By Dani Pardo-Yepez | April 14, 2016
This memo is part of a series of posts showcasing examples from GPS' Policy Making Processes course. These assignments have students take the role of a policy adviser on a wide range of issues.
Memorandum for: President of National Assembly in Ecuador, Gabriela Rivadeneira
From: International expert in CSR and Public Policy, Daniela Pardo
Subject: Overcoming social structural problems through delegation and association
Action Policy Event: Who gets into real public policy?
Politicians need to reconsider the way they have been handling public policy issues in our country. You were democratically elected by the Ecuadorean people and it is your responsibility to identify your constituencies and not only work for them, but also with them. Throughout decades we have had governments in which the active power of each participant is set under a strict definition with no room for implementing new ideas in the field. The government is supposed to manage the overall wellness of a country while the private sector is profitable, employs other citizens and pays its taxes. NGOs and other social organizations are in charge of goodwill and specialized projects. Society has been working as if the government is an almighty force that asks for results to its policies but rarely asks for private sector’s participation in setting goals and alternatives (Rudder 2008). Nowadays in our country, it is clear we are influenced by the political stream in which only the President, founder of the political party Alianza Pais (AP), and the National Assembly, with over 75% of AP followers, make decisions. However, there are no visible leaders that don’t belong to the government that influence the construction and approval of policies; this must change in order to continue with your political ideology of social revolution and mitigate the power of few privileged groups, as AP promised in its political campaigns. It is time privately-made policy incorporate all public opinion and contribute to the real meaning of public policy.
The purpose of this memorandum is to propose a path that will focus on building a policy making process that is public as it was created for. Everyone has to be part of the rule making, as Rudder states. Public policy also comes from the private sector of society. This sector might pursue its own interests but over time, law shapes these private preferences and works through new policies. Nevertheless, this is not happening in our government as it was intended. We know private groups affect quality of life for their different stakeholders, and they can reach as a whole to larger groups (Rudder 901). The goal is to bind these decisions and make policy work for the majority. This is achieved through programs and accountability strategies that will determine every actor is better off with the new taxes, regulation, subsidies among other tools. Additionally, those who are excluded from private governance because of the limited action of it, will then be included by the government. The goal is not to give power to the private sector, but to empower them in society’s evolution.
Analysis on how to reach this integrated policy process
As a government, it is important you know and recognize your strengths and weaknesses. The government, as a public institution, can set goals to accomplish. However, the government and its programs receive more than 50% of their revenues from oil exports which is a real problem due to the present international prices in the market (The Observatory of Economic Complexity 2015). It is clear during the last 9 years of the Alianza Pais’ holding the Presidency and the National Assembly’s chairs, several results have been achieved. For example, poverty rates are at all-time lowest percentages. Also, important public investment made in health, education and infrastructure has improved general standards of life in Ecuador. Yet, policies have to also include “not-public” participants in order to combine strengths and overcome a financial crisis like the current one. In the last year, over 10,000 people have lost their jobs in the private sector because companies suffer from demand contraction and can’t afford to maintain their employees’ numbers. Also, FDI is at its lowest numbers since no financial security can be offered with no national currency that could help alleviate the high prices of our exports or even strong laws that protect private investments in our country. The government has the influence to work with private governance when making public policies and “make binding rules that affect not only their own industry but the life chances of those outside their particular system of private governance” (Rudder 2008).
Corporate social responsibility, CSR, is a tool in which all parties can connect. Referring to Rudder’s terminology, it can be called “Corporate Social Integration”. It goes beyond philanthropy, but it is a strategy that comes from private governance and combines with the public governance in order to reach to public policies. It goes beyond reports that are self-produced and evaluated from the private sector but that create a win-win situation for all parties. Companies’ goals are to be profitable, and their strategies are focused on this. The private sector generally looks for individual gains, but in a collective action strategy, private companies can obtain greater gains from government when working together through cooperative regulation and action, which benefits society.
