Global Business and Global Poverty Conference, Stanford
Speaker: Lord Browne of Madingley
Speech date: 19 May 2004
Venue: Global Business and Global Poverty Conference, Stanford
Speech date: 19 May 2004
Venue: Global Business and Global Poverty Conference, Stanford
Ladies and Gentlemen, good afternoon. It’s tremendous to be back in Stanford, and a real privilege to take part in the inauguration of this new Centre.
We’re very pleased to have been able to play a part in its creation and we have high hopes of what a Centre like this can achieve.
It seems to me that globalisation is the right issue to be discussing now, and that nowhere could be better for that discussion than Stanford.
It’s just 25 years ago since I first came here – to study at the business school, and I don’t think the word globalisation was part of the language at that time.
In a different way though the concept did exist. I remember being struck when I came here that this was a place which brought together all sorts of people – the common denominator among whom wasn’t their nationality, or their background, or the colour of their skin – it was simply ability.
We’re very pleased to have been able to play a part in its creation and we have high hopes of what a Centre like this can achieve.
It seems to me that globalisation is the right issue to be discussing now, and that nowhere could be better for that discussion than Stanford.
It’s just 25 years ago since I first came here – to study at the business school, and I don’t think the word globalisation was part of the language at that time.
In a different way though the concept did exist. I remember being struck when I came here that this was a place which brought together all sorts of people – the common denominator among whom wasn’t their nationality, or their background, or the colour of their skin – it was simply ability.
And once you realise that there are criteria of judgment which don’t stop at a national border and which embrace everyone – whatever they look like and whatever their religious beliefs – then your view of everything changes.
And I think that is what happened to me. I certainly began to see business as a global activity, which because of history happened to be largely broken up into national segments. And I’m delighted that the last twenty years have seen the reassertion of the global nature of business, because I’m convinced it is very good for customers, for shareholders and for society as a whole.
Of course, globalisation isn’t just about business. Knowledge, the environment, culture and politics all have powerful global dimensions, some of them reflected in the international institutions. Business is just one part of the story.
Nor is globalisation wholly positive.
And I think that is what happened to me. I certainly began to see business as a global activity, which because of history happened to be largely broken up into national segments. And I’m delighted that the last twenty years have seen the reassertion of the global nature of business, because I’m convinced it is very good for customers, for shareholders and for society as a whole.
Of course, globalisation isn’t just about business. Knowledge, the environment, culture and politics all have powerful global dimensions, some of them reflected in the international institutions. Business is just one part of the story.
Nor is globalisation wholly positive.
The last few years have demonstrated that there are dark sides to globalisation. Factors which can accompany globalisation and which can hamper its development.
Now I could very simply state the view that more globalisation – more open trade, the removal of barriers, stronger flows of international investment and so on – is the way to reduce poverty.
I do believe that.
- Terrorism;
- the disruptive nature of globalisation, particularly for those who are ill prepared for change;
- corruption;
- and the sense of unfulfilled expectations driven by the fact that globalisation is incomplete – that many areas of activity and many places and people are untouched by the process and denied the benefits which it can bring.
Now I could very simply state the view that more globalisation – more open trade, the removal of barriers, stronger flows of international investment and so on – is the way to reduce poverty.
I do believe that.
It’s almost become unfashionable to say it – but I think, on the basis of the objective evidence of the last half century, it is clear that open markets and rising living standards have gone together.
It’s clear that when countries have opened their economies – as in China or Russia – they have benefited economically.
It’s clear that those countries which have kept their economies closed – such as North Korea - have not benefited from autarky.
And it is true in aggregate as well.
In the first fifty years of the 20th century the living standards of the world, measured by GDP per head rose by just 1 per cent a year, with population growing by around 1 bn.
In the second half of the century GDP per head rose more than twice as fast, despite the population growth of 3.5bn.
And the reason for the difference between those two periods?
One of the principal reasons was that in the fifty years from 1950 to 2000 world trade grew by a remarkable 1,700 per cent.
The great difference between the two halves of the century is that in the period up to 1945 the world was characterised by distrust and protectionism.
It’s clear that when countries have opened their economies – as in China or Russia – they have benefited economically.
