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Contributions from
the Column
Focus
Thomas Loster: Untapped wealth: ways to advance climate protection
Stephan Kunz: Raising labour standards in Bangladesh
Interview with Barbara Unmüssig: “Eroding statehood“
Dominikus Collenberg: paradigm shift
Jan Martin Witte and Thorsten Benner: Benefits and limits of UN partnerships with the private sector
Carola Torti: aid: logistics giant DHL supports UN in times of disaster
10/2006
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“Eroding statehood”
Public-private partnerships (PPP) are geared towards corporate interests and, as a result, conform to business reasoning. Barbara Unmüssig of the Heinrich Böll Foundation believes they are unlikely to tackle socially important tasks and calls for more public debate.
[ Interview with Barbara Unmüssig ]
What is the greatest risk of the PPP approach?
The greatest risk is that businesses avail themselves of public funds as free riders, in a self-serving manner. Combining public and private funds does not automatically mean that firms will act responsibly in environmental and social terms across the board. Another risk is that not enough public funds are spent on neglected public goods. PPPs tend to be geared towards corporate interests, so ultimately they are driven by the profit motive. However, where market logic dominates, it is unlikely that attention will be paid to neglected public concerns.
What do you mean in tangible terms?
There are many public-private partnerships in health care, for example. It is a positive thing if PPPs lead to increased expenditure on vaccinations, AIDS prevention et cetera. However, in my opinion, it is important that public money be spent on research on diseases that may not interest the pharmaceutical industry, but which matter tremendously to many Third World countries. Public funds must be directed to where markets fail.
Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) has certain criteria for PPP proposals to be funded. One such criterion is that projects are only supported if they contribute something beyond the partner’s ongoing business.
Yes, but what is the proof that that is really the case? PPP projects often deal with defining environmental and social standards. Why can’t the private sector take care of that itself? Aren’t these typical management tasks? I don’t want to condemn such projects, they certainly help the people affected in some way, but many questions remain unanswered.
German retail representatives would tell you that tough competition is forcing them to sell T-shirts at very low prices, and that this fact makes it hard for them to act in a socially more responsible way.
If that is so, the companies should reach an agreement among themselves in order to make competition fair, instead of raising their standards with taxpayers’ money. Business associations must talk to one another and find agreements. If they don’t, we will achieve nothing more than isolated islands of progress in a sea of grievances.
The leaders of the industry associations would probably argue that they cannot force their members to abide by standards of good conduct. Nor do they have a mandate for such negotiations. Then I would play my trump card: Is it the purpose of German development policy to optimise competition conditions for German companies? I don’t think so. We are dealing with the questions of what can the market regulate, and what must the state genuinely take care of. I have no objections to win-win situations that really benefit both sides. However, we must make sure that state funds are used for improving conditions across the board.
Are there win-win situations of that kind?
Bill Gates is investing, through his Foundation, in the Global Alliance for Vaccines and Immunisation. That is a good thing. Eight million children will be vaccinated. But where are we heading in the long run if private individuals become key players in global health policy? The Bill and Melinda Gates Foundation will soon command more capital for investment than the World Health Organisation. Accordingly, Gates is on the Global Fund’s board, but he has no democratic authority. I believe governments should determine the course of action, not private philanthropists. And what about their personal interests? It says on Gates’ website that he supports genetically modified crops because he believes that they are necessary for providing humanity with food. But that matter is controversial globally.
The Foundation is also connecting elementary schools in the USA to the internet. That has a lot to do with Gates’ corporation Microsoft, a software company.
Mixing self-interest with public goods is problematic. We are constantly discussing the erosion of statehood. In Third World countries, above all, institutions are fragile, have no power or do not even exist at all. I do not believe that multinational corporations will make a substantial contribution to building state capacity and government responsibility in those countries. On the contrary, blending private and public interests will probably undermine good governance. The boundaries blur. In Germany we have the Bertelsmann Foundation. There is no doubt that it is an excellent think-tank and does good work. However, its policy porposals are naturally consistent with the concerns of the Bertelsmann group. After all, the foundation is the majority stakeholder in this media empire. Its public-interest activities lessen its tax burden. In other words, the Bertelsmann Foundation is involved in public affairs guided by corporate motives and using funds which really have only bypassed the tax authorities.
Scholars of governance, however, tell us that modern states should become mediators and not try to do everything themselves.
Inge Kaul, a scholar with the United Nations Development Programme, puts forward a similar argument. She says the PPP approach is sensible, but that state actors should play a stronger role in defining the rules and conditions than they have done so far. That sounds fine. But we know that corrupt and weak states are in no position to do so. There are countless examples to prove that. For instance, many projects involving the private sector in water utilities have failed. First of all, we need stable state authorities, capable of fulfilling their responsibilities. Today, that is consensus in the development community. Government agencies must ensure adequate water quality as well as socially equitable rates. If at all, privatisation will only work where there are strong regulatory authorities – a capable state, in other words.
Proponents of the PPP approach use empirical data to point out that private players operate more efficiently and economically than do public authorities.
Of course, the data will prove right private-sector players who say they’d rather do something themselves than entrust it to a state bureaucracy. Warren Buffett, the billionaire, has pledged $ 30 billion to the Gates Foundation. He says that he trusts Gates to make good use of the money for humanitarian purposes. Well, perhaps private-sector players, on their own account, can really work better, more efficiently, faster and more immediately. Nevertheless it is essential in democracies that public institutions assume responsibility for the common good. Accordingly, there is also a public interest in de-bureaucratisation.
Can you envisage any rules which would ensure that PPPs actually serve the common good? We cannot scrutinise the details of every individual project in public.
That is exactly why we need public debate on the limits and risks of public-private partnerships. We must not vilify the approach, but we must understand that we are embarking on a course which erodes public responsibility. The BMZ likes to emphasise that, for each Euro of public funds in PPP projects, two Euros are contributed from the private sector. That may be true, but the BMZ is only able to spend that one Euro once. We must ensure that this is not to the disadvantage of other tasks which are perhaps more important.
Questions by Hans Dembowski.
Barbara Unmüssig
is a board member of the Heinrich Böll Foundation.
unmuessig@boell.de
http://www.boell.de
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