ENGINEERING MIRACLES?

The young social entrepreneurs basking in Silicon Valley’s enthusiastic glow have probably not read the Spence report. According to them, we do know what will get the developing world to grow—they just need to adopt the latest technologies, chief among them the internet.

The fact is evidently so obvious that the report does not bother to cite much solid evidence, which is sensible since there is no such evidence to cite. After all, in developed countries there is no evidence that the advent of the internet ushered in a new era of growth. The World Bank’s flagship publication, the World Development Report, in its 2016 edition on digital dividends, after much hemming and hawing, concluded that on the impact of the internet, the jury was still very much out.⁸⁵

The internet is just one of the technologies tech enthusiasts believe can be both a commercial success and an engine of growth for poor countries. The list of “bottom of the pyramid” innovations that are supposed to change the life of the poor and power growth from the bottom up is long: clean(er) cookstoves, telemedicine, crank-powered computers, and rapid testing kits for arsenic in water, to name a few.

One common feature a lot of these technologies (though not the internet) share is that they were developed by “frugal” engineers, such as the students at MIT’s D-Lab or the entrepreneurs funded by Acumen Fund, a prominent “social” venture capital fund. Behind this and other similar funds is the believable idea that one reason why developing countries are poor is that the technologies developed in the North are not appropriate for them.

While the Acumen Fund sees itself as an entirely new type of organization, not an aid organization but a venture fund for the poor countries, in a sense its technology-oriented view of growth harks back to the 1960s, when engineers dominated the aid world and went bust trying to bridge the “infrastructure gap,” giving large loans to poor countries for building dams and train lines that would allow them to catch up with rich countries. Despite the lack of evidence that this has helped those countries to grow, the fascination for electricity as the source of growth and development has never really gone away. Ecuador is currently under severe financial strain thanks to a loan from China to build a massive dam that was never fully operational. Acumen loans are smaller and they are given to private actors rather than to governments, but the dream is still one where engineers will fix the world’s problems. One of Acumen Fund’s key sectors is electricity. The ideal source of energy has changed from large dams to power from grain husks, or the sun, and the latest “cool” idea is that it is possible to develop cheaper “off the grid” solutions to reach poor communities; but the focus on electricity goes back fifty years.

It turns out, however, that it is not easy to invent appropriate technologies that are also profitable in a poor country. A good part of what Acumen funds fails. A rule of thumb in the social investing world is that 10 percent of the ventures work out (the rest fold) and only 1 percent reach significant scale. The issue is more that it is difficult to identify those supposedly life-changing new products and services, and efforts to do so often meet a frustrating lack of interest from the people whose lives are supposed to be changed.

Electricity is a case in point. In a recent randomized controlled trial in Kenya, researchers partnered with Kenya Rural Electrification Authority to offer electricity connection at different prices in different communities. The demand fell very sharply as price rose, and villagers were not willing to pay anywhere near what would have been sufficient to cover the cost of connecting to the grid (not to mention building the grid).⁸⁶

The frugal engineering world is littered with many similar disasters, from the $100 laptop to educate the world (which actually costs $200 and has been shown to have no impact on what children actually learn),⁸⁷ to cleaner cookstoves that nobody wanted,⁸⁸ to various water-filter technologies⁸⁹ and innovative latrines.⁹⁰ A lot of the problem seems to be that these innovations take place in a void, insufficiently connected to the lives they wish to change. The core ideas are often clever, and it remains possible that one day they will click, but it is hard to place a lot of faith in this prospect.