International Development

 

*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*

*/Twitter/* [1]

I just finished a book on international development by Samir Rihani.  The
title of the book is Complex Systems Theory and Development Practice:
Understanding Non-linear Realities.  It is a very thoughtful and well
written look at the history of international development.  As with most of
my blogs, you are probably wondering what the heck this has to do with risk
management.  There are two things.  The first is that the book takes a look
at international development in the context of complex systems, which of
course is an area of interest to me and an area to which I think much more
interest needs to be paid by the risk management community.   I could of
course write the blog on this point alone. 

However in reading this book a much more significant thought hit me.  In his
book, Dr. Rihani points out the failure of the linear thinking world when it
comes to international development.  He points to the enormous efforts in
terms of resources and time that the IMF, the WTO and the World Bank (to name
just three international organizations involved in international development)
have put into trying to get the undeveloped world out of poverty.  He also
points out the equally (and depressingly) poor results have that have been
achieved.

Dr. Rihani"s thesis of course is that the failure of these august
organizations is to apply one size fits all linear (complicated) thinking to
systems that are inherently complex.  Before I too easily digress into yet
another rant about the need to appreciate and develop complexity thinking, I
believe it is worth a moment's thought to ask how effective major
international organizations such as Basel have been at preventing financial
disruptions.  Is there a parallel with International development?

International development, just like international risk management, basically
began in earnest in the shadow of World War II, although earlier adjustments
began with the Great Depression.  As Dr. Rihani argues, the record in
relieving poverty in the undeveloped world has been abysmal.  Any
corporation with the same track record of results given the resources
allocated to the problem would have been shunned by investors long ago.  But
has the record of cooperation for the purposes of keeping the international
financial system free from excess volatility been any better?

Okay, I cannot resist.  I am back to complexity again.  I believe there are
parallels between risk management, Basel, Sarbannes Oxley, Dodd Frank, and
the similar well-meaning actions of agencies cooperating to enhance
international development.  Both ignore complexity in favour of complicated
thinking.  Both have less than efficient results.  Which community will
wake up to the fact first that it's not complicated?


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