|
|
 |
|
| Thought Leaders: Business |
Concerted Efforts
George C. Lodge and Craig Wilson
12/01/2006
|
Peter Woicke, former executive
vice president of the World Bank Group’s International Finance Corporation,
recently said that to help the globe’s 1.2 billion people who live in poverty,
"The challenge goes well beyond the capacity of the public sector the
private sector has to take some responsibility." World leaders ranging from
Kofi Annan to George W. Bush concur, and have called for multinational
corporations to use business know-how and market forces to solve global social
problems.
Some multinationals have responded. For example, BP has established an enterprise center in Baku, Azerbaijan. Part of the business
justification is to shore up its "social license to operate" and part is to
create a better pool of local businesses with which BP can partner. Nestlé now
trains thousands of poor farmers in developing countries where it sources
agricultural products. Intel has set up Internet kiosks to help people in remote
areas access information and learn about opportunities.
While these efforts are a strong start, they are not enough. To
truly leverage the power of the private sector to achieve social goals on a
global scale, there must be a framework that provides businesses with an
adequate mandate for this new mission. Despite the responsibility fatigue that
many executives feel as a result of the extra-legal requirements that have been
foisted upon them, they are willing to help. But they are uncertain how to
proceed and concerned about the risks involved. We suggest the formation of a
world development corporation (WDC), a new organization that would be owned and
operated by the world’s great multinational corporations. It would seek to drive
new business investment on a commercial basis into the poorest economies, and
thereby reduce poverty.
If big business pursued poverty reduction as well as profit in
developing countries, these markets would be invigorated and the legitimacy of
participating multinationals would grow. Also, a WDC would develop ways to
measure the effects of corporate activity on poverty reduction.
Growth Engines
The need for a world development corporation has never been
greater. The flow of private investment into developing countries relative to
public capital flows has grown exponentially, and the former now dwarfs the
latter. Unfortunately, there have been no precise measurements of the positive
effects rendered by corporate investment, but we know that they are significant.
This was confirmed by the UN Commission on the Private Sector and Development,
which concluded in its 2004 report, Unleashing Entrepreneurship: Making Business Work for the
Poor, that the private sector was the engine
of growth in poor countries and thus the way up for the poor. We also know that
the domestic private sector in developing countries is given a significant boost
when multinationals arrive to do business, either as partners or competitors.
Yet, while there have been some improvements in poverty levels
in developing countries, the absolute number of people living in poverty, as
measured by the World Bank, has actually risen over the last 20 years.
Consequently, world leaders and the various international organizations are
desperately looking for new answers to global poverty—in part due to the menace
of terrorism. The 9/11 hijackers may not have been poor themselves, but their
motivation was derived in part from the fact that the per capita income of
Muslims around the world is about half the global average.
To harness and focus the transformative power of private
investment, a WDC would be established under the auspices of the UN. It would be
owned and managed by a board of 12 or so multinationals with experience in
developing countries—companies like Nestlé, Unilever, Shell, BP, Ericsson, ABB,
Tata Industries and Cemex. They would provide the initial funding, although
matching funds might also come from governments and development agencies.
The WDC would proceed experimentally, focusing on countries or
areas that have received little or no investment, those left behind by
globalization. It would design commercially viable projects to be undertaken by
a team of multinationals in cooperation with local partners—development
institutions as well as host governments. Working together within an
organizational framework, the multinationals will bring the skills, technology
and access to world markets and sources of credit that are necessary for local
businesses to be competitive in the world.
 | Craig Wilson, of the International Finance Corp., and George C.
Lodge, of Harvard Business School, wrote A Corporate
Solution to Global Poverty: How Multinationals Can Help the Poor and Invigorate
Their Own Legitimacy. |
|
|
|
|
|
