How to Leverage Resources for Maximum Liberty

Matt Warner – Atlas Network President — talks about a new model for global economic development

My show has always been about promoting ideas that lead to a flourishing, free society. I try to leverage my resources to spotlight issues that are neglected by shallow politicians and mainstream media (see my free guide to *The Shallow State* for details).

While occupational licensing and rolling back the administrative state may not be the most glamorous causes, I never tire of covering the work of organizations like the Institute for Justice in their fight against the most pervasive and regressive forms of government overreach.

Much like the entrepreneurs they serve, the Atlas Network also leverages scarce resources for maximum impact. They have cultivated a global network of think tanks working behind the scenes to advance free market competition and accelerate international development.

While the “problem” of development has stymied well-funded academics, and supranational government bodies, Atlas has used the same “engage and exchange” formula time and time again to spur growth and entrepreneurship without accepting a penny from any government or quasi-government institutions.

How?

Matt Warner, the Atlas Network’s president, reveals the secrets in his new book Poverty and Freedom: Case Studies on Global Economic Development. Warner recognizes development as an opportunity — not a problem. The case studies from the dozens of Atlas-supported think tanks around the world show that solutions are not handed down from on high by all-knowing government officials but discovered on the ground. Through the broader Poverty and Freedom initiative, Atlas Network is “harnessing local visions for change to free people to carve paths out of poverty.” The secret is property rights, aligning incentives, finding key partners and building bottom-up coalitions. Warner is a dissenter in the world of development economics and a self-described “positive deviant.”

In addition to summarizing uplifting case studies ranging from prison reform in the state of Georgia to innovative land rights reform in Ukraine, each chapter ends with important questions for everyone in the liberty movement (not to mention entrepreneurs, parents, and community leaders) such as:

• How can I make the most of my scarce resources?
• How can I communicate effectively to politicians and people in power?
• How can I be a “positive deviant” and what unlikely innovations could I harness in pursuit of my unique mission?
• If I am determined to achieve even more than I am now, what peers can I choose that are most relevant for a motivating comparison — and from whom can I learn the most?

If you need a break from all of the doom and gloom of current events, do yourself a favor and read Matt’s book — or tune in live to the show of ideas (never-ever, not one single time, the show of attitude). The arc of history is long, but it bends toward freedom.

TRANSCRIPT

Bob Zadek: Hello everyone and welcome to the Bob Zadek Show, the longest running live libertarian talk radio show on all of radio. We are always the show of ideas and never the show of attitude. Thank you so much for listening.

This morning’s guest, Matt Warner, is the President of the Atlas Network. Matt has written a book that helps me connect so many dots regarding the cause and effect of poverty around the world. Poverty does not happen randomly and poverty does not reflect at all upon the poor people as we all know, but rather on the environment that creates it.

Much like people with coronavirus aren’t born with it, they are exposed to it, it is the same with poverty. Matt has edited an important new book Poverty and Freedom. This is not speculation. This is not theory. This is Case Studies in Global Economic Development. We will learn from Matt during this hour that there are universal causes and universal cures for poverty. Erasing poverty is simple. You have to wonder how it hasn’t been erased already. Matt, welcome to the show this morning.

https://www.amazon.com/Poverty-Freedom-Studies-Economic-Development/dp/0578557541

Matt Warner: Thank you very much Bob.

Bob Zadek: Now Matt, Atlas Network is an organization that I have supported over the years. I have had many of your colleagues on my show. Tell us a bit about the Atlas Network. It is quite an unusual and effective business model.

Matt Warner: It is hard enough to explain to one’s parents that you work for a think tank. Imagine trying to explain that you work for a nonprofit that serves think tanks. So this is the challenge I always face at the holiday dinner, trying to explain what Atlas Network is and what it does. The development of think tanks — that is nonprofit institutions that are independent from government — which are looking at policy solutions that are going to increase economic freedom and individual freedom towards human flourishing. In the 50s, our founder established a think tank in London that Margaret Thatcher later credited with being the intellectual foundation of her successful reforms. Fast forward to today, the number of think tanks around the world that fit that mold is around 500 in more than 90 countries.

