22.01.2004 Annual Meeting 2004 The experience of the richer powers today shows that the private sector provides the base for a country's development, said Paul Martin, Prime Minister of Canada. Visitors to most developing countries see evidence of widespread entrepreneurship in bazaars and markets and of the skills possessed by local people. So why have these nations not also been able to make the same economic advances as countries in Europe and North America? One explanation he has heard, said Martin, is that indigenous business has no confidence that it will be able to overcome the various administrative barriers that dominate economic life, that property rights can be protected, or that legal systems can bring real justice. How far is this true? he asked his fellow panellists.
David Green, Executive Director, Project Impact, USA; Social Entrepreneur, suggested that foreign firms and organizations operating in developing countries should follow a scheme of "ethical globalization" or "compassionate capitalism, where profit is a means to an end rather than an end in itself". This approach ensures sustainable healthcare. His own organization has set up over 150 specialized hospitals and clinics in many countries which aim to enable local practitioners to take on the enterprise and run it. All are based on a system of differential pricing. At an eye hospital in India, some patients pay nothing, some pay part of the cost of the treatment they receive, and some pay much more than the cost.
Chile and South East Asia have shown that cooperation between the government and the private sector can ensure that development is sustainable. Without this cooperation, it is not, observed Juan Villarzu, President and Chief Executive Officer, Corporacion Nacional del Cobre de Chile (Codelco), Chile. Business has to seize the opportunities to invest and provide capital not only financial capital but also training, management skills and knowledge. "In this way, business becomes a good citizen, ensuring that the benefits of growth can be shared by all elements in society." For C. K. Prahalad, Professor of Business Administration, University of Michigan Business School, USA, the failure of international business to recognize the huge market opportunities offered by many developing countries is part of the problem. Outside investors see only poverty, which they regard as uninteresting. "I wish we could drop the term 'the poor' and instead use 'bottom of the pyramid consumers'. Consumers attract respect." The entire growth of the global wireless market is driven by demand among the poor. "How can anyone in hi tech ignore this huge marketplace?" The whole dialogue should be changed, dropping talk of "poverty alleviation" and replacing it with "market development".
Hernando de Soto, President, Instituto Libertad y Democracia, Peru, agreed. "There is a new phenomenon, the market of the poor." Over the past 35 years, cities have expanded rapidly, for example, Guayaquil in Ecuador whose population has grown 20 times over that period. All the countries, which have achieved growth, have essentially applied capitalism, although many use other labels to cover it up, because the term remains a nasty word on the streets of countries as far apart as Switzerland and Peru. But the people flooding into the cities are part of a new wave of entrepreneurs and established firms "better think about them".
Why is there so little problem with adapting capitalism in Communist China "while we in Latin America still see the private sector as a necessary evil?" asked session moderator Ernesto Zedillo Ponce de Leon, Director, Yale Center for the Study of Globalization, USA, and a former president of Mexico. For de Soto, this is partially a result of the dominance of the civil code principle in Latin American countries which leads to political dominance of the economic process and a proliferation of regulation. Meanwhile, around China's borders are examples of flourishing capitalist economies Japan, South Korea and Taiwan. "How could China ignore these success stories?"
Summing up, Zedillo said the world faces a tremendous challenge if poverty is to be reduced 50% by 2015, the target set in the United Nations Millennium Development Goals. There is no one solution or one model that fits all. "But having a strong private sector is unavoidable if we are to meet the challenge."
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