Paths to development: the UN vs private business

Michael Hopkins
21 November 2006

"Where the proceeds of industry ... are misspent or misapplied over long periods by governments, people turn to the company and say 'You made money, but there is little in the country to show for it.' To protest that we paid our taxes is of no avail. It may not be our responsibility, but it becomes our problem."

Mark Moody-Stuart (chairman, Anglo American plc), Tacitus Lecture on Business and NGOs in Sustainable Development, 23 February 2006

"However, we have also seen how the UN's work on development and environment is often fragmented and weak. Inefficient and ineffective governance and unpredictable funding have contributed to policy incoherence, duplication and operational ineffectiveness across the system."

"Delivering as One", report of the United Nations secretary-general's high-level panel, 9 November 2006


Here we go again! The United Nations, already struggling to cope with the last set of reforms, receives the recommendations of yet another. In advance of the sixtieth anniversary meeting of the UN general assembly in September 2005, Kofi Annan had commissioned a high-level panel to undertake an inquiry into how the organisation could be reformed to fit the challenges of the 21st century. Its December 2004 report was the foundation of the UN secretary-general's March 2005 reform package: In Larger Freedom: towards development, security and human rights for all.

The latest proposals - entitled "Delivering as One" - are the product of an equally impressive reform panel, again initiated by Kofi Annan and co-chaired by three prime ministers: Luísa Dias Diogo (Mozambique), Jens Stoltenberg (Norway), and Shaukat Aziz (Pakistan). The panel also included such luminaries as Britain's chancellor (and probable next prime minister) Gordon Brown, and Chile's former president Ricardo Lagos.

The UN is often accused of being bloated, unnecessarily bureaucratic, corrupt, lacking accountability and transparency. Such criticisms can be exaggerated or unfair, but even the latest UN panel acknowledges that:

"(Without) ambitious and far-reaching reforms the United Nations will be unable to deliver on its promises and maintain its legitimate position at the heart of the multilateral system. Despite its unique legitimacy, including the universality of its membership, the UN's status as a central actor in the multilateral system is undermined by lack of focus on results, thereby failing, more than anyone else, the poorest and most vulnerable."

In attempting to resolve such problems, the high-level panel's principal recommendations are:

  • create a unified UN at the country level responding to national needs ("One UN": one leader, one programme, one budget and, where appropriate, one office)
  • establish a new multi-year Millennium Development Goals funding mechanism to drive performance and accountability
  • consolidate three bodies into a new organisation for women
  • create a UN sustainable-development board to oversee a new "One UN" country programme
  • appoint a coordinator to better marry UN operational and normative activities at global, regional and national levels
  • strengthen leadership on humanitarian and environmental activities.

Michael Hopkins is chair of the International Centre for Business Performance and Corporate Responsibility, Middlesex University Business School, and managing director of MHC International. His books include The Planetary Bargain: Corporate Social responsibility matters (Earthscan, 2003) and Corporate Social Responsibility and International Development: Is Business the Solution? (Earthscan, 2006)

The weakness of strength

This is a challenging prospectus. To put it in proportion, and to be fair to the UN, it is important to emphasise that the UN is actually a small organisation and that (as my experience both as a UN official and external consultant confirms) it does a great job for its size. The total operating expenses for the entire UN system - including the World Bank, International Monetary Fund and all the UN funds, programmes and specialised agencies - came to some $18.2 billion a year at the turn of the 21st century.

This is considerably less than is spent by many transnational organisations and governments. To take a few examples: General Electric had a market capitalisation of $350 billion in 2004, Exxon Mobil had profits of around $25 billion in the same year, and the United States's military expenditure was $80 billion in Iraq alone in 2005.

Moreover, the budget for the UN's core functions - the secretariat operations in New York, Geneva, Nairobi, Vienna and five regional commissions - is $1.25 billion a year. This is about 4% of New York City's annual budget, $3.7 billion less than that of New York's State university system, and nearly $1 billion less than the annual cost of Tokyo's fire department.