It’s clear that those countries which have kept their economies closed – such as North Korea - have not benefited from autarky.
And it is true in aggregate as well.
In the first fifty years of the 20th century the living standards of the world, measured by GDP per head rose by just 1 per cent a year, with population growing by around 1 bn.
In the second half of the century GDP per head rose more than twice as fast, despite the population growth of 3.5bn.
And the reason for the difference between those two periods?
One of the principal reasons was that in the fifty years from 1950 to 2000 world trade grew by a remarkable 1,700 per cent.
The great difference between the two halves of the century is that in the period up to 1945 the world was characterised by distrust and protectionism.
I also think it is true to say that the gain has not just come through increased wealth. Other elements which go to make up the quality of life have also been helped by open markets. The spread of knowledge and of best practice, for instance, has improved environmental conditions – and continues to do so. Russia is a prime example of that. They’ve improved the world’s health – with the effective elimination of the diseases, such as smallpox, which used to be fatal for millions of people.
And individual freedom and human rights have also been advanced because the process of scrutiny, through the media and through Non Governmental Organisations such as Human Rights Watch and Amnesty, has itself become global – and that has helped to shine a bright light on some dark places.
Nothing is perfect, or complete, but I think the case which links globalisation and progress is pretty strong.
But that assertion isn’t enough. It is clear that the link between globalisation and the removal of poverty is complex. Simply opening up markets can be so disruptive that the immediate effect is negative.
And individual freedom and human rights have also been advanced because the process of scrutiny, through the media and through Non Governmental Organisations such as Human Rights Watch and Amnesty, has itself become global – and that has helped to shine a bright light on some dark places.
Nothing is perfect, or complete, but I think the case which links globalisation and progress is pretty strong.
But that assertion isn’t enough. It is clear that the link between globalisation and the removal of poverty is complex. Simply opening up markets can be so disruptive that the immediate effect is negative.
When that opening is done at scale and with speed, the impact can be even more disruptive. The discovery and development of natural resources for instance can bring windfall gains to economies which are unprepared to make effective use of the money.
The gains can disrupt established patterns of economic activity, trade and employment, and at worse they can encourage corruption and conflict. The phrase “resource curse” is too emotive and doesn’t express the true complexity of the issue – but it would be pointless to deny that there is a real challenge to be met. Too many countries have failed to benefit from the development of their own resources.
That’s why it is so important to consider all the elements that go to make up globalisation and to try to define the best combination and sequence of those elements to achieve a positive outcome.
Business is part of that process – and that is what I’d like to concentrate on today.
The gains can disrupt established patterns of economic activity, trade and employment, and at worse they can encourage corruption and conflict. The phrase “resource curse” is too emotive and doesn’t express the true complexity of the issue – but it would be pointless to deny that there is a real challenge to be met. Too many countries have failed to benefit from the development of their own resources.
That’s why it is so important to consider all the elements that go to make up globalisation and to try to define the best combination and sequence of those elements to achieve a positive outcome.
Business is part of that process – and that is what I’d like to concentrate on today.
I think we have to start by considering the role of business in society.
The business of business is business. We exist to provide products and services to those who want to buy them and in doing so we provide a return to our investors. We’re not in the business of social change, nor are we seeking to displace Governments – indeed we very much need to have legitimate governments in place if business is to be able to thrive.
But business is about the long term. We make money today from investments often made many years ago, and the investments we make today will generate revenue for decades to come. That means we have a direct interest in the health and stability of the places in which we work. And for global companies that extends to an interest in the progressive development of the international trading system.
We’re among the principal beneficiaries of globalisation and therefore we have a direct and continuing interest in ensuring that other people are beneficiaries – as many people as possible.
The business of business is business. We exist to provide products and services to those who want to buy them and in doing so we provide a return to our investors. We’re not in the business of social change, nor are we seeking to displace Governments – indeed we very much need to have legitimate governments in place if business is to be able to thrive.
But business is about the long term. We make money today from investments often made many years ago, and the investments we make today will generate revenue for decades to come. That means we have a direct interest in the health and stability of the places in which we work. And for global companies that extends to an interest in the progressive development of the international trading system.
