Danish Development Cooperation

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1 Danish Development Cooperation An Analysis of Private Sector Involvement THESIS Written by Nicolai Skafte Supervisor: Johannes Dragsbæk Schmidt Development Studies and International Relations, 4 th semester Aalborg University Date: Characters:

2 Abstract Both the former Danish Government and the current have launched strategies and political initiates involving the private sector in the Danish development cooperation. Among these is the strategy called The Right to a Better Life, which was adopted by unanimity in the Danish Parliament in At the core of this strategy is to fight poverty and promote human rights. Recently, Denmark adopted the United Nations Sustainable Development Goals, which contain 17 different goals including ending poverty, enhancing gender equality, securing clean water and clean energy. Both The Right to a Better Life and the Sustainable Development Goals points to the private sector as an important player in achieving the goals. The aim of this thesis therefore is to look further into private sector involvement in the development cooperation, answering the following research question: How do the Danish politicians perceive the involvement of the private sector in the development cooperation? And how does the engagement of the private sector correspond to the Danish politicians objectives within the development policy? In order to answer this research question, semi-structured elite interviews have been conducted, interviewing four Danish politicians and a representative from the Cooperation of Danish Industries. With the purpose of answering the first part of the research question, the interviews have been analyzed, using three International Political Economy theories to categorize the respondents comments. The three theories are; economic liberalism, mercantilism and Marxism. Aiming at answering the second part of the of the research question, the goals from The Right to a Better Life and the Sustainable Development Goals were compared with the five respondents statements about the private sector s possibilities of contributing to achieving these goals. The five interviews were discussed and synthesized. On the basis of the analysis and discussion of the interviews, the thesis succeeds in answering the research question. The conclusion to the first part of the research question is that the politicians perceive the involvement of the private sector in the development cooperation differently. Gjerskov, from the Social Democratic Party, has a Marxist perception of the involvement of the private sector in the development cooperation, focusing on the exploitation of the developing countries and the conditions for the working classes. Aastrup, from the Liberal Party, and Hansen, from the Danish People s Party, both have an economic liberal perception of the ideal involvement of the private

3 sector in the development cooperation. However, they both perceive the current involvement of the private sector in the development cooperation as mercantilist, emphasizing the importance of Denmark benefitting from it. Finally, Lidegaard, from the Social Liberal Party, agree with Aastrup and Hansen s perception of the current development cooperation. The conclusion of the second part of the analysis can be summarized as follows: the engagement of the private sector can partly be said to correspond to the Danish politicians objectives within the development policy; the private sector cannot reduce poverty among people living in countries with wars and conflict. In peaceful countries, the private sector might be able to reduce poverty. The private sector will definitely enhance the chance of achieving some of the goals described in the SDGs. And finally, the private sector might be able to enhance human rights in the developing countries. In sum, the engagement of the private sector only partly corresponds to the Danish politicians objectives within the development policy.

4 Abbreviations DI Corporation of Danish Industries FDI Foreign direct investment GNI Gross national income IFU Investment Fund for Developing Countries ILO International Labor Organization IPE International Political Economy NGO Non-Governmental Organization SDGs Sustainable Development Goals TNCs Transnational corporations UN United Nations US United States of America USSR United Soviet Socialist Republics

5 Table of contents 1. Introduction Research question Structure Methodological considerations Semi-structured elite interview Sampling strategy selection of respondents Secondary data Theoretical framework Mercantilism Economic liberalism Dambisa Moyo Marxism Analysis How do the politicians perceive private sector involvement? Private sector involvement and political objectives Conclusion Bibliography Annexes Interview guide Marie Gad Interview guide politicians Interview with Marie Gad Interview with Mette Gjerskov Interview with Michael Aastrup Jensen Interview with Claus Kvist Hansen Interview with Martin Lidegaard... 98

6 1. Introduction Ever since Denmark provided its first development assistance in 1949, supporting a United Nations (UN) development program (Nielsen, 2012), Danish development policy has been an extensively debated topic. Through the years however, Danish development policy has steadily evolved and therefor remains a highly interesting topic in academia as well as in the general population. This thesis will not explain the evolvement of the Danish development policy all the way back from Instead the focus will be on a specific tendency in Danish development policy the involvement of the private sector. As will be apparent in this introduction, the former and current Danish Governments perceive the private sector as an important player in Danish development cooperation. The Governments have, among other thing, set up goals for Denmark s development policy and highlighted Danish companies as key actors in achieving these goals. In 2012, the Danish Parliament passed a new law about international development cooperation by unanimity, and adopted a new strategy for Denmark s development cooperation (Udenrigsministeriet, 2012). The law states that fighting poverty and securing human rights are the central goals of Danish development cooperation (Retsinformation, 2012). The new strategy for Denmark s development cooperation, called The Right to a Better Life, also underpins this, which can be seen on the following figure: Figure 1 (Strategy for Denmark s Development Cooperation, 2012) Page 6 of 103

