For all the laments we heard this year about inequality and calls to Occupy this or that, very little was actually done to close a wealth gap that, in some countries, has reached Gilded Age proportions. In the United States, the economy sputtered along and the presidential horse race soaked up most of the oxygen, while Europe spent most of 2012 peering into the abyss. In short, it was a year sorely in need of big ideas.
A look behind the headlines, however, finds an abundance of seemingly small ideas that are quietly changing the world in big ways. One comes from Nadim Matta (No. 25 on this year's Global Thinkers list), whose Rapid Results Institute works around the world to get things done by helping people set wildly overambitious 100-day goals and then meet them. Other innovations also flowered where most people aren't looking, and they are changing the lives of people who often go unnoticed: the world's poor.
PAY FOR PERFORMANCE
In foreign aid: Ethiopia wants more of its children to stay in school. The Department for International Development (DFID) wants to help. Normally, the British aid agency would give Ethiopia money for building schools, hiring teachers, or taking other specific steps. Ethiopia would have to provide regular reports about how the money was used. Would the program work? No one would ever know.
This year something different is happening: DFID has decided to pay only when something good comes out. Ethiopia can do anything it wants to increase school attendance, but it will only get DFID's money when there are measurable results. For every extra student who takes the 10th-grade exam, Ethiopia will get a payment. For every extra student who passes the exam, another payment.
The idea, in the early days of a pilot, comes out of the Washington-based Center for Global Development, which calls it "cash on delivery." Cash on delivery could make foreign aid work better, allowing countries to do what they think works, rather than following rules made by a faraway donor. It also could raise political support for foreign aid in wealthy countries. Under cash on delivery, foreign aid is never wasted; if a program doesn't work, taxpayers don't pay.
With social impact bonds: Many social ills can be prevented, and prevented cheaply. Getting the chronically homeless into supportive housing, for example, both improves their lives and saves money. Other programs are proven to prevent crime or avoid hospitalizations. They, too, are bargains. But governments don't invest in prevention -- they're too short of cash. It's a vicious circle, and an increasingly expensive one.
This year New York became the second city, after Peterborough, England, to experiment with a new financial instrument that has attracted attention around the globe: the social impact bond. New York wants to run a program to keep young men jailed at Rikers Island from ever coming back. Investment firm Goldman Sachs is providing nearly $10 million to finance the program. The government will repay Goldman if the program works -- if it cuts recidivism. And Goldman can make a profit of $2.1 million if it really, really works. If it fails, the government pays nothing.
Although untested, the model is so attractive that governments all over the world are already scrambling to set up social impact bonds, and development groups are trying to design them to deliver services in poor countries, such as preventing malaria, increasing contraception coverage, or finishing the job of eradicating polio.
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