Monday, 28 May 2012

Is The New Alliance the true alliance?

By Noshua Watson

Private sector companies have pledged $3 billion over ten years on inclusive agricultural value chain initiatives in The New Alliance for Food Security and Nutrition. This new alliance is one promoted achievement of the recent G8 meeting at Camp David. Initiatives that harness private sector investment are key, but I there are some questions…

As a bit of background…
The program will launch in Tanzania, Ghana and Ethiopia and then expand to other countries in the Grow Africa partnership. This combination of aid donor, African country government and private sector commitments began as part of the L’Aquila Food Security Initiative in 2008, with the intention to improve food security, integrate small holder farmers and improve nutrition.  Particularly, The New Alliance will focus on technological innovation; financing (especially for infrastructure); risk management strategies; and nutrition (focusing on mothers and children).

The recent follow-up report on L’Aquila finds that the G8 and developing countries have largely met their funding commitments and agricultural production, trade volumes and regional trade have grown. However, the national agriculture investment plans are about 50 per cent underfunded and despite the apparent economic growth, the performance indicators do not sufficiently account for gender and allow proper monitoring and evaluation of mother and child nutrition outcomes, mostly due to a lack of private sector investment.

Is The New Alliance learning from past practices or ignoring them?
So, if the context is anything to go by, The New Alliance is a direct response to poor funding and a miniscule private sector involvement. However, the lack of mention of any involvement by NGOs like Oxfam GB or the Fairtrade Foundation is disappointing to say the least, as they are greatly invested in improving smallholder opportunities and have experience in working with the private sector on these types of initiatives. It is a shame to leave NGOs and other experienced sectors out of the process.

Friday, 25 May 2012

Chile's discontent: Inequality and rethinking the economic model

By Carlos Fortin

Something that often puzzles international observers about Chile is why is it that, while the Chilean economy seems to be doing very well, there is widespread discontent among the citizens? A recent article in The Economist attributed this apparent paradox within society to persistent inequality, ‘as Chileans become better off, they want the government to guarantee a fairer society’.

This growing discontent is impossible to ignore, as it has been widely expressed through mass student demonstrations, regional protests that block access to whole areas of the country and a marked dissatisfaction with the centre-right government and indeed with the political class as a whole. A recent opinion poll asked do you approve or disapprove of the way the President and his team are managing the economy?  And the response?  24 per cent approve and 58 per cent disapprove. According to The Economist article the recent student protests have:
“struck a chord in a society that is increasingly middle-class but remains highly unequal. Only 15 per cent lived below the poverty line in 2009, down from 45 per cent in the mid-1980s. But the distribution of income in Chile is the most unequal in the OECD … Taxes and government transfers do little to reduce inequality. The education system has locked in social inequality rather than breaking it down.”  
The solution to this societal imbalance could come through the introduction of reforms to the economic model that would improve income distribution through transfers and facilitate access to education. The Economist , cites approvingly Carlos Peña Gonzalez, Rector of Universidad Diego Portales who says that popular support for the student movement is “not really a radical rebellion against the market economy”. Rather, it is the consequence of a “gigantic revolution of expectations”.

However, as ever, the problem by my reckoning seems to go much deeper.

As Bradford de Long* discusses the United States in his paper ‘Re-Capturing the Friedmans’, his argument is equally applicable to any country, like Chile, which has adopted a neoliberal economic model. Writing in 1979**, Milton Friedman, the father of the monetarist-neoliberal economic model, predicted that the market economy would produce a sufficiently egalitarian distribution of income.
“The Friedmans argued”, writes De Long, “ that a minimal safety net for those whom bad luck or a lack of prudence had rendered destitute, and elimination of all legal barriers to equality of opportunity, would lead to the most equitable outcomes possible. Profit-seeking employers, using and promoting human talents, would bring us as close to a free society of associated producers as is attainable in this fallen sublunary sphere.” 
Evidently, this has not occurred, in the US or in Chile. In De Long’s words, in the United States, “the end of American preeminence in education, the collapse of private-sector unions, the emergence of a winner-take-all information-age economy, and the return of Gilded Age-style high finance have produced an extraordinarily unequal pre-tax distribution of income, which will burden the next generation and make a mockery of equality of opportunity.”

In other words, “the world described by the Friedmans is not the world in which we live”. On this basis, what is called for is a more fundamental rethinking of the model itself. The Economist and, more importantly, political leaders in Chile and elsewhere would do well to take note.