7 As Figure 1 shows, poverty should be fought through a human rights-based approach and will be concentrated on four strategic priority areas: human rights and democracy, green growth, social progress, and stability and protection. The Right to a Better Life involves various actors such as Non-Governmental Organizations (NGOs), civil society, governments and multilateral organizations, but a special emphasis is put on the role of the private sector which can be seen from the very beginning of the paper: Denmark will work for sustainable and inclusive economic growth and employment creation, which will continue to be a core element in Denmark s development cooperation. Economic growth must be driven by the private sector in dynamic interaction with the public sector, which for its part must ensure that the proper framework conditions are in place. (The Danish Government, 2012: 2) Furthermore, it is stated that Denmark should have an active development policy, focusing on the poorest countries, where needs are greatest, where Denmark can best make a difference and where it is in our own interest to do so. (Ibid.: 33). The poorest countries in Africa are mentioned as the areas that Denmark should make a special effort to help, but it is also stated that poverty cannot be fought solely through development cooperation and that the developing countries eventually are in charge of their own development (Ibid.: 7). A final point from The Right to a Better Life that I wish to highlight is how the development cooperation effectively underpins development: Today, many developing countries are demanding trade, investments and political alliances on which to pursue shared goals and meet challenges on a par with or perhaps even instead of traditional development cooperation. Accordingly, we need to bring all Danish strengths and competencies into play in our cooperation with developing countries in order to ensure that Denmark remain a relevant and sought-after partner. (Ibid.). In May 2014, the former government launched yet another strategy called Government Strategy on Export Promotion and Economic Diplomacy More Trade. New Jobs. This strategy is interesting because the Government here stated that it would intensify its use of economic diplomacy in its foreign policy, including the development cooperation. In the strategy, it is explicitly suggested that Page 7 of 103

8 development aid and commercial activities should be linked in order to create growth and jobs in the developing countries as well as in Denmark (The Danish Government, 2014: 26). On August 27 th 2014, the Danish Minister for Trade and Development Cooperation, Mogens Jensen from the Social Democratic Party, and Foreign Minister, Martin Lidegaard from the Social Liberal Party, started a debate called More Denmark in the World with the purpose of discussing Denmark s future foreign policy, development policy and trade policy. As a result of the debate, a vision paper was presented by the two ministers on December 5 th 2014 (Udenrigsministeriet, 2014). The Government s vision was, among other things, that trade and development should create synergies that would benefit both Denmark and the developing countries. Through intensified cooperation between the Ministries of Foreign Affairs, Trade and Development, on the one hand, and the companies, on the other, the Government expected to be able to increase Denmark s export, create growth, reduce unemployment and diminish poverty in the developing countries (Ibid.). During the election in June 2015, Denmark s development policy also became a widely discussed topic in the public debate. What was discussed in particular was the rate of the Danish contribution. Most of the rightist parties advocated for a 20% reduction in the Danish development aid to 0.7% of the Danish Gross National Income (GNI), while the leftist parties were in favor of raising or maintaining the level of foreign aid on 0.87% (Finansministeriet, 2014: 46). The rightist parties won the Danish election and a government, consisting only of the Liberal Party, was supported by a majority in the Danish Parliament. In the Governing Program, the following is stated: The road to development is growth. Developing countries are increasingly demanding trade, investment, technology and knowledge rather than traditional development projects. We must meet this demand with a continued joint planning of trade and the development efforts. We must ensure that Denmark's strong business skills come better into play in development work and that our efforts are also serving the Danish businesses. (Regeringen, 2015: 32) During the election, the leader of the Liberal Party, Lars Løkke Rasmussen, who is now Prime Minister of Denmark, proclaimed that he would ask [ ] an experienced, respected person with an Page 8 of 103

