I would like to
welcome on behalf of the Board of Directors, Management and Staff of
the ECCB and the ECSE, all of the participants to this Caribbean Corporate
Governance Forum.
I would also at
the same time like to express our sincere thanks and appreciation to
the Commonwealth Secretariat which responded to our request for this
event and to the other major sponsors, the Caribbean Development Bank,
the World Bank and all those listed in the booklet.
I draw particular
attention to the sponsors as they represent not only a broad reflection
of the global environment in which we now live, but also because their
interest is consistent with the trend towards a global preoccupation
with the subject of governance.
This is a relatively
recent phenomenon and it is of vital importance that we situate it within
the context of an international system apparently deeply concerned with
political democratisation and economic liberalisation.
To understand the
process of governance therefore requires a familiarity with three important
phenomena, namely, democracy, development and globalisation. It also
requires an understanding of the impact of these phenomena in three
geographical locations, namely the national, the regional and the international
arenas.
The evolution of
the international system and the countries within it has followed a
particular path with respect to both democracy and development. There
is a division of the world into developed and developing countries with
the practice of democracy and the experience of development being concentrated
in the former as opposed to the latter.
In fact it is true to say that there is not only an acknowledgement
of this difference but also a recognition that the gap between the two
is widening. It is also true to say that there is an acknowledgement
of the danger this poses to the international system in general and
the most developed states in particular.
The interdependence
and interconnectedness of the international system is now fully accepted
particularly after the events of 9/11. The Economist magazine of August
16 - 22, 2003 quotes President George W Bush as saying a year after
9/11 that the event "taught us that weak states, like Afghanistan,
can pose as great a danger to our national interests as strong states."
The major industrialized
nations in accepting the pursuit of the Millennium Development Goals
explicitly accepted this principle at least at the conceptual level.
The task of accomplishing these goals is extremely daunting given the
magnitude of the undertaking which is dramatically illustrated by the
data in the UNDP's Human Development Report of 2002. Among the numerous
statistics the following stands out.
- In 1999, 2.8
billion people lived on less than $2 a day (the poor) with 1.2 billion
of them barely surviving on less than $1 a day (the extremely poor).
- In 50 countries,
with almost 40 per cent of the world's population, more than one-fifth
of children under the age of five are under weight. It is estimated
that between 1997-1999, some 815 million were undernourished, 95 per
cent of them in developing countries.
- Of 680 million
children of primary school age, 113 million (17 per cent of the total)
are not in school. In Sub-Saharan Africa, South Asia, and the Arab
States, four out of ten adults cannot read or write.
- Every year about
11 million children die of preventable causes, often for want of simple
and easily provided improvements in nutrition, sanitation and maternal
health and education.
- Every year there
are more than 300 million cases of malaria, 90 per cent of them in
Sub-Saharan Africa. Every year 60 million people are infected with
tuberculosis. 1.1 billion people lack access to safe water, and 2.4
billion do not have access to any improved form of sanitation services.
About 4 billion cases of diarrhoea occur each year, leading to 2.2
million deaths predominantly among children.
^
Glenn Firebough
in a book entitled "The New Geography of Global Income Inequality"
describes what he terms as the trifurcation of the world into a high
income group - Western Europe and its offshoots, a middle income group
- Southern and Eastern Europe and Latin America and a low income group
- Asia and Africa.
Firebough asserts
that using nations as the unit of analysis and by using one piece of
information about individuals - where they live, can explain about 70
per cent of the variance in individuals incomes worldwide. It is therefore
possible following this assertion to pinpoint where income poverty leading
to the statistics in the UNDP Report is located.
The issue then becomes
the willingness and capacity to address these issues within the developing
countries and the willingness of the so-called one third world to assist
and facilitate this transition out of poverty.
At both the national
and international levels, some form of governance however defined is
necessary to address these issues and is bound up in the phenomena of
democracy, development and globalisation.
Governance or good
governance to be more politically correct is characterized by the Commonwealth
Secretariat as a concept which comprises the complex mechanisms, processes,
relationships and institutions through which citizens and groups articulate
their interests, exercise their rights and obligations and mediate their
differences. They go on to say that good governance addresses the allocation
and management of resources to respond to collective problems, and is
characterized by participation, transparency, accountability, the rule
of law, effectiveness and equity. Governance includes as its major actors
the state, the private sector and civil society. The state functions
to create a conducive and legal environment. The private sector functions
to create increased economic activity, jobs and income. Civil society
facilitates political and social interaction, mobilizing groups to participate
in economic, social and political activities.