In Ecuador, as well as other open economies, the private sector’s contribution to GDP is strategic for an economy’s growth. The empowerment envisioned for and delegated to the private sector needs to make public policy more reachable for everyone, and therefore, the government has to stop being one-sided. The importance of including the value chain of the private sector is imperative. These different aggregates of the industries reflect their needs through their operations. Groups that work into a collective with political institutions obtain an important voice into making policies that reach each member. For example, independent and rural coffee producers did the hardest work in the coffee industry and received benefits that barely covered their productive and living costs. Throughout CSR projects and the work of NGOs with communities, one company started working with producers in training them with new technologies and tools, as well as buying from them directly. The outcomes were measured by the higher wages for the producers, better working conditions and an export-qualified coffee bean, competitive in international markets. This was such a success and became their competitive advantage that set a standard in the market and more NGOs started working in this field with other coffee companies. Now, the Asociación Nacional de Exportadores de Café is working as a guild generating a political environment that promotes not only great companies that export coffee, but also small producers and organizations that work in the field with these companies. Another reason why this is a success case is because their CSR strategy aligned to their business strategy because “no business can solve all of society’s problems or bear the cost of doing so” and they have expertise in their area (Porter and Kramer 2006).
The positive aspects of this process on making public policy have to do with flexibility of the private parties. Private governance can act with more flexibility than bureaucratic government institutions, as in a trial-error scenario. They are less rigid in using alternatives found in their industry than government regulation. Their focus is on stakeholders because they need to be profitable and sustainable, so they need to have an operating social license in which communities impacted by their activities. If these activities produce negatives externalities and their trade-offs, companies should compensate and control these with the community’s participation. They have limited resources but can self-finance their initiatives and can organize other members within their industry. These industries should lobby the government as advisors for the policies in their sector. This will ensure that government policy is more efficient and that the negative externalities are controlled for. Also, the government should regulate private companies’ communication strategies as a way to be transparent in their real outcomes individually and as an industry. These strategies usually include publishing self-evaluated reports in which they focus only on the positive aspects of their operations but leave their weaknesses hidden and use this as green washing. The government should set recommendations on reporting strategies so that every actor, small up to large companies, have the same opportunities and there is no space for misinterpretation or green washing, as a public relations tool to focus on good deeds rather than in mistakes from the company that were remediated and will become part of a strategy to be prevented in the future.
With these considerations, and with the focus of the government to have build support during the current economical crisis, I propose three recommendations for you, as President of the National Assembly, to revise and bring forward for a vote in the National Assembly.
1. Motivate industry associations and guilds
Acknowledging the power private sector has over individual citizens, it is more strategic for the government to motivate industries not only to build associations and guilds but to organize their members and discuss current policies and changes in the policies that would improve their production.In this case, the main focus is in companies that manufacture products in national and international markets.Nowadays, the government is a regulator of laws.It is important to comprehensively understand the incentives of these companies which is to make more profit and be sustainable.There are no companies that will actually be successful if the societies in which they operate are still struggling with basic needs.No industry will be willing to invest in a country that has a weak political or economical system.However, the government can share this responsibility with the industries.
A way to reach to their incentives is through taxes or regulation.Although the current situation of the country is extremely fragile, in order to commit to private sector’s willingness to generate planning of these goals, of their needs and the government’s needs.We should see where the common areas of agreement are.For instance, the government cannot offer to invest taxes collected these next three years in improving highways that connect rural areas to main airports, but it can compensate the private investment in these issues by lowering the regulations they have with respect to part-time hiring.That way, the industries will be motivated to compensate having higher costs in fixing transportation routes because they will incur in less costs when hiring low-skilled labor without jeopardizing the temporary worker.
