Truthfully though, I think with a kiva-like project it is even harder to make that kind of answer but still, I think it is probably quite minimal. The nice thing is that with kiva I can choose where I want to loan my money but this is still through a list of pre-approved kiva projects.

In my opinion at the time (which the passing of years has vindicated), the project would have been a foolish use of scarce resources for the country involved. Bank technocrats could not present a coherent case explaining why the private sector was failing in the project, and the government quite rightly rejected the program. Sure enough, in the intervening period, telecoms infrastructure has arrived without government subsidy in the region in question, perhaps a bit more slowly than it would have otherwise but without another load of debt hanging over the country’s children.

Observing the above, and not believing that I possessed any special prescience, I started to wonder what drove the Bank’s project marketing efforts (all, of course, assuming that you think economic development and infrastructure creation are good things, which I know many people do not). The only answer I could come up with that really fit with the facts as I knew them was that the Bank’s incentives are driven by the interests of donor nations. These rich countries are where high technology infrastructure devices are created, and Bank recipient countries represent a possible source of demand for this market. So the process that resulted was effectively that the firms manufacturing telecoms devices lobbied their governments to provide funds – and preferably general Bank funds, not just funds donated by that government – to promote projects that would ultimately buy the firm’s products, whether or not the projects were really beneficial to the recipient country. Win-win, except that the recipient country’s kids end up paying.

How bad is this really? Hard to say. On the one hand, countries do end up with better infrastructure, and I am one of those who think that this is probably a good thing on balance if it can be put to use. On the other, if a country is so mismanaged that its private sector cannot be relied upon to produce the necessary infrastructure, it is unclear to me that using outside financing will end up really helping over the long haul, and the debt level implied by World Bank and similar programs may actually end up raising the local cost of capital beyond a competitive level even if the government does get its act together. I also wonder whether the benefits today of such infrastructure investments outweigh the future costs of the debt incurred; I really do not know the answers. But I would be a lot more comfortable with programs that actually functioned from the bottom up, with local investors seeking to generate the infrastructure based on a locally sound business plan that met local needs; rather than programs that seem more oriented toward providing donor countries either with more markets for technology products or more sources of primary resources. This clearly makes ethical sense, and I think it makes economic sense as well. Thus, I am in synch with the Kiva objectives, but I remain concerned about implementation since I am not sure whose interests are being pushed in Kiva-approved loans.

I have one question to what you said and that is your reference to the World Bank. My understanding of WB transactions was that it functioned as a bank in that it issues loans to governments (with heavy restrictions, no doubt) in order to employ local labor in the improvement of local infrastructure. I’m obviously oversimplifying but am I missing a key ingredient or is your point that the restrictions are generally more political than economic?