From poverty to growth: entrepreneurship and development (Shand, Deed, Clarke)
Posted by admin on April 13, 2012
The next chapter of the Labour’s Business pamphlet to be published on the website is the chapter on how Labour can spur international development through a sustainable business development strategy, contributed by Tim Shand, Oliver Deed and Victoria Clarke.
Tim Shand is the international programmes co-ordinator for Sonke Gender Justice Network in South Africa. He works on programmes and policies across the region which seek to engage men and boys in achieving gender equality, preventing HIV and gender-based violence and promoting human rights. Tim began his work on gender equality in South Africa in 1998, when he spent a year working as a student teacher in the Mpumalanga region. He has subsequently been active in British politics, including as a ward councillor in London and a candidate for the Labour Party in the 2010 UK general election.
Victoria Clarke works in public affairs for non-governmental organisations in Africa.
Oliver Deed is a member of Guildford Labour Party and former parliamentary researcher to Bob Ainsworth MP.
BY TIM SHAND, OLIVER DEED and VICTORIA CLARKE
This chapter argues that we must build on Labour’s proud record on tackling global poverty, and ensure our future policies on international development include a stronger focus on encouraging entrepreneurship, particularly social entrepreneurship, micro-credit and small business development. This approach, together with development aid, should form the cornerstone of a sustainable and empowering poverty reduction strategy around the world.
The global poverty challenge and Labour’s proud record
The Labour Party and the last Labour government have a proud record in the area of international development. Labour changed the context within which we debate this issue in the UK. The last Labour Government’s decision to set up the independent Department for International Development (DFID) led to a fundamental change in the way that development policy was made. No longer were our development efforts seen as an offshoot of Britain’s foreign policy, and a way to increase our strategic reach; development policy was appreciated as distinct in its own right and a way to help those in developing countries to help themselves.
Labour also recognised that creating a new department alone was not enough to fundamentally change our approach to international development: to be successful, our policies needed to be backed up with sufficient resources. Under the leadership of Tony Blair and Gordon Brown, Britain consistently made the case for significant international investment to tackle global poverty. The former Labour government trebled the international aid budget and was the first to commit to increasing it to 0.7% of gross national product (GNP), as advocated by the Millennium Project; a target on which the current UK Coalition Government plans to bring forward legislation. These efforts lifted millions out of poverty. Labour changed the landscape, and the Conservatives and Liberal Democrats have followed.
Again and again, Labour has put its weight behind the Millennium Development Goals (MDGs) and led the way in calling for other countries to meet the 0.7% GNP target. At the G8 Summit in Gleneagles in July 2005, Blair and Brown put the cause of helping Africa to end poverty at the top of the agenda. The historic Make Poverty History campaign running alongside this summit showed the political world that there is significant international support for efforts to address global poverty. The agreements made in Gleneagles committed G8 countries to increasing aid by $50 billion per year, and to cancelling the debts of the world’s poorest countries. These agreements have already changed the lives of many around the world.
International aid alone is not sufficient
Despite this, renewed efforts from the governments of the developed world and decades of investment the challenge of global poverty remains. We still live in a world where billions survive on less than a dollar a day; where children die of preventable diseases, like diarrhoea; where hundreds of thousands of women die each year during child birth; where gross inequality reigns; and where the key determinate of an individual’s future life chances is the place in which he or she lives.
Having so much political and good will, and with substantial funding from developed countries over a number of years, the question then is why are we off track from meeting the critical 2015 targets within the MDGs?
Maintaining and increasing aid spending is key to answering this question and to ensuring the gains made under the last Labour government are not squandered. Britain should be extremely proud of the £8 billion it spent on aid in 2010/11, and the projected £11.5 billion it will spend by 2014/15. In times of global financial instability, the world’s poor suffer more than ever from crises not of their making, and Labour must continue to stand by those people. However, aid alone is not a sufficient or sustainable solution. It must be coupled with a focus on economic development and job creation, helping countries to increase their GNP and reduce their dependency on overseas financial support. If we fund development aid alone we may find ourselves with the same challenges in the decades to come. And, at a time of fiscal austerity, we may face increasing challenges in gaining the support from the average person on the street in Britain without being able to make visible, or explain, the positive results of our international aid spending.
