Sunday, September 27, 2009

Business Ethics and Development Intervention

I am fascinated by the ways that our development intervention engages with Chagga economic culture. We've done our best to invest artfully and to allow our project to interface with local ways of doing business. This is very much a practical concern: the more room we leave for people to apply their own conceptions of economy and business as they engage the project, the more likely the project is to be incorporated successfully into the community once we leave. At times, we must have been hamfisted and have inadvertently trampled on the Chagga way of doing capitalism. But our general approach is to make objective-specific money allocation decisions and allow local people to execute the task at hand. We have two basic systems to minimize our vulnerability to graft. First, we meticulously check facts and prices with as many people as possible before making a purchase. (Yesterday, we went to a wedding. I don't have dress shoes, so I asked a friend if I could borrow some. He lent me what appear to be a pair of second-hand, alligator skin Gucci kicks, but they were dusty, and he instructed me to get them shined prior to the wedding. I asked the chef at a local restaurant how much a shoe cleaning normally costs. I ordered the shine, handed him a small bill, and asked for change based on my well-researched understanding of the standard fare. The shoe shiner clearly anticipated a juicier-than-usual shining fee from this young traveler, and was visibly surprised at my command of local prices.) Second, we are working with multiple stakeholders to produce the physical project, and they often have conflicting interests. We exploit these differences to make sure we are getting the right prices, timely services, and good information. (Mwalimu Richard, for example, is a chronically behind-schedule wood chopper. His lateness started to delay construction, though he insisted he was doing everything possible to get the job on time. The construction workers disagreed and said Richard was just too busy to chop our wood on time. They hired their own chainsaw operator and to Richard's consternation, started chopping wood on-site, and at the right price.)

The downside of our conscious decision to leave most of the execution to local actors (and to pitch in physical help whenever we can) is that several ethical quandaries arise in the process. We're not doing anything evil or malicious, and we're doing our best to shed as much moral baggage as possible. I don't lose sleep over this stuff, and I'm not uncomfortable about it. The reason I raise the issue on this blog is because these ethical issues are both rich in information and they're interesting; I thought I'd share some of what we deal with as a way of soliciting readers' thoughts on the issues in general and possible ways of dealing with them.

Today, I'll start by kicking around the issue of kickbacks.

Everywhere, socially savvy entrepreneurs have mastered the art of the kickback. Whatever kickback institutions prevail in a given locale, the most successful operators are equally adept at seizing opportune kickback moments, and at gracefully accepting kickbacks sent in their direction.

Here's a rough sketch of what I mean when I write "kickback": a nugget of value left over from an economic exchange that one party to the exchange returns to the other following the original or primary exchange. That cash makes everything freely convertible to everything else might render the "value left over" part of the definition functionally irrelevant. But the general idea is intact: an exchanger makes a profit and, for whatever reason, returns some of it.

Sure, kickbacks can be a form of financial credit. They can also consist of a payment for some under-the-table service as in the most widely publicized kickback cases: shameless cases of government or corporate cronyism. This kind of publicity gives kickbacks a bad rapport. But I think most day-to-day kickbacks, the kind that take place innumerable times in markets all over the world, are not ethically problematic. In Luo markets in western Kenya, vendors seal sales by adding an extra couple of vegetables to whatever bundle they've negotiated. The kickback helps vendors retain old customers and capture new ones. It's a marketing tool and its function is social.

It seems to me that kickback ethics get murky in cases where value gets transferred from one domain of economic exchange (DOE) to another. I'm not exactly sure what I mean by DOE--anthropologists have been wrestling with these apparent phenomena and developing concepts to deal with them for a century now. But examples from our medical system illustrate the point. First consider medical referrals. Although their matrix-like, (at-best) interminable nature makes them slightly more complicated than a classic kickback, referrals fit the general mold: an endocrinologist refers a patient to another, the second doctor profits. Eventually, if Dr. 2 holds up her end of the deal, she'll "kick back" a second patient to her colleague Dr. 1 down the line. Presumably, there are several endocrinologists to whom Dr. 2 might refer a given case, and they'd all do a good job. Therefore, Dr. 2's decision to refer back to Dr. 1 is not just medical but also social; it helps her build a professional network, it helps her ensure good care for her patient, and everyone benefits. No ethical qualms here.

Until recently, a more problematic kickback system thrived in doctors offices as drug representatives bought lunch for office staff and supplied piles gimmicky pens with drug logos as well. Those of us who have enjoyed those lunches might not relish the ban on such practices, but the ban is an ethical no-brainer. We all know that at Big Pharma, the bottom line reigns supreme. Furnishing office supplies and lunches was part of an elaborate kickback cycle in which healthcare providers got freebies and drug companies expected favorable treatment when the pen hit the prescription pad. (Whether or not they got it is someone else's debate.)

We finished paying Richard for lumber last week. He earned a significant portion of our grant. At the end of the exchange, he told us not to forget about him when Duma implements additional projects. We paid him in full, but he didn't have change for our cash. First, he said he'd pay it back the next day. Then he thought hard, reached into his new wad of bills, and kicked us back 10,000tsh, about $8, and told us to buy ourselves a soda. It was uncomfortable, but Richard is a teacher at the Lata School and we didn't want to refuse the kickback if this is indeed the way business is done in Chagga land. Following Chagga business etiquette seemed the most prudent path at the time (more on conflicts of interest later). Furthermore, if we were building our own animal shelter, there would be absolutely nothing wrong with accepting the kickback. The ethical dilemma stems from the fact that we are managing money on someone else's behalf, and since we are leaving in three months, we are not reliable business partners as private operators. This dynamic made the kickback feel like the grafty kind you read about in the Times. We decided to err on the side of moral intuition and reinvest our portions of the kickback into the project.

So should we have bought the sodas? What are your thoughts?

I'm not sure about citing sources on blogs. If you want to learn more about the social function of credit, or the ways in which economic entrustment operates in African markets, Parker Shipton's The Nature of Entrustment, on the Kenyan Luo, is a good place to start. The book inspired a lot of the thought behind this post.

Posted by Jake


  1. Sulochana DissanayakeSeptember 30, 2009 at 6:47 AM

    Fascinating stuff Jake. Congrats to both of you for your work. About the question of ethics and morals, I feel that you must take different cultural practices in to context, as I believe an understanding of what's accepted and not differs from culture to culture. So for eg: In sri lanka, 'kick-backs' are known as 'bribes' - a slightly harsher term, but depending on the context, can be as harmless as an extra few beets from your local vendor or as harmful as massive bribes paid to politicians to import illegal goods in the country. So I think your judgement call must depend on the cultural context and the magnitude of the exchange.

    So in my opinion, yes, you should have bought the sodas!

  2. Jake this is a fantastic project. I'm glad this is what you've been getting into since we last spoke. Best of luck man.

  3. The real question is would you have bought Coca Cola?