LeapFrog is the world’s first investment fund to focus on the insurance needs of low-income and financially excluded people. Launched by President Clinton and hailed by The Wall Street Journal and Private Equity International, LeapFrog has opened a new frontier for social investment and microfinance. Andy founded LeapFrog in January 2007, inspired by his extensive experience enabling entrepreneurs in emerging markets, and then co-built the firm with a team of former CEOs and pioneers in emerging markets insurance. Andy is a former Managing Director of Ashoka, which has financed and connected 2000 social entrepreneurs in over 60 countries. He worked with both Grameen and BRAC, the world's largest microfinance institutions, to market their social ventures. He also co-founded Kuper Research, which designed The Daily Sun, now sub-Saharan Africa's largest newspaper, with 5 million daily readers. Born and raised in South Africa, Andy is a serial social entrepreneur and author of books including Democracy Beyond Borders (Oxford) and Global Responsibilities (Routledge). He holds a PhD from Cambridge, where he was supervised by Nobel laureate Amartya Sen, who first stimulated Andy’s interest in market-based solutions to poverty.
Question: Why do you disagree with Peter Singer?
Andrew Kuper: Peter Singer and I had a really fun, fascinating and intensive knockdown debate about how we should address global poverty. Peter’s view is that we as individuals should give away a huge portion of our income to low income people and his reasoning is very interesting, he says, “Look, if you are walking to a lecture, say that you’re a lecturer or to your job, and you saw a child drowning in a puddle, you’re continuing to walk on to your lecture or job when you can rescue someone from almost certain death is morally reprehensible. And all you’re going to do is get your clothes muddy, maybe you’ll lose the clothes,” he says it’s a similar thing. By not giving away our income when we could be lifting people out of poverty that often kills them, we are in effect doing that morally reprehensible thing.
Now, I believe there’s a powerful emotional reaction to that by my difference with Peter is simple, I think that it’s not so easy in this complex global environment to get people out of the puddle. And that there are better mechanisms that we don’t disagree on getting people out of the puddle, there are much better mechanisms for helping people get out of poverty than just giving everything away.
Don’t get me wrong, I believe in charity, I just believe in one tool among many, many others. Now, why do I emphasize some of the others, I emphasize some of the others because I believe poverty is a systemic notion so you might give away a whole lot but if the system doesn’t include people if the economic system doesn’t include people, they’re not going to be lifted out of poverty. So you might give away money to people and it helps them to get food or something profoundly important like that or slowly increase their income but then you haven’t dealt with the macroeconomics of the country so the currency collapse and people are suddenly starving again.
Now, it goes well beyond that because now think about the use of your dollars because you could give them away but in South Africa, one of the and many, many developing countries, one of the major sources of income is tourism. The tourism industry supports millions and millions of people, it supports the economy, it’s the driver of the economy.
If you give everything to the point where you have just the bare subsistence amount to yourself, all of that goes away, there isn’t going to be that kind of system and a whole economic engine that employs millions and millions of people will simply disappear. Similarly you stop consuming higher end clothes, what happens to the millions of people in India, China, Sri Lanka, South Africa who are making those clothes? They’re going to be, probably, out of work so I think there’s a real danger in simplistic thinking, “I’ll give it away.”
We learnt this in the ‘70s with Food Aid, people said, “Give them food.”
So food was dumped in the local environment, thereby bankrupting the local farmers because they couldn’t sell their produce so the best of intentions, the road could be paved with good intentions. So what we need to do is think about really systematic institutional interventions and what I have emphasized in my work and what Leap Frog emphasizes in terms of creating whole profit with purpose, companies and therefore ecosystems that support the poor and are yet profitable, what I’ve emphasized is create sustainable infrastructure for ending poverty, don’t just think you can give it away, give money away and it will solve the problem.
And a last thought on this, even if the largest foundation in the world has 60 billion dollars, there are four billion poor people out there, that’s $15 per person, even if you could give it all away to those poor people with no transaction costs, no friction, that would be $2 a day for a week and then it would be gone. Charity capital has to be catalytic capital, it has to help start things, things like Leap Frog, things like the Acumen fund or Ashoka, or Endeavor, it has to drive innovation that then creates sustainable solutions, often market-based solutions to poverty.
There are uses that are pure charity capital like helping people to get out of slavery, like dealing with terrible immigration situation there are clear uses for charity capital just as charity, not everything can be done profitably but to the extent we can, we should be using that capital to help generate institutions, infrastructures that have massive, sustainable global effects.
Recorded on: May 1, 2009