We’re among the principal beneficiaries of globalisation and therefore we have a direct and continuing interest in ensuring that other people are beneficiaries – as many people as possible.
In any system, and any institution, if the benefits are restricted to a very small number of people, those who are outside that magic circle will in one way or another ensure that the system fails.
So we have a direct interest in the widest possible success of the process of globalisation, and to achieve that I believe business has to reflect and embody the best characteristics of a genuinely global open market.
Long term business success isn’t about controlling everything from one place. It isn’t about exploiting protected, privileged positions. It isn’t about a new form of colonialism in which a tiny self perpetuating elite grow rich at the expense of everyone else and it’s not about exploitation of low wages and poor standards.
Of course all those things happen, but to me they are not the ingredients of long term sustainable business success in an open global market.
So we have a direct interest in the widest possible success of the process of globalisation, and to achieve that I believe business has to reflect and embody the best characteristics of a genuinely global open market.
Long term business success isn’t about controlling everything from one place. It isn’t about exploiting protected, privileged positions. It isn’t about a new form of colonialism in which a tiny self perpetuating elite grow rich at the expense of everyone else and it’s not about exploitation of low wages and poor standards.
Of course all those things happen, but to me they are not the ingredients of long term sustainable business success in an open global market.
I believe the ingredients of sustainable success are transparency, the extension of opportunity, education and the improvement of environmental conditions.
Transparency to me means demonstrating what you are doing, and the impact you are having in each of the areas in which you work. Declaring what you are paying to Governments and thereby enabling others to debate how that money should be spent. Eliminating bribery and facilitation payments. Avoiding involvement in politics and partisan issues.
We’ve been making progress on all these issues – establishing clear rules which are applied universally. Publishing data on what we pay, and the impact of our activities. And eliminating all political contributions from corporate funds – right across the world.
Of course, those steps on their own don’t change everything. But I hope they’ve shown what can be done. They’ve shown it is possible for a company to publish what it pays without losing business. And that it is possible to work effectively without paying political contributions.
Transparency to me means demonstrating what you are doing, and the impact you are having in each of the areas in which you work. Declaring what you are paying to Governments and thereby enabling others to debate how that money should be spent. Eliminating bribery and facilitation payments. Avoiding involvement in politics and partisan issues.
We’ve been making progress on all these issues – establishing clear rules which are applied universally. Publishing data on what we pay, and the impact of our activities. And eliminating all political contributions from corporate funds – right across the world.
Of course, those steps on their own don’t change everything. But I hope they’ve shown what can be done. They’ve shown it is possible for a company to publish what it pays without losing business. And that it is possible to work effectively without paying political contributions.
Opportunity is about providing an equal chance to everyone – on the basis of merit. So that if we are working in China or Russia, a Chinese or Russian woman joining at the age of 21 or 22 has an equal chance of rising through the company across the world as someone joining the company here in the US or in the UK. Opening the door of personal opportunity within a global organisation is very important because it demonstrates that globalisation brings real practical benefits at a personal level.
But, of course, international companies only employ a tiny proportion of the population. If companies want to have an impact they have to go beyond that.
Opportunity is also about giving the wider population of the communities in which you work the chance to learn and to develop their own skills to the maximum of their potential. That applies at all levels – from basic education to the highest quality university courses. Education is the means whereby individuals can take the opportunities which globalisation offers.
But, of course, international companies only employ a tiny proportion of the population. If companies want to have an impact they have to go beyond that.
Opportunity is also about giving the wider population of the communities in which you work the chance to learn and to develop their own skills to the maximum of their potential. That applies at all levels – from basic education to the highest quality university courses. Education is the means whereby individuals can take the opportunities which globalisation offers.
At each step education is the most effective ladder out of poverty – for individuals and for whole nations. The small group of people who founded Stanford did so to advance the fortunes of California.
Leland Stanford writing just before the university was founded said that he wanted to create an institution which would help to give the people of California the opportunity to escape from conditions of poverty and ill fortune at a time when this was one of the poorest and most disadvantaged areas of the United States. He certainly succeeded, and in doing so demonstrate what a sustained commitment to education can achieve.
