Replies to This Discussion

Permalink Reply by Elena Panaritis on April 16, 2009 at 12:13

Hello SungAe,

Yes you are spot on - regarding your comments and assessment. One of the challenges in this area is that it was traditionally perceived as a soft area of research by traditional economists, as a result the space was not well defined. As an economist I felt very much out of place when I started working in the topic of property rights and illiquid markets in 1990. Your request to establish further research in the area is actually there - much of it documented in my book Prosperity Unbound: Building Prosperity Markets with Trust and a new methodology called Reality Check Analysis on how to help establish a robust analysis of the market - before entering and of policy reform solution to transform illiquid assets to liquid ones.
The problem is not one of the developing world but that of developed rich countries including the US.
if you like check more www.prosperityunbound.com/blog

Permalink Reply by Mary Knoop on April 16, 2009 at 20:38

I've found a lot of this discussion very interesting, especially in relation to the risk and tourism topics. I feel that a serious downfall when it comes to economic development and political turmoil is the loss of contracts and policies based upon specific governments. If the government or political system abruptly changes in a developing country and all contracts are lost it can pose a serious threat to any entering companies and I feel that if measures could be taken to greaten the insurance of entering a developing country it would promote entry. I also feel that if companies that aren't rooted in corporate responsibility and community development then their entry won't add economic or political worth to that country. In terms of tourism I feel that emerging markets are opening for developing countries due the appeal of their geography and potential for tourism success. In developing countries, such as the Dominican Republic and Nicaragua, tourism has experienced growth in visitation and resort stays. While the countries may be experiencing political or economic issues they still gain visitation due to their geographic appeal. The risk associated with these countries and destinations still does need to be monitored but if tourism can continue to grow and better the community in the process then I feel that it's a great venue for continued entry success for other corporations as well as the promotion of local companies success.

Permalink Reply by SungAe Lee on April 17, 2009 at 3:41

Hello Elena,

It’s great to know that economists are engaging in higher level of research and analysis of various markets. These research findings would be highly beneficial for firms and governments when they are making decisions on which markets to enter. I think the Reality Check Analysis that you introduce in your book is an effective form of mechanism in developing strong analysis of markets by identifying the actual origination of problems that eventually lead to poverty. It was interesting to learn that most conflicts in society originate due to various institutional breakdowns in the area of property and proper reform is only achieved when people are able to understand why the property right system was violated. This highlights the significance of preserving strong property rights in order to sustain economic stability and peace in the nation.

Permalink Reply by Elena Panaritis on April 17, 2009 at 12:59

Hi SungAe,

Thank you for your focused contribution - As you also notice such a basic issue, that of rights to ones property is unfortunately taken for granted but most traditional analysts - I would include all professions. We tend to point our fingers to economists but unfortunately this also applies to others (lawyers, engineers etc) that have been trained in a traditional way.

If we manage to figure our how to apply secure rights to our property (i.e. wealth) then we are half way there. My approach Reality Check Analysis helps - but we need to apply it more and then implement it.

Thank you again for your contribution
Elena

Permalink Reply by Anna Nadgrodkiewicz on April 14, 2009 at 18:23

Thank you, Kim, for moderating!

As a part of this discussion, I would like to bring to everybody’s attention a new and exciting educational resource, the CIPE Development Institute, which addresses precisely the themes of peaceful economic development and the role of political and economic freedom. It is a joint effort with Center for International Private Enterprise (CIPE) partners and distinguished global scholars such as Nobel Prize-winning economist Douglass North, Hernando de Soto, and Larry Diamond. This platform provides self-study and classroom materials, with case studies from a variety of developing and developed countries. The resources include: multimedia presentations from international speakers, accessible lesson plans and readings, and an open forum on development issues. The curriculum focuses on 12 topics important to development, such as democratic governance, economic freedom, entrepreneurship, and anti-corruption.

Please visit: www.developmentinstitute.org for more details – I trust you will find the perspectives of the Institute’s international presenters interesting and well worth discussing.

Anna

Anna Nadgrodkiewicz, Program Officer, Global Programs, Center for International Private Enterprise

Attachments:

• introBannerLogo_lg.JPG, 74 KB

Permalink Reply by Raymond Gilpin on April 15, 2009 at 16:45

I would like to also highlight a new initiative by USIP's training department --- a suite of interactive training programs (see: http://www.usip.org/etc/expansion/index.html). The course on economics and conflict addresses the development-conflict nexus, and helps practitioners think through creative ways in which economic levers could be used to prevent/manage conflict and promote peace.

Permalink Reply by Michael O'Neal on April 17, 2009 at 3:12

Thanks for drawing attention to this resource, Anna.

