Development Issues in Global Governance

Public-Private Partnerships and Market Multilateralism

Benedicte Bull, Desmond McNeill

• Publisher: Routledge
• Year: 2007
• ISBN:
  9781134162994
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Development Issues in Global Governance presents the first serious academic study of multilateral organizations' current partnerships with the private sector.

This new volume describes empirically, and analyzes theoretically, the impact of such partnerships on the practices, legitimacy and authority of the parties involved. With detailed case studies of key international bodies, including the World Health Organization (WHO), the International Labour Organization (ILO), the World Bank, and the UN's Education, Science and Communication Organization (UNESCO), the reader is given a clear understanding of present debates in this critical area of world affairs.

This invaluable book:

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• includes fresh case studies that deal with five different industries: pharmaceuticals, software, water supply, tobacco and chocolate
• provides an overview of the scope of the phenomenon of partnerships in the multilateral system, and classification of different types
• is based on detailed qualitative research, including extensive interviews in the multilateral organizations
• places the findings in a rigorous theoretical framework, relating them to current trends in international politics and international political economy
• examines the challenges contained in the Millennium Development Goals: the provision of drugs to HIV/AIDS patients and vaccination for all children; the bridging of the digital divide; combating child labour; and the provision of clean water to the poor.

The authors conclude that we are witnessing the emergence of a new institutional form, best characterized as 'market multilateralism'. They argue that although transnational corporations have become heavily involved with multilateral organizations, these partnerships are crafted to deal with specific instances of market failure, while the guiding principles of the global economy remain unchallenged.

This book will be of great interest to all students of development studies, international relations, political science and business management.

1 The Rise of Public–Private Partnerships in the Multilateral System

Introduction

‘One day Kofi Annan brought me, Ted Turner, Bill Gates and two other billionaires together and asked each of us to put $1bn into a fund’, recalls Nicolas Hayek, who became a billionaire creating the Swatch watch. He continues: ‘Everyone except Turner refused. The United Nations doesn’t need me; the UN needs to get itself respected.’¹

Some years back such an attitude was common among the world’s wealthiest businessmen; but in recent years the UN and other multilateral organizations have succeeded in attracting money and attention not only from individual billionaires but also from companies, foundations and business associations. Through the formation of so-called public–private partnerships (PPPs), the multilateral organizations, whose structure of governance used to be distinctly state-based, have increasingly turned to the private sector for funds, for expertise and for role models. These partnerships are launched with multiple purposes, but for all of them the stated objective is to combine the efforts of states, multilateral organizations and the private sector in pursuit of commonly accepted goals (Tesner with Kell 2000). Critics, however, argue that international organizations are being co-opted by business elites and may no longer act independently of globalizing capitalist forces (Richter 2002, 2003). Moreover, it is claimed, public–private partnerships fragment international cooperation and undermine efforts for cooperation and equity among states (Zammit 2003).

Our purpose in this book is not primarily to argue for or against PPPs, but to examine the issue at a systemic level – to assess what are the causes and consequences of this important phenomenon. We will approach the subject from the perspective of multilateralism. In an important book entitled Multilateralism Matters: The Theory and Praxis of an Institutional Form, John Ruggie defined multilateralism as ‘an institutional form that coordinates relations among three or more states on the basis of generalized principles of conduct’ (Ruggie 1993: 11). Multilateralism, he argued, modifies ‘states’ self-serving behavior by specifying appropriate conduct for a class of actions, without regard to the particularistic interests of the parties or the strategic exigencies that may exist in any specific occurrence’ (Ruggie 1993: 11).

