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Profit: An Antidote to Poverty

Megan MacDonald | Wednesday 10th June 2009

Putting all the benefits of Corporate Social Responsibility aside, my biggest interest in growing the sector is plain and simple to help end poverty. Idealistic? Yes. But the more time I spend immersed in Development studies the more I realize just how important the role of the private sector is in taking developing countries to the next level.

It's not blind trust in the market - though many free market enthusiasts and politicos would sell their soul in its defense. That approach has been tried, at great expense, during the years of Structural Adjustment policies in the 80's. As one of my professors recently said, "you can't emphasize the role of markets when you haven't improved people' s ability to cost share." The market can only serve as an agent of change if people have the education, skill and resources to make it work.

So addressing poverty through the private sector does not mean standing back and letting it do its thing - though it is about building business, about supporting large-scale industry and manufacturing. The activist in me screams (no!) but the academic has to acknowledge that the greatest service that the private sector can offer in fighting poverty is the creation of jobs and the infusion of investment and tax revenue. Don't worry - this doesn't mean there's no room for the little man - I quote a 2005 World Development Report saying, "private firms - from farmers and micro-entrepreneurs to local manufacturing companies and multinational enterprises - are at the heart of the development process. Driven by the quests for profits, they invest in new ideas and new facilities that strengthen the foundation of economic growth and prosperity. They provide more than 90% of jobs, creating opportunities for people to apply their talents and improve their situations. They provide the goods and services needed to sustain life and improve living standards. They are also the main source of tax revenues, contributing to public funding for health, education, and other services. Firms are thus critical actors in the quest for growth and poverty reduction."

This is ultimately where CSR comes in. If we grant the corporate sector the task of going forth and developing business in the name of developing nations and poverty eradication, it can't be done with the blind faith of the power of the market as it has been in the past, but with the understanding that universal wealth creation is the result of responsible, socially conscious business practices. We need businesses to have profit at heart to maximize what they can ultimately contribute through their operations, but with the joint understanding that it is for the benefit of the community at large, and never at its expense.

To this end, a past point we've discussed recognizes that none of this is possible without a strong policy framework and government partnership, "It is obvious that without a conducive investment climate, the private sector in developing countries will no doubt under perform and will not have a significant effect on poverty alleviation." As the author of this journal article recognizes, the public private effort to address poverty is entirely symbiotic - with the private sector serving as the engine of growth and the government or state serving as the facilitator/developer of the enabling environment.

Hand in hand, a balance of profit and potential for all.

All quotes from this journal article.

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Megan MacDonald 11 June 2009

HI Anne - so true! And yet sadly so many businesses have. There's a great discussion going on on the front page re: the recent settlement of a Shell Oil case in Nigeria. I've been reading up on it all day and it's an exact representation of an industry that historically has just trampled on the rights and interests of local people (who don't happen to be major oil consumers!). I do think things are getting better, but it's up to us to hold companies accountable. Will be posting on this shortly.

Anne Constantino 11 June 2009

"Firms are thus critical actors in the quest for growth and poverty reduction." I could not agree more Megan. The best part is, it can work both ways. Makes sense, right? For indeed, how can businesses single-mindedly pursue nothing but corporate interest in the midst of so much mass poverty and despair-- without putting at risk its very own fundamental social contract to even exist in that community, and much less prosper?