Atlas Network looks at those locally-led think tanks that are independent of government and independent from us as the key answer to achieving the kind of economic and individual freedom reforms that we know lead to human flourishing. Our job is to support them, and our model is to provide grantmaking and financial support for their projects — to provide training on think tank excellence — and the best practices in policy reform ideas that are happening around the world.

Most importantly, we exist to provide them with a network. It is not the most common job to have to lead a think tank. We simply provide these fantastic, inspiring, enterprising think tank leaders with peers around the world that they can learn from. The case studies are an example of how we tried to circulate those kinds of great ideas that are being discovered around the world and then shared.

Bob Zadek: As you explain the business model of Atlas Network, I thought about global federalism. The quality of work that’s done is better to the extent that it is local to the problem. States are better at solving their problems than Washington. Cities are better than states. The more local one can get, the more success you’re likely to have. That was a founding principle of our country. Your model is simply that same premise, that the good work can be done by the local think tanks. The cures for that problem will vary from locale to locale.

Local Think Tanks versus Global Aid Foundations: The Outsider’s Dilemma

Bob Zadek: If one didn’t have 500 or so local think tanks with knowledge of their community, their states or their regions, what would be the alternative? How does foreign aid operate without think tanks? What is the governmental system that we live in right now? What are the shortcomings with it? Your local think tanks solving problems of economic freedom and poverty have the same goal as the global organizations which our government gives a lot of support to. So how does the operation of these global aid organizations work, and why are local think tanks better?

Matt Warner: It has become increasingly important to share this message that there is an alternative way to do foreign aid. The reason it’s become important is that most of the aid community has recognized the limitations of foreign aid as a model. Currently the United States spends about close to $50 billion a year in foreign aid. It is by far the largest donor in absolute dollars, but the UN has established a target that all countries give 0.7% of GDP. Few countries do that. Most Scandinavians crossed that threshold. But of course in absolute dollars it’s very little money compared to the U.S., less than 10%. So we do about 50 billion and foreign aid. Most of that goes through USAID, the United States Agency for International Development, and the State Department and the Defense Department.

What is foreign aid? A lot of it is military support, and not many people realize that. It also includes things like dealing with health issues in the local area. It’s also this idea of long-term development. How do we help solve poverty in the long term? Not just humanitarian aid for right now, which is also part of it. The reason why the foreign aid community has become very introspective about its efficacy is that you started to have some broad criticisms in the last 20 years about two things in particular. One is how do we even know how to measure the results of foreign aid and if it’s even working, and two, how often are we actually doing more harm than good?

There’s this challenge that we face that I call the outsider’s dilemma, which isn’t just a problem for foreign aid, it’s a problem for any of us who are trying to be charitable to others. The outsider’s dilemma is basically the question of how we know that our ideas are the answer for someone else? How do we solve an economic problem for someone else? The truth is that the nature of economic development and the nature of human dignity and individual freedom means that there are limitations to what we can do to solve other people’s problems. In the arena of foreign aid we have a laundry list of projects that have not only failed but have made things worse. Quick example. In Uganda we spent $300,000 to a local village of 7,000 farmers to switch from banana crops to corn crops. Researchers from Columbia University said, “you’ll get a much better yield with corn crops. We think that’s the answer. We’re smart. We’re educated, we’re wealthy. We should know.”

They brought all this money that was hard to say “no” to. The village got excited and switched their crops. They did increase their yield by quite a bit. The problem is that economies are not simple. What happened as a result was there was no one to sell the extra crops to and there was nowhere to store it and it started attracting a huge infestation of rats to their village. So not only did they have this new problem of rats, they didn’t have their old crop of bananas that they understood how to make the most of. That’s just one of many examples where good intentions aren’t enough to come in and solve problems.

The reason why the think tank model is so important is that we, we know from studying economic development, that institutions are really important. What do I mean by institutions? The rules of the game — the actual law that people face in their society and the norms and customs that influence the way people behave in an economy and in their communities can lead to the talent of entrepreneurs becoming very successful and providing value, or it can lead to these entrepreneurs gaming a political system to benefit themselves but no one else.

That’s the difference between the quality of the institutions.The reason think tanks are so important is because they are locally sensitive to how to improve those institutions, how to make property rights more secure, how to make a market exchange easier and fluid, and how to have predictable courts where you know that if you have a conflict you can get a fair judgment. Local think tanks can tackle, and we would hope that local governments can tackle them too, but when we give them money in the foreign aid model, that undermines the local democracy for reforming institutions because they no longer answer to their constituents, they answer to us.

