Argument

Make Money, End Poverty

Make Money, End Poverty

Governments at the United Nations are in full swing designing the next blueprint for global development, the successor to the Millennium Development Goals (MDGs). The entire process is important, to be sure, but one particularly notable aspect is that governments are asking corporations to show how they can help make poverty history, while also making money. This represents a big shift since 2000, when the U.N. adopted the original MDGs. That time around, the role of corporations was largely confined to "corporate social responsibility" and "philanthropy."

What is driving this important change? First and foremost, governments have recognized that their ability to help the world’s poor, hungry, and sick is quickly diminishing. At the same time, businesses are playing an increasing role in lifting people out of poverty.

USAID’s administrator, Rajiv Shah, frequently notes the relationship between sustainable development and private profit. He has declared that in combating poverty, the public sector "need[s] to help companies find profit opportunities abroad, not photo opportunities."

A number of key global trends make up the background for this chorus of support for the private sector. Today, foreign direct investment (FDI) flows into developing countries have surpassed traditional development assistance — the rate is now five to one — and over 90 percent of jobs in the world are in the private sector. This is a significant change: Not so long ago, public-sector employment constituted almost half of all employment in certain regions, including Africa.

Looking to the future, too, global infrastructure and national security demands will have enormous consequences for development. Trillions of dollars will be invested in new projects, and companies in the infrastructure sector will be important partners for governments.

In light of these trends, unless governments strategically leverage the private sector, the simple fact is that the world likely will not achieve the forthcoming Sustainable Development Goals (SDGs), including the goal of eradicating extreme poverty. Yet despite recent, positive changes to their relationship, the U.N. and governments still are not utilizing the private sector as a development tool and partner to the fullest degree possible. It’s not too late to get the relationship between public and private sector actors sorted out, and the process of creating the SDGs is a good venue in which to start.

To start, governments must stop speaking at private-sector actors and begin to converse with them as equal partners. Norine Kennedy, vice president at the U.S. Council for International Business, recently noted that the private sector is usually engaged at the U.N. in two ways: Its members are either allowed to make two-minute interventions during U.N. meetings or to participate in side events. This modus operandi is prevalent across the board when governments and multilateral organizations try to work with the private sector. Yet this arrangement is neither effective nor supportive of the desires of the business community.

The ongoing process to develop the SDGs exemplifies this problem. In 2012, the U.N. secretary-general announced the formation of a high-level panel to advise on creating the new global development agenda. Last year, the group released an initial report to guide the intergovernmental process that is now underway. While the 26 members of the panel consulted companies and sought input from businesses, only two members were actual representatives of the private sector. Instead of this outdated model of engagement, 50 percent of advisory panels and similar bodies working on strategies for sustainable development should come from corporations and business associations.

The reasoning is simple. In order to be effective in the implementation phase, the private sector needs to be part of setting the agenda in the first place. Only then can the sector be fully and effectively integrated down the road. Consider the force-multiplying effect of heads of state and NGO leaders sitting at the same table as the CEOs of leading corporations — Coca-Cola, General Electric, Google, Ikea, Toyota — when a vision for the future is formed.

Having a seat at the table would also help companies achieve their primary goals, including increasing profitability. Of course, the U.N.’s primary responsibility is not to facilitate business, but to serve the public interests of its member states. However, public interests and private profit can converge when partnerships are set up collaboratively. As noted by the U.N.’s initiative for private-sector outreach, the U.N. Global Compact, "Businesses have a built-in motivation to see development succeed. Quite simply, business does better when the world does better, and is literally at a loss in a setting of disease, strife, environmental breakdown, illiteracy, abuse of human rights, arbitrary government practices and impoverishment."

The innovative potential that exists when governments and the private sector find common cause is illustrated through the momentous project that put a man on the moon. The enormous scale of the Apollo program in the 1960s, as well as the novel technological challenges associated with it, meant that the U.S. government had to rely heavily on the private sector to build the hardware and even to operate missions. In short, the public and the private sector leveraged one another’s strengths, and NASA’s relationship with industry was oriented toward a mutually beneficial partnership serving the greater public interest. Of course, the companies that participated in this project — and other major government-industrial partnerships in aerospace, defense, and security during the Cold War — reaped great financial benefits. But this, in turn, laid the foundation for landmark civilian technological spinoffs, such as the Internet, the development of semiconductors, and the introduction of GPS technologies.

A similar strategic partnership between public and private actors is now required. As noted recently by Nigerian CEO and entrepreneur Tony Elumelu, "A global agenda that intends to address the livelihood of people and attack extreme poverty is not set up for success if it does not fully engage the sector of society that controls the most capital, employs the most people, and fosters the most innovation."

Once it is fully at the table, perhaps the largest contribution the business community could make to the forthcoming SDGs would be to improve national infrastructure and security capacity across the developing world. Today, billions of people are in need of clean water, adequate public health facilities, sustainable food and energy solutions, and a plan for societal resiliency against climate change and natural disasters. The market for these upgrades over the next few decades is upwards of $57 trillion, and the market for securing these investments is expected to grow to over $105 billion only in the next few years.

What’s missing now is a long-term business plan and capital infusion from both the public and the private sector to get efforts started. Some financing proposals include the establishment of a new global fund, replenished by both the public and private sectors, whose coffers could be used to address the challenges that the SDGs identify. (A similar fund already exists in the fight against HIV/AIDS.) Another idea includes using traditional development assistance to fund private-sector-led solutions, including the building of infrastructure. Both these initiatives would be excellent ways for governments to spend taxpayers’ money and for corporations to spend business-development capital.

It is vital that innovative financing me
chanisms be top priorities in the agenda for the SDGs. In short, they need to be decided upon now and robustly implemented soon.

The SDGs can set a new tone for how the world approaches development. And critical in setting that tone is making room for the private sector in the most meaningful way possible. The designers of the goals need to bring the private sector to the table and clearly communicate the nexus between the public interest and private profit. They also need to prepare ways to maximize the potential of that nexus, so the world can hit the ground running with the new development goals. If this can all be achieved, there will be winners all around: governments, the private sector, and — most importantly — people across the globe.