This was the provocative title of an event recently organised by 11.11.11, a major Belgian non-profit organisation. The reply is NO – without ambiguity. European businesses can contribute to economic, environmental and social progress in the Global South for sure. But “the private sector has never and will never save the world”, as put forward by a participant in the event.
A representative of the United Nations Conference on Trade and Development (UNCTAD) recalled that private capital has been playing a pivotal role in historic processes of industrialisation – in Europe as in a number of Asian countries. However, to make that happen, countries need to have adequate policies in place to regulate such investments and direct them to the sectors of the economy where they are needed to serve local development and generate more and better jobs.
This is not the case in many developing countries today, which lack sound industrial policies – private capital flowing to developing countries is often not being governed. In addition, the global context in which European companies invest in developing countries is not the same as in the last century, when Europe followed its own industrialisation path. Profits of large private companies increase, but investments in our economies don’t. Few very large companies dominate markets, preventing economic actors in the Global South to thrive and have bargaining power in value chains. Patent rights facilitated by trade and investment agreements increase such market power instead of supporting innovation, and ensure benefits are kept in wealthy countries – further incentivising inequality. Public subsidies for large companies are supposed to deliver social benefits, i.e. jobs in particular. But what happens instead is that shareholders and executives of large companies get the lions’ share.
The Chair of the OECD-DAC – the body in charge of determining what categories of financial flows towards developing countries can be qualified as official development assistance or aid – said that we need to measure the impact on poverty eradication of European companies’ investments in developing countries. For sure, this is necessary to ensure tax payers money is used in an effective and accountable manner. But in view of the context of unregulated financial flows, strong investors’ protection and financiarisation of the economy, it seems naïve to believe that the impact on poverty eradication and the fight against inequalities will be significant.
It is time for governments to take their responsibilities and change that context: For example, ensuring tax transparency and international cooperation to prevent and repress tax avoidance; Putting a hold on trade liberalisation and dumping of subsidised goods in developing countries, ensuring we leave them the policy space they need to support their local industries and to protect their small scale farmers against land grabbing; Contributing to the elaboration of a UN Treaty ensuring business companies respect human right and can be held accountable in case of abuse; and capping the insane amount financial intermediaries are taking on migrant’s remittances sent back home. That’s how to save the world. Let’s hope our elected representatives will show they are not powerless and can make a difference.