Category Archives: Economic Justice

Enterprising answers to development

Tomato vendor, African market

A few good sources exploring the themes of social entrepreneurship and microcredit.

Beyond Good Intentions reproduces an article from the International Trade Forum on innovative approaches to reduce poverty through trade, which are bringing business, NGOs, government and aid agencies together. Examples include Bespoke Experience, a social enterprise creating high-end tourism lodges in Mozambique, and using its profits to enable communities to work their way out of poverty.

NOW and PBS review the debate on microcredit, and whether it’s really pro-poor or simply exploiting the most vulnerable, with a focus on Compartamos, the Mexican non-profit turned for-profit microfinance institution at the centre of a fierce debate. It contains an excellent interview on the subject with Muhammad Yunus, the world-renowned founder of the Grameen Bank and father of microcredit, who also wrote another good piece on Social Business Entrepreneurs here.

Revision thoughts 1.0

 Coverbook - Schumacher's Small is Beautiful

As I enter the final, inhuman and degrading phase of this academic year, a.k.a. revision, I have decided to start posting some thoughts, quotes, memorable ideas that I hope I will take with me into the exam rooms and possibly into my future life (assuming I will have one). These will sometimes be followed by my crucial follow-up insight [in italics], for the benefit of humanity and posterity at large.

So here goes… First, some thougths on the global political economy:

1. Gerschenkron distanced himself from deterministic visions of prerequisite, explaining that – even if present in England or Germany – each country had its own path to follow. There is no such a thing as a ‘stage scheme’ of development. [which means, in the network society and information economy, we need to focus on new paths and strategies of development to lift countries out of poverty]

2. There should be more emphasis on internal rather than external integration of developing countries’ economies: dense linkages between sectors, high local demand for local products, generated by high levels of wages for workers to become consumers. Export demand should not be the main source of economic growth: rather, a socially and sectorally integrated economic structure (Robert Wade). [which I read as: let’s concentrate on creating aggregate demand, increasing consumers’ purchase power, building local entrepreneurialism, and the big investments will follow]

3. The liberal market was created at some huge human cost. [to me: if we can achieve similar results without having to go through the same levels of human suffering, environmental destruction, social disintegration, political upheaval, all the better. Keep it small, which as known is beautiful]

4. The organization and functioning of monetary and financial systems are rarely influenced by narrow economic logic of maximising efficiency. They also reflect various political rationales relating to the pursuit of power, ideas, and interests (John Ravenhill). [which means: it’s pointless to attack the capitalist system without addressing first the roots of its political and ideological power – the concept of competitive maximisation of profit at the heart of the American political system]

More pearls to follow soon, stay tuned!

Africa – March 2007 Round-Up

 Hluhluwe Park, South Africa - C  www.mmuspratt.com

These are the articles, posts and news-items that have caught my eye in relation to Africa over the last month. My main sources are Africa Unchained, Sociolingo, BlogAfricaMy Heart’s in Accra and Timbuktu Chronicles, amongst others…

African Update paints a portrait of the Mugame regime, backed by video evidence, before predicting its demise, while Stephen Chan gives a good analysis of the current situation in Zimbabwe on Open Democracy. A good, informed read, like most of Stephen’s stuff.

Issa G. Shivji, Professor of Law at the University of Dar es Salaam, discusses on Pambazuka News the changing nature of the development discourse in Africa over the last few decades.

Afrol News writes a really interesting article on Ethiopia’s continuing economic boom, which – unlike that of other African economic miracles like Angola or Botswana – is not attributable to oil or natural resources, but to ‘hard work, economic reform and investments in its people and infrastructure’. While IMF officials were quick to state that this ‘mainly comes as a result of implementing economic policies prescribed by the Fund’, the article rightly points out that it’s down to Ethiopia’s willingness to ‘invest in key sectors that empower the poor masses, mainly in education, infrastructure and agriculture’. A good example of this comes via Sociolingo: in the outskirts of Addis, Azmeraw Zeleke is turning burnt-out shells into cylinders used in coffee machines!

