Finding Common Ground Between Skepticism and Profits in Solutions to Poverty Alleviation

Daniel Medina, PhDFinancing for DevelopmentCoursera MOOC, The World BankDecember 2015

Key Thoughts

How things got so bad The role of stakeholders in international

development Doing good vs. doing well A suggested framework for action

How things got so bad

More than 3 billion people live on less than $2.50 a day. More than 1.3 billion live on less than $1.25 a day (UN Human Development Report, 2014)

Historically, foreign governments and corporations have exploited poor countries and taken profits abroad

Countries are saddled with debt (but the debt pales against the value of extracted resources and evaded taxes)

Trade agreements impose unfair conditions on developing countries, often at odds with SDGs (e.g., http://thecitypaperbogota.com/features/defending-our-seeds)

Social exclusion has increased, even when poverty declined

Corruption and bribery developed as a result of social and economic stress

It takes a long time to get out of poverty

In Latin America, it will take until 2052 for the average citizen to achieve the standard of living that someone in a rich country had in 2000

(Sources: http://www.economist.com/blogs/americasview/2014/01/poverty-latin-americaWorld Bank. 2013. Shifting Gears to Accelerate Shared Prosperity)

The role of stakeholders in international development

Stakeholders: Multilateral institutions NGOs Private sector Country governments

The most recent thought process states that stakeholders hold complementary roles in financing development.

Multilateral institutions provide seed money or guarantees as catalysts for larger investments by the private sector.

Recipient governments provide the business framework to allow business activity.

NGOs provide on-the-ground knowledge, local connections, monitoring, and critique.

Doing good vs. doing well

Private businesses are motivated by profit – It’s better if they state their goals upfront.

Philanthropy is fine only if it is consistent with business goals – It’s better if businesses don’t pretend to pass for charities

Global expansion is important to businesses and plays into corporate strategies

It is important for businesses to access global markets; therefore, it is to businesses’ advantage to play a role in the well-being of the country

Educated local workforce Purchasing power

Acceptance of the for-profit motivation and of the limitations of the competencies of a business sets realistic expectations for “doing good” out of “doing well.”

A suggested framework for action

A balance between skepticism and desire for profits sets the proper stage for collaboration and challenge among businesses, NGOs, multilateral institutions, and country governments

Multilateral institutions should support country governments to frame long-term strategy and governance for development. Businesses should be skeptical and test the framework

Private companies should admit that they want to make a profit and recognize their skills and core competencies in setting their business plans. But they need to realize that poor people can’t buy things.

NGOs can provide valuable local knowledge. They should be skeptical of businesses and serve as critics when things go wrong or stray from the strategy