just misguided.

What do they make in Ecuador? Cars? Electronics? No.

Bananas are their claim to fame with other vegetables, fruits and the ever popular cocoa bean are closer to reality. None of which can truly be used to base an entire country's economy on. No better than sugar or free zones run by foreign countries within their own borders where all the real money leaves and the poor are understandably grateful for any kind of job. But the big money which counts leaves.

Yes, great they have a "trend" that many years from now might actually continue. But they are decades away, if ever, from any real success.

not a banana republic

Chele John, Those fine people of Ecuador are also oil producers - they're an OPEC nation. Not the biggest, for sure, but 50% of their export earnings are from oil, representing 15-20% of their GDP and 30-40% of their government revenues. (figures from the US State Department) It's just not nice to dismiss them as a banana republic when you really don't know.

Fair? How about reality instead?

No matter how much some would rather deny it...Ecuador is a banana republic in every sense of the word. Yes, they produce and export oil and, yes, it does amount to barely over fifty percent of their exports. Yet again a soft number, a percentage, is used to hide a reality. That reality is in total exports Ecuador still comes in behind countries like Pakistan and Bangladesh. Wow! There are two thriving economies we can also point to as shining examples of success for it's people! NOT!

I've beaten this dead horse enough. My job takes me to all the countries in Central America as well as quite a few in South America. Not to the resorts for a vacation or to backpack around humming Kumbaya, but work. Most times away from the big cities most never leave on their own brief visits. My views don't come from Google searches for trends and percentages but eyes in my head and time on the ground.

I've been to Ecuador twice. The last time was eleven months ago. Visiting Ecuador is not much different from being in Nicaragua. Especially when one considers the real lack of true opportunity for it's citizens to change their station in life. Like Nicaragua, the wealthy in Ecuador who own and run the major business', like oil and bananas, do not reinvest in their own country. Just like Nicaragua. The status quo is more important to maintain. The money stays with the wealthy and their families while the poor...are like the poor in Nicaragua.

That's the only point I have been trying to make. Nicaragua and Ecuador are very much alike for the average citizen. To tout some kind of trend or economic report as if it signals some vast change/improvement in their economy, as if they are "moving up", is silly and just plain untrue.

I appreciate positive people but sometimes mindless cheerleading needs to be called out and shown that while things could be worse, they are certainly a long way from truly better.

Want to see real Latin American economies you could be proud to show off? Try Chile or Brazil. Yes, they have the desperately poor but they also have the truly advanced economic realities and are improving ten fold over anything some report about Ecuador tries to claim. Plus they actually have products, besides a small amount of oil, which the world wants and is willing to pay for.

change

Well Chele John, we have a lot in common. We've both traveled internationally for work, don't stay in resorts, and don't sing kumbaya. Now, am I making any claims based on a single report or purely from the internet? No, nor am I going to drop everything I know on you - I don't think most people care. For too many, it's far easier to make an off the cuff dismissive comment which is what started this conversation.

What I'm telling you is they're seeing growth and change now, not yet on the level of Chile or Brazil, where I hope it goes without saying their economies are soaring, but they're making the right changes and it's having an effect. And unlike the countries that have yet another uneducated caudillo in charge, the change is being led by a President with a PhD in Economics but it's also a grass roots movement.

Now whether that means you can spot it is a different story. They can do something small like remove school fees, which they did, and you're not going to notice but the poor will.

We both know what life is like for the average person and that oligarchs don't want change - that's no different than most of Central/South America and the Caribbean. What I'm telling you, is they're managing to change despite that and it's interesting to watch what they're doing. Maybe Nicaragua will learn from it.

Why so dismissive?

Yes, Ecuador is a relatively small country. But each time anyone tries to put the information in perspective, you offer comparisons that, well, make no sense. Take your Pakistan and Bangladesh comparisons. Both those countries have populations of 10 times that of Ecuador. I certainly would hope they would have bigger economies.

Likewise, Brazil is doing well but it is the fifth largest country in the world and has a population over 10 times that of Ecuador. Of all your examples, at least the population of Chile is not that much different from Ecuador but it is close to three times the area. So, rather than toss our a lot of random information, maybe comaring Chile to Ecuador would make sense. That is, that comparison could offer a reasonable perspective -- something that would help people understand the reality and the potential of Ecuador.

While the stats are from 2007 so it will not show recent changes, the PPP-adjusted GDP info from the IMF offers a place to start. We see Chile falling into the $14-20K band, Ecuador in the $6-8k band and Brazil in the $8-11K band. (For local reference, Nicaragua is in the $2-3K band. The whole map in interesting as it shows where all the players fit in.)

