Privatisation of the Fight against Poverty: Five Reasons For Saying No

“ better one’s own duty (dharma) although imperfect, than the duty of another, well performed”

— Lord Krishna to Arjuna (Bhagavat Gita)

This article will argue that the outright privatisation of the fight against poverty proposed in the recent budget would be one of the most reactionary steps taken by any government since Mauritius attained independence. It is so gross that one is at pains to accept that the authors of this proposition have given careful thought to all its implications.

There is still time for the Minister of Finance and the Prime Minister to take corrective action to set the clock of history right again. The “private sector” to whom has been devolved this responsibility would on their part be well advised to politely tell government that it is not within their remit to undertake such responsibilities. It will distract them from their fundamental mission of wealth creation through productive use of resources and assets.

This is not to suggest that the private sector is not concerned with the well-being of their employees and other stakeholders, but that the manner in which what has been described as a Marshall Plan for poverty has been thrust on them is simply beyond their capabilities and their role.

As we argue later any proper and rational assessment by the boards of private companies should reach the self-evident conclusion that the risks associated with this “responsibility” far outweigh the eventual benefits which they could reap.

Here are the reasons on which this case rests:

1. Although one suspects that there has not been a deliberate and concerted argumentation to support the introduction of this proposal along such ideological lines, it is nevertheless an inescapable fact that such a measure is embedded in the dominant school of unfettered market capitalism, and its concomitant assumption that the real obstacle to socio-economic progress in any context is government’s bureaucracy with its alleged propensity to constrain the “animal instincts” of private entrepreneurs through unnecessary regulations.

Indeed one has heard the argument being propounded that the private sector has the right management tools and organizational clout to more efficiently lead the fight against poverty. Basically the fallacy of this argument lies in the assumption that management tools and concepts used in business have universal application independently of the environment and actual objectives of the organization.

This kind of reasoning flies in the face of all recent studies which demonstrate that the struggle against poverty has its own desiderata and requires the kind of approach and measures which only governments or specialized NGOs can deploy. The fact that governments in the past have singularly failed in taking the appropriate decisions leading to effective action cannot justify the fact that the burden should now be shifted to the “private sector.”

2. It is now established that there is no single mode of capitalist organization. Whereas the system is universally characterized by the relentless search for maximization of profits and shareholder value creation, its actual organizational form is historically and politically determined in different regions and countries.

Of direct relevance to our point, for example, is the distinction in ownership structure – the Anglo-Saxon model in which ownership is dispersed and actively traded on the stock markets versus the Continental European model of concentrated ownership. In these cases of concentrated ownership such as in France and even Germany the big corporations are in fact mostly family controlled. Without going here into the merits of one or the other, suffice it to state here that Mauritius is incontestably classified into the latter category.

Given the above situation what the concept of “parrainage by the private sector” being proposed in the budget will actually mean in practice is that a small number of families are now being charged with the responsibility of taking care of the “poor in their regions.” In the best of cases, this smacks of “paternalism” and in the worst case a return to feudalism.

3. Almost fifty years after independence and in spite of some genuine efforts, the “private sector” has barely managed to shed the views and prejudices associated with it in the minds of large sections of the population of Mauritius. These are grounded in sometimes deep and complex socio-economic experience, and have to be handled with utmost caution in order not to jeopardise some of the progress made recently. A strong view can be taken that by engaging on the path of the proposed programme the “private sector” will open itself to very high risks of being embroiled in the kind of controversies with its usual racial, religious and political undertones which it has neither the skills nor the time and resources to control.

4. Closely related to the above is the more general argument about the role of “business” in the evolving socio-economic paradigm. Between the extremist views illustrated by the Milton Friedman school of thought – according to which businesses should only be concerned with maximizing returns for their shareholders – and the rather fuzzy, romantic view taken by proponents of a charitable “business community” which would be constantly weighing the effects of its decisions against its eventual social impact, the jury is still out about where to strike a balance between the two.

The whole debate about “stakeholder” capitalism and its implications for good corporate governance has been raging for more than many decades now and remains rather inconclusive. As far as Mauritius is concerned, given the concentration of ownership of the largest businesses in the hands of a few families, one would be inclined to treat corporate governance matters as fundamentally though not exclusively a distributional issue relating to processes and structures which ensure transparency and openness about how the wealth created by these enterprises are appropriated among its various “stakeholders.” In this connection the decision to vest the “private sector” with the additional responsibility for the critical function of combating “pockets” of poverty is a “leap of faith” (a very popular expression these days!) which many will abstain from taking and rightly so.

5. It was the French philosopher Lucien Goldman who had declared that the nearest one could reach to objectivity in the social sciences was to declare one’s own “bias” to one’s interlocutors. In this regard it would not have escaped most of our readers that we have taken a stand against the Freidman Milton’s view of unfettered capitalism.

On a more affirmative note let us state clearly that in our view the notion that it is the State which is ultimately responsible for the “welfare” of the population at large is a basic tenet of a progressive society. Any attempt such as the one under review to make particular sections of the population irremediably indebted to another identifiable group in society is a hugely reactionary step and deserves to be condemned.

* Published in print edition on 3 April  2015