Chapter Two - What Business Can and Can't do for the Poor
There has been a lot of confusion about what business can do for the poor. Faced with the failure of many development projects and the relatively small size of aid budgets, many development practitioners have started to hope that businesses can do almost everything. They have been strengthened in this view by the advent of corporate social responsibility (CSR), which they imagine will allow them to persuade businesses to do all sorts of morally good things, regardless of the business case.
In the introduction, we foreshadowed our scepticism about CSR as a way of benefiting the poor. We criticised it from a business perspective as we see it as stifling innovation and creating a distraction from the real business of creating value. In Chapter 9 on reputation we discuss how profit, rather than any other measure of corporate activity, is the best first estimate of how much value a business creates for society and that we should therefore encourage businesses to make profit rather than try to distract them with other tasks.
In this chapter, we’ll try to learn from the people who oppose CSR from the developmental perspective. We don’t always agree with their underlying philosophy because they often argue that csr ‘add-ons’ do little for poverty alleviation and therefore that business as a whole does little for development—missing the point that it is the core business not the add-ons that create the real developmental value. But their criticisms of specific CSR activities and, in particular, the tendency of businesses to become involved in development programmes unconnected to their core business are important and give us extra reasons to be sceptical about CSR as a whole.
So we’ll outline the emerging developmental criticisms of CSR. We’ll emphasise that businesses cannot do everything in development and that csr will do little to change that. Then we’ll describe the fundamentals of what we think businesses can do. Finally we’ll discuss how all this works on a global scale and, in particular, why many countries may miss out on the benefits of international business activity.
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Chapter 2 – links and resources
The UNDP’s Commission on the Private Sector and Development published a report, Unleashing Entrepreneurship: Making Business Work for the Poor, in March 2004 that outlines why the private sector is important to development and what role multinational companies can play. As of March 2006, it was available for free download at the Commission’s website (www.undp.org/cpsd).
The Wealth and Poverty of Nations
Marcel Fafchamps, ‘Engines of Growth and Africa’s Economic Performance’ argues that technological change is essential for sustainable economic growth.
"The Poor like Globalization" by David Dollar reports survey findings on attitudes towards globalisation in the developed and developing world.
Professor Stefan Dercon's, "Poverty Traps and Development: The Equity–Efficiency Trade-Off Revisited" discusses the circumstances in which growth does or does not help the poor.
‘Lack of Investment is the Tragedy in Africa’ by Kurt Hoffman, Director of the Shell Foundation, discusses the weakness of aid flows compared to the potential of investment flows to developing countries.
Tarun Khanna, Krishna Palepu and Jayant Sinha, ‘Strategies that Fit Emerging Markets’, discusses the dangers of transporting business models from developed to developing countries.
