Goodbye market systems, we hardly knew you at all

The International Labour Organization (ILO) began experimenting with market systems development (MSD) before it had even been codified as an approach.

In Sri Lanka in the late 2000s, the Enter-Growth project learnt key lessons about the importance of taking a facilitation role, acting as a catalyst for change and addressing underlying constraints. These tenets eventually became known as ‘making markets work for the poor’ (M4P), and later as MSD.

Since then, the ILO has implemented a raft of projects from Afghanistan to Zambia, Mozambique to Rwanda. They were supported by a central innovation and knowledge hub, the ILO Lab, which worked on adapting a market systems approach to create more and better jobs.

As the ILO portfolio of MSD projects enters a new phase – and with a new, Sida-funded Systems Change Initiative coming online – we took a step back to embrace the MSD spirit of ‘learning by doing’ to identify what did not work well, and what the ILO will do differently in future.

First, our application of MSD became too focused on the ‘how’ of implementation, and not enough on ‘what’ the approach is trying to achieve. MSD’s facilitation principles and the Operational Guide offer rules of thumb on how to go about programme design and delivery. But these have left many non-MSD practitioners with greater clarity on what the approach does not do (we don’t do direct delivery!), rather than what it actually does – in part because MSD guidance tries not to be prescriptive. In case studies and conferences, the consequence has been a focus on understanding the way in which projects were implemented (the ‘crowding in’, ‘copying’, adaptation and measurement). In short, we became too preoccupied with the ‘means’ of MSD and lost sight of the ‘ends’ of systems change. As a result - as we have written about in another blog - many projects pursued a ‘technocratic’ approach that followed all the rules of MSD, but often did not lead to ‘transforming’ the way that systems work (or don’t work) for people in poverty^₁.

The good news is that systems change has now become the North Star for many – from local and national governments, to NGOs and the private sector – especially as the world considers how best to ‘build back better’ from the COVID-19 pandemic. Systemic change also has a solid definition - “shifting the conditions that hold the problem in place” - and a clear analytical framework to measure progress. 

Second, MSD suffers from an issue of branding, especially regarding the term ‘market’. When the approach was first documented, MSD put forward a pragmatic vision of a pluralistic economy, one in which the state, private sector and civil society all had possible roles to play, depending on the context. But in practice, MSD programmes have tended to partner with the private sector, and the ‘rules of the game’ – the tricky, long-term work in political systems and policy – has been largely left behind (with a few notable exceptions). Yet, as the MSD approach moved out of its origins in agriculture and financial services into sectors like health and education – the framing of market system development has become problematic. MSD is now, for many, not just a way of understanding how multi-stakeholder systems work, but has become a synonym for market-based solutions.  And as noted in a recent internal webinar reflecting on how the ILO was inspired by a systems approach to design a new country programme for Moldova, the word ‘market’ simply isn’t helpful for many areas of the ILO’s mandate in promoting social justice, social dialogue and international labour standards. Safety at work, for example, is about rules, cultural norms and public labour inspectors – not a ‘supply and demand’ transaction. 

Labour markets, of course, remain central to the world of work and the majority of people rely on markets for their livelihoods and to support their families. This implies that markets and their functioning will always remain central to the economic and system transformation that is needed to address the most pressing social issues. 

But removing the shackles of the word ‘market’ might allow MSD to move forward and break new ground, making it easier to fit within both the rights-based approach, as well the myriad other approaches that seek to embrace the complexity and long-term nature of social change processes^₂. It would importantly allow for a more pluralistic understanding of systems, a set of intervention ‘solutions’ that doesn’t always default to the private sector and open up MSD to a much wider set of partners, from people working on labour rights to development finance, and the green economy to governance.

Third, the MSD baby should not be thrown out with the bathwater. The MSD toolbox remains rich and relevant. We should retain its core principles – recently articulated in the ILO’s 3rd edition of the Value Chain Development guide on how to ‘think and work in systems’. This includes a focus on sustainability through local ownership and catalysing change; and scale by improving how a system functions around target groups. Tools that allow programmes to unpack the ‘incentives’ and ‘capacity’ of actors are just as important, whether looking at the role of duty-bearers towards rights-holders, as much as they are to an economic exchange.

In the grand sweep of the history of development cooperation, MSD has been around for a relatively short period of time: barely long enough for programmes to have had the 10 years commonly thought to be sufficient to bring about ‘systemic change’. But MSD has generated an outsized level of learning and debate about the best way that development cooperation can achieve lasting, large-scale change to meet SDGs related to poverty, hunger, education and economic advancement.

The ILO has both benefitted from – and contributed to – this knowledge, but the time is right to evolve. We look forward to working with diverse partners on a range of initiatives which may be labelled ‘market-shaping’, ‘system transforming’ or ‘MSD’. So long as they aim to address the underlying reasons for the existence of a decent work deficit.   
 

_{¹See Systemic Change: Walking the Talk?. To paraphrase that 2019 piece, it is clear that the uptake of a new product or service alone – the ‘goal’ that many projects pursue -  cannot be a systemic change unless it alters the fundamental system structure – such as power dynamics and resource flows, which far fewer projects focus on.
²Such as Doing Development Differently and Problem-Driven Iterative Adaptation}