If not properly implemented, aid also comes with challenges, such as potential mismanagement. This means that the funds are not used for the originally intended reason or do not reach those in most need of the support. While this is certainly not the case with all development aid, concerns about aid transparency and effectiveness, including the potential granting of funds to countries which are not well governed, have been widely documented. For example, while the Millennium Project 2005 report recommended that “well-governed low- income countries be granted ‘fast-track MDG status’ by the international community and receive the massive increase in development assistance needed for them to implement MDG-based poverty reduction strategies”, concern was expressed by Transparency International and Freedom House about a number of countries defined by this report as “potentially well governed”, which these organisations regarded as corrupt or ‘not free’ respectively. Many international development programmes are also driven more by Western priorities than local realities, creating challenges with follow-up, local ownership, co-ordination and empowerment, and possibly minimising the potential for strategies to be scaled-up, particularly though government policies, which is key to broader impact.
Ensuring a sustainable solution to international development requires the building of social capital to hold developing country governments and donor governments accountable for the funds that are spent and poverty targets that are missed. It also requires improving governance and creating the conditions for entrepreneurial skills and culture to flourish, with a focus on using the efficiencies of market demands to help ensure that money gets to where it is needed. And it requires providing financial support, such as micro-finance, to the poorest, enabling a country’s economy to grow from the bottom up, and minimising the stages at which money can get lost as it works its way down the food chain.
Unlocking talent and reducing poverty: the role of entrepreneurship and micro-finance
Away from bureaucratic processes, entrepreneurship, particularly social entrepreneurship, is growing. Social entrepreneurs are creating self-perpetuating enterprises that have the goal of social good, but which also reduce the cycle of dependency on aid. Often, finding and creating a market for something is an effective way of ensuring that a product gets used properly, and thus prevents the problem that it was designed for. It also supports economic growth and job creation.
For example, a company set up by inventor Steve Katsaros called Nokero, short for ‘no kerosene’, developed a solar-powered light bulb to provide light for the 1.4 billion people who aren’t on an electrical grid, and to avoid the use of kerosene fuel lamps, which are dirty, expensive and can cause health problems. As Michelle Kaffenberger, a blogger, points out:
“Rather than continually looking for grants to produce the bulbs and then handing them out to people who may not recognise their value or may not be the most in need, Katsaros made the bulbs cheaply enough that he can sell them in the developing world. By selling the bulbs, Katsaros can also stay in business as long as people want his bulbs, rather than becoming unable to provide when the grants dry up.”
Another example of where market forces have improved the effectiveness of a product can be seen in two different models of the distribution of bed nets, which have the potential to reduce malaria infections and deaths effectively. In Malawi, a nonprofit organisation called Population Services International sold bed nets for a small price to mothers through antenatal clinics, also incentivising nurses to keep nets in stock by allowing them to keep a cut for themselves. By selling the nets at a higher price to wealthier Malawians, they subsidised the cheap nets. The result was that the proportion of children under five sleeping under bed nets rose from 8% in 2000 to 55% in 2004, and a follow-up survey found that nearly everyone who had paid for a net was still using it. In contrast, a Zambian programme handed out nets for free, and a study showed that 40% of recipients didn’t use the nets for their intended purpose.
A key strategy for economic development and job creation is the provision of micro-credit. There are many examples around the world where the benefits of micro-finance are changing people’s lives for the better. For example, Grameen Bank in Bangladesh was set up by Professor Muhammad Yunus, who saw the huge potential in providing economic support to those living in poverty. By removing the need for collateral, “these millions of small people with their millions of small pursuits can add up to create the biggest development wonder”. As of July 2011 the bank has 8.37 million borrowers, 97% of whom are women.
There is already interest in micro-finance as a development tool in British parliamentary circles, as evidenced by the All Party Parliamentary Group on Micro-finance, which was established in 2002. Labour must ensure that it provides a strong voice in support of this group, raising the profile of micro-finance within Parliament and linking this group to other poverty reduction activities.
International development is not all about aid, although aid is an essential element. As the above examples highlight, international development strategies should also provide states and individuals with the tools to drive sustainable economic growth, and economic freedom. Those living in developing countries do not desire handouts; they wish to trade their own way out of poverty. The support and development of entrepreneurship can help local people to solve problems in a sustainable way, which is driven by market demands, rather than solely benevolent ideals, often directed by outside priorities.
