How Can Business Foster Civic Leadership?

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The Sixth Assembly
Making Democracy Work

How Can Business Foster Civic Leadership?

Organizer:      
 
Moderator:
Jean Rogers – CIPE (U.S.)
 
Rapporteur:
Eric Hontz – CIPE (U.S.)
 
Presenters:
Jesus Estanislao – Institute for Solidarity in Asia (The Philippines)
Daniel Cordova – Instituto Invertir (Peru)
The consolidation of democracies remains one of the key challenges for the development community. Increasingly, reformers are turning to the concept of “democracy that delivers,” which means that having democracy on paper is not enough; we must put into place institutions that make democracy work on a daily basis for ordinary citizens. Democracy that delivers means that citizens must realize tangible outcomes of democracy; electoral promises must translate into policies; public officials should be held accountable for their action or inaction; and citizens at all levels of society must have opportunities to participate in public policy.
 
Democracy is more than a matter of elections; it’s also about how decisions are made in between elections. The objective of public decision making is to create transparency, understanding, and debate, as well as genuine cost-benefit analysis. When that does not happen, authoritarian leaders can simply make the legislature rubber-stamp their decisions. This has been the case in many Latin American countries; for instance, a culture of low expectations for democratic governance has become the norm, poisoning economic policy making and the delivery of basic services to citizens. Without effective economic policy, markets cannot take root and deliver growth and prosperity on a widespread, sustainable basis, and democracy is put at risk as a result.
 
The most recent Freedom in the World 2010 report from Freedom House concluded that, for the first time since the fall of the Berlin Wall, more countries have seen a decline in political freedom than an increase. What this reveals is a global political crisis intertwined with the global economic recession. New challenges to stability are emerging around the world, especially in the newest democracies. But along with these challenges come new opportunities to support democratic development and connect it to the broader development debate.
 
A democracy that delivers is one in which governance institutions work hand-in-hand with the marketplace for sustainable economic growth. No matter the size of their share of economic growth, citizens become stakeholders in their political and economic institutions. From the rule of law to educational systems, citizens have an interest in the mechanisms that inform decision making and generate economic growth. Stakeholders are also invested in the peaceful resolution of disputes when they have something to lose. Economic growth thus builds stakeholders in peace and stability.
 
Challenges
 
  • How can a government, faced with rampant corruption and an inheritance of decades of poor governance, meet the demands of the citizens who elected them? The government must work together with the private sector to deliver the goods and services that are expected of them. Business and society share the same aim, which is to deliver growth and personal fulfillment through access to meaningful employment. Democracy and markets are like yin and yang—each must balance the other and needs the other to survive.
  • A challenge in Latin America is that democracies are seen as populist and these governments fail in economic management while authoritarian regimes are perceived to manage economies better (e.g., under Pinochet, Chile had a frightening authoritarian system of governance that smothered democratic institutions and personal freedoms, yet the country consistently posted strong economic growth). The challenge facing those who wish to promote democracy is to change the perceptions of democracy among citizens and business people. For example, civil society in Latin America is becoming splintered by false democratic governments, as in Venezuela. These governments are elected in a “democratic” manner, but then dismantle the institutions that are vital to a sustainable democracy. The idea held by some in business, that “a little corruption is okay” or a strong hand is necessary to guide economic growth, needs to be disputed in public in a forceful manner.
  • Corruption is a problem in both authoritarian regimes and in Latin America’s “social democracies.” Social democracies often place increased regulation on business, which gives power and incentive to bureaucrats to engage in rent seeking activities, while authoritarian regimes concentrate wealth and opportunity in a select few. Autocratic regimes may be perceived as “efficient,” but there is a hidden price to pay in cronyism that is often hidden from the public view. The East Asian experience of authoritarian capitalism, however, is not as clear-cut as many pundits would make it out to be, and further investigation into the true economic successes and costs of this system is needed.
  • We need to bring ourselves down from the lofty ideals of democracy to focus on the day-to-day operations of society. If we, as active agents of change in civil society, only work on these issues at the ideological level at the top, we ignore the basic fundamentals of a democracy that delivers to citizens at the more practical level. Instead of criticizing and fence sitting, we must move toward involving more people in their local government. This is vital for making elected politicians more accountable. The business community also needs a strong partner in local government to move forward on resolving conflicts and disputes at all levels of society, which, if left unresolved, threaten to undermine democracy.
  • The rhetoric of politicians and the realities of policy are often far apart. The economic policies that are implemented are often prohibitive to local enterprise development without the input and attention of the business community. Business associations and chambers of commerce need unanimity and consensus to play a role in bringing economic issues to the attention of governments and to influence decision-making processes.
Recommendations
 
  • Adopt some best practices from the private sector, such as score cards, to create accountability and transparency in local government, and, consequently, trust between citizens and their governments. The business community must see the cause of democratic governance less as a “risk-based” system of management with the private sector playing a passive role, and more as a system of management “engaged in change.” The story of microfinance and products designed for “poor people” are demonstrating to businesses and governments that often the most effective way to fight poverty is with business. 
  • Civil society should work with young leaders to encourage a perception that both democracy and a free market economy are necessary for sustainable growth. Youth should see that markets give them opportunities to succeed, and that only a free and democratic government can protect them and their way of life.
  • The private sector and civil society must work with the local governments that touch the daily lives of people and gain citizen input into what type of city they would like to see. By gaining local input early in the process the core principle everyone can agree on can be identified and progress can be made. Local governments need help in clarifying their visions, and only then can they lock governments into a contract (i.e., governance scorecards) that holds the government accountable.
  • Without local government involvement, the business community is subject to the whim of political ambition and rent-seeking officials. By broadening the base of information through the creation of local committees and greater public-private dialogue, and by tracking progress, there can be tangible results of democracy for citizens. We always need to operate on a tri-partite basis, including business, government, and civil society. Involving only the business community and government means the impact on the individual citizen is often lost.
  • Democracy activists need to make a “business case” by demonstrating that democracy is indeed a more efficient allocator of resources (and is thus better for business). Borrowing from the business world, civil society should outline the roles of individual stakeholders, identify the risks involved, and quantify the rewards in real terms. Just as the Chinese language symbol is the same for “problem” and “opportunity,” we as activists must recognize that with each additional problem there exist new opportunities.
Additional Observations:
 
  • Women business leaders play an important role in their societies and are natural future political leaders. Women business owners can use their independence and leadership skills and transfer them to political life to broaden the concept of leadership and bring new voices into the political discussion.
  • There are really three actors involved in corruption: the person who gives the bribe, the person who takes the bribe, and the society that turns the other way and allows the corrupt transaction to continue.
  • Microfinance represents a very democratic process. It moved from an unregulated informal practice into a regulated formalized institution that allows people to grow their microenterprises.