Again afrol News discusses the heavy price air-borne African exports are beginning to pay because of Europe’s increasingly populist green policies. Also at stake is the increasingly important tourist industry, at a time when more and more African countries are relying on tourism to earn much needed foreign reserves.

Henry Ekwuruke from TakingITGlobal argues on his blog that ‘funding is not a necessity for invention’. In fact, he says, ‘the need to adequately fund research without unfairly compromising invention and innovation, this is why money is such a complicated component of any scientific and technological development’.

Ethan Zuckerman writes on My Heart’s in Accra about the awe-inspiring talk given at the TED conference by former Nigerian finance minister Dr Ngozi Okonjo-Iweala: Africa, she says, has its fair share of problems, but it’s Open For Business, and the signs of an African Renaissance are beginning to be visible.

Akwe Amosu on Foreign Policy in Focus gives a good and in-depth overview of the China-in-Africa issue, and of the governance issue that lies at its heart.

Sociolingo writes about the 50th anniversary of Ghana’s independence, and reviews the comments and articles that have been generated across the web.

Timbuktu Chronicles reports on the imminent advent of solar-powered cellphones, which promise 20-25 minutes of talk time for a 40 minute charge in the sunshine. This phone could revolutionize the way Africans communicate and do business in an environment with unreliable electricity supplies.

The UNDP published (back in February, in fact) a highly critical policy brief on the impact on the MDGs of privitizing basic utilities in Sub-Saharan Africa (PDF): Privatisation has failed on several counts. Contrary to expectations, private investors have shied away from investing in such utilities in the region. So it has been costly for governments to motivate them to invest. Moreover, the focus of investors on cost recovery has not promoted social objectives, such as reducing poverty and promoting equity. Thus, current realities dictate refocusing on building up the capacity of the public sector. It continues to dominate the provision of water and electricity, and will do so for the foreseeable future. But a dramatic scaling up of both external and domestic resources will be needed to finance more extensive public investment in these sectors.

And finally, Kathleen starts getting excited about the PICTURE Africa project, which aims to learn how ICTs are affecting poverty in East Africa. Nice!

Trading in lawsuits

trading pays... lawyers! 

Alan Beattie writes on the Financial Times about how lawsuits are coming to dictate the terms of trade [via Patrick]

Some years ago, American catfish farmers got cross when cheap Vietnamese catfish started flooding the US market. Their expensive lawyers forced the Vietnamese to stop calling their catfish catfish, on the grounds it was a different family to, though in the same Siluriformes order as, American catfish. The Vietnamese relabelled their exports as basa or tra (meaning, in Vietnamese, “catfish”). Sales continued to thrive.

Undeterred, the US catfish farmers’ lawyers changed their strategy, successfully securing import duties on Vietnamese catfish on the grounds that they were being “dumped”, or sold at unfairly low prices, in the American catfish market. To do so, they needed to prove that Vietnamese catfish were a “like product” to American catfish, having previously spent many thousands of dollars in fees to establish that Vietnamese catfish were not, in fact, catfish.

As far as their critics are concerned, that tells you pretty much all you need to know about what happens when trade lawyers get out of control. As the so-called Doha round of World Trade Organisation global trade talks sputters, more and more of the work of trade relations has shifted away from negotiation and towards litigation and arbitration. To its defenders, this trend represents rule and reason constraining power politics. To its critics, it means runaway jurists subverting democracy.

Read the full article here.

Oxfam vs. Donegal ‘Vulture Fund’ International: 1-0

Vulture - XVI century copperplate engraving 

From the Oxfam website:

In October 2006, Oxfam came across a commercial company trying to scavenge $55 million from Zambia, one of the poorest countries in the world…

And got to the bottom of the story

In 1999, ‘Vulture Fund’ Donegal International bought up $15 million of Zambia’s debt at a knock-down price of $3.3million (just one month before Zambia qualified for debt cancellation).

