If you are a private citizen who wants to help end poverty, find a pro-business project to help. Good places to start are the websites Businessfightspoverty.org and Businessactionforafrica.org. If you’re interested especially in businesses that aim to help the poor in emerging countries, start with the online clearinghouse Nextbillion.net, a joint project of the World Resources Institute and the Acumen Fund.
As for leaders and managers of foreign companies, or donors seeking to improve conditions, the key is to make sure that charity money goes only for refugee, medical, or emergency relief. For economic development, support the business sector. For example, Barclays PLC boasts that it supports 700 community groups in 26 countries. Why not cut that figure in half, and support local business with the other half? Founded in 1690, Barclays was one of the earliest firms fostering a healthy business sector in the United Kingdom. It can help do the same in other countries.
Microfinance, training, and business loans are simple ways to start helping local business. The aim is for companies to contract to new local businesses what in more-developed countries they don’t do themselves, such as transport, banking, supply, distribution, and other services. For example, if you are a manager, you might need to help develop and support a local construction or real estate business to help you build and maintain employee housing. It is especially valuable to promote local social enterprises, such as the recent partnership between the Grameen Bank and yogurt maker Danone to create a nonprofit in Bangladesh. (See “Not Just for Profit,” by Marjorie Kelly, s+b, Spring 2009.)
We see a special role for business schools and their students in poor countries of the world. During the past two decades, the number of business schools in China has grown from zero to more than 100; India now has more than 1,000. All poor countries need competent business schools that support their local business sectors with dedicated research and trained graduates. Local alumni networks become pro-business associations. And local schools offer research and seminars that help a country reform and begin to move up the Doing Business list. These business schools can also profit from partnership projects with business schools in rich countries, as long as the project helps promote a strong relationship with the local business sector as well.
Business school students in rich countries can help. Social enterprise is booming among most major business schools; it’s common to find that a quarter of all business students are members of social enterprise clubs. The international club Net Impact has hundreds of chapters; it sponsors field projects where business students travel to work for social enterprises. That alone is worthwhile, and it is not much of a stretch to expand to include small businesses in poor countries. If pro-business aid ever takes off, MBA graduates from rich countries will probably be such aid’s foot soldiers, in the same way that an earlier generation went overseas on government and nongovernmental organization projects to help “save the world.” And the local business school graduates in poor countries will lead the way in building their own thriving business sectors.
And as for domestic companies in poor countries, they’re already doing what they need to do: staying in business. That is the single most important step in building the kind of climate that leads to prosperity. The easier it is for companies to stay in business, the more rapidly prosperity will appear.
Reprint No. 09502
- R. Glenn Hubbard is a former chairman of the Council of Economic Advisers under President George W. Bush, and is the dean and Russell L. Carson Professor of Finance and Economics at Columbia Business School.
- William Duggan is a former Ford Foundation representative for West Africa, and is an associate professor at Columbia Business School.
- This article is adapted from The Aid Trap: Hard Truths about Ending Poverty, by R. Glenn Hubbard and William Duggan (Columbia University Press, 2009). It was originally published in s+b, Special Issue, Autumn 2009, and was updated for this issue.