And the fourth area is about environmental protection.
The greatest enemy of the environment is not development but poverty itself. The struggle of people who are living at subsistence levels does enormous damage to many elements of the environment. Development and investment gives people more and better choices. Technology and the spread of global best practice can protect land and water supplies and can improve the fuel mix – reducing the dependence on coal and wood, containing the uncontrolled use of land, and giving people the opportunity to use resources in ways which are sustainable.
Leland Stanford writing just before the university was founded said that he wanted to create an institution which would help to give the people of California the opportunity to escape from conditions of poverty and ill fortune at a time when this was one of the poorest and most disadvantaged areas of the United States. He certainly succeeded, and in doing so demonstrate what a sustained commitment to education can achieve.
And the fourth area is about environmental protection.
The greatest enemy of the environment is not development but poverty itself. The struggle of people who are living at subsistence levels does enormous damage to many elements of the environment. Development and investment gives people more and better choices. Technology and the spread of global best practice can protect land and water supplies and can improve the fuel mix – reducing the dependence on coal and wood, containing the uncontrolled use of land, and giving people the opportunity to use resources in ways which are sustainable.
So the application of global standards, transparency, the extension of opportunity on the basis of merit and ability and support for education which allows that ability to develop.
We believe those are the keys to sustainable business success because in different ways each of those activities helps to create the conditions in which societies can thrive and in which poverty can be reduced.
Business can bring investment and jobs and a source of wealth – but through the way in which we behave we can also bring something more. We can be a catalyst of change and progress. We can remove at least some of the concerns which globalisation brings.
But, of course, we can only do that in those places where we are able to operate, able to do business and able to make a profit.
In many of the places where poverty is at its worst business can’t operate. Markets are closed or biased against fair competition. Investment and profits are restricted or banned altogether.
We believe those are the keys to sustainable business success because in different ways each of those activities helps to create the conditions in which societies can thrive and in which poverty can be reduced.
Business can bring investment and jobs and a source of wealth – but through the way in which we behave we can also bring something more. We can be a catalyst of change and progress. We can remove at least some of the concerns which globalisation brings.
But, of course, we can only do that in those places where we are able to operate, able to do business and able to make a profit.
In many of the places where poverty is at its worst business can’t operate. Markets are closed or biased against fair competition. Investment and profits are restricted or banned altogether.
I believe there is a strong and direct correlation between the successful open activity of business and rising living standards.
And equally there is another strong and direct correlation between closed markets, the places where we can’t operate, and the persistence of poverty.
Of course, even in the places where business can operate freely, the process of escaping from poverty is difficult and slow. One of the other very important things I learnt here in Stanford is that we live in an imperfect world.
Business can’t change things on its own – society as a whole must make its own choices, and that is as it should be. Success depends on the active engagement of many different elements in society. That engagement is not always present, and is often complicated by history.
The role of Government is crucial but I don’t think that Government alone has all the answers either. Governments can redistribute funds – either within one country or internationally, and they can establish laws, regulations and incentives. But on its own that will only take us so far.
And equally there is another strong and direct correlation between closed markets, the places where we can’t operate, and the persistence of poverty.
Of course, even in the places where business can operate freely, the process of escaping from poverty is difficult and slow. One of the other very important things I learnt here in Stanford is that we live in an imperfect world.
Business can’t change things on its own – society as a whole must make its own choices, and that is as it should be. Success depends on the active engagement of many different elements in society. That engagement is not always present, and is often complicated by history.
The role of Government is crucial but I don’t think that Government alone has all the answers either. Governments can redistribute funds – either within one country or internationally, and they can establish laws, regulations and incentives. But on its own that will only take us so far.
Government doesn’t create the wealth which it distributes and the act of distribution in itself won’t be successful if it simply replaces poverty with dependency.
I believe the way in which poverty can best be tackled is through the coordinated activity involving both the public and the private sector.
With transparency in business matched by transparency in Government.
With private investment in people and merit matched by public investment in the development of skills through effective education systems.
With the development of global enterprises matched by the development of global public institutions which can establish international standards.