* Professor of Economics at the University of California at Berkeley, a research associate at the National Bureau for Economic Research and former Deputy Assistant US Treasury Secretary
** Milton Friedman and Rose D. Friedman, Free to Choose: A Personal Statement, New York, Harcourt Brace Jovanovich, 1990

Thursday, 17 May 2012

How does climate policy influence business behaviour?

By Vivienne Benson

With just over a month until world leaders will join thousands of participants from governments, the private sector, and NGOs in Rio for the UN Conference on Sustainable Development, the relationship between climate policy and the private sector is a timely issue.

Over the last few weeks here at IDS, our Business and Development seminar series has set out to understand how businesses seek to influence climate change policy and how climate change policy influences business strategies.

As Tuesday’s event with Del McCluskey was the final seminar in this series, I thought I’d ask: what have we learnt?
  1. While the price of carbon remains low, climate policy will have minimal influence on the behaviour of businesses. Jonathon Shopley, Managing Director of The CarbonNeutral Company explained that currently, there are $trillions of capital assets wrapped up in high-carbon initiatives, markedly overshadowing the market for innovative businesses seeking to develop low-carbon products and ideas. He argued that companies do try to influence Climate policy, as a means of protecting their capital assets and intellectual property.
  2. Rural development comes with mitigation and adaptation policies, they cannot exist separately.  Manuel Fuentes, Manager of International Development and Renewable Energy at IT Power argued that for mitigation and adaptation policies to be successfully implemented, the infrastructure has to be in place to support them. Government policy should reflect this. There is a risk of putting in place costly and unsustainable energy structures that would not protect a community from climate change. 
  3. If we want to engage business, we need to reframe the climate change debate. Iain Watt, Principal Sustainability Advisor, Forum for the Future explained that uncertainty about how the climate is going to change can deter organisations from considering how they can change their behaviour. The focus needs to be turned on its head, to how climate change will directly impact on individual businesses. Then companies can implement structures to ensure that their supply chain and direct services are not affected.
  4. Business can play a crucial role in bridging the knowledge gap between government and communities. Del McCluskey, Managing Director, Environment and Energy Sector of Development Alternatives Incorporated (DAI)  talked about a scaling up from communities who are already adapting to climate change and a scaling down from Government who prefer to favour tangible ‘hard investments’ over sustainable ‘soft investments’. 
So, will any of this be considered at Rio? Will businesses be listening? Will policymakers consider any of this? Watch this space…

Listen to all the seminars and interviews with speakers from this seminar series, and prior Business and Development seminar series on the IDS website. The next series will begin in September and will continue to look at the role of business in development.

Tuesday, 8 May 2012

Is China innovating in renewables?

By Hubert Schmitz

Last month I visited the trade fair for the wind power industry in Copenhagen. I was particularly interested in finding out how much progress Chinese companies had made. It is well known that China is now a major producer of wind turbines (see, for example, Competition and Cooperation between Europe and China in the Wind Power Sector). It is not clear whether they are also innovating.

I found indications that the Chinese enterprises are innovating. And they are doing it in interesting ways – by using international innovation networks. The most interesting example is a Chinese company setting up its innovation centre in Denmark’s wind power cluster. This innovation centre has hired some of the best Danish engineers who - jointly with their Chinese colleagues – have developed a dual-blade wind turbine. This is a new type of off-shore wind turbine to be launched soon. The promise is that it is highly effective but is less complex, has fewer components, is easier to install off-shore, and is cheaper than competitors. It remains to be seen whether it works as well as the company claims once there is a full wind farm - with these two-blade turbines – in operation.

In the mean time, we can take stock of rapid changes made by the rising powers in the global innovation business.
  1. It is only a few years ago that we were asking whether countries like China and India were managing the break-through from production to innovation.
  2. Now we can say that there is a shift in innovation power, for example in the software and auto industries.
  3. The example above indicates that is also beginning to happen in low-carbon technology.
 What next!!??

Thursday, 3 May 2012

When is business ‘inclusive’?

By Elise Wach (guest blogger, IDS Impact and Learning Team consultant) 

This has been a question that has been nagging at me for quite some time.

We have initiatives such as Vodafone’s M-PESA (supported by DFID) which seem to be unquestionably inclusive – M-PESA has enabled more than 18.5 million people to access money transfer and banking services and continues to be a profitable business model for Vodafone (i.e. it is a win-win for development and for the business).

But then we have other business models which, for me, are not quite as straightforward. Coca-Cola’s new distribution scheme that is meant to ‘empower’ women, for example, never really resonated with me as inclusive. Does it really empower women? What were those women doing before? They’re still selling carbonated sugary drinks, right? What if Marlboro distributed its cigarettes through women? Would that still be inclusive?

