Getting back on the rails: the private sector and development

Getting back on the rails: the private sector and development

Re-weighting the balance between market and the state

This paper contends that private sector is a vital player in poverty eradication and is the engine of development. However, all too often it underperforms in developing countries as the Washington Consensus elevated market over the state ignoring the inter-relatedness of both. This led to a partial form of globalisation allowing parts of private sector to create enormous wealth and restricting the ability of governments in developing countries in building right institutions for economic prosperity and social progress.

The partial globalisation that has been pursued is profit-oriented. It can lead to wealth creation but does not always contribute to poverty reduction. It sometimes makes it worse. The author argues that new policies, regulations and institutions are needed to ensure that:

  • markets function fairly and inclusively
  • private sector does not harm poor communities
  • private sector redresses any harm it causes to the poor
To this end, corporate accountability cannot be left to voluntary initiatives under CSR. International agreements and national laws should cover private sector. These agreements and laws should be integrated in private sector development strategies.

Some of the recommendations include:

Developing country governments should
  • strengthen links between different parts of private sector and different channels of development
  • ensure poor are included in markets but protected from exploitation
  • hold privates sector to account
Donors should
  • revise private sector development policies to preserve the right of developing-country governments to make their own policy
MNC’s should
  • work with developing country governments, civil societies, donors through accountable CSR and core business activities