You talk about distribution of wealth. That's the common piece that even the PPP-adjusted GDP numbers do not show. But, we have a reference point mentioned in this thread. The "poverty line" for a family of four in the US is $22,000 which is $5500 per capita.The US falls into an unbounded category which is "over $38K". Even at $38k, this suggests that earning only 15% of the average moves a usano above the poverty line. That certainly offers a lot of space on average. I assert that in Ecuador, there is just a lot less space -- that 50% being classified as poor there vs. about 16% in the US is not a surprise.

While you discount the importance of trends. I don't as looking at an early trend enabled me to create a business a year before a host of big players decided there was a market but let's re-label the idea. Ecuador has recognized the poverty problem and the government has decided to take steps to address it. On the other hand, the US government doesn't seem to notice a problem. While we don't know the long-term results, my prediction is that while a lot of people don't concern themselves with trends, we will see a lower poverty percentage in Ecuador than the US in the not too far distant future.

Please not that I am not just trying to create an argument for argument's sake. I am trying to understand the world from something other than a US-centric point of view. Some time in the early 1980s someone told me that Nicaraguans were losers because the GDP of Nicaragua at the time was about $600/year per capita. He not I could live in the US for $600/year so it was pretty clear that Nicaraguans had figured out how to do something which I could not. Over the past 30 years, I have used that as my guide when trying to put comparisions into perspective.

My comparisons were answers to people speaking specifics.

They wanted to talk about total exports from specifics countries. I gave examples of specific countries and where they stood in total amount of exports.

Not population size.

Adjusting numbers means just that. Adjusting. Which in turn leads to misleading conclusions.

All one has to do is physically visit these countries and the economic truths becomes obvious.

Others...will Google around for their take on the world and then arrive at incomplete perspectives not really based in reality.

What it comes down to is investment. Not population size.

Having an economy based on something of value and having that value spread throughout the population enough to raise the average standard of living.

Nicaragua, Ecuador and many other countries have no interest in raising the average standard of living for their citizens.

Chile and Brazil do. Despite their much larger populations and land mass they have done much better for their people.

There's a reason for that and it's not just due to economic theories proposed by those who don't really have to worry about their own personal economics.

It's because they know in order to make a real change for their people there has to be something more than published reports offering lip service to the outside world about how they think things should run. Much like the majority of MBA's. They know how to manage but when it comes down to it, they don't have a clue how to make or do anything. It's all theory lacking substance to back it up.

And to be clear...I am not trying to troll around to make arguments for arguments sake. Just discussing with the utmost respect to you and others whole trying to state my views as clearly as possible based on what I've seen first hand.

Frankly I don't see how relating any of this to the US makes sense on so many levels. Wealth, population, oil and/or GNP. All countries have poverty at some level. It's unavoidable. Just "recognizing" it accomplishes nothing and the US has plenty of programs to help those in need...even though what's considered true poverty would be very hard to come by in the US compared to a majority of the other countries in the world.

Nicas have figured out how to live on so much less because they have to. Homes with dirt floors, no running water and a complete lack of first world infrastructure make it basic survival to live with less.

I've always wondered about putting an average American in Nicaragua and see how long they would last living as the truly poor do before they ate a gun. Those of us with US passports and backgrounds assume so much more is "basic" when it's really not. Our definition of poverty does not hold up in so many places because...it's not what others consider real poverty. It's a much higher standard of living.

I Applaud Any

change that helps poor people get a leg up. Eliminating school fees ? A good start. Poking your finger in the eye of someone who is trying to help you? Stupid. Forgive me if I appear cynical of a Correa promoting "free speech". He could more appropriately promote freedom of the press in Ecuador.

The dynamic is so different between the US and CA and LA that any comparison in poverty levels between our country and LA is probably worthless. An analogue would be comparing literacy rates between Costa Rica and Nicaragua: not all that different, but literacy in Costa Rica goes way beyond a 6th grade education that leaves the Nicaraguan graduate barely able to read. The statistic is worthless in terms of where this puts the two countries in competing for investment. That's why CR has "Gringo Investment Valley" with modern manufacturing plants stretching from the airport to San Jose, offering Costa Rican's good paying, clean jobs, ,, and Nicaragua has uhh.. I need to think on that.

