Public Interest, Private Sponsors

Tuesday, September 22, 2015 - 09:45

World leaders are promising to eradicate extreme poverty, hunger, and inequality by the year 2030. They say the money to meet these promises will have to come from corporations.

What could possibly go wrong?

By one United Nations estimate, it will cost $2.5 trillion a year to implement the Sustainable Development Goals (SDGs), which the leaders are expected to adopt in just a few days. Although that sounds like a lot, governments have little trouble finding seven times as much to spend on their militaries. Yet they have balked at backing their latest promises to the world's people with specific financial commitments.

Instead, rich countries unwilling to fulfil age-old promises on aid are now turning to private corporations and philanthropists to sponsor the public interest, again without specifying targets. Many good people work for these entities, some of which have shown real commitment to the communities in which they operate, but it is a fact that the entities expected to help fight poverty, hunger, and inequality include:

  • Corporations that rob developing countries of between $100 billion and $200 billion a year – more than these countries receive in aid – by avoiding or evading taxes, according to estimates from the UN and the International Monetary Fund. Not surprisingly, many companies oppose efforts to tighten regulation and close the loopholes.
  • Firms that have manipulated commodities markets, pushing 150 million people into hunger since 2007. Similarly, these corporations oppose rules that would curb their wanton gambling.
  • Companies that have exacerbated inequality among their own employees. On average, the top 350 firms in the USA paid their chief executives about 296 times what they paid the typical worker in 2013, up from around 20 times in 1965 – all the while spending hundreds of millions of dollars to oppose higher wages for workers at home and abroad.

In return for their money, these corporations are able to whitewash their images and find new business opportunities. The SDGs are expected to generate some $1 trillion worth of investment opportunities annually in infrastructure alone. Without reform of rules and practice, much of this investment is likely to perpetuate the pattern of partnerships in which private investors participate so long as the host country absorbs the risk of financial failure.

Businesses and private philanthropies also are exerting pressure on governments and UN agencies, for example by directing how and on what their money is spent. In the case of corporations, those conditions are intended to generate profit, make it easier to operate, or both.

For their part, many philanthropies that support good causes nevertheless demand and are given significant roles in setting agendas, framing issues, and influencing decisions and public policy in line with their own values and objectives. Like businesses, foundations are ultimately accountable to themselves. Many were established with money from industry and continue to fund their operations with income from investments, meaning they have a stake in the financial markets.

It is undeniable that poor countries and the UN system need major infusions of money. This is not because of some inevitable and inescapable force of nature, however. The shortfalls are the consequence of deliberate actions by wealthy and powerful governments.

As members of the United Nations, dominant governments could strike a blow for multilateralism and the redistribution of resources needed to tackle extreme inequality. They could support smaller and poorer countries' calls to open up international tax rulemaking and in turn make it easier to collect a fair share of tax from multinational corporations. If the rich countries don't help in this way, then poor countries, under international tutelage and poorly served by inconsistent donors and investors, will have to squeeze their citizens with consumption taxes, which fall most heavily on poor people.

Corporate philanthropy is to be welcomed, but the tough truth is that a world that works for all will need much more than that. The most important contribution corporations can make is to pay their taxes, respect the rights of their workers and follow, not obstruct, public regulations for the common good.