And with joint approaches which combine the abilities of Government and business to identify solutions to the challenges we all face.
I believe the way in which poverty can best be tackled is through the coordinated activity involving both the public and the private sector.
With transparency in business matched by transparency in Government.
With private investment in people and merit matched by public investment in the development of skills through effective education systems.
With the development of global enterprises matched by the development of global public institutions which can establish international standards.
And with joint approaches which combine the abilities of Government and business to identify solutions to the challenges we all face.
We’re beginning to see how that can be done in relation to the challenge of climate change – through trading systems which ensure that resources are applied where they can be most effective, and through the development of incentives for business to research and develop new products which displace carbon. Only Governments can establish such trading systems – but only business can make use of them to achieve the desired outcome.
I don’t believe it is impossible to identify similar ways of combining our strengths to tackle the issue of poverty.
If we look back at what has happened over the last fifty years, the track record is pretty good. Hundreds of millions of people have been lifted out of poverty – thanks to the combined efforts of national governments, business, the international institutions such as the World Bank and the WTO. Those people have gained more choice and therefore more freedom as a result.
We should celebrate that progress and understand the multiple factors which helped to make it happen. I hope this Centre will do that.
But we need to do more than that. I hope the Centre will also look at the barriers which are still in place and which still deny choice and freedom to so many.
I don’t believe it is impossible to identify similar ways of combining our strengths to tackle the issue of poverty.
If we look back at what has happened over the last fifty years, the track record is pretty good. Hundreds of millions of people have been lifted out of poverty – thanks to the combined efforts of national governments, business, the international institutions such as the World Bank and the WTO. Those people have gained more choice and therefore more freedom as a result.
We should celebrate that progress and understand the multiple factors which helped to make it happen. I hope this Centre will do that.
But we need to do more than that. I hope the Centre will also look at the barriers which are still in place and which still deny choice and freedom to so many.
I very much support the proposals made by the UK Chancellor of the Exchequer, Gordon Brown. His vision is to establish a new global development fund – a $ 50 bn fund - designed to support investment in the fundamental elements of infrastructure – particularly in education and health care – and to link the distribution of that money to advances in a country’s transparency and governance. To incentivise the changes which are necessary and to demonstrate what can be achieved when those changes are made.
I believe that sort of initiative is practical and timely.
It should form the agenda for World Bank and the other international institutions and the agenda for business because it represents the most effective way to deal with the negative elements of globalisation which I mentioned at the beginning.
The best way to counter terrorism and corruption is to put in place the mechanisms which combat the factors which cause them. The best way to reduce the disruption which globalisation can cause and to avoid the sense of unfulfilled expectations is to give people to capacity to take part in the process of globalisation.
I hope this Centre will take Gordon Brown’s idea and develop it.
I believe that sort of initiative is practical and timely.
It should form the agenda for World Bank and the other international institutions and the agenda for business because it represents the most effective way to deal with the negative elements of globalisation which I mentioned at the beginning.
The best way to counter terrorism and corruption is to put in place the mechanisms which combat the factors which cause them. The best way to reduce the disruption which globalisation can cause and to avoid the sense of unfulfilled expectations is to give people to capacity to take part in the process of globalisation.
I hope this Centre will take Gordon Brown’s idea and develop it.
The philosophy behind that initiative is very important. It starts from the view that progress is possible, and that change for the better is within our grasp.
We’ve seen over the last fifty years that poverty isn’t inevitable.
Poverty is caused by a certain combination of factors – and it can be alleviated by a different combination.
That’s why there is no excuse for fatalism. If this Centre can assist in the process of identifying those factors – and can show us all what needs to be done and how, it will have achieved something of enormous importance, and something which I believe would entirely reflect the spirit of those who created this university.
Thank you very much.
We’ve seen over the last fifty years that poverty isn’t inevitable.
Poverty is caused by a certain combination of factors – and it can be alleviated by a different combination.
That’s why there is no excuse for fatalism. If this Centre can assist in the process of identifying those factors – and can show us all what needs to be done and how, it will have achieved something of enormous importance, and something which I believe would entirely reflect the spirit of those who created this university.
Thank you very much.