These types of questions are what led to this paper, which I wrote as my MA dissertation last year. It was quite a cathartic process to delve into the questions of ‘what is inclusive?’, ‘how can you tell?’ and ‘why does it matter?’

You’ll have to read the paper to find out all the details, but I’ll share one of my key findings here: a number of studies and reports have been done to prove the impact of inclusive businesses. I couldn’t analyse all of these, but I picked a few of the major ones (i.e. the INSEAD Poverty Footprint, the Oxfam Poverty Footprint, the WBCSD Measuring Impact Framework, and the BCtA Results Reporting Framework (pdf), to name a few) and found that none of them really unpacked the assumptions around why a certain business model was inclusive, and none of them actually succeeded in measuring the impact of an inclusive business.

Why does this matter?
  1. There’s a lot of potential for inclusive business to contribute to development goals. Again, look at M-PESA. When was the last time a development initiative reached 18.5 million people with just some start-up support?
  2. There’s a lot of enthusiasm for inclusive business initiatives in both the development community and the private sector. DFID, UNDP, and USAID are all supporting inclusive business initiatives. Businesses are definitely catching on to the idea that there's a ‘fortune at the bottom of the pyramid’.
With all this potential and all this enthusiasm, we need to be sure we know what we’re supporting and promoting. We need to have accurate information that enables us to identify and respond to opportunities as well as problems.

So I hope that some of the concepts discussed in this paper are taken into account as we seek to harness the potential of the private sector to contribute positively to development outcomes, and as we identify and promote inclusive business models (such as in the upcoming World Business and Development Awards at Rio+20).

Tuesday, 1 May 2012

Defending UNCTAD’s dissenting voice

By Carlos Fortin

The XIII Ministerial Meeting of the United Nations Conference on Trade and Development (UNCTAD) ended in Doha on 26 April with the adoption of a document setting up the programme of work of the organisation for the next four years. The text was approved by consensus, but by all accounts the conference was one of the most acrimonious in the recent history of UNCTAD.

The reason was an attempt by developed country governments to limit the mandate of the organisation to largely technical and uncontroversial areas; this was resisted by developing countries, with the support of international non-governmental organisations (NGOs) and others.

UNCTAD’s mandate is to carry out research and analysis and make non-binding policy recommendations on the management of the world economy and on the development problems and prospects of developing countries. All quite harmless, one would have thought: not so, however, in the eyes of developed country governments who look askance at the fact that UNCTAD often takes a different view from that of the World Bank and the International Monetary Fund on such issues as the workings of the global financial system, the virtues of unfettered free trade or the role of industrial policy in development strategies.

Specifically, in the preparatory process for UNCTAD XIII the two main developed country blocs (the European Union and the so-called JUSCANZ, i.e. Japan, United States, Switzerland, Canada, Australia, Norway, New Zealand, South Korea and Liechtenstein) proposed to exclude from UNCTAD ‘s mandate the analysis of: the global financial crisis and mechanisms, including regulation, to prevent its recurrence; the management and resolution of national debt crises; the role of industrialisation policies in development processes; the pros and cons of foreign direct investment for development; and, in the field of intellectual property rights, the issue of benefit sharing in the areas of traditional knowledge and genetic resources.

The proposal was rejected by the bloc of developing countries and China as an effort to in effect emasculate the organisation. Development NGOs also reacted forcefully, and sent a statement to the conference entitled Strengthen, Don’t Weaken, UNCTAD’s Role in Global Governance which argues for an enhanced role for UNCTAD particularly in the analysis of the financial crisis. A group of over 50 former UNCTAD senior staff – including a former Secretary-General, Rubens Ricupero, and four former Deputy Secretaries-General - as well as academics such as Dani Rodrik, Giovani Andrea Cornia and Thomas Weiss, also signed a public statement in this vein.

After intense negotiations, which ended at 05:00 on the last day of the Conference, developing countries managed to get agreement on a text that did not alter fundamentally UNCTAD’s mandate. The crucial paragraph calls for UNCTAD to “continue, as a contribution to the work of the UN, research and analysis on the prospects of, and impact on, developing countries in matters of trade and development, in light of the global economic and financial crisis.” Commenting on this, the participating NGOs stated that “as civil society, we celebrate that this Declaration language gives a clear mandate to UNCTAD to continue its excellent and highly lauded work on the global economic crisis.”

Others however – myself included - are more cautious. It is unlikely that efforts at silencing dissent in international debates concerning the global economy and development will go away easily. We must remain vigilant.