We have schools in the US, and "free higher education" for anyone who want to borrow the money, but disruption in many minority areas makes a quality education impossible for those who want to learn. You can't get into most colleges if you can't read and write, even in these PC and affirmative-action times. We have social services, but much of the benefit is diverted to purchasing drugs, by parents whose interest in their children's future is non-existent.

Access to quality schools for those who want to learn is available in some areas, but in most areas this access (through a voucher system) has been blocked by teachers' unions and their political allies. Dependency is fostered in order to perpetuate a political constituency. I'm not talking about Nicaragua and Ecuador here. There are chilling parallels between the governments of the US, Nicaragua, and Ecuador at this moment in time. It's not three zincs and a pig in the US yet, but we've certainly moved in that direction over the last four years.

Clapping both hands and feet for that

One of the most crazy-making kind of "helping" is "our lives work better than your lives, therefore you should be more like us" which generally ignores starting conditions for different cultures, climate, local diseases, the difficulty of getting people who like cooking with wood to consider cooking with smelly nasty methane, available essential resources, and trim.

I tend to get people trying to suggest books for me to write and generally go down people's throats for that, but since I've been suggesting things that people not do, I decided not to be fussy here, but what is it with true crime novels and people who haven't actually read anything of mine but feel like they'd have great ideas of work for me to do -- and that alone would make me sympathize mightly with what this person is saying.

There's also some wonderful project where a NGO group gives US problems to people in completely different cultures -- probably more for the sheer audacity of it, but it might be a better exercise than coming in and telling people that they need to do things our way (for all versions of our way from state farms to privatizing health care, which the US wanted Costa Rica to do sometime in the 1970s or 1980s).

http://technoccult.net/archives/2010/04/14/third-world-solutions-to-firs...

Rebecca Brown

Perestroika and Glasnost

Been done before.

Limitations of the command (top down) approach exists more each day as more complex the economy and products become. System D is where the main innovators are in most so called "3rd World Countries". That has not stopped the 4 main dictators in Alba from continuing to try to impliment the command economy. So an article like this is an affront in some ways but nothing new.

Like in Soviet Union incremental change failed in the end and it all collapsed-just like it will in Nicaragua at some point when the wheel turns. Cannot continue forever consolidation of wealth and power to one political party with minority support. 2 billion dollars a year from Chavez is keeping this going-basically getting short term trickle down at the expense of long term freedom. You really see these guys giving up power? Is Tropigas the last energy supplier still in private sector hands?

They will own almost everything so undoing this in 30 years with full blown revolution will be easy. Is a cycle and happened before in Nica history.

We need a milder word for 'revolution' like evolution with evil intents...

The US has a less favorable GINI index than Canada

Or than Nicaragua for that matter. More and more wealth is concentrated in fewer and fewer hands. So, the US needs to do something about that if you follow your logic to its conclusion (the US seems to do major property reallocations every 150 year or so).

Rebecca Brown

Better paying jobs, better living conditions

If you look around you´ll see that´s what makes the big difference between Nicaragua´s ¨working class¨ and the US working class, hell why go so far, next door Costa Rica. There´s this belief that the poor want to storm the rich man´s mansion and take everything he owns. Some politicians have led people to do just that knowing all along it was not the solution. In the US as in any other country, I dare say, true wealth is concentrated in few hands, is not as if there was a vast number of wealthy people and their number has been decreasing with every passing year. The poor, everywhere has always aspired to have a better life than the one we have, at least most do. One thing that the US has managed better than other natiions is to give its people a better deal than most other countries. Most of us want for us and our family the comforts of a better house, a car, the whole package. Not all of us have the spartan warrior or self denying monk´s mentality. We have been conditioned to want more, to never be satisfied, and that is why people work and go into debt, to obtain what we can´t afford. Of all the reasons for a person to migrate I can think of two being the most important, fear for your life or safety, and the promise of a better life through better paying jobs. As I said before no one that has a relatively safe and prosperous life would leave his country to start all over again in a strange land. I´ve been to a few millionaires´ homes and they also have something to complain about as all humans do. I have also been to the first home of many young couples starting out their lives and along with all their uncertainties and fears there´s this belief that things can only get better if they work harder and smarter, and with a little help from their government in the end things will work out just right. And that is why you don´t see americans leaving the US by the thousands seeking a better place to live in. As long as they have access to the Ámerican Dream´ you can keep your wealth, they are working on theirs. Wether that is, or not, the biggest scam perpetrated upon an unsuspecting humanity is up for debate. Nicaragua needs better paying jobs, among many other things, but that´s a good place to start. It could make things a whole lot easier if not better.