Development and the Elimination of Poverty

Bob Zadek: I’d like to ask a question and offer an observation at the same time. The large organization that manages foreign aid as you said, is USAID. Speak about the word “development.” Your case studies deal with poverty. The concept of development is not per se about poverty. Curing poverty requires institutional restructuring. Development is building a dam, a project, or something. Once you focus on development you get off message and cannot cure poverty, since they are not exactly related. What does development mean and is it designed to cure poverty?

Matt Warner: Historically speaking, if you think back to the Marshall plan and reconstructing Europe, development did have a tangible, linear, direct investment approach. Fast forward to the sixties and seventies. We were focused as a development community on how we bridge the gap between the capital that’s available in free markets, that feels very secure in making investments and the capital that would be needed to invest in developing economies where private investors are not so confident. So that is where the world bank and IMF tried to bridge gaps where they said they would provide some financing to help build this infrastructure, create these environments, and construct these things like airports or dams. The problem is these things are crude and blunt solutions that aren’t context sensitive.

They don’t actually know what, at the margin, is the next step in development. The good news is that I think we have started to broaden our understanding. If we just think about the idea of a country developing and becoming a more robust, rich economy of free people, it is going to necessitate the phenomenon which happens in a free market, which is that no one person or no one organization decides how exactly that economy is going to develop. Who decides? All the individuals making daily decisions as a function of the trade-offs they face and what they value in an economy. There is something marvelously rational about the way that individual decisions aggregate together to create value in a society. As long as people are free and given human dignity to make those decisions for themselves, you can have progress.

It is not a zero sum game. The pie gets bigger. That’s the trick that we’re trying to support. However, it can’t happen as a result of one set of wealthy educated technocrats designing a system or a construction project that is going to solve poverty across the world. Poverty is solved by individuals themselves navigating their own paths and they are more likely to be successful if they are not facing unjust restrictions.

What Causes Poverty?

Bob Zadek: That is a perfect segue into a subtopic I’d like to cover for a few seconds. I found myself asking myself the question of what causes poverty? Does poverty happen because a country or region lacks natural resources? Is it because the weather is bad? Is it because of sheer size? Maybe there aren’t enough people there to make the region or the country wealthy? All of those questions I just asked are rhetorical. Obviously it’s not size. Look at Singapore, look at Hong Kong, look at Japan, which do not have a lot of natural resources, yet they are wealthy places where there is very little poverty.

When you ask yourself what causes poverty, it’s not natural resources or size. Compare Venezuela with the largest oil reserves in the world and Singapore, which has none. What is it? Well, Matt, as one learns from your book, it’s the economic environment. Does it foster economic activity and economic freedom? As I have observed on my show, the ultimate natural resource is economic freedom. That’s the secret. Tell us how the think tanks around the world, as part of your network, how do they focus on building economic freedom.

Matt Warner: One of the ways that our model works so well is because we at Atlas Network are not going around prescribing to think tanks what they ought to be doing. Instead, it’s a model that requests from them strong proposals that tell us what they believe, what their vision is for how to increase economic freedom in their country. They of course understand local politics, local culture, historical factors that influence things, and in particular, the things right now that are most egregious, that have the most disproportionate impact on the low income populations?

For example, in Burundi, there is a very modest think tank run by just an inspiring young man who lives in a country that is one of the poorest in the world and leans very authoritarian. It’s a very difficult place to be advocating different ideas.

But he has identified some very practical concrete ways that he believes not only increase economic freedom, but provide the government and other stakeholders with a win-win solution that helps the economy overall. The informal economy, the people who are doing business here in a very modest way, all the street vendors, all the very small businesses that don’t have business licenses, they make up a large portion of our economy and we want to grow the formal economy. The reason for that is that people who are in the formal economy who have a business license have the institutional protections and the legal protections that allow them to take risks and grow and become smart to reinvest in your business. One of the reasons why he identified as a think tank was that the formal economy wasn’t as big as it could be because for a lot of very low income entrepreneurs joining the formal economy, getting a business license was not only expensive because of government fees.