Since Ruggie wrote his influential book, a number of changes have taken place in global politics. One of the most important is the increasing prevalence of non-state actors – both non-profit, non-governmental organizations (NGOs), and also global corporations, private-sector organizations and private foundations. In theorizing about global governance, this phenomenon has recently received significant attention. Some argue that it marks the end of a state-centred system of world governance, and its replacement by one which is dominated by loosely coupled networks of governance (Reinecke 1998; Reinecke and Deng 2000; Witte and Reinecke 2005; Slaughter 2004). Others examine the phenomenon of the rise of private authority in international relations (Cutler, Haufler and Porter 1999; Higgott, Underhill and Bieler 2000; Hall and Biersteker 2002), in some cases arguing that non-state actors nevertheless operate within the frames of a stable international system with underlying consensus about the rules of international interaction and the legitimacy of the state units (Josselin and Wallace 2001). Ruggie himself has suggested that the upsurge of global non-state actors has led to the emergence of a new global public domain – and an increasingly institutionalized transnational arena of discourse, contestation, and action concerning the production of global public goods (Ruggie 2004).

Little attention is paid, however, to how the very institution of multilateralism is transformed by the presence of non-state actors, which is the main focus of this book. One exception is O’Brian et al. (2000), but this is concerned with the increasing prevalence of social movements in global politics, while we focus on those actors who operate for profit or are closely connected to for-profit organizations. We set out to answer questions such as: What characterizes this form of multilateralism? What are the implications for the multilateral organizations? Will it enhance or undermine their authority and legitimacy?

In addition to John Ruggie, our theoretical understanding of multilateralism also owes much to Robert Cox (1992a, 1992b, 2002), as will be spelled out in further detail in Chapter 2. We analyse the transformation of multilateralism within the context of the changing political-economic world order, including power relationships between states, financial flows and flows of ideas. We understand the present multilateral system as emerging from a specific context, namely the political and economic order negotiated between the victorious powers of World War Two, and characterized by the subordination of non-state actors to states. This political-economic system has been significantly eroded, and the current changes in the operations of the multilateral organizations are a response to that. This is well expressed by the Secretary-General of the United Nations, Kofi Annan, himself:

While the post-war multilateral system made it possible for the new globalization to emerge and flourish, globalization in turn has progressively rendered its designs antiquated. Simply put, our post-war institutions were built for an international world, but we now live in a global world.

(Annan 2000: 11)

Following the early work of Cox (1969) and Cox and Jacobson (1973) we reject the view of multilateral organizations as passive and dependent, viewing them rather as potentially active forces that may significantly change the nature of multilateralism. Indeed, we argue in this book that the strategies adopted by multilateral organizations to seek to engage with the private sector derive not only from pressure from their constituent nation states, but also from the convictions of the organizations’ leaders, and from the desire of the organizations to regain authority and legitimacy in an increasingly market-oriented world.

We do not dispute that states are still the potentially most important actors in the global political economy, but we argue that large transnational corporations (TNCs) are also of great significance. Although motivated by profits, their short-term interests are often more complex. Moreover, it is not only states but also large corporations that seek legitimacy, and predictability in their global environment; such considerations, it has been argued, are important motivations for states to operate within a multilateral framework (Ikenberry 2003).

States and private actors are increasingly interlinked within what we claim is in effect a new form of multilateralism, which we call ‘market multilateralism’. While multilateralism coordinates relations between states, there is now developing a system composed not only of states, but also of multilateral organizations and private actors – predominantly large transnational corporations. We claim that there are emerging ‘generalized principles of conduct’ in this system – the outcome of interaction between two sets of norms: the classic norms of multilateralism (Ruggie) and the norms of the market. These are influenced by all three parties involved: multilateral organizations and transnational corporations as well as states. In this book we seek to establish what is the nature of this emerging market multilateralism, by examining different examples of public–private partnership, to establish to what extent there are common features between these very diverse cases.

Some have already reached a conclusion on this issue. One extreme position is that the interaction between private actors and the multilateral institutions is purely instrumental; in other words that businesses merely use the multilateral institutions to improve their image or contribute to creation of markets, while the multilateral institutions are happy to collaborate on any terms as long as there is funding involved. At the other extreme are those who claim to observe the victory of principles of cooperation over the logic of the market. We do not start with any such preconceptions. On the basis of the empirical material that we examine, we conclude that there are emerging principles of conduct, but that these are not such as to challenge the interests of transnational corporations.