In February 2007, they attempted to sue Zambia for the full cost of the original debt, plus penalty payments, plus interest – a staggering $55 million.

Then we shouted about it

We broke the story with ‘Newsnight’, on the eve of the High Court judgement … ran an exclusive with the Financial Times …and we turned up outside the Court with a live vulture, just to drive the message home!

Inside the courtroom, the judge said that although he was legally bound to award the core debt, it would be considerably less than Michael Sheehan, the man behind Donegal – who he said had been ‘deliberately evasive and even dishonest’ – was asking for.

And so did our supporters

More than 24,664 actions have already been taken to stop Donegal International scavenging $55 million from Zambia.

Supporters have been sending emails to Mr Sheehan asking him to give the money back; and calling on Gordon Brown to push for legislation to stop vulture funds. More people are adding their voices to this campaign every day.

Then the British government responded

The Treasury issued a statement condemning vulture funds, calling Sheehan’s action ‘socially irresponsible’.

Very soon, it made headlines in America

Donegal is registered in the British Virgin Islands, but Mr. Sheehan is an American citizen. The US media were onto the story fast.

Where it was raised with President Bush

After seeing the story US Congressman John Conyers, chair of the Judiciary Committee, raised it directly with President Bush.

Who said he’d do something about it

We want President Bush to put the brakes on Sheehan, and to send a strong message to all other Vulture Funds that they must stop scavenging on the poorest people in the world.

And now it’s just possible…

Back in the UK, the court re-convenes in March to decide how much to award Sheehan.

…that this kind of thing will STOP.

There is still more to do, please send a strong message to all Vulture Funds that they must stop scavenging on the poorest people in the world.

What links YouTube with Yogurt?

Istanbul the Eastern Capital

The answer is of course Turkey, where yogurt was invented and YouTube recently banned… Read on:

Saving the world with a cup of yogurt – Nobel Peace Prize winner Muhammad Yunus, the father of microcredit, has a new idea. It’s called social business enterprise, and the first step is a yogurt factory in Bangladesh. [via Pam]

Turkish court bans YouTube access – Access to the popular video-sharing website YouTube has been suspended in Turkey following a court order. The ban was imposed after prosecutors told the court that clips insulting former Turkish leader Mustafa Kemal Ataturk had appeared on the site. According to Turkish media, there has been a “virtual war” between Greek and Turkish users of the site, with both sides posting insulting videos. [via Ebed]

ASAQ – The $1 Future of Malaria Treatment

 

Sources: MSF, DNDi, Le Monde, La Repubblica.

On 1 March a revolutionary pharmaceutical product to treat malaria will be launched on the world markets. Why revolutionary? Because it is patent-free, it is not subject to intellectual property (IP) regimes, it is not-for-profit and anyone will be able to copy its formula. It’s called ASAQ and it is the result of an agreement between Drugs for Neglected Diseases Initiative (DNDi) – a not-for-profit research organisation created in 2003 by Médecins Sans Frontières – and the French pharmaceutical company Sanofi-Aventis.

This is the first product manufactured by DNDi, and it represents MSF’s response to PhRMA, the powerful lobbying arm of the largest US pharmaceutical research and biotechnology companies. The objective is to develop affordable cures for those ‘forgotten’ diseases that are not lucrative enough for the profit-making drug companies. Malaria is one of them. It is an infectious disease affecting some of the most vulnerable regions of the planet, where people do not have the economic resources to buy medicines at market value. Since the drug companies do not see profitable opportunities there, they have no incentive to develop life-saving medicines.

DNDi’s objective is to coordinate research into pharmaceutical products that can be developed and sold in developing countries at low cost, without IP restrictions. The launch of ASAQ – the first not-for-profit antimalarial drug – marks an entirely new way of conceptualising pharmaceutical products, similar to the way open source changed the way the software industry operates. No one owns the thinking behind a product, so anyone can take it, use it, improve it or – like in this case – save lives.