Kind regards.

Permalink Reply by Solomon Brayant Mpapale on April 15, 2009 at 2:13

Thank you very much to all the participants.

1.First of all, the reforms desirable to achieve the empowerment of the poor demand that the "pyramid of fortune" be inverted to percolate opportrunities to all those down the ladder.In other words, when the wheel of fortune turns, it should momentarily stop and for longer at the stage of the poor to enable them board.For the poor and those shut out from the formal ecomonomy to be incorporated, there is need for massive investements in education, health services,water provision, better nutrition,enviromental sustainability,fair trade and agriculture and empowement for example of the genders.The millenium Development goals provide very good policy infratstrucure to attain this goal but the challenge still remains how to implement.

There is also a need to aggresivley pursue welath generation and distribution mecahnisms that take account of the relative streanghts and weaknesses of various segments of societies and in this case the poor.For example land reforms,the ownsership of mines and industrial wealth can be rationalized in a way that does not chaotically usher in a socialist state but takes cognisance of the different talents and endowments of various people.

The NGOs, public and private sectors can aid this process through research,advocacy,litigation,lobbying the authorities and forging strategic patnerships that synergize policy cordination as well as doing consultancy work.

2.The Social and Institutional prerequisites for development and peace sustananc are:Democracy,The Rule of law,Gender equity,social justice,Economic freedoms,liberties and democracy, and of course an agile, educated and informed citizenry.This is an argument valid from classical times and of course carries a lot of water in the modern globalized world.In human socities, since time immemorial, the fundamental cause of conflicts has always revolved around the need to control natural and economic resources.Therefore if a formula can be found to justly distribute economic resources in the world then conflicts would be contained.They persist because of the absence of this intervention,sometimes culminating into full scale wars including world wars.As a requisite therefore socities need to cohere and the economic frameworks of socities need to be inclusive and responsive to the interests of all rather than exclusive and repelant.

3.The Indian Economist and nobel prize winner Armatya Sen has propounded the theory of capability in which he argues that poverty and deprivation in socities arise due to the denial of the right to control the potentials and wherewithal to generate wealth so that we are able to realize our full functionings and lead the lives we would want to.Central to these are economic freedoms which if granted would surely enhance political and in turn peace.A hungry man is an angry man and likewise, a satisfied man is a humble and happy man.The answer therefore lies in capacitating humans economically through unlocking their potentials.the mechanisms vary from affirmative action,state interventions, provision of welfare directly by the state,subsidizing welfare provision and other methods,tried and tetsed over time.

Solomon Mpapale,
London,UK.

Permalink Reply by Mitchell Kassler on April 15, 2009 at 3:16

Pete Tashman mentioned that he is studying the roles that businesses can play within their existing corporate social responsibly programs to profitably engage in poverty alleviation. Specifically, he mentions that businesses are able to address social issues in a strategic way, treating them as unmet market demands. By meeting these market demands businesses are able to no only make a profit, but begin to create competitive advantages. This idea of making a profit while also reducing poverty is a great concept. But it appears to me to be a difficult task to accomplish as there are many challenges associated with working in poverty stricken environments. Pete mentions a few of these obstacles and Borany Penh outlines a few more of them in her presentation. She mentions that these environments usually have low capacities, that there is often bitter feelings between the occupying parties, and as a result it is often difficult for businesses to implement social political concerns into their programs. She also notes that there is often fear of a return to conflict in these regions, making it difficult to attract investors for these projects. Pete, how would you respond to these challenges? In your continuing research have you seen any consistent strategies that businesses have been using to develop these capabilities? If so how successful have they been?

Permalink Reply by Pete Tashman on April 15, 2009 at 17:16

Hi Mitchell, Thanks for the questions. They are at the core of the issues holding back capitalism in impoverished markets. I'm not sure I have the answers, but I will attempt to advance the conversation with an extremely length answer.

1) First I think that those conducting or thinking of conducting business in these markets need to keep in mind the latent wealth of poor. It is by all accounts a massive marginalized economy. This fact should be constantly emphasized in the dialogue, so that even if business ideas prove too risky to implement, enterpreneurs and business strategists will retain their focus on the potential and continue to develop new ideas that might be feasible given the environmental risk factors. I believe that the economic opportunity justifies an "at first if you don't succeed, try again" attitude.
2) Second I think that increasingly, for better or for worse, the CSR discourse in becoming strategic; that is it is focused on win-win outcomes which see businesses as embedded in communities and dependent upon them, rather than simply an ethical thing to do. So, businesses seeing social issues as market opportunities are not only programming social concerns into their business initiatives, but basing these initiative entirely on addressing social concerns. I believe that in many markets, the business that does not do this has no reason to be there at all, since consumer preferences in impoverished markets likely revolve only around business activities that meet social demands (job creation, hygene, nutrition, disease mitigation, etc...). But to get more to your question, how does a business implement such an idea given the risks, even if the idea is implicitly social at the core? Based on the "at first if you don't succeed" idea and that these markets are worth trying to capture in the long run, scholars have identified some intuitive corporate behaviors.