In the remainder of this chapter we will first clarify some key concepts that will be employed in the rest of the book. Thereafter we will provide a brief review of the process of increased participation of private actors in the multilateral system. This will be followed by a typology of partnerships and an outline of the rest of the book.

The multilateral system, the private sector and partnerships – some definitions

Having defined multilateralism, we find it necessary also to specify how we define three related terms: multilateral organizations, multilateral institutions, and the multilateral system. A multilateral organization is a formal organizational entity, characterized by a permanent location and postal address, distinct headquarters, staff and secretariat.² A multilateral institution is the organization as thus defined, but more broadly interpreted to include also associated rules and practices. We will speak of the multilateral system when referring to the totality of the multilateral organizations, the rules and principles that govern them, and the actors that participate in their governance or operations.

In this book we will focus on those multilateral organizations whose primary mandate is to contribute to development. We will therefore exclude those engaged in broader or different tasks, such as the Security Council and specialized agencies such as the International Telecommunication Union and the International Aviation Union. We include the World Bank, but, as our focus is mainly on global development institutions, we exclude the regional development banks.

In political science, the efforts of states to contribute to international development are often viewed as anomalous, and development issues have always been marginal to the debates about multilateralism. ³ Our focus on development aid and policy has important implications for the questions that we will discuss. Such apparently altruistic behaviour runs counter to the general assumptions about what motivates states. At most, support for the multilateral development institutions has been viewed as a ‘side activity’, something that states engage in to gain goodwill but that has little to do with their core activities. From this standard perspective, the role of multilateral organizations in development is to distribute the scarce resources that states and private actors dedicate to this purpose, but is not associated with the coordination of behaviour of states (or other actors), which is what is seen as the normal function of such bodies.

Bøås and McNeill (2004), however, argue that this standard view does not provide an adequate picture of the multilateral development organizations, which are part and parcel of the international political economy and are embedded in a socio-political system of material interests, norms and beliefs. The motives of states for engaging in the multilateral development system are inherently political: they include altruism, but also for example the desire to create markets and maintain spheres of influence. States may have conflicting goals in promoting development, but joint development efforts are in many cases more efficient than individual efforts. The multilateral development system, therefore, plays a role in coordinating the behaviour of states. Whether it can also serve to coordinate the behaviour of private actors is an open question. This is where the phenomenon of public–private partnerships under the auspices of multilateral organizations comes in.

In this book, we adopt the definition of partnerships that is used by the UN: ‘voluntary and collaborative relationships between various parties, both State and non-State, in which all participants agree to work together to achieve a common purpose or undertake a specific task and to share risks and responsibilities, resources and benefits’ (UN General Assembly 2005: 4). This avoids the normative stance of some common definitions, as for example the one employed by Tesner with Kell, who define a PPP as a ‘mutually beneficial agreement between one or more UN bodies and one or more corporate partners to work towards common objectives based on the comparative advantage of each, with a clear understanding of respective responsibilities and the expectation of due credit for every contribution’ (Tesner with Kell 2000: 72).

More open to debate, perhaps, is our definition of the private sector and private actors. We will use ‘private actors’ to refer to non-state individuals and organizations that operate for profit or are closely connected to for-profit organizations. This will include three kinds of actors: for-profit corporations; non-profit private foundations that are closely associated with for-profit corporations; and national and international business associations. This is a diverse set of actors; what they have in common is their close relation to profit-seeking organizations. (This distinguishes them not only from the state but also from other non-state actors, such as NGOs.)

This definition of the private sector is not uncontroversial. Whereas the inclusion of profit-seeking corporations is rather unproblematic, the inclusion of private non-profit foundations may be questioned. Some authors even include them in the term public sector (e.g. Ridley 2004). According to Ollila (2003), UN officials distinguish clearly between private foundations and corporations, and view receiving money from corporations as more risky than being funded by foundations.⁴ However, as Ollila also notes, many foundations do have close ties to corporations (2003: 43). Moreover, as will be discussed in Chapter 3, corporations and private foundations increasingly share a common view as to the proper way to organize the development tasks of multilateral organizations. This is particularly true for a new type of foundation often called ‘venture philanthropist’.

