The New Missionaries: NGOs in Third World Development

NGOs are the new missionaries to the Third World.  The original missionaries carried messages of Christianity and capitalism.  Many of the new missionaries whether Christian or not, are decidedly anti-capitalist.  Many are given unwarranted legitimacy in international forums.

Oxfam/ Community Aid Abroad has been active for many years, seeking a reduction in the debt owed by the most heavily indebted poor countries to multilateral institutions such as the World Bank and IMF.  A nice thought, except that the successive forgiveness of debt provides an incentive to continue Third World practices that created the debt in the first place.

Guilt, wrongly attributed, and altruism, can raise money for transfers of wealth between the First World and the Third, it has succeeded in capturing the minds of international bureaucrats in the UN, and at times unfortunately in the World Bank, though less so at the IMF.  Guilt, however, is no substitute for the message of economic development based on sound political and economic institutions.

Take one very prominent example, the Jubilee 2000 campaign to forgive the debt of poor countries.  Oxfam and the churches, with the Pope and the Dalai Lama and stars like Bono of rock group U2 pressed Western governments to forgive the debt of the poorest countries.  The argument was to let them start afresh without the burden placed on them by the West.

A former World Bank economist, William Easterly, has tested the incentives in debt forgiveness.  He found that the big problem is that debt forgiveness is not new.  The World Bank/ IMF Highly Indebted Poor Countries Initiative, now running at $27 billion, stands on the shoulders of decades of previous rounds of debt forgiveness.

The promise of Jubilee 2000 was no different to all of those that have gone before.  "The debt campaigners treated debt as a natural disaster that just happened to strike poor countries".  The truth is not so charitable.  Countries that borrowed heavily did so because they were willing to mortgage their future.  They were irresponsible, they sold productive assets into unproductive hands, they built unproductive infrastructure, they favoured one ethnic group above another, or one region above another, they ran inflated economies, they were corrupt, they waged war, they allowed black markets to develop because they controlled exchange rates and interest rates.

How many "progressive" NGOs would sign up for Easterly's remedies?  "Does the government of each nation face incentives to create private sector growth, or does it face incentives to steal from private business?  In a polarised and undemocratic society, where class-based or ethnically based interest groups are in a vicious competition for loot, the answer is probably the latter ... In a democratic society with institutions that protect the right of minority interest groups, institutions that protect the right of private property and individual economic freedoms, governments face the right incentives to create private sector growth".

Environmental NGOs have bought into the trade, aid and development game as well.  The Australian Conservation Foundation is active in Papua New Guinea, supporting local NGOs pressing its line on "ecologically sustainable development" and "management of natural resources".  Green NGOs will cite the Ok Tedi mine as an example of poor exploitation practices.  Ok Tedi experienced wash from a tailings dam escaping into the local river and affecting the amenity of the residents downstream on the Fly river.  The action brought by Slater & Gordon in Australia was the straw that broke the camel's back in terms of BHP's involvement with OTML in the mine.  They walked away from the mine, agreeing to pay compensation to certain groups.  They were already paying compensation to others, already paying for infrastructure and development costs in the immediate region, they were already subject to an Act of the PNG legislature requiring specific performance in all matters associated with the mine, including environmental management.

The mine continues, in the hands of the PNG government, but with a significant and skilled partner, BHP absent.  The chance for PNG citizens to break out of the primitive existence is diminished.  The Greens wants to keep the PNG villagers in the Stone Age.

A contrast in the Pacific, where the progressive NGOs are conspicuously absent, or at least ineffectual, is New Caledonia.  Rather than opt for the liberation path of the post-colonial so disastrous for their neighbours, such as the Solomons, New Caledonia is "still lucky to have France".  New Caledonia has a First World standard of living, high literacy rates and long life expectancy.  The careful and long-term devolution of power from the colonial power to the locals, contrasts with the Anglo experience in the Pacific, where the liberationists have reaped the dividend of poverty and mayhem.