If Labour is to make progress on policy in the area of international development, we should look to include support for the development of social entrepreneurship and micro-finance at the heart of delivering a dynamic international development policy moving into the next election. People who live a daily reality of poverty deserve the respect to meet their needs through making their own choices and seeking solutions to problems; our international development strategies must facilitate that. For instance, supporting mobile phone technology is a low cost solution to linking a huge number of people to all kinds of services, in a world where only around one-fifth have access to the internet. Relevance, and listening to the ideas and thoughts of citizens, therefore must be a core principle.
We should include within our poverty reduction policy a strong focus on encouraging economic development within countries that have stable government. The aim of this is to build capacity within that country, encouraging an environment that supports small enterprises and businesses. Labour can also help countries to adopt policies which foster the creation and development of small businesses and business hubs.
Labour also must not be shy about encouraging work with large corporations, internally within the country and with multinational organisations. By creating tempting tax breaks for companies, corporate social responsibility programmes can focus on creating real change. For instance, mining companies might choose to invest heavily in the health care of their workers, creating HIV prevention and treatment programmes in the communities where they work, from which they will receive more benefit than they invest. The support of regional economic integration will additionally benefit countries by encouraging healthy import and export markets.
However, most fundamental to creating dynamic societies that drive themselves forward is creating an education system that empowers people to solve the problems of their country. Building skills and understanding which are in sync with a country’s needs is the bedrock. This should include skills building for the future entrepreneurs in developing countries. As Wangari Maathai, the Nobel Peace Prize winner and founder of the Green Belt Movement in Kenya, said, when speaking of a farmer in Cameroon who is degrading the soil of her land through ignorance about farming techniques:
“Unless the farmer – and millions of others like her – acquires what she needs to develop her skills and educate herself and her children, and is encouraged to make decisions that can take her on a different path, then future generations will look back fifty or a hundred years from now and shake their heads [...] They’ll suffer through the inevitable conflicts that occur when people scramble for scarce resources.”
he real story here is that Labour can continue to be the catalyst for change which will prevent yet another generation slipping by in grinding poverty. This speaks to the very core of our values. We have an opportunity, and we must take it.
Recommendations for Labour’s international development policy
In light of the above, we make the following recommendations, which would support Labour’s international development policies:
1. Include a strong focus on encouraging entrepreneurship (particularly social entrepreneurship), micro-finance and small business development in our international development policy. This policy should clearly articulate that supporting economic development and poverty eradication are two mutually reinforcing strategies;
2. Encourage and support the development of low carbon economies within developing countries, which presents opportunities for new ‘green’ jobs. As reflected by the Copenhagen agreement, meeting poverty reduction and climate change are indivisible challenges;
3. Encourage the development of policies (and greater policy coherence) within developing countries which:
* create an environment supportive of entrepreneurship and business development, including the development of infrastructure, market institutions and support services;
* contain specific strategies to foster the creation of small enterprises and businesses;
* create business hubs to support capacity building for entrepreneurship;
* promote entrepreneurship, and include this within the education curriculum as a key skill;
* invest in education as a key strategy for self-empowerment;
* support mobile phone and other low-cost technological solutions;
* ensure that existing micro-credit schemes and income generation activities are focused on not just poverty alleviation, but also economic growth enhancement.
4. Encourage large corporations to support the development of small businesses, particularly through their corporate social responsibility programmes;
5. Support further regional economic integration between developing country states, to create the conditions for healthy import and export markets;
6. Support regional agencies, such as the East African Community, the South African Development Community, the African Union and African Development Bank, to expand their work on supporting entrepreneurship among member countries.
In conclusion, as we have argued, aid should form only one part of a comprehensive international development approach to be adopted by Labour; such aid must be coupled with a clear strategy for economic growth creation, particularly through building a culture of entrepreneurship, and supporting micro-credit and small business development. This approach should be embedded within a clear pro-business and pro-enterprise commitment, which will provide the foundations from which we can empower others to help themselves. We are the party of internationalism. We will not walk by on the other side, when there are so many who have so little. Let us be proud of what we have achieved, and resolved to harness the market to deliver even greater global poverty reduction.