The inclusion of business associations as ‘private actors’ may also be questioned. Some authors include business associations within the category ‘civil society’ which may be defined as ‘a political space’ where voluntary associations seek deliberately to shape policies, norms, and deeper social structures (Scholte and Schnabel 2002: 3). However, civil society is often associated with organizations that ‘pursue neither public office nor commercial gain’ (Scholte and Schnabel 2002:). We therefore maintain that many business associations and foundations have sufficiently close connections to the for-profit sector to include them in the category ‘private actors’.

Having defined our terms, we will now provide a brief review of the rise of public–private partnerships (PPPs) in the multilateral system.

The rise of public–private partnerships (PPPs) in the multilateral system

There are several different stories to be told about the rise of PPPs in the multilateral system, depending on both the multilateral organization concerned and the perspective of the storyteller. It is important, for example, to distinguish between the UN organizations and the World Bank. And within the UN, the account differs significantly according to whether it is from the perspective of the Secretary-General’s office and the General Assembly, or from that of the specialized agencies. The switch by the former, from a very low level of cooperation with businesses to the active pursuit of partnerships, influenced the different paths towards increasing business cooperation in the UN specialized agencies; but these were equally influenced by their own governing bodies, including annual general assemblies, executive boards and executive directors.

In the UN one could arguably trace the story of the rise of PPPs back to the creation of the organization, since there was some business interest in the founding conference in San Francisco in June 1945. As reported by Tesner with Kell (2000), several business associations and union groups made a case in favour of attending, but only one, the International Chamber of Commerce (ICC), asked for (and immediately received) accreditation to the UN under Article 71 of the Charter. According to Tesner, at the inception of the UN there was no notion that it was anti-business; this came later, during the Cold War. One important process that contributed to this image was the (ultimately unsuccessful) attempt to develop binding codes of conduct for multinational enterprises under the UN Conference on Trade and Development (UNCTAD).

The closing down of the UN Center on Transnational Corporations (UNCTC) in 1995⁵ is often viewed as a symbol of the weakening of the multilateral system vis-à-vis the private sector (Gjølberg 2003). The major turning point, from anti-business to pro-business, occurred, according to Tesner with Kell, in 1997, with the appointment of Kofi Annan:

Kofi Annan brought with him an understanding of, and an appreciation for, the private sector that none of his predecessors had ever displayed. His business education constitutes, in and of itself, a radical departure from the traditional government and diplomatic background of every UN secretary-general before him.

(Tesner with Kell 2000: 2)

As we will discuss in more detail in Chapter 2, we believe that Kofi Annan’s appointment as UN Secretary-General was a part of a larger picture, and certainly not the sole cause of the rise of PPPs. Nevertheless, he did not waste much time before taking his first steps to include the private sector in the activities of the UN. On 1 February 1997, four weeks after assuming office, he addressed the World Economic Forum in Davos, Switzerland, and declared that there was now ‘a new universal understanding that market forces are essential for sustainable development’ (Tesner with Kell 2000: 32). In the same year, the UN received the historic gift from Time Warner Vice-Chairman Ted Turner which led to the establishment of the United Nations Foundation (UNF), and later its operational arm, the United Nations Fund for International Partnerships (UNFIP).⁶

The next major milestone in the evolution of the UN–business relationship was the speech given by Kofi Annan to the World Economic Forum in January 1999, where the idea of a ‘global compact of shared values and principles’ was launched. In this speech he outlined nine principles, based on a series of UN conventions that should se...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of Illustrations
• Acknowledgements
• List of Abbreviations
• 1 The Rise of Public–Private Partnerships in the Multilateral System
• 2 Multilateralism and Globalization
• 3 Partnerships in Context
• 4 Global Partnerships for Health: Health for all, or more ‘Big Pharma’?
• 5 Tripartism meets CSR: The ILO’S partnership experiments to combat child labour
• 6 UNESCO and the Software Companies: Bridging the digital divide, or transforming US dominance?
• 7 Water For All: The World Bank and private water companies
• 8 Market Multilateralism: Towards a new institutional form?
• References
• Notes