9 international outlook to give his overall strategic proposal for a coordination or joint planning of defense policy, foreign and security policy, trade policy and aid policy. (Vangkilde et al., 2015). On September 15, 2015, Lars Løkke Rasmussen then announced that Peter Taksøe-Jensen an experienced Danish diplomat who is currently Denmark s ambassador to India and former ambassador to the United States and legal advisor to the UN Secretary General is the person to rethink Denmark s foreign policy (Gormsen, 2015). Taksøe-Jensen will finish his proposals on May 1 st, 2016, and this will form the basis for the Government s future development policy. Obviously, at the moment, one can only guess what Taksøe-Jensen will recommend the Danish politicians to do, but until his proposals are revealed it is clear that the Government is not just awaiting: On September 29, 2015, the Government presented its proposal for the financial bill for As promised during the election the Government wishes to reduce the Danish development aid to 0.7% of GNI. In the bill it is also mentioned that the development aid should be directed towards fewer priority countries, which means that Bolivia, Pakistan, Indonesia, Mozambique, Nepal, Zimbabwe and Vietnam are phased out as priority countries. The Government also states that the development aid should increasingly be spent on preventing migrations, for example by creating employment opportunities for the youth. And that the support for organizations will be limited to organizations that promote Danish priorities such as gender equality and human rights (Finansministeriet, 2015: 120). Furthermore, the Minister of Foreign Affairs, Kristian Jensen, have announced that the Government intends to spend more money on improving the conditions for the private sector to invest in the developing countries (Frandsen & Kaasgaard, 2015). A last thing that will be pointed out in this introduction is that Denmark formally adopted the UN Sustainable Development Goals (SDGs) at the UN Sustainable Development Summit on September 25-27, The SDGs replace the UN Millennium Development Goals and consist of 17 goals which are expected to be achieved by Among the goals is a wish to end poverty and hunger, ensure healthy lives and quality education, achieve gender equality, ensure clean water and sustainable energy, promote economic growth, improve infrastructure and foster innovation, reduce inequalities, make cities sustainable, ensure sustainable production and consumption, fight climate changes, protect oceans and forests, promote justice and peace, and strengthen global partnerships (UN Sustainable Development, 2015a). Common for the goals is that they are not only targeted at the developing countries but at the whole world. These goals are, however, also expected to be Page 9 of 103

10 included in the Danish development policy. As something new, the SDGs mention the private sector as an important factor in achieving the goals (UN Sustainable Development, 2015b). As the above shows, the private sector is being mentioned in all strategies and policy proposals both by the former Danish Government and the current. The purpose of the thesis will therefore be to investigate how the politicians perceive the involvement of the private sector in the development cooperation; Are the Danish politicians more concerned about enhancing Danish interests than helping the developing countries? Do the politicians perceive the private sector as the key solution in creating growth and fighting poverty in the developing countries? Or do the politicians even perceive it as a bad idea include the private sector? Furthermore, the thesis seeks to answer engagement of the private sector is a useful tool in achieving the goals presented in The Right to a Better Life and the SDGs. 1.1 Research question The aim of this thesis is to provide a qualified analysis of Denmark s development policy, focusing on the engagement of the private sector. In doing this, I will answer the following research question: How do the Danish politicians perceive the involvement of the private sector in the development cooperation? And how does the engagement of the private sector correspond to the Danish politicians objectives within the development policy? The answer will indeed depend on how the researcher approaches these issues. I have chosen to use International Political Economy (IPE) as the basis for analyzing Denmark s development policy. IPE embraces both liberal, realist and Marxist currents and therefore constitutes a broad approach which is expected to contribute to a qualified answering of the research question. It is hoped that this broad approach will reveal that the politicians might have different reasons for believing that private sector involvement in Danish development cooperation is a good idea. In order to answer the research question, I have chosen to interview four politicians, who are spokespersons on development cooperation. I will outline why I have chosen those respondents in chapter 2. Furthermore, I have interviewed a representative from the Cooperation of Danish Page 10 of 103

11 Industries (DI) with the purpose of obtaining more knowledge about how DI perceives the private sector s involvement in Danish development policy. With the aim of limiting the focus of the thesis, Denmark s multilateral and humanitarian aid will not play a significant role in answering the research question. 1.2 Structure In this section, I will shortly give an overview of the thesis structure that will lead to answering the above research question. In chapter 2, the methodological considerations that form the basis for this thesis will be outlined. I will explain how I have collected data for the analysis and discuss the advantages and disadvantages with this method. In chapter 3, the theoretical framework will be presented. In this chapter, it will also be outlined how I expect that the theories can contribute to answering the research question. In chapter 4, the collected data will be analyzed, using the theoretical framework as a tool to understand and categorize the findings. In chapter 5, I will compare and synthesize the findings from the analysis and answer the research question. In chapter 6, all the sources that I refer to throughout the thesis are listed. In chapter 7, the annexes can be found. Page 11 of 103

