IDS organised a fringe event at the Conservative Party conference called “Is business the new aid?” The title was deliberately focused on getting a sharp response from the panel members (chaired by Lanre Akinola, Editor of This is Africa, Financial Times with Barbara Stocking, CEO of Oxfam, Sue Clark, Director of Corporate Affairs, SAB Miller, Stephen O’Brien, the DFID Minister, and me).
Everyone on the panel agreed that the answer to the question was “no”. For me the answer was “no” and “no”. No because businesses creating jobs and tax revenues are much more powerful than aid in reducing poverty and no because unlike businesses, aid has a responsibility to work for the most vulnerable.
We want aid to create the conditions where progressive growth can flourish—helping with governance (legitimate political stability, inclusive property and user rights, transparent recourse and justice mechanisms), with infrastructure (to reduce transactions costs for everyone), and with pro-poor institutional innovations (e.g. supporting smallholder farmers to work together to enter and influence value chain rules). The business schools call this reducing “beta risk” to allow (small and medium) enterprises to continue taking their own “alpha” risks. By progressive growth I mean growth that generates decent jobs (Stephen O’Brien called this “jobful” growth), that reduces poverty and is environmentally responsible.
I was struck by how relaxed the audience at the fringe event was about the role of business in development (I was also reminded that all 3 DFID Ministers have substantial business experience). The experiences of the BRICS countries seem to have changed the development community’s attitudes to business.
But the problem remains: how to tell whether the "business and development" success stories on display at panels such as these are: (a) genuine successes (have they been as independently and rigorously assessed as aid interventions are?) and (b) not just window dressing?
There is no way of knowing this at the moment. We need much more independent research on this issue. Collectively DFID, 3ie and Aus Aid have recently funded about 200 systematic reviews on development interventions—each of these will focus on 20 or so studies, making for at least 4000 high quality studies of development interventions. My guess is that there are less than 40 such rigorous studies of the impacts on business on poverty. That is why IDS will focus on building up the evidence base in this area over the next 5 years.
After our event, there was a reception hosted by the Conservative Friends of International Development. It was packed. Andrew Mitchell has clearly been very effective in building support for development within his party—certainly with the elder statesmen and stateswomen and the younger members of the party who have experienced the Umubano work in Rwanda. The strong support from David Cameron is important too. But what about those in the middle? Their resolve will surely be tested in the next 2 years as it dawns on the UK public that the aid budget will increase by 40% by 2014-15. George Osborne’s speech to Conference yesterday “we’re not going to save the planet by putting our country out of business” is a sign that the UK is reining in its green leadership ambitions and provides a contrast to Andrew Mitchell’s frequently repeated phrase “we’re not going to balance the books on the backs of the poorest”.
Encouragingly, there are no signals that the government’s stance is softening on the importance of DFID’s efforts to support international development. (Indeed the close out of the Conference by David Cameron will be dedicated to mobilising support from the membership for famine relief for the most vulnerable in Somalia.) But perhaps an even more important test of the Government’s resolve on development will materialise if it emerges that its development efforts are holding back UK businesses. That is why it is so important for DFID to work across government to head off these potential tradeoffs and identify the things that BIS, DECC, DEFRA and the rest can do to support development without damaging UK business interests.
When does business have the biggest positive impact on development? That is the research question. Is development bad for UK businesses? That is the political one.