The World Bank in
a 1992 report on Governance and Development identified four issues in
good governance.
1. Public Service
Management
2. Accountability
3. A Legal Framework for Development
4. Availability of good and sufficient information and transparency.
The Bank has had
to confront something of a dilemma in the application of the principles
of good governance. It sought to draw a distinction, according to Sylvia
Chen in a book entitled "Liberalism, Democracy and Development"
between governance as an analytical framework and governance as an operational
concept and distinguished between three aspects of governance.
1. The form of political
regime.
2. The process by which authority is exercised in the management of
a country's economic and social resources for development.
3. The capacity of governments to design, formulate and implement policies
and discharge functions.
^
Clearly, the Bank
cannot overtly be involved in determining the form of political regime.
However, there is a growing consensus since the demise of communism
and the collapse of the Soviet Union that liberal democracy defined
in Western terms is the appropriate yardstick for democracy. There is
a further implicit and increasingly overt and explicit connection between
liberal democracy and development.
This brings us back
to the division of the world into Western industrialised states which
are "democratic" and developed as opposed to the status of
the developing countries in general. The question then becomes, can
governance in the liberal democratic context lead to development?
From this it follows
that the issue at hand is the challenge facing individual countries
and the international community to attain successful outcomes in the
goals they have set themselves, namely the Millennium Development Goals.
In searching for
solutions, we require a methodological approach which, while having
economics as its base, embraces four other disciplines, namely economic
history, law, political science and philosophy. Economic history in
both its traditional and more quantitative forms, enables us to draw
useful lessons and comparisons from countries which have some experience
of dynamic and complex change in the economy, society and polity.
Can these examples
be replicated or best practices drawn from certain specific policy episodes?
Is there a limit to development given the state of the art or is there
a limit to the number of countries which can develop given the long
run historical experience or the more recent experience of the Asian
countries. In short is there development pessimism? What is the primum
mobile or central agent for development in a particular time and in
a particular place?
These questions
raise issues that reflect the current state of inequality within and
between countries and the extent to which a large number of people remain
in abject poverty despite the advances in technology, communications
and the progress of globalisation.
In the case of law
the fundamental issue is the legitimacy and appropriateness of constitutions
as well as statutes governing social and economic intercourse both at
the national and international levels. The process of creating legal
instruments either out of domestic norms and customs or transplanting
them from external sources is critical to the propagation of growth
and development. Institutional arrangements are grounded in a legal
framework for which the necessary sanctions can be applied for non-compliance
and the incentives for long term contracting are codified and immutable.
^
The utility of political
science lies in the need to aggregate societal demands and to treat
with divergent views and conflict in a manner which would not result
in the demise of the community. This is where the democratic remit is
fundamental as the spirit of the concept extends in the widest possible
incorporation of the members of society in determining the progress
of the nation state.
Philosophy leads us to the concept of the just society and the search
for truth and happiness which translates into convergent national and
global objectives such as the Millennium Development Goals. It forces
us to accept the responsibility for one's neighbour in the context of
the reduction of the planet to the much talked about global village
in which technological innovations have brought pain and suffering,
glory and grandeur, spectacle and drama, live and in living colour into
our homes via satellites and television.
We are now in a
position to carry out a comprehensive review and analysis of development
and democracy with its implications for governance against the backdrop
of an interdependent world with glaring disparities in standards of
living and quality of life.
An economistic point
of departure for development was the rather simplistic concept that
economic growth is sufficient to ensure development. This quickly gave
way to the pluridimensionality of the concept of development in which
economic, social, cultural and political factors are all intertwined.
To these were added the "subordination of the pursuit of economic
and social objectives, to ecological constraints concurrently with a
search at the instrumental level for economically efficient solutions."
Then followed the
addition and use of the word "human" to qualify development
in order to make it clear that the aim is not just the production of
material wealth but the development of the human personality.
This is where the
role of democracy enters the equation and can either facilitate or through
its absence inhibit movement towards sustainable human development.
The issue is frequently
raised about the utility of democracy in a situation of severe deprivation.
The argument advanced is that democracy however defined is a luxury
in an environment where basic human needs are not being met. In some
working democracies undergoing economic and social stress, the sentiment
is often expressed that to listen to the voices of the people can jeopardize
the economic future by diverting attention from major issues.
The work of Amartya
Sen, particularly his publication "Development as Freedom"
treats with this issue in a very cogent and convincing manner. Sen treats
the freedoms of individuals as the basic building blocks of development.