Anytime you have a bureaucrat who is in charge of whether you get a license, you’re vulnerable to having a lot of corruption and bribery. When you have these fees, it becomes too cumbersome and Byzantine to figure out how to secure your license. You have to go to all these different offices and it took months and months. Low income people can’t afford to spend their time trying to get a business license. They have to make enough money every day just to survive. Well, this think tank succeeded in convincing the government to simplify its processes, significantly lowering those fees. The year prior to achieving those reforms, there had been a 5% increase in business licenses. The year after that there had been a 49% increase in business licenses. You had all these talented people rushing to join the formal economy.

We got introduced to a man locally named Papa Coriander. He made products out of coriander drinks and other other products. And for years he had had this small business. He had two employees. He tells about being jailed many times, police taking all of his cash or taking all of his inventory. He had no legal recourse because he wasn’t a licensed business. Now that he is licensed, this will sound incredible. In a year he’s grown to 100 employees. His business has exploded. That is how poverty is solved. We give individual people the freedom and the institutions that support and facilitate their own ideas and investment in their own success. So we celebrate and we look for these kinds of opportunities to provide modest grants to these think tanks to help them achieve these kinds of projects. It’s not, as you said, natural resources or foreign governments investing in infrastructure. It’s economic freedom and institutions.

Bob Zadek: That story touches me in a very deep way because here we have Papa Coriander in an undeveloped third world country who didn’t have an MBA, he just needed government to get out of the way. It’s almost as if it’s part of human DNA to learn through trial and error through experience and through observation the best way in that environment to earn a living, and he observed the world that he lived in, detected a need, and determined he had to satisfy that need to make a profit. Give people what they want at the price they wanted to pay for it. He made a living and the only obstacle to a hundred employees was government was in the way.

What astonishes me is the parallel between that and the United States. I have done many shows on occupational licensing where individuals who want to be anything from a barber to a chimney sweep to an interior designer are prevented from doing so by the difficulty in getting a license.

So Americans, don’t get smug. It can happen to you and it is happening today. So the obstacles of wealth accumulation are universal. It highlights the important work that your think tanks around the world are doing.

Matt, I’m going to ask you a softball question. What is the likelihood that USAID would come around to solving the problem of business licensing in Burundi?

Matt Warner: Things aren’t as bleak as you might think. The current administration of USAID is working hard to help countries transition out of aid and in fact the World Bank in their “Doing Business” report has been very influential around the world to wake governments up to this very problem. It includes this business licensing question. So I’m actually pretty optimistic that even though some of these traditional models have some fatal flaws in them, the people who are trying to make the most of them and do good in the world do recognize some of these important principles.

Sustainable Development: Applying First World Values to a Third World Country

Bob Zadek: We have discussed briefly the alternative to local think tanks, which is large global aid and development organizations. You explain some of the problems with that model. It’s not all bad. They do lots of good work, but there are some inherent problems and one you pointed out in the book is the focus of these large organizations on something called “sustainable development.” This is an example of how first world countries apply first world goals and first world values in a third world country, and it has a very deleterious and negative effect. Explain how that doesn’t work and how other first world lofty principles cannot be imposed in the third world just yet.

Matt Warner: We talked a little bit about the fact that there are good people working in the USAID and the World Bank. I’ve gotten to know lots of these people very well. They are super smart. They feel a real calling to be out helping the world improve and get better. Their hearts are in the right place. The problem I see is that the model itself is extremely problematic. And the reason is as you say, it’s very difficult for us to get out of our own way when we are the donor as a country going through a political decision-making process to achieve economic development somewhere else. You can’t help but include your own values, your own opinions, your own priorities. And in fact, many taxpayers would say, that’s absolutely correct, if you’re spending my taxpayer money abroad, I want to make sure that I agree with the priorities.

That is fair enough. But those priorities may be at odds with what is actually needed at the margin — the next development opportunity or milestone transition experience that that economy needs to go through to achieve a sustained development or enduring development. What often happens is that sometimes it gets distilled down to what we think is a good idea but may not be.

