To reduce poverty we need economic growth. The only way to create lasting economic growth is through the growth of businesses. This generates jobs, income, skills, collaboration, taxes, vitality and creativity. But most importantly it is the start of a middle class. The middle classes are the foundations of political stability in a country.
The source of this economic growth is entrepreneurship. The moment of truth and starting point for every entrepreneur is sales. Without sales there will be no jobs and no business. This is why BiD Network is a strong believer in entrepreneurship. And why sales is a higher priority than jobs.

The aid industry is in essence taking a short term approach when they focus their strategy on poverty reduction and job creation. Of course poverty reduction and job creation is important. The problem is that the poor are not capable of creating jobs for other poor people. By investing in growing the middle classes, entrepreneurs and focussing on sales a solid foundation is laid down. Firstly, it is the entrepreneurs that will create lasting jobs for the poor. The poor cannot create jobs for the poor. Secondly, it is sales that will create jobs. not the other way round. As Keynes, Tinbergen and Leontief have explained frequently: it is the added value of a business (sales minus purchases) that lie at the heart of economic growth.

Of course attempts have been made to redistribute wealth under circumstances with no economic growth. The consequences have been tragic. Mugabe most recently took land from white farmers in Zimbabwe and gave it to the landless. Land reforms like these have mainly resulted in less food for the poor. Many collectivization and nationalization initiatives have been taken in countries attempting to redistribute wealth in zero-growth situations - the results are appalling. The two World Bank economists Dollar and Kaay, but also World Bank defectors like Easterly, Stiglitz and others will agree that growth is essential for poverty reduction. The trick is to create growth from which the poor will also benefit.

The Cigarette package warning is serious. Aid is addictive. It is easy money for those who know the jargon and have the right connections.

Aid also creates bureaucratic cancer. For some reason the aid distributors want so much information. They are not satisfied with results. alone. Aid generates an endless stream of reports. Feasibility studies beforehand and evaluations on a regular basis. The effect being that less than 25% effectively ends up in the hands of the intended beneficiaries: the poor.

<to be continued>