Development & Aid, Economy & Trade, Global, Global Geopolitics, Global Governance, Globalisation, Headlines, North America, Poverty & SDGs

DEVELOPMENT: Critics Pan U.N. Private-Sector Poverty Plan

Paul Weinberg

TORONTO, Apr 9 2004 (IPS) - A United Nations report that argues boosting support for the private sector in developing countries is the fastest route to eliminating poverty is meeting a sceptical response among civil society.

“The report is not new,” says Roy Culpeper, president of the North South Institute, an Ottawa-based independent non-governmental research organisation.

“We have been hearing about the importance of an enabling environment to business for 20 years,” he added, referring to structural adjustment policies advocated by the World Bank and the International Monetary Fund (IMF).

But Allen Hammond, vice president for innovation at the Washington-based World Resources Institute (WRI), says the report, ‘Unleashing Entrepreneurship: Making Business Work for the Poor’, “puts the UN on record, I think for the first time, saying we cannot achieve the Millennium Development Goals (MDGs), we can’t really solve poverty, without a much bigger role of the private sector”.

The world’s nations agreed to the MDGs in 2000. They include cutting world poverty in half by 2015.

Hammond and his colleague C.K. Prahalad, a professor of business administration at the U.S. University of Michigan provided background research for the U.N. report, published by the U.N. Commission on the Private Sector and Development.

The study was authored by Canadian Prime Minister Paul Martin and former Mexican President Ernesto Zedillo, two men with close ties to the private sector, as well as strong attachments to international development issues.

Martin and Zedillo recommend that legal, financial and structural barriers to the success of small businesses in the poorest regions of the world must be lifted. Multi-national companies, in particular, stand to benefit from nurturing and building links with local entrepreneurs and smaller companies, they argue.

U.N. Secretary-General Kofi Annan said at the report’s launch in March that a plan of action and set of initiatives stemming from the report will assist “in our work to reach the Millennium Development Goals”.

Culpeper has no quarrel with Martin and Zedillo’s strategy to encourage the growth of local enterprises because, he says, they can generate jobs. Nonetheless, he adds, the report offers solutions for urban poverty while neglecting the greater number of poor people who live in the countryside.

“The deepest symptoms and manifestations of poverty are among the landless poor of the countryside. Where is the solution for them? You don’t see a lot of that in this report,” says Culpeper in an interview.

Missing from the Martin-Zedillo report are solutions to rural poverty, such as land reform and increasing agricultural productivity, which should be linked to long-term assistance, he adds.

The North American-European model of the isolated individual who sets up a business will not work in the impoverished South because of the challenges involved in marketing products and obtaining stable financing, argues another observer.

“Is that a realistic model for success? Martin and Zedillo, “don’t ask that question because (their recommendations are) the only way they can think about (development),” says Daryl Reed, an assistant professor and coordinator of the business and society programme at York University in Toronto.

He argues that the authors neglect the much-documented success of community and co-operative enterprises, which, with considerable technical, financial and technical support, can generate more employment than corporations focused on short-term profits.

“There seems to be an assumption (in the report) that if you liberalise (trade and private investment) you are going to get development, and nowhere is that case really made,” Reed told IPS.

The reality, he adds, is that private sector investment, both in the industrial North and in the South, had led to more growth than employment.

Mark Malloch Brown, the administrator of the U.N. Development Programme (UNDP), is among the confirmed speakers at a Dec. 12-14 San Francisco conference, ‘Eradicating Poverty Through Profit: Making Business Work for the Poor’, which Hammond is organising.

He hopes the meeting will encourage more northern corporations to explore the innovative strategies of southern enterprises, which he says have successfully targeted the neglected consumer needs of poor communities, where household incomes are as low as six thousand dollars.

“The vast majority of multinational companies from the North mistakenly concentrate on the tiny middle-class population in the South who most resemble their counterparts in North America and Europe,” adds Hammond.

“In many cases, there aren’t organised companies as we would think of them (in the South) actually meeting these needs. They are very small … they are local merchants, they are agents; they are not companies in the way that we would normally think,” adds Hammond. “There is a need to build local companies.”

Another observer, James Paul, executive director of the New York City-based Global Forum, suggests a trend of U.N. agencies, like UNDP, moving toward a private-investment oriented development model.

But that model cannot explain China, which has a robust trading relationship with the rest of the world, but still maintains a highly regulated economy and controlled currency that kept it immune from the 1997 Asian financial crisis that gripped countries like Indonesia and South Korea, he says.

The latter countries, he continues in an interview, followed the dictates for deregulated and liberalised markets pushed by the World Bank and the IMF.

“The country that has by far the most successful development record, which is China, doesn’t follow these policies at all. It is rather embarrassing for the bank and the fund, for the neo-liberal economists, and of course now for these U.N. reports and agencies that promote these kind of ideas,” adds Paul.