How silver-tongued multinationals can win trust in development circles

If civil society is to embrace the private sector, big business must ditch the cliches and build a transparent regulatory environment.

The increasing emphasis placed by some on the role of "the private sector" is a growing source of tension in global development debates.

The term, which covers such a wide range of operations, is sometimes worse than useless, fuelling a perhaps deliberate ambiguity about what is being discussed. In reality, the debate concerns multinational business and international finance – I am yet to meet an opponent of support for small and medium-sized domestic firms.

On the one hand, many Organisation for Economic Co-operation and Development governments are gravitating towards an increased focus on the role of the international private sector in development for three main reasons. First, as a way to make up shortfalls in overseas development assistance (ODA), which is wrongly used to conflate the different characteristics of public and private money. Second, they see ODA as a means of supporting their companies’ chances of securing overseas contracts, not necessarily by tying aid, but by opening up opportunities and contacts. And third, many people are instinctively pro-private sector – based on their training they see business as more often the answer than government.

Global businesses, unsurprisingly, are supportive of these instincts and there is a growing cadre of friendly businessmen whose job it is to attend conferences such as the one that has just finished in Mexico, emphasising the importance of business for growth.

On the other hand, contrary voices, especially from civil society and the more left-leaning UN bodies, express their concern over the direction of the debate, sometimes engaging in forceful campaigns against multinational companies and their failure to live up to basic social and environmental standards. When a private sector spokesperson argues that the private sector is crucial for development and job creation, some in civil society recoil amid concerns that this is code for less regulation and better tax breaks.

But just as the lines are being redrawn between two apparently conflicting sides, the irony is that, in some ways, the debate is already over.

Previously there were many countries and political movements that saw the private sector as the enemy of development – today there are few. Conversely, the dominant neoliberal analysis of growth and development that sought to undermine the role of the public sector is also, thankfully, over. The broadly consensual view of today’s experts is that strong public and private sectors are crucial for development.

The real debate is not about the importance of the private sector. That is a given. The debate is about what the right balance is between strong regulation of businesses and finance to enhance developmental impact and ending red tape to allow creativity to thrive. It is about whether there is a place for the profit motive in the provision of basic services to poor people, and it is about the best way to promote job creation.

These issues will mostly be decided at the national level in political battles – just as they always have – with economic interests exercising a far more important impact than evidence in decision making – again, just as they always have.

It is valuable to have spaces where all sides can sit down and, ideally, build trust and understanding in order to move from caricatures to constructive dialogue and joint initiatives. The first high-level meeting of the Global Partnership for Effective Development in Mexico was one such space, but the lack of trust between the two sides was palpable, and not helped by the decision of the organisers to deny a trade union representative space on the main panel.

Civil society organisations were heard to complain of the excessive influence multinationals were exerting. But that’s probably not fair. You cannot invite private sector representatives to the party and expect them not to express their views or influence outcomes. Either powerful companies come to the table with other stakeholders and discuss the issues, or they exercise their considerable influence in private – you can’t change the fact of their power.

But I do have two recommendations for multinational representatives and their supporters when seeking to engage in good faith with civil society in international meetings such as this.

First, don’t try to minimise the crimes committed by large companies against poor people. When I hear smooth-talkers dismissing civil society activists as annoying and unconstructive, I wonder how much time they have spent with communities displaced by mining or agricultural companies, or how many relatives they have working in disgusting conditions.

Civil society nervousness about engagement with large companies is not based on Marxist theory but on visceral experience. Even if they turn up in suits at the mega-conferences, civil society representatives go back to report to marginalised communities, whether urban or rural, many of which are in constant battle with companies – supported in many cases by governments – displacing them from their land, polluting their atmosphere, and disrespecting their dignity and human rights. When private sector lobbyists try to minimise this reality they undermine attempts to build trust.

And second, don’t use the non-ideological language of inclusivity to further a narrow policy agenda. The fears of civil society about the ulterior motives of the private sector are not conspiratorial, they are thoroughly justified. Anyone who thinks big business has not spent the past two decades successfully lobbying government for reduced regulation is naive. The interests of the powerful are as real as ever.

If civil society is expected to lower its barriers and move towards accepting a greater role for multinationals in the development debate, multinationals also need to move on. A stable and clear regulatory environment is necessary for the private sector to promote development objectives, rather than take their own benefits and run – the experience of too many local communities.

Investment alone does not mean development. When companies and their government cheerleaders begin to argue that, sometimes, more regulation is needed rather than less, and when they start to insist on a place for trade unions at the table, however much they might disagree, they might begin to persuade the sceptics that trust is worth building.