On April 25th, 2023, I had the opportunity to present some of our work on market-creating innovations in the halls of the United States Congress. I began my remarks by telling the following story I’d heard from a minister in an East African country.
The minister explained that as the COVID-19 pandemic began, leaders in the country realized they didn’t have the capacity to make facemasks and other personal protective equipment (PPEs). As a result, their country would be vulnerable to the virus with little to no protection against it and a struggling healthcare infrastructure to manage it. So, quickly, and quite miraculously, they mobilized the necessary resources to set up a factory to make facemasks. This was a major victory for them. They may not have been able to build a thriving healthcare system in a matter of months, but at least they could protect, to some degree, against the unmitigated spread of the virus. This provided some relief. But the relief was short-lived.
When the government approached the country’s Ministry of Health to purchase these locally made facemasks for their doctors, nurses, lab technicians, and the sick in public hospitals, the Ministry “couldn’t.” The reason? The ministry’s funds were donated by a development organization and there were stipulations that the funds could only be spent in the donor country. So, if the ministry was going to purchase facemasks for their healthcare workers and patients, they’d have to purchase from the wealthy donor country.
But there was a problem.
The world was in the throes of a global pandemic which caught everyone—including wealthy countries—off-guard. And so, the wealthy donor country didn’t even have enough face masks for its own use, much less for the use of this poor East African nation. All of a sudden, what seemed like a big local victory began to turn into despair as the country found itself in an incredibly precarious situation.
After I told the story, multiple people walked up to me and asked if it was Ethiopia, or Kenya, or some other country. I didn’t divulge the name of the country, but the fact that the story resonated so much with those in the room meant that as sobering as it was, it was not surprising.
By and large, that is the current state of foreign aid and development. In actuality, it sounds more like anti-development.
Instead of the development organization celebrating the fact that this poor country had built local capacity to make products it could sell to its citizens and possibly export—the activities which actually lead to development—the development organization prioritized a broken system. Even a global pandemic that put this poor African nation at risk wasn’t enough to change the ineffective policy.
Recently, multiple articles have highlighted the broken foreign aid system. Much of the foreign aid given by donor countries cannot be classified as foreign. Barely 30% reaches recipient countries and even when the funds do reach, there are often stipulations on how they must be spent. This is why the work that Unlock Aid is doing is so critical to the development industry. If they are successful, their work will not only revolutionize how aid is spent, but who receives it.
Unlock Aid is “championing policy reforms to empower innovators, break down barriers, and unlock funding” so that it reaches entrepreneurs and communities where it is most needed. To reach the Sustainable Development Goals (SDGs), global development actors cannot keep doing things the same way. Unlock Aid’s work is so resonant with our research at the Christensen Institute because it focuses on getting the appropriate resources to the people closest to the problems.
Much of our research focuses on how a particular type of innovation—market-creating innovations—can transform nations. These innovations transform complicated and expensive products into simple and affordable ones and make them accessible to many people in society. They are the critical missing link in much of our development and foreign aid programs.
The United States was once a poor country with widespread poverty and demographics worse than many poor nations today. But through investments that created new markets for average Americans, the United States has become the richest country today. So, how can more of the aid the United States provides go to funding market-creating innovators in poor countries? That’s the focus of Unlock Aid’s work.
Congressman Joaquin Castro (Texas-20) and Congresswoman Young Kim (California-40) just co-sponsored the Fostering Innovation in Global Development Act (FIGDA) in Congress. The bill will direct USAID to shift toward evidence-driven foreign aid models that leverage the power of the private sector. There are many important initiatives in global development, but few will have a transformational impact on the sector. This one will.
Bills like FIGDA will make it so that when a poor country builds a manufacturing plant for face masks in the midst of a global pandemic, donors will be more inclined to support their work. Simply put, few activities represent development more than a country’s ability to produce and sell things it, and the world, needs.