The motivation for private foundations and NGOs is different.The government has to accept that the role of these organizations is to make public social issues that the average person is not aware of.Although it is true the current government has been working to overcome several of these issues, NGOs pointing them out is not a threat for the government but it should be an opportunity.The NGOs could be strategic partners of the government.For instance, Bangladesh, a country at least ten times bigger than Ecuador and with a structural poverty in more than half the country, is filled with NGOs that have become the main co-workers of the government.They work to decrease the country’s extreme poverty percentages, lack of health and high mortality indicators, as well as work in education programs that have increased the years of schooling as well as the ratio of girls in the educational system.
2. Standardize evaluation systems nationally
Throughout these past decades, the international community continuously developed several tools to measure social impact. Many are specialized on specific industries but there are several that can be generalized for all industries. For instant, the Global Pact, the Global Reporting Initiative and the ISO 26,000 are international systems that have created mechanisms in which private companies, NGOs and even local governments have a process on which they can evaluate their impact on society. If the government becomes a mediator between these tools and the private sectors and creates a standard requirement to report these tools, then it will be able to have a clearer understanding on what has been done and what the goals of individuals are. These negotiations for standardization would be agreed in workshops with different industries and every actor in society that wants to get involved in policy making processes for their sector. This is a mechanism that goes into the paternalist side, which might generate rejection from the private sector since it might be assumed as a micromanagement technique. However, the idea is to talk through the process with all the parties and the importance of a collaborative society. It is a way in which the government can allow participation in policy for small actors which sometimes lose their voice in large associations and guilds. The biggest weakness of this approach is how time-consuming it is and the costs of having workshops and lobbying for each and every industry. However, it is a more effective way in which sectors with private governance will be active, at least in a specific starting point.
3. Laissez faire, laissez passer
This alternative is to maintain the status-quo.This government has a record of staying in power, it rules two out of three political branches so there are many policies that are made and implemented without having to go through the processes mentioned before.However, Ecuador’s reality nowadays is completely different from the situation the country had about three years ago with the oil’s price over USD $110 per barrel and a budget made with the projection of this income to spend on social welfare.The country’s 2016 budget was planned with a price of USD $35 per barrel; this price is below USD $20 during the first trimester of 2016. The government’s strategy has to change, and since foreign direct investment that does not come from China is limited, it has to bet on internal direct investment.Keeping the current strategy is not a feasible option if the government has lost its cash-flow and still need to respond to its constituencies with social and economic growing projects.
Conclusion and Recommendation
The Ecuadorean government is facing a severe economic crisis. On the other hand, private companies are forced to fire people because of the economy’s instability. Society as a whole is struggling. As an international expert in Public Policy and Corporate Social Responsibility, my recommendation is that the government acts strategically to achieve a win-win situation. Approaching into a transparent process of empowerment from society lead by the government will engage the private sector. They will build cooperative guilds that receive special incentives from the government, based on taxes or regulations. Simultaneously, these guilds of industry-experts will promote policies that reactivate the economy in each sector, making everyone in society better off.
Dani Pardo-Yepez is a 1st year Public Policy student, focused on Latin America. She has been working as a liaison between the private sector and NGOs as a Corporate Social Responsibility consultant in Ecuador. After GPS she is interested in having a greater social impact in the NGO sector.
Asadullah, M. Niaz, and Wahiduddin Mahmud. "Paths to Development." Is there a Bangladesh Surprise? London: International Growth Center IGC, 2014.
Kingdon, John W. Agendas, Alternatives, and Public Policies. 2nd. New York: Addison Wesley Longman, Inc., 1984.
Olson, Mancur. The Logic of Collective Action: Public Goods and the Theory of Groups. London: Harvard University Press, 1965.
Porter, Michael E., and Mark R. Kramer. "Strategy and Society." The Link Between Competitive Advantage and Corporate Social Responsbility. Harvard Business Review, December 2006.
Rudder, Catherine E. "Private Governance as Public Policy: A Paradigmatic Shift." The Journal of Politics (Southern Political Science Association) 70, no. 4 (2008): 899-913.
The Observatory of Economic Complexity. Ecuador. 2015. http://atlas.media.mit.edu/en/profile/country/ecu/ (accessed February 27, 2016).