Business, poverty and signs of confusion

Some skepticism of policy trends promoting the private sector's role in meeting development goals is healthy.

But there is a 'but' here.

The 'but' is that skeptics risk confusing means with ends, in ways that sound stridently pro-poor but which might occlude opportunities to harness (or unleash) private enterprise, in ways that might hold far more development and empowerment potential than the aid schemes of conventional development practitioners ... 

Take the latest Gaurdian Development Digest network's email this week.

There is a post (here) that laments the shift in development aid policy towards helping promote trade, investment and the liberalisation of markets. Whatever its merits, this makes the bizarre suggestion that "globalisation has made a tiny proportion of people better off." OK, the environment has suffered and China's sprawling migrant mega-cities may be awful -- but the author is determined to ignore the evidence that China's development has lifted hundreds of millions of people out of poverty. 'Liberalisation of markets' was integral to that process.

The confusion and contradiction among these skeptics is illustrated in the same Guardian issue, which carries a post on the challenges to attracting private investment in Africa's energy sector. Without this investment, Africa cannot create jobs, electrify hospitals, light classrooms, etc.

Attracting investment of this sort has huge pro-poor developmental implications.

Aid that helps countries erect regulatory frameworks to enable this, for example, surely cannot be dismissed as 'neoliberal' as if that easy, glib label explains everything we need to know. That is lazy, self-satisfying criticism.

It follows that (for instance) shifting UK aid policy to help improve the investment climate in poorer countries is not simply a self-serving process of diverting aid towards corporate interests.

The contradiction on that one page of the Gaurdian hub suggests that some observers want development, but only by certain means. These means, for them, must not involve any possible benefit to the private sector, local or foreign. Poor people good, companies bad.

This is so short-sighted, condescending and statist that it is hard to know where to begin attacking it.

Development targets are so hard to obtain and the ends of these development goals matter. If the means to achieving them involve opening up markets in ways that foster productivity and growth and opportunity and financing, it should at least be considered. Many development types seem instinctively, almost ideologically, to reject it.

Now, development is of course a process, not just a set of outcomes.

That is, the manner of the process matters. How things are done (participation, inclusion, etc) are as important as the achievements. Otherwise, if only outcomes and targets mattered, we would all be praising Rwanda's development achievements. The reason many right-thinking people do not is because they recognise that these goals are achieved in a political context where people are not free to mobilise to express their disagreement with government policies designed to benefit them ...  

Nevertheless, the ends matter too, at least to those directly affected by stubborn poverty traps.

It follows that if altering the thrust of development practices towards facilitating the prospects for business growth, investment and job-creation holds promise for bringing whole populations out of poverty, the fact that this might create investment opportunities for private business owners is not, on its own, a reason to oppose them.

This must be so unless growth is a zero-sum gain, whereby any gain must necessarily be at someone else's expense. I'm no development economist, but intuitively that seems wrong.

Development policy cannot be reduced to market-creation, and aid spending cannot simply be about opening doors for one's home corporations to find new markets -- but the desire to avoid benefiting private sector firms cannot itself justify opposition to schemes to increase and liberalise trade and investment that might have direct and indirect pro-poor benefits.

In contemporary Africa, policies calculated to improve the business environment are not simply the manifestation of global capitalism vanquishing the interests of the poor. Nor is the UK's shift in aid policy (and others like it) simply designed to promote British industry at the expense of local people in developing countries.

The fact that these new pro-growth aid policies and related economic opportunities will be distorted by powerful, self-interested elites is a manageable risk. Otherwise we accept that 'aid' only comprises hand-outs of the old-fashioned kind, which are also manipulated politically and yet hold no promise of economic self-empowerment.

There are much wider structural issues of trade and investment that affect the prospects of emerging out of poverty: aid to help build local business and attract investment should be balanced with aid to help build the capacity of countries to engage in trade and investment negotiations on better terms.

Jo

See here for previous posts expressing caution with the tilt towards business's role in development.