The main problem of the UN is also its strength: the fact that the body is simply a distillation of the views of its members. Accusations of "dithering" are hardly surprising when each nation has one vote. The World Bank, by contrast, is praised for its efficiency, but it can base its mandate on "one dollar, one vote". (At the same time, it suffers from a different sort of problem: "one leader, one vote", where the United States's choice - currently Paul Wolfowitz - is not to everyone's taste).

This member-centred reality partly explains why the UN is continually felt to be in need of reform, and why reforms never give way to a definitive new reality. The Delivering as One proposals are likely only to reproduce duplication and confusion as the organisation at various levels feels obliged to adhere to the latest concepts. Since most of the individual UN agencies are controlled by their own governing bodies, they will continue to pursue their own track while paying lip-service to the new tenets. For instance, Unicef is too well known and successful to risk letting one person in a country look after its multifarious interests.

The agencies will also have to cope with a new UN secretary-general in January 2007: Ban Ki-moon (himself selected in an undemocratic process of nomination and negotiation in the Security Council). Kofi Annan's successor may turn out to be a revelation, but the prospects are not bright. Ban told reporters in New York that his priorities would be making the UN "more efficient, effective and relevant", and using the UN's limited resources and manpower more effectively to reduce the "redundancies and overlapping in the overstretched organisation". The words come straight out of the automaton school of new appointees to any organisation. The UN needs more and better at this stage of its life.

Also in openDemocracy on United Nations reform:

Carne Ross, "The United Nations and genocide" (1 November 2006)

Mariano Aguirre, "Power and paradoxes in the United Nations"
(7 November 2006)

Beyond the new mantra

If a single message is embodied in the latest high-level panel's reform efforts, it is more accountability and transparency. This new mantra is something all those who seek to improve the work of UN agencies can cheerfully espouse. When I pressed a British minister for work and pensions in 2005 to explain why Britain (along with the US) had vetoed the International Labour Organisation (ILO) budget, he explained that it was because there was too much waste - therefore a need for more "transparency and accountability" ("T&A", in the reformists' jargon).

In principle this sounds fine, but in practice such simple ideas can drive organisations into the ground by giving more power to the bureaucrats who control them and less to the innovative thinkers who could work on the problems the organisation is supposed to be in existence to solve.

An ILO insider told me that the 2005 budget process had tripled the use of senior staff, who had to be taken away from more productive duties. Thus the T&A mantra drives the UN organisations into more bureaucracy and less delivery - the opposite of what is intended. The logic is that a serious rethink is required by sanctimonious bodies who call for more T&A without considering what is involved as a consequence. The Delivering as One report fails badly on this count.

In my new book, Corporate Social Responsibility and International Development: Is Business the Solution? (Earthscan, 2006), I argue that corporations are starting to earn a better reputation by investing in development as part of their newfound corporate social responsibilities. There is more interest from corporations than even a decade or so ago in being involved in development, although much of this interest to date has been in philanthropy (charitable giving) rather than development per se.

Development is a wider and much more complicated concept than mere philanthropy. Development means working with local partners and public institutions to create sustainable projects. Much of development, and probably the most effective (albeit often unsung) lies in purely creating capacity; the best such projects are those which help people to help themselves (in the classical maxim: teaching people how to fish instead of simply giving them a fish).

In this light, it is significant that the UN reform report hardly mentions the contribution of the private sector. Yet many businesses, frustrated with infrastructural blockages and social problems in many of the countries they operate in, are now themselves cooperating in a variety of development initiatives. Together, these amount to much more than the relatively puny annual $10 billion development-aid budget of the United Nations.

If, as Chukwu-Emeka Chikezie and Ehsan Masood write in openDemocracy, migrants and diasporas are becoming an important potential agency of national and international development, business is becoming another. Today, the United Nations will continue to find, and lose, its development impact through yet more "transparency and accountability" reforms. Meanwhile it is already starting to be bypassed by the private sector. 

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