State Dept. Advisor Says New Ideas Can Defeat Global Poverty

A mother and child have their eyes examined by the staff of PVRI (Pushpagiri Vitreo Retina Institute, one of Acumen’s portfolio companies)

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Washington, DC – The world is at an extraordinary moment in time to harness new ideas to defeat global poverty, Jacqueline Novogratz, the CEO and founder of Acumen Fund, told a Pentagon audience today (May 29).

“It doesn’t matter in which country I am visiting; you feel a yearning for shared global values — a shared sense of a single world — and yet, at the same time, [you] can see this kind of pulling into ourselves — [a] fear of the other,” Novogratz, who’s also a member of the US State Department’s Foreign Affairs Policy Board, said at a “New Ideas @ OSD” forum.

The Foreign Affairs Policy Board, according to a State Department website, was launched in December 2011 to provide the Secretary of State, the Deputy Secretaries of State, and the Director of Policy Planning with independent, informed advice and opinion concerning matters of US foreign policy. The board serves in a solely advisory capacity, with an agenda shaped by the questions and concerns of the Secretary of State.

The board’s discussions, the website said, focus on assessing global threats and opportunities, identifying trends that implicate core national security interests, providing recommendations with respect to tools and capacities of the civilian foreign affairs agencies, defining priorities and strategic frameworks for US foreign policy, and performing any other research and analysis of topics raised by the Secretary of State, the deputy secretaries, and the director of policy planning.

Acumen Fund is a nonprofit global venture fund that employs entrepreneurial approaches to solve the problems of poverty, according to Novogratz’s biography on the State Department website. During her Pentagon remarks today, Novogratz said technology has connected the world like never before, but people and communities are still clinging to old ideas — leading to a persistent poverty cycle.

It’s time to move past those old ideas and to think about development and poverty differently, Novogratz said. “We’ve been at these moments before in history,” she said, noting that the solution to today’s global economic challenges is not to be found in revisiting large-scale economic rescue programs like the Marshall Plan.

“We’re at a different time in history, where you’ve got three billion people who feel fundamentally excluded from the global economy,” Novogratz said. “I’ve really seen how private markets too often exclude the poor.” And, top-down approaches to poverty create dependency, she said. “We need a new paradigm,” said Novogratz, noting that instead of massive, widespread investments with rapid, but short-term, results, her organization advocates “patient capital.”

These targeted investments, she said, are in companies and ideas that will help the poor access real choices that will improve their lives in the long term, but the full returns may take years, even decades. “Income alone is the wrong metric,” Novogratz said. “Too often … we focus on those things we can count rather than what it actually means to give people this idea of choice and opportunity.”

Providing people with the opportunity to make choices about the direction of their lives gives them dignity, said Novogratz, noting that rather than creating solutions for others, her organization uses funds from philanthropic donors and government agencies to invest in entrepreneurs in places where governments and markets have failed to reach the poor.

With time, these entrepreneurs have not only succeeded in areas like low-cost housing, water purification, farming and health care, Novogratz said, but they were able to expand. Their successes build models that are transferrable to other developing countries, she added.

Over the past 12 years, Acumen has invested about $85 million in 76 companies located in India, Pakistan, Peru, Colombia and several countries in Africa, Novogratz said. These companies created 60,000 jobs and delivered goods and services to more than 100 million people.

Novogratz said one result surprised her — for every dollar of investment by Acumen, an additional four dollars of traditional capital has followed. “One of the things we also didn’t understand when we first started was that this whole sector would burgeon around us,” she said. “We were one of a sector of one or two organizations back in 2001 — now there are 300 organizations that call themselves ‘impact investors.’” Novogratz noted that not all of these organizations are created equal, however, and some are simply hedge funds investing in clean technology rather than human capital.

The work of systems change is slow and messy, Novogratz said. It requires organizations to be dedicated to trust-building and developing talent. And “corruption ultimately hurts the poor more than anybody else,” she added.

But, making these larger systemic changes is essential if more entrepreneurs are going to be encouraged to operate in these areas, Novogratz said. “It all comes back to dignity,” she said. By providing the poor with the opportunity to make choices in their lives, they play a role in their own success, she added.

Dignity allows an investor and an impoverished housewife to speak to each other as equals and be transformed by the experience, Novogratz said. It is well-documented that poverty breeds civil unrest as well as terrorism in impoverished parts of the world.

In his remarks at a March 12, 2009, dedication ceremony for Abraham Lincoln Hall, a new building on the campus of the National Defense University on Fort Lesley J. McNair in Washington, DC, President Barack Obama urged the use of all elements of national power to combat terrorism and other threats to the United States in the 21st century.

“We cannot continue to push the burden onto our military alone, nor leave dormant any aspect of the full arsenal of American capability,” Obama told NDU students at the ceremony. “That’s why my administration is committed to renewing diplomacy as a tool of American power, and to developing our civilian national security capabilities.”

Civilian employees of all agencies must join to help allies enhance governance, develop economies and advance opportunities, Obama said at the NDU ceremony. “We have to enlist our civilians in the same way that we enlist those members of the armed services in understanding this broad mission that we have,” Obama added.

At the Pentagon today, Novogratz said it’s time “to find ways to transform the world by recognizing that we need to change all of our systems — not just our markets, not just government, not just military, but every one of our systems — to start with this inherent idea of human worth and that each of us live with this great sense of infinite potential inside of us and that it’s our job to figure out how to unleash it.”

And, “the more we do it from a place of honesty and start by looking at the problem at hand from the perspective of the poor themselves and build from there, the more we actually have the chance to extend that assumption that all men are created equal,” she said.

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