Corporate Effort

Support for reform has faded, but business can still pick up the pace.

The business sector -- more specifically, the large resources companies - played a key role in economic reform.  During the 1970s and 1980s, they maintained large teams of policy people on staff, who made seminal submissions to virtually every inquiry, study or investigation.  They funded a host of independent analyses from universities, think-tanks and consultancies.  They provided leadership and backbone to the many business groups that then promoted reform.  They gave courage and political support to politicians, and their leaders participated directly in the debate.

This no longer happens.  The policy teams are largely gone.  The financial support for independent research has declined and in many cases has been shifted to anti-market groups.  Business groups, with some exceptions, have gone quiet and politicians receive little public support from business for further reform.

This does not mean that business has gone into hibernation.  As a result of deregulation and market-based reform, companies have been on a treadmill of internal reform to increase efficiency.  Indeed, the pace of change has been unprecedented.  Companies have understandably shifted their focus from changing the economy to changing themselves.

To a degree, this is to be welcomed.  Few businesses have taken full advantage of the scope for internal reform and the opportunities that are allowed under the present regulatory framework.  And therefore, even on a public-benefit basis, the best return for their effort lies with internal reform.

There are other reasons for the shift in focus from economic to internal reform.  First, many of the big-ticket reforms that affect the private sector have been done, with the big exception of reform of the labor markets, which remains incomplete.  Second, the remaining reforms are, in the main, outside the expertise and operation of the business sector, such as higher education, public hospitals, and welfare.  While private hospitals and universities exist and could expand, the public sector will remain the dominant funder and provider.  Third, companies and industries have become more global and therefore less focused on Australia and its reform needs.  Fourth, corporations are increasingly unwilling to risk what is left of their reputations to promote market-based reform.  Corporations, in large part because of their role in promoting and implementing market-based reform, have been subject to a concerted campaign of "brand-mail" by the opponents of reform.

A recent example of this campaigning is the RepuTex Index, which provides a public soapbox for anti-market advocacy groups such as Greenpeace, the ACTU and the Ethics Network, to shame and blame corporations.  Of course, the excesses of the dot-com bubble, many cases of corporate fraud and other examples of managerial capitalism run riot have not helped the standing of the sector in the public's eye.  Finally, business leaders, like politicians, have become lazy, content to reap the benefits of past reforms while not pushing for more.  If this continues, Australia's capacity to compete and prosper will also begin to wane.

What it means is that a key source of support for reform has waned.  This has contributed to the pace of reform slowing at the national level and going into reverse at the state level.  However, the main fault lies not with business but with short-sighted politicians and the excessive power given to fringe political parties.

Nevertheless, business support for economic reform can be mobilised.  First, reform of the Business Council of Australia (BCA) is needed.  The BCA is potentially an important institution as it brings together the big corporations across all sectors.  During the 1980s and early 1990s, its contribution to reform was profound.  It lost its way in the mid-1990s when it was restructured to allow select chief executives to speak on behalf of the corporate sector as a whole.  Because its members were not willing to put their own companies' reputations on the line for the greater good, the BCA has since avoided taking a stand on most tough issues and has gone quiet on reform.  This can be changed by emulating the structure and personnel of the New Zealand Business Roundtable, which has kept the torch of reform burning despite a hostile government.  The ascendancy of Hugh Morgan to the presidency of the BCA is a very positive sign.

Second, even though companies have gone global and the "branch office" mentality reigns, global corporations can be persuaded to invest in public-interest issues in Australia.  After all, they did so in a big way in the 1980s.  For example, while the multinationals have cut policy staff in Australia, they have expanded these resources in the region, often in Singapore.  These companies need to be convinced that investing in policy change in Australia is worth their while.

Third, businesses should recognise that good corporate citizenship does not just mean giving money to charity (worthy though it is).  It also means helping make the case for reform.  Reform is, after all, not only good for shareholders but for society as a whole.