On Wednesday, Bill Clinton will present the Hult Prize at the Clinton Global Initiative meetings in New York. The $1 million award will go to a team of young social entrepreneurs with a business idea to improve lives in developing countries. The finalists this year include a group that has invented a chewing gum that slows tooth decay and another that has trained bees to diagnose diabetes. Some 10,000 college and university students worldwide applied; this year’s finalists represent schools that include MIT, York University, and the Indian School of Business.
The Hult Prize is just one of a number of awards recognizing young people keen to change the world, reflecting what inspires would-be world-changers these days. Forget bureaucracies, charities, foreign aid, and big multinationals, they might say, the best way to fight global poverty is through the right blend of innovation and business savvy. In its own way, this is simply a new brand of naiveté. The fact remains that poor countries can’t develop without a big, traditional private sector that creates jobs, and the smartest innovations can only go so far without functional governments to provide basic services and infrastructure.
The social enterprise movement is built on cynicism about the public sector and large-scale private enterprise. A recent survey of 12,171 people aged 18 to 30 across 27 countries found that while 68 percent thought they had an opportunity to become entrepreneur, only 45 percent believed one person’s participation could make a difference in the current political system. For cynics who nonetheless want to change the world for the better, social enterprise offers an attractive alternative to the snail’s pace of institutional change. With a double bottom line of profit and social impact—and the right killer app—social enterprises can innovate their way to a better world.
That vision has a lot to recommend it. Helping the world’s most destitute people stretch the pennies they have has been the primary force of progress in the world’s poorest countries. New ideas really matter, and the social enterprise movement is generating a lot of creative ones. Take the winner of the 2013 Hult Prize: Aspire Food Group, created by students at McGill University, seeks to sustainably farm edible insects for human consumption. Insects are potentially a far more efficient source of protein than conventional livestock and people across the world already eat nearly 2,000 different species of insect.
But the problems with the social enterprise approach start with the challenge of being small. Aspire is currently working in Mexico, where grasshoppers regularly appear on restaurant menus. At the moment, the insects cost six times more per kilogram than beef or chicken. The enterprise hopes that by significantly scaling production—factory-farming the insects—they can dramatically reduce that price. That’s a significant hurdle. Small startups rarely go global. Not, at least, without governmental buy-in.
There is another way to look at the scale issue. Are social enterprises offering a cure or a Band-Aid? Back to the crickets: While many poor people do eat insects, it isn’t clear whether that’s by choice or necessity. Maybe they’d prefer to earn enough to afford a chicken cutlet—and that’s going to take a lot more decent-paying private sector jobs. Or look at Uncharted Play, which sells a soccer ball that can power a lamp and a jump rope that can charge a cell phone, and Toms Shoes, with its buy-one, give-one policy. They may help make recipients’ lives a little better temporarily. But sustainable development progress is about extending the electricity grid and making sure people have pavements to walk on. That takes governments that provide public infrastructure.
Again, hundreds of millions worldwide lack access to clean water and sustainable ways to cook. Numerous social entrepreneurs have developed cheap water filtration devices alongside better cookers to help them. Among the latest ideas are the Infinity Bakery, backed by the James Dyson Foundation and designed to use recycled oil drums to turn the sun’s rays into a heat source for cooking, and Portapure, a five-gallon water-filtration device that won the Chicago Innovation Awards. But it turns out to be very hard to sell such devices, and they frequently fail. The record of cook-stoves is particularly grim. Twenty years worth of studies have found that “improved,” low-cost cook-stoves either weren’t used or didn’t deliver the expected health and social benefits. In the long run, we need to fix the underlying problem: People need networked water and gas.
That brings us back to government. The problem in developing countries isn’t too much government—it is too little of the wrong sort. To paraphrase the old joke about a bad restaurant: Public services in these countries are horrible, and there’s not enough of them. Central government tax revenues as a percentage of gross domestic product in the U.K. are about 26 percent, according to the World Bank. In Tanzania, they are 16 percent, and in Afghanistan, 7 percent. That means the U.K. central government is spending about $9,000 per person per year on public services, compared to $265 in Tanzania and $133 in Afghanistan. And much of the limited money that developing country governments do have to spend is wasted or misspent. Enterprises in Tanzania get an average of about one-third of their electricity from generators, for example, because the state-run electricity company is so poorly managed and underfunded.
The development challenge is awesome: Some 2.4 billion people worldwide live on less than $2 a day, and 5 billion live on less than $10 a day. But it is not hopeless. Take vaccines against diphtheria, pertussis, and tetanus. In 1980, only 17 percent of the world’s kids had been immunized with the DPT shot. Today, 83 percent are. That’s a roll-out of hundreds of millions of vaccines in the space of three decades, progress that could not have been made without thousands of government workers who delivered vaccines.
Fixing the infrastructure problems and low-quality health and education services takes more, better government—even if the services are contracted out. For all the valuable work they do, social entrepreneurs can’t replace the state’s role, and they can’t function nearly as effectively where governments are poor, incompetent, or corrupt. Even if millennials are skeptical about their ability to make governments work better, there is no way around the need to improve stodgy bureaucracies, including aid agencies at home and state monopolies abroad. Cynicism about government is useless. We need outrage at its performance.
So how do we fix broken bureaucracies, badly designed aid programs, trade and migration policies that keep the poor poor while making the rich richer, and weak regulations that allow firms to pollute or exploit their workforces? Perhaps it is time to establish a few more prizes for aspiring permanent secretaries and auditors general—alongside civil society campaigners and community organizers—with good ideas on how to do that.