Update 02/03/07: See some further explanatory remarks by Jean-René Kiechel and Bernard Pecoul of DNDi on the Public Library of Science blog. The story has now been picked up by the NY Times, AP and Reuters.

Bloody Diamonds

Diamonds are forever

About a month ago my friend Paul was posting about the upcoming blockbuster Blood Diamond and wondering why Diamond Facts – the website set up by the diamond industry to dispel the film’s central idea that the diamond trade might be fuelling conflict in Africa – wasn’t linking to Global Witness, the NGO that has been at the forefront of much of the (often risky) research on the issue.

Well, here‘s why. Global Witness, Amnesty International USA and… er… Warner Bros have joined forces to launch a new website, Blood Diamond Action, where Diamond Facts’ claim that more than 99% of diamonds are now from conflict-free sources is bluntly contested:

It is extremely difficult to estimate the current percentage of conflict diamonds as smuggling can easily take place outside government controls, creating a trade in illicit diamonds. Illicit trade, thought to represent up to 20% of global trade, shows that there are serious loopholes in the Kimberley Process. Any type of diamond smuggling highlights weak spots in a system through which conflict diamonds can potentially infiltrate. Poor government controls also allow some conflict diamonds to be certified as ‘conflict-free’. Some members of the diamond industry are knowingly flouting international and national law, yet the lack of industry oversight and willingness to find and expel unscrupulous members of the trade allows these traders to operate with impunity. [The Truth About Diamonds, downloadable PDF]

De Beers must be very unhappy about this…

Corporate Social Responsibility – whose business is it?

Fortunetex Garment Factory, China

From Global Voices Online:

On Thursday November 9th, at 6:30pm EST (23:30 GMT / 07:30am Friday Beijing time), Reuters will be hosting a live conversation about corporate social responsibility at its New York headquarters.

According to the special web page built for the event: “Corporate responsibility is increasingly important in today’s global landscape, with companies taking a greater role in developing communities, working to reduce poverty and addressing the health of our planet.”

But are companies – multinational as well as local – making nearly enough effort to be socially responsible? You, our dear readers and community members, likely have a few opinions on this subject.

We hope you will express your views on your own blog (please tag your posts with CSR for “corporate social responsibility” in Technorati) or let us know what you think in the comments section of this post. We will be feeding relevant blog posts into a special section of the event page. Also, I will be in the room on Thursday and will relay your views to the panelists.

We also hope that the Global Voices community will join us live on the day by listening to the webcast (link tba on the event web page) and participating on the live chat. Your participation will bring some badly-needed perspectives from developing countries and non-Western nations.

Your participation is especially important because if you click on the event web page, you will see that the panel of speakers is, well, not exactly the most geographically, economically, or ethnically diverse panel we’ve ever seen – to put it mildly.

If you’d like, please help us spread the word and get more friends to participate by putting a badge for the event on your blog:

Reuters Newsmaker - Social responsibility: whose business is it?

Fair trade or fairy tale?

 

Some really interesting exchanges yesterday on the topic of fair trade. At the core of the argument was the following question:

Is fair trade good for developing countries, or is it just a placebo to soothe our conscience, while doing very little to lift them out of poverty?

The debate was framed within a wider discussion on poverty and inequality, in which neo-liberal and Marxists economists threw World Bank data at each other in an attempt to win the argument. Someone later commented they were like children in a school yard. And indeed, it is hard to see how we can move forward in understanding how to fight poverty and inequality if all we get to hear is this biased bickering, which takes into little consideration the real complexities of the world. What’s the use – for example – of drawing conclusion on the impact of global economic dynamics on Africa when the data aggregates all countries, without distinguishing the ones that have been ridden for decades with internal conflicts?

Data (mis-)management aside, the fair-trade debate was an interesting one, because it brought the theory down to the real world, and confronted us with some hard questions. High-return industries are increasingly concentrated in economic cluster areas – dominated by North America, Europe and East Asia – while only the lower and less profitable parts of the production chain are off-shored to developing countries. This off-shoring comes at a heavy price, as northern TNCs play southern countries against each-other to induce them to lower their corporate taxes, reduce environmental regulations and curb the legal power of unions. So little hope for an economic boom on the manufacturing side.

