TrueValueMetrics ... Impact Accounting for the 21st Century

It has been said that all politics is local ... but even more so, all life is local. More than anything else, this is the central concept of Community Accountancy.

Systemic Dysfunction

Taken as a whole ... there is systemic dysfunction. Given the amazing power of modern knowledge especially in science and technology, all sorts of things are possible. Together with a global population that is more educated than in the past, the situation should be great, and likely to get even better. In fact, the global economy is 'in a funk' and nobody seems to know what to do.

While there is very good science and technology that could be deployed for the benefit of society to achieve better socio-economic performance this is not being done. Why not and what to do about it is an important question. The progress of development has been much less than was expected 50 years ago ... not because science and technology does not exist ... not because the world is short of wealth and knowhow ... but because the approach is wrong, the process is wrong.

There are many constraints to success and rapid progress ... institutional, traditional, cultural, governmental, etc., etc. Progress and performance has been constrained by something ... or many things ... that add up to systemic dysfunction.

The problems are many. No one silver bullet will make much of a difference on its own. The easily recognized problems fall into a number of groups:

Systemic dysfunction,
Inaccessible data,
Chaotic complex structure,
Decline of professionalism,
Value destroying dynamics.

Wrong modes of interaction and wrong way information flows

The main interaction between north and south over the past several decades has been “official” through government and institutions like the World Bank, the IMF, UN, bilateral government agencies, etc.. Private NGOs and family remittances were small.

There are wrong way information flows. Information flows are too much North to South. The present state of affairs is for a vast effort to flow information to educate and inform the south ... based on the idea that north knows and south does not.

Interaction between North and South

The present state of affairs:

A better situation would be:

Information flows between North and South

The present state of affairs:

A better situation would be:

This has not worked well ... the structure has been dysfunctional and data flows the wrong way. The result has been failed development.

A better situation ... less official interaction and much more private and people to people interaction and more data flows from south to north.

In fact the north has relatively little data, even though a vast amount of analysis is done ... with conclusions that may well be without merit. A large pool of data in the south is almost totally ignored ... even though it could be very useful to inform decision making. A better state of affairs would be for the North to get much more data from the South ... and to get the information into an organized form where it can be easily used for analysis. The North can add value to the data by adding in what the North knows in terms of science and technology and access to financial resources ... and the South can add further value by giving feedback about use of resources and the results being achieved.

There have been changes ... but there is resistance by established organizations that do not want to have a diminished role.

And there is also the role that grand corruption has had on progress facilitated by the large official flows of relief and development assistance and the benefits arising from favored official treatments.

The market mechanism has been called into play to help define what “price” should be ... but it really does not work very well. And when it is decided that the government can administer price better than the market, the results are usually horrendous.

Examples abound ... these are some from the writer's experience: >hr>

Staff costs in the relief and development sector
Staff costs are important ... and especially the huge difference between the remuneration paid to local staff and remuneration paid to international staff. This subject has not been much discussed though it is very important in the design and cost effectiveness of almost every development intervention.

Frankly ... this subject has been kept off the table for at least the last three decades because it is key to most development experts' career planning ... and many who aspire to this group. But it is too important a matter not to get it addressed.

Powdered milk – impact of subsidy
I tried to organize the supply of powdered milk for a West African importer ... and what I expected to be relatively easy was a nightmare. The cost of milk is very variable depending on how much subsidy the farmer has negotiated and where the cows are located. Both the European Union and the United States have highly subsidized cows. Of course the ex-farm price of milk becomes a component of the cost of powdered milk ... but then there are programs that encourage export of agricultural products including powdered milk, and these programs are further subsidies. With the maximum of subsidy the price of powdered milk turned out to be about $1,050 per MT in Europe and $1,100 per MT in the United States ... and by the time shipping and insurance were factored in the cif cost was going to be somewhat lower from Europe than the United States.

But then it appeared that there were quantity questions ... and if the quota was exceeded and all the subsidy used, then the prices would not be $1,050 and $1,100 respectively but more like $2,050 and $2,100. At the lower price, the price being paid by our West African importer would have generated a modest trading profit ... at the higher price, a considerable loss. And then it started to appear that the problem of the missing subsidy on the supply side would go away if we ordered immediately with some premium to be negotiated. In other words everything had a price.

Meanwhile, our customer in Africa was relatively new to this business ... and the established importers did not want new competition. Suddenly his bank needed all sorts of additional information, and it became pretty clear that there was what amounted to an import cartel that also had influence in the bank.

Lesson ... while the market may be powerful as a theoretical construct, it is puny relative to the many different centers of economic power that control and profit from the status quo. The incentives that really matter ... the profits in the value chain are complex and usually driven by some important private relationships.

Tea auction – Malawi
The conventional wisdom is that

Cashew – farmgate prices in Kerala
The conventional wisdom is that

Controlled prices for everything – Guinea Bissau
The conventional wisdom is that

Coffee auction - Burundi
The conventional wisdom is that

Exchange control distortion – Nigeria
The conventional wisdom is that

Price projections – World Bank getting it wrong
The conventional wisdom is that

TVM Value Accountancy identifies some of these and helps get them addressed.

TVM Value Accountancy aims to put data about community economics into a balance sheet ... and see what are the constraining factors ... and how they can be removed so that the community progresses.

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