Mon 5 Sep 2011
Welcome to a new feature of Open the Echo Chamber, a quick post on something that interests me. Yes, I am capable of writing less than 1000 words in a post, but most of the time I take on subjects that need a lot of attention. Going forward, I am going to try to intersperse some “quick thoughts” on the blog for those who lack the 15 minutes and headspace to deal with my longer fare . . .
I’ve been doing a lot of reading about hedge funds lately, and it recently hit me: does anyone in the markets bet for or against development initiatives? It seems to me that you could – after all, a big initiative from either a multilateral or large bilateral donor will often come with quite a bit of money attached (at least initially), a lot of publicity, and some clearly stated goals that are almost always tied to economic growth or diversification. So, do investors look at these initiatives and bet for or against them? I’m not saying they bet directly on an initiative, but on its outcome: for example, do funds look at large food security initiatives in a particular country and bet on the prices of the crops involved in that initiative?
Here is why I care: if nobody is betting on them, it pretty much signals that these initiatives are largely irrelevant. Either they are not large enough to move any market in the short or long term, or they are not aimed at anything likely to induce a transformation of economy and society through some set of cascading impacts in the long term. If this is the case, it seems to me we ought to back out of those initiatives right away. This is not to say that we should not be addressing the needs of the most vulnerable people in the world, but to suggest that an absence of interest in these initiatives might mean that our efforts to address these needs are not likely to come to much.
On the other hand, if we see significant betting on the outcomes of initiatives, it seems to me we might start to look at the direction of this betting (short or long) to get a sense of how things are likely to play out, and start looking for problems/leveraging opportunities as soon as possible.
Just a quick thought . . .