21 Feb 2007  Op-Ed

What a U.N. Partnership with Big Business Could Accomplish

If the world's large corporations really are the greatest drivers of wealth creation, it only seems reasonable that their capabilities and resources can be focused on global poverty, says professor emeritus George C. Lodge. Here's the case for a partnership between business, the United Nations, and NGOs. Key concepts include:

  • More than a trillion dollars has been spent since WWII to alleviate poverty, with marginal success. But the goal of poverty reduction will not be reached unless the world tries something new.
  • Countries most successful in reducing poverty have focused on creating profitable businesses. They provide the jobs, income, and motivation for education and individual development that raise standards of living.
  • Multinational corporations can play a key role by connecting local businesses to world markets, credit, and technology.
  • A nonprofit World Development Corporation could be formed to identify and design profitable projects in poor countries in which teams of multinationals would collaborate with local partners.

 

As Ban Ki-moon begins his tenure as secretary-general of the United Nations, the world's poor continue to cry out for help and hope.

One-sixth of the world's population lives in "deep poverty"—generally defined as surviving on half or less of the annual income of those at a nation's poverty line. And yet, more than a trillion dollars has been spent by bilateral and multilateral organizations since World War II to try to alleviate this problem.

The funds that were supposed to help improve people's lives have often been lost to governments that lack either the desire or the ability to reduce poverty within their borders.

Several years ago, world leaders gathered in Monterrey, Mexico, and gave poverty reduction top priority. They committed themselves to halve the number of people living on less than $1 a day by 2015. They realized that poverty is the seedbed of terrorism and the spur to migrants hammering at the gates of Europe and America.

But the goal of poverty reduction will not be reached unless the world tries something new.

It is clear from the experience of countries that have been most successful in reducing poverty—Japan, China, Singapore, South Korea, and Botswana, for instance—that the creation of profitable businesses is the key. They provide the jobs, income, and motivation for education and individual development that raise standards of living.

Small- and medium-sized domestic operations have created most of the jobs. But globalization has meant that for a local business to flourish, it must invariably be connected to world markets, credit, and technology. That's why multinational corporations must play a critical role.

The goal of poverty reduction will not be reached unless the world tries something new.

If the world's large corporations really are the greatest drivers of wealth creation, there needs to be a way to bring their capabilities and resources to those countries and regions where they are now absent.

It is also essential to minimize the risk, make their investment profitable, channel it so that it has a maximum impact on poverty, and make it legitimate in the eyes of the world.

Here's where Ban and the United Nations can play a part.

To leverage the multinationals' power and reach, we propose establishing a World Development Corporation that would be formed and managed by a partnership of these corporations in cooperation with nongovernmental organizations and the United Nations.

This development corporation would be nonprofit, but its task would be to identify and design profitable projects in poor countries in which teams of multinationals would collaborate with local partners.

This concept offers multinationals a mechanism to do well with minimum risk and maximum efficiency.

In its early stages, a typical project would have to be commercially oriented and driven by private funds, though public funding from development banks or foreign aid agencies would help.

The development corporation could proceed experimentally with a small staff, focusing specifically on those countries or regions that have received little or no direct foreign investment. It would bridge the gap that now exists between multinationals and other development agencies, as well as facilitate cooperation between these business and NGOs.

The case for corporate support

There are many reasons why far-sighted executives should be interested in supporting the concept of a World Development Corporation.

The idea that corporate legitimacy stems from the satisfaction of shareholders and competition to serve consumer desires is now insufficient. Fulfillment of community needs such as clean air and human rights is every bit as important.

This concept offers multinationals a mechanism to do well with minimum risk and maximum efficiency. It also provides them with a means to improve political stability in potentially volatile territories.

The prospect of Chevron Texaco's multimillion dollar investment in Kazakhstan, for example, is threatened by poverty in that country's rural areas. A World Development Corporation project to rehabilitate agriculture after the collapse of the Soviet-subsidized collectives would help build stability by raising incomes and giving people a stake in a more promising future.

Our research also shows that many multinationals find that their activities in regions struck by poverty act as powerful magnets for attracting bright young managers. Finally, these types of projects would offer businesses access to local partners and opportunities in developing nations that could benefit their future activities.

There is growing evidence that companies that have innovated to ensure effective environmental safeguards, greater eco-efficiency, better organizational health and safety, and improved cultural protections have benefited from better political support and higher profits. The same will be true of companies that play an explicit role in the alleviation of poverty.

Creating a World Development Corporation will contribute greatly to making that happen.

About the authors

George Lodge, a professor emeritus at Harvard Business School, and Craig Wilson, Executive Director, the Foundation for Development Corporation, Australia, are coauthors of A Corporate Solution to Global Poverty: How Multinationals Can Help the Poor and Invigorate Their Own Legitimacy (Princeton University Press).