What about the agricultural sector? Well, this has never been the door to economic miracles, and dependency on the fluctuation of prime food commodities (like coffee, tea, etc.) means many countries are building their economies with a foot in the grave. The long collapse of coffee prices, for example, was mainly showldered by small farmers, who bore the heavy costs of a production chain that won’t cut down advertising costs in New York or London, but will happily let those who grow the beans go hungry. Result: no hope for Nicaragua to raise to the levels of economic growth of Taiwan.

The response – aside from the smashing of Starbucks shop-fronts – has been the rise of the Fair-Trade industry. By paying a premium to small farmers, the Fair-Trade label guarantees a sale price to farmers regardless of the fluctuations of the market. This – combined with the security provided by long-term contracts – allows farmers to start focusing their resources on improving production facilities, community infrastructure, cooperative initiatives, and eventually gather enough money to start-up integrated business ventures. Ideally, on the log run, Nicaragua’s cooperatives will be able to produce, package, store, ship and market their own coffee, by-passing the expensive steps of New York and London, to reach directly the consumer with a high-quality and competitive product that will constitute a real drive for the country’s economy.

This is the theory. And what about the practice? Well, leaving aside recent reports by the Financial Times on the alleged lack of integrity of the Fair-Trade certification process, there are some dark spots in the picture. The first one is purely market related: although most people claim they support the principles of fair trade, only 5-10% actually walk the talk. This poses limitations on the amount of support the Fair-Trade Foundation, for example, can give to farmers – in terms of certification costs, etc. The second issue relates to the capacity of large multinationals to change the rules of the game to their advantage. Seattle-based Starbucks is a good example.

First, having had a number of windows smashed in various cities of the world, it declares it wants to come clean and starts an interesting partnership with Oxfam. Then, it decides that rather than complying with international Fair-Trade standards, it’ll be better off writing its own rules:

Starbucks Coffee Company initiated C.A.F.E. (Coffee and Farmer Equity) Practices to evaluate, recognize, and reward producers of high-quality sustainably grown coffee. C.A.F.E. Practices is a green coffee sourcing guideline developed in collaboration with Scientific Certification Systems (SCS), a third-party evaluation and certification firm.

Finally, it shows its true colours by blocking an attempt by Ethiopia’s farmers to copyright their most famous coffee bean types, denying them potential earnings of up to £47m a year. Indeed, every time I try and have faith in companies, and trust their statements of corporate social responsibility, I stumble across some other dirty trick they play in the un-fair game of market competition. So is there no hope?

Well, I am not sure. Personally, I came up with a few policy suggestions which might help us move forward:

  1. More FDA should be channelled directly to fair-trade and cooperative organisations, especially to promote business ventures in the primary production process; this should be done with the help of business experts and market analysts, to allow the emergence of integrated fair-trade business models, building on the existing capabilities of the national economies (agriculture) to expand in the direction of the manufacturing and service industries.
  2. Fair trade should be at the centre of any future trade negotiation between developing and developed countries, especially the EU, and should be dealt with separately from other forms of trade: in a sense, fair-traded commodities (not just agricultural ones) could consitute the way out of the current empass on the EU subsidies.
  3. Fair-trade associations and cooperatives should be given a strong voice – and separate from the business and civil society sectors –  in the shaping of national economic development plans.
  4. A strong campaign should be launched against businesses setting up their own “fair-trade” labels, questioning their ability to be really independent in deciding what is ‘fair’ in all trade matters.

In all this, clearly, the role of governments is fundamental. And to those who think their ability to reign in large corporations has been destroyed, check this recent report by the NY Times on China’s move to boost unions and end workers’ abuses by TNCs operating within its boundaries [via Patrick].

More suggestions/ideas are welcome…