Let me give you an example. I’ve been working hard to build relationships with a whole range of diverse allies. It’s not just libertarians who are concerned about some of these issues of undermining democracy abroad or being too paternalistic. There’s a movement called #ShiftthePower. It’s a global community fund. The whole idea behind it is that basically we should move who is leading development away from wealthy governments and wealthy NGOs in wealthy countries to helping to build up the local independent institutions and NGOs and think tanks in developing countries.

And I support that. I think that’s smart. That actually matches our model, however the problem is that because their movement represents their priorities, they have the premise correct but they’re numbered. Their top two priorities for helping people in developing countries is to solve climate change to improve the inequality problem as they see it. Now, I don’t know about you, but I can only imagine that the kind of projects that are going to be green-lighted. Projects to spend millions of dollars in developing countries, focused on inequality and climate change, are unlikely to be the kind of industrial, technological, or free market opportunities which are actually going to help that economy and that community achieve a standard of living that will endure in the future, so that they pull themselves and their children out of poverty.

Bob Zadek: Can you give some examples of where those values had the opposite effect or perverse effect on local economies?

Matt Warner: Just yesterday, in Foreign Policy magazine, in an article titled “Mozambique is a failed state. The West isn’t Helping.” We have been investing in the country of Mozambique to try to solve poverty for a long time and we think that what we’ve got set up via the current government is our best chance to solve that problem. But in the end, all we’ve done is prop up a corrupt government and keep them in power. The economic development hasn’t come. This is actually such a non-unique story. There was a great book by a guy named Dan Honig, Navigation by Judgement. He created the first comprehensive database to evaluate economic development projects around the world.

Even on self-assessment, economic development practitioners only gave 14% of their more than 13,000 projects top marks in achieving their success. Our intentions do not equal outcomes. This is happening unfortunately all over the world. There’s a book if listeners are interested in Linda Pullman called The Crisis Caravan, that details in just a very disheartening way all of the times that we’ve tried to attack a human crisis and actually made things worse, even though we didn’t mean to. Isn’t that a great disappointment? It should cause some real self reflection on our savior complex.

We think we are the smart ones who are going to solve their problems. Inherent in that is an arrogance and hubris and denial of the human dignity of those individuals who are perfectly capable of solving their own poverty, so long as their governments start to right size and build the kind of institutions that have made us prosperous.

Tied Aid: An Analysis

Bob Zadek: I learned a phrase in your book which I had never heard before and it’s an important phrase that really encapsulates everything you’ve just said, that is, the concept of “tied aid,” which exists both in the United States when Washington gives block grants or gives money to states and cities, but it has a lot of strings attached. Help us understand the important international foreign aid and the concept of tied aid and how that concept plays into your thesis.

Matt Warner: When there’s politics involved, there’s politics involved. The important thing for us to do is realize that foreign aid, because it is done through a political apparatus, is always going to be vulnerable to the politics of the day. In fact, this isn’t unique to the U.S. I had a chance to meet with a researcher in Oslo, Norway a few years ago who had just won a large grant from the Gates Foundation to study Norway’s foreign aid. And he explained to me that when Norway started to become a wealthy country in the sixties and seventies from their oil production, they needed a way to get their name out on the global stage so that they could join the global market for oil. They realized the best way to do that was to increase their foreign aid apparatus.

They would start a foreign aid program in your country. They would say, “Hey, we’re also interested in selling oil here.” These things always go together and they are hard to parse and they aren’t always necessarily evil and malicious. It’s just a part of the portfolio of any foreign ministry or state department to say that we want to make sure that our businesses can do business over there. But too often, this has the very effect of notifying or at least making very difficult the actual humanitarian and antipoverty efforts that we hope to see. So part of my message is to say, love or hate foreign aid, stop pretending it’s going to solve poverty. It’s not even designed to do that.

This is the challenge we face as Americans who want to help the world and in our own country. You mentioned occupational licensing. We’re investing in that too. We totally agree that there are lots of priorities here. We actually have more than a hundred think tank partners in the U.S. that we support. It is important that we focus on what is going to work and let the old model atrophy that hasn’t proven to be the right way to solve these issues going forward.

