Palladium’s Nicholas Monahan responds to the Gates Annual Letter, suggesting that while there is a nationalist case for globalism, there is also a strong case for businesses and investors.
In their annual letter, Bill and Melinda Gates make the argument that foreign aid is a matter of self-interest: Trans-national issues like health pandemics threaten our national interest, and we therefore must continue to support international development efforts. Aid increases stability abroad, and thus security at home. Nationalism need not mean isolationism. They are concerned that governments seem to be turning inward and away from foreign aid commitments.
But even if public donors continue to invest at current rates, many of the challenges faced in developing nations will not disappear – or will not be alleviated sustainably. The support of traditional government donors alone is unequal to the task.
Opportunities for the Private Sector
The nationalist case for globalism need not apply only to governments; increasingly, companies’ financial self-interest and sustainability are rooted in the social wellbeing of the communities in which they operate. Corporate sustainability is not the same as Corporate Social Responsibility; it is potentially much more impactful – for the company, as well as for the community from which it sources or to which it sells.
This is not merely the case for the exchange of financial for social capital. Strengthening public health can save the lives of potential customers and increase the stability of markets. Enhancing the quality of farmer agricultural products increases household incomes and creates lasting supply chains. Improving infrastructure facilitates trade, and access to markets boosts the need for financial and other services. Companies help create positive impact for both individuals and the economic ecosystems in which they do business.
Investing for Impact
Even as the pace of globalisation may be slowing, there are new opportunities for the private sector – and investors – to seize. Investors are finding opportunities around the world that will have a positive impact on peoples’ lives while generating a financial return. In Ghana, Palladium Impact Investments has invested in Naasakle, a majority female-owned company that produces shea butter for the cosmetics industry. The company sources and processes shea nuts from women pickers, providing them above-market prices and access to social programs such as financial literacy training. With our financing, Naasakle can accelerate its growth and will also produce a financial return. Through impact investments like this, capital can be used to profitably tackle poverty and inequality in a sustainable manner.
The Role of Government
Despite, or perhaps because of, the inward-facing trend about which the Gates are concerned, governments have also taken notice: The U.S. Agency for International Development has made strengthening its engagement with the private sector a cornerstone for their recent Acquisition and Assistance Strategy and Private Sector Engagement Policy. Partnering with USAID and the private sector, approaches such as Development Impact Bonds provide new and innovative vehicles to leverage private sector funds with experienced development actors. For example, with funding from USAID in a number of countries including Ghana and Kenya, we have piloted investments in financial institutions to reduce the risk of outreach to remote, unbanked populations. This is bringing more people into the formal financial sector by giving them access to savings and loan products, while increasing banks’ client base.
Bill and Melinda Gates are right that there is a strong national interest case for globalism. Governments can articulate a vision of globalism that includes the leveraging of private capital for public ends. Where public funding may lapse, the government’s ability to convene and organize broad groups of unfamiliar actors is key to achieving impact at scale in parts of the economy outside of a company’s focus. But there is an equally – or even stronger – business case for globalism, where the private sector can achieve positive development impact while growing their businesses.