Monday, 21 February 2011

Business and development - mulling over the muddle

By Neil McCulloch

At long last we have recognised that poverty reduction needs growth, and that growth in most places will come from the private sector.

This is the new frontier of development. We have stopped treating business only as the bad guys, and started to realise that what business does can have positive, indeed sometimes transformative effects on incomes, employment and poverty reduction.

And yet, despite this enthusiasm, it is hard not to feel that it is all rather a muddle.  The reason is that the business and development field consists of myriad groups of people using similar language, but actually doing rather different things.

  • Investment climate: It may be abstract, but it is an important agenda, a country’s labour laws, licensing practices, or customs procedures can be a major constraint on getting growth going and enticing business. Most famously the International Finance Corporation (IFC) developed the Doing Business ranking which, whether you love it or hate it has driven efforts to improve investment climates around the world (see the great critique by Commander and Tinns).
  • Corporate social responsibility (CSR): Traditionally, CSR  is businesses being “good”, in the sense of following good labour practices, good environmental procedures, good engagement with local communities where they work and so forth.  A huge literature was generated, often by the business community, on how to implement CSR and the extent to which such measures were embedded into business practices or were just window dressing (see the work of INSEAD’s Social Innovation Centre).
  • Social entrepreneurs: These are firms who are explicitly trying to deliver a good or service that they think will be socially useful – but doing so in a way that makes money, or at least enough to sustain the operation of the activity. Again there’s a variety of examples – from solar powered lights, to more controversial examples such as privately provided social services (see the Skoll Foundation’s work on social entrepreneurship).
So what are we to make of this exciting, burgeoning but confusing field?

It is not that one approach is right and another wrong. Each of these approaches to engaging with business has the potential for good – but they all also raise many questions about their effectiveness and appropriateness in different contexts. And these are exactly the questions that IDS’s Globalisation Team is addressing.