The Success of Local Think Tanks

Bob Zadek: One example which often finds its way into the news is how often Washington, in doling out foreign aid around the world, ends up — because of the conservative social right wing part of our government, which has all these abortion restrictions — depending upon which a party is in power. As a result, foreign aid which is primarily economic aid to eliminate or reduce poverty, often has all of these social concept riders. For example, like abortion, or like as you said, equality, children’s rights, and the like, which simply don’t export very well to a third world country. We have seen how once the political process gets involved in the decision-making of where the grant money goes, the goals get all distorted. Help us understand how these independent local think tanks operate and tell us some of your favorite anecdotes and recent events of the success of the local think tank model as compared to the model we’ve been discussing up to now.

Matt Warner: One that comes to mind is not only a great story, but it also should give us pause when it comes to thinking that we can design these things from afar. There’s a think tank in Johannesburg, South Africa that in the 90s was on the forefront of pushing to end apartheid and to create justice in the aftermath of apartheid. They pushed for legislation that would allow all of these apartheid victims who were living in free government housing the opportunity to win title to where they were living. In many cases, their land had been taken from their parents or their grandparents. So this was about making restitution and giving them a chance to move beyond a free government housing lifestyle, which has never been the key to achieving prosperity.

So they passed that legislation in the 90s and as part of their ongoing agenda, they started to realize that even though they got the law right, they hadn’t seen a big change in land titling and in home titling. So they studied the issue. Why weren’t more people who were eligible to go and receive title to their homes doing it? Well, they did more research on the issue and they did a pilot project in a local town. Fast forward to just a couple of years ago, they learned that there wasn’t trust in the system. Those people who they thought should be jumping at the chance to get title to their property said, “We heard about that, but we thought it was too good to be true and we don’t trust those big city lawyers anyway, and we’re not going to get involved.”

They created a model that set up in each community local attorneys and then they matched it with donors so that they could get some bulk rates on the administrative fees to achieve title. They called this project Kaia Lamb and they have since helped to achieve land title for thousands of post-apartheid victims. They estimate that there are just millions and millions of dollars available to those who are sitting on what is called dead capital. That is, without the right institutions, without a land title, you can’t sell your property, you can’t use it as collateral to get a loan for education. You can’t start a business. That’s what we’re starting to see as a result. And that was an iterative process. There wasn’t one plan that someone came up with from afar. This think tank that was locally born and bred, and it had to live the experience and fight and stay diligent to come up with those kinds of solutions.

Bob Zadek: There’s so many valuable lessons from that one anecdote that you have shared with us, but one that comes to mind is that when you have 500 local think tanks, when they make a mistake it is usually a small mistake. When USAID makes a mistake, it is a huge mistake which costs taxpayers big chunks of money. Other think tanks learn from one another (and their mistakes) and develop the best practices around the world. One think tank will learn from the other.

Networking Around the World

Bob Zadek: One can just imagine how once the few homeowners got title, they now have acquired by magic a capital asset that they then borrow against, create a business, improve their life or give some of the money away. And all of a sudden there’s this profound multiplier effect. So wealth is created like magic just in the very modest system you have described. It almost gives one goosebumps.

You also provide meetings around the world. Tell us what the networking process is all about. Tell us what it’s like if any of our listeners were to be sitting in the back row of one of those meetings you have, and how they exist constantly around the world. What are those meetings like?

Matt Warner: First let me invite all of your listeners to come sit in the front row at any of our meetings there. We hold them around the world. We invest in physical opportunities to spend time together. The reason why freedom leads to prosperity is because it allows for so much constant learning and correction. We’re constantly experimenting, learning something, doing something different. If you try to apply very crude rules that one size fits all, that doesn’t work. So in our broad network of think tanks around the world, we love to get people together to learn from each other. There isn’t someone in charge who’s deciding what everyone should be doing. We don’t believe in that.

We do a few things that based on human behavior and psychology research, we do things to accelerate and facilitate the successful achievement of these think tanks. And that is, we provide awards. We put a fine point on who’s succeeding and achieving something. We do those case studies so that people can learn, not necessarily copy, but learn from each other. We do a lot of competitions. Our grant making is very competitive. We’re very collegial with our think tanks.

Anyone who wants to do this work, we cheer for them. But we are very judicious about where the donor money goes. We want to see a good outcome. So part of the reason that our third pillar is training is that we get to know all of these think tank leaders through all of our training programs which are very peer-driven. They aren’t very prescriptive in what it means to be a think tank leader. But they give people an opportunity to tackle big questions and learn from each other.