Stuart Hart and Sanjay Sharma wrote an article called "Engaging Fringe Stakeholders For Competitive Imagination" which describes how companies like Unilever and Hewlett Packard have developed routines for engaging the poor (by having managers live in poor communities as part of their training in some cases), learning about their environment and issues and aniticpate the challenges of working there, integrating this knowledge in strategic planning and finding fit with their business' core competencies. Essentially they argue that developing a detailed understanding of the needs of communities as well as the local norms that guide trust in social relationships will help business develop plans that meet community needs, adhere to their norms (since a lack of understanding of informal social rules can derail a business' legitimacy), while doing what it is presumably good at already. Mark Milstein, another scholar, has discussed in more detail how businesses can do this. He suggests that they should experiment with new ideas on a small scale, that these ideas should be radical (that is not tried and tested ideas for rich markets), that they should invove input and testing with fringe stakeholders (the poor), and that they should have a chance of becoming scalable, because people have low incomes, there are many of them, and many of them will require jobs when the idea is brought to production.
3) Political concerns are more difficult to address in CSR I believe, especially in areas of conflict. I believe that at the level of the community, a business that engages people and understands their norms can create trust. When it has trust, it can begin to become a mediating institution, where people come together in the workplace and are subjected to new norms involving governance, and then hopefully institutionalize these behaviors in them. When people start developing these governance routines as habits, they are more like to accept and work towards establishing more political institutions that protect their governance routines. This is an idea that is well-theorized in Tim Fort and CIndy Schipani's work on businesses as mediating institutions for peace. In terms of addressing political turmoil, I am far from an expect, but I believe that engaging NGOs and government agents in dialogue, joint ventures or other types of collaborations can help a business or industry create more certainty, if the goal is to more closely align the interests of the institutional players so they are willing to support each others goals.
4) I believe there may be many opportunities to implement ideas that do not require political stability. For example, Unilever marketed Annapurna Salt in India, a product which has the potential to vastly reduce the prevalance of iodine deficiency disorder. They are now marketing it in Chad. Since Unilever is by all accounts a multinational-domestic firm that generally develops domestic supply chains in the countries in which it operates, if the demand for Annapurna reaches its potential in Chad, they will produce it there. Since the product clearly improves livelihoods and has job creation potential, Unilever has two sources of legitimacy that can help to shield it from political risk. Combine this with their efforts at collaborating with public and civil sectors and Unilever has both a business and a political strategy for mitigating their political risk. But, it all rests upon the having the right idea (salt that reduces the prevalance of a common and destructive disease) that can easily be marketing via existing channels.

Cheers

Permalink Reply by Mitchell Kassler on April 16, 2009 at 21:58

Pete, thank you very much for your detailed response. It was very insightful and provided me a much more detailed perspective on the underlying issues. I would like to comment on your second point; I think that the CSR discourse becoming more strategic is for the better not the worse. In capitalist societies private entities exist to earn profits. The fact that businesses are seeing opportunities to earn profits in impoverished regions means that they will continue to “try again.” Through continued attempts if businesses keep basing their initiatives on addressing social concerns and keep on improving their strategies, eventually they will succeed. This success will be the result of capitalizing on a “win-win” situation rather than an ethical act. I think this is a good thing because it will provide incentive for more businesses to engage in these endeavors, whereas, the sole purpose of an ethical act although nice will not offer the same incentives. As a result, this “win-win” situation will be the source of far greater amounts of poverty alleviation. Therefore, to me it appears to be a decisive factor. Good luck to you on your continued research.

Permalink Reply by Pete Tashman on April 18, 2009 at 22:31

Sorry about my delayed response. I agree. I think that Strategic CSR is not only a positive thing, but is the best kind of CSR, when a company is doing what it is best at to help address social issues. Some have a more philosophical view and think that businesses should engage in CSR for moral reasons primarily (to more firmly institutionalize morality in the institution of business), and so there is a bit of an ideological debate amongsts scholars about the best kind of CSR. My reasons for framing strategic CSR the way I did was only to sidestep any ideological debates in that answer. But, getting into that debate, I am firmly on your side of it.

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