Tuesday, 22 April 2014

'Partnering' business for development

In the new fashion for cross-sector cooperation, are we tending to distort the term 'partnership', applying it to things that are either just dialogue, or normal cooperation with regulatory requirements?

And alongside all the promise that lies in the convergence of public and private sector focus on shared development constraints, are there not some concerns?

Convergence and blurring are related ideas, but one has a positive sense and the other a pejorative one.

So policymakers have 'discovered' the private sector as an 'actor' with impacts and interests relevant to development. Duh. But we now risk too rapid a transition in which proper parameters and principles have not yet been worked through.

Scaling-up the private sector's developmental impact was a key theme of last week's inaugural high-level meeting on global partnerships for effective cooperation for development ('GPEDC'), held in Mexico.

This blog is very 'pro' looking for ways to unleash-yet-harness the energies (etc.) of business in support of sustainable development aspirations and imperatives. Yet one overwhelming theme at and message from the GPEDC agenda / outcomes was not really about partnering for development (in the sense of systematically looking for areas and issues where business strategy / self-interest and government policy / duty overlap).

Instead, a major focus was about shifting from external financing of development (donors) to 'domestic resource mobilisation'. That is, taxation of business activity and constraining licit and illicit capital outflows, retaining more value within regions such as sub-Saharan Africa. (See para [4], [20-[24] of the outcomes document). This is a very sound idea (see a previous post on taxing for development in Africa). Especially for heavily indebted donors, and some developing country governments which might become more democratic if they become more reliant on and responsive to local taxpayers.

But a focus on taxation is not 'partnering' with business for development, nor is it public-private development cooperation.

It is a basic function of the state to tax and spend, and a basic obligation of a firm to pay, and to complain or leave if it does not wish to. When regulatees share the regulators' vision and cooperate, this improves compliance and eases regulatory burdens. But tax compliance is not cooperation, it is an obligation. Cooperation comes where business and government enter dialogue about what the taxation envelope might consist of. Even then, this is not a relationship of equals, for a number of reasons on both sides.

It is a basic ideal of development policy to eventually wean a country off external funds to enable it to finance its own development. To do so, one wants to think less about particular partnerships with business here and there (helpful as these can be), and more about creating an environment where business can flourish, so that appropriate social shares can be taken and distributed, building a better and more sustainable, inclusive society in which (in turn) business can flourish more. Virtuous cycles, and so on.

Sure, there is scope for greater cooperation, expertise-sharing, dialogue, etc between the public and private sectors. But these are not necessarily 'partnerships'.

Cooperating to find ways to help developing countries to tax more fairly, consistently and to spend the proceeds on developmental purposes is something to be explored. In previous posts I've repeatedly noted the initially counter-intuitive idea that a major investor might help its host government improve its tax and regulatory capacity. This way business can know what its fiscal exposure is, but also know that its taxes will in fact lead to better infrastructure, a healthier and better educated population (workforce / customers), and so on. Cooperation like that is to be welcomed, and specific partnerships may help deliver it.

But 'partnering for development' should not now mean everything that vaguely relates to business. Some of those things are just 'development'. Hence the 'duh' above: why is it such a revelation to donors that business can make general and specific contributions to development goals, and may in fact be interested in more peaceful, prosperous societies?

The social responsibility of any one corporation is not open-ended. One needs only pause for a minute to know why this is a good thing: business is not accountable in ways that policymakers (in theory) are. Hence the previous post, making the point that business and government may 'partner' but are not true 'partners': governments must lead, serve, respond, take responsibility.

Excitement about 'partnering' should not obscure the state's duties, and the state's capacity shortfalls without which it cannot partner effectively.

Blurring these lines is not in the interests of business, or in the public interest.

Where government functions as it should in Africa (or anywhere), there would perhaps be nothing shocking and anti-progressive about reiterating (with caveats) Milton Friedman's adage that the social responsibility of business is to grow, employ, obey laws, pay tax ... the social responsibility of governments is to finance development by planning, supporting, taxing, spending. There is convergence, there are shared interests and vulnerabilities, but there are separate spheres, and there is value in that. Friedman had some objectionable ideas, but it is too often overlooked that he cherished freedom. Do we want the public and private spheres to blur?

This blog says that the private sector inhabits a public world, and with it various responsibilities. But that does not mean business can or should do it all, or that government can absolve itself of its duties by producing a soup of partners.

In academia, 'multi-disciplinary' scholarship is useful for cross-cutting problems, but by definition relies on people who first have a strong grounding in their individual discipline, and only secondarily have an openness to other forms of knowledge. So it is with development: each sector needs to succeed in its own sphere, while looking out for judicious combinations and efficiencies. Societies need to resolve where those spheres lie, what is private and what is public.

These are big questions of ideology and social-political preference. The current 'business and development' debate can obscure that this is so. Does business want more social responsibility? Do we want business to have more social influence?

These things need discussion, not what I call the NDL: the New Disapproving Look. One gets it these days if one suggests that not everything that matters can be solved by some or other public-private dialogue and, of course, a partnership. 'Only connect!' and all will be well? I do not think so.

On a practical level, firms and departments may not be very good at partnering, or sure about it. The NDL and the new high-level rhetoric on engaging companies and investors in development can obscure the extent of ambivalence that still exists, within both bureaucracies and corporate structures, about expanding explicit links.

As with all high-level meetings: they matter, they steer, but they are generally aspirational, not declarative. Greater cooperation is a goal and a process, but it is hardly happening all around us. Policymakers need to show both the public and potential business 'partners' why partnering is more efficient and effective. Intuitively it seems so, and these linkages hold enormous promise for dealing with development bottlenecks and business frustrations. But more proof is needed, that partnering works. 

And in Africa and beyond we must keep an eye out that 'partnering' is not a cover under which the state (realising how few expectations it can deliver on) tries to abdicate its role or responsibility, or a cover under which business (fearing the effects of unmet expectations) tries to partner so as to say 'we tried to partner'.


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