According to Sen "attention is paid particularly to the expansion
of the capabilities of persons to lead the kinds of lives they value
- and have reason to value." He further posits that "these
capabilities can be enhanced by public policy, but also, on the other
side, the direction of public policy can be influenced by the effective
use of participating capabilities by the public."
This is a very critical
observation and certainly provides a view of development which places
the individual at the centre of the analysis as both recipient and propagator
of the advantages of development. As Sen puts it very succinctly "Greater
freedom enhances the ability of people to help themselves and also to
influence the world, and these matters are central to the process of
development."
Finally, in our
assessment of Sen's contribution to this debate is his elucidation of
what he describes as instrumental freedoms of which he lists the following:
1. Political freedoms
2. Economic facilities
3. Social opportunities
4. Transparency guarantees
5. Protective security
^
Political freedoms
can be broadly described as the equivalent of liberal democracy, that
is, political dialogue, free elections, a competitive political party
system and political accountability.
Economic facilities
are broadly equated with access to economic resources for consumption,
production or exchange. The economic development of a country brings
with it distributional issues which have to be dealt with at the level
of the individual and the state.
Social opportunities
"refer to the arrangements that society makes for education, health
care and so on which influence the individuals substantive freedom to
live better." These factors are critical for effective participation
in economic and political life.
Transparency guarantees
have to do with the concept of societal trust which goes back to the
law and institutions. Transparency guarantees reflect the openness of
the society and the impact this has on such critical issues as corruption,
financial irresponsibility and underhand dealings.
Protective security
is the safety net which prevents the most vulnerable in the community
from slipping through the cracks in times of crisis.
The issue then becomes
the respective roles of the state, the market and civil society bearing
in mind the position of the individual as recipient of benefits and
producer of wealth and income. What conditions and environment are most
conducive to the good life based on cultural, political and economic
circumstances?
Corporate governance
treats with the role of the market and the private sector. However,
the implication of the analysis above is not the exclusive dominance
of this sector over the state and civil society. In fact, development
presupposes collaboration between all three actors in the interest of
society as a whole and the improvement and development of the individual
and collective human condition.
Corporate governance
implies a series of rules, regulations, ethics and norms which guide
market activity and balance profit and greed against societal obligations.
There are major issues of a broad nature which have to do with the treatment
of labour, the impact on the environment and the contribution to social
and cultural activities.
.
Laws and regulatory procedures govern market conditions such as monopolies
and corruption while ethics and norms cover the relations between business
on one hand and the state and civil society on the other.
There are ideological
and historical tensions in this area which can be found in theological
texts, for example, the prescription against interest, and the ambivalence
about profits.
^
Doctrinal splits
in the church and the rise of Protestantism were asserted to have facilitated
the advance of business; a thesis brilliantly spelled out by the economic
historian R H Towney in his book "Religion and the Rise of Capitalism."
The modern situation
up to the demise of communism gave countries doctrinal options which
have now been abandoned and most countries are accommodating themselves
to the role of the market in one capitalist form or another as practiced
respectively in North America, Europe or Japan.
The recent corporate
scandals in all three capitalist centers and the failure of the market
model to address some of the most pressing development problems in the
short run, pose serious potential problems for the model within countries.
Simultaneously, despite the inexorable progress of globalisation, the
events in Seattle and other cities, signal a dissatisfaction with the
status quo which is making it difficult to deliver on the promise of
development in situations of political democracy and economic liberalisation.
These tensions at
the international and national levels, complicate the process and practice
of corporate governance as both the private sector and its two counterparts,
the state and civil society view each other with suspicion.
The need for a broad
social contract accepting by consensus a viable and appropriate concept
of democracy and governance is a sine qua non for development. However,
this will have to be complemented by international efforts of significant
magnitude to bridge the divide between rich and poor countries which
if not treated with, will exacerbate international tensions and thwart
progress in both types of states.
In the Caribbean
we have had the good fortune to have consolidated our system of liberal
democracy, despite our difficult economic circumstances. However, without
growth and development we will be put under severe pressure and the
implicit support of the process could be withdrawn.
The social contract
between the private sector, the state and civil society will be particularly
important in our case as we place increasing pressure on the government
and business to deliver benefits in a fundamentally charged external
environment.
In conclusion one
can only affirm that the ability to choose and to take individual and
collective responsibility for one's own development must be a feature
of our governance structures in general, and in response to the new
challenges, those of our private sector as well.
3 September 2003
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