12 2. Methodological considerations In this chapter, I will present the methodological considerations that this paper builds on. As mentioned in the introduction, I have chosen to interview five persons, using qualitative, semistructured elite interviews. In this chapter I will describe why I have chosen a qualitative research approach and argue how it will contribute to answering the research question. Next, I will explain how and why I have chosen the respondents the sampling strategy. To a minor extent this paper also builds on secondary data. Lastly therefore, I will explain how this kind of data is included. A qualitative research approach I have chosen the qualitative research approach because it makes it possible to go into depth and gain detailed knowledge about the politicians thoughts about the involvement of the private sector in the development cooperation. The qualitative approach makes it possible for the interviewer to ask follow-up questions and to make sure that the respondents provide the wished information. Another advantage is that the qualitative method is flexible and can be adjusted continuously if new information is revealed. One disadvantage of the qualitative method is that the results can never be said to be representative. I will therefore not be able to say something about the Danish politicians perceptions in general but only about the politicians, I interview. Furthermore, the interviewer plays an active role in the creation of new knowledge, which makes the study more subjective. The interviewer s questions might also lead the respondents to look for an explanation that will appear plausible to them and the interviewer, though this explanation might not be right. Though disadvantages exist, I find the qualitative research approach highly relevant for this thesis. 2.1 Semi-structured elite interview I have chosen to use semi-structured elite interviews to answer the research question. The interviews are called semi-structured because I use a guide while talking with the respondents and elite because I am dealing with experts within the field. I will argue why the respondents all can

13 be viewed as experts in the section about sampling. First, however, I will elaborate mere on the guide. I have chosen to make semi-structured interviews, which means that I follow an interview guide that focuses on specific topics and contains questions that guide the interviewer (see Annex 7.1 thru 7.2). I have chosen to use two different interview guides; one for the interview with the representative from DI and one for the four politicians. The former guide primarily focuses on the companies role in development cooperation while the latter focuses on political decisions and the politicians opinions. However, as interviewer, I am not obliged to follow the order of the questions and it is possible to ask clarifying questions which are not mentioned in the interview guide (Kvale & Brinkmann 2008: 144). Furthermore, I will ask open-ended questions which enhance the conversational flow and the depth of the response (Aberbach & Rockman 2002: 674). According to Aberbach and Rockman, open-ended questions are most suitable for elite interviews as they allow the respondents to arrange their answers within their own framework and thereby increase validity of their responses (Ibid.). The open-ended questions also provide a good basis for an exploratory and in-depth work. However, the answers might be more difficult to code and analyze as the respondents answers may be very diverse (Ibid.). There are several challenges when making elite interviews. First and foremost, it might be a problem even to get to interview these leaders or experts because they are busy people. In my case, I succeeded in getting appointments with all the respondents, I contacted. However, the respondents often had limited time, which meant that I had to get straight to the point, which is also reflected in the interview guides. Secondly, there might be a predominant asymmetrical relation between the interviewer and the expert. However, Kvale and Brinkmann argue that [a]n interviewer who demonstrates that he or she is proficient in the subject of the interview will get respect and be able to achieve a certain degree of symmetry in the interview relationship. (Kvale & Brinkmann 2008: 167). I have therefore made sure that I was well prepared and knew a lot about the topics before interviewing the respondents. Thirdly, the expert is often used to being interviewed and may therefore have a more or less prepared speech that he or she is giving, which makes it important for the interviewer to ask critical questions (Ibid.). In order to avoid this, I made sure to ask follow-up questions and remain critical through the interview. Page 13 of 103

14 2.1.1 Sampling strategy selection of respondents In this section, I will argue why I have chosen elite interviews and present the selected respondents. I am interviewing four political spokespeople from different Danish political parties. All the persons can be argued to be experts within the field because of their rolls as spokespeople. I have chosen this approach because I want to know their and the political party in question s thoughts and arguments for involving the private sector in the development policy. It would be relevant to interview the Minister of Foreign Affairs, Kristian Jensen, or representatives from the Danish Government. This has not been a possibility but fortunately there are a lot of material and interviews available on the internet. I have chosen four spokespeople from different parties because I want to cover the differences in opinion that might exist within the Danish Parliament. Due to limited resources, it has not been possible for me to interview the relevant spokespeople from all nine parties in Parliament, and hence I cannot rule out that there will be some point of views that I will not come across, but I have chosen four very different politicians from both the left and right wing in Parliament to enhance the probability that I will see different opinions and arguments. As mentioned in the introduction, I have also chosen to interview a person representing the Danish companies to better understand how the Danish companies perceive their role in Danish development cooperation. Below I will give a brief presentation of the five respondents, an in depth explanation of why the individual respondent were chosen, and what I hope to get out of them. Marie Gad, Corporation of Danish Industries (DI) Marie Gad is Senior Advisor at DI where she works with the companies international activities, focusing on the companies international framework conditions which deal with export promotion, export financing and development policy. DI is an organization with more than member companies and therefore I found it relevant to talk with Marie Gad, as she could draw a picture of how the private sector perceives its involvement in Danish development policy. Furthermore, I wished to gain an insight into what possibilities and challenges the Danish private sector sees in development assistance in order to have this knowledge in mind when interviewing the Danish politicians. Page 14 of 103

15 The interview took place on September 9, 2015, and can be found in Annex 7.3. Mette Gjerskov, the Social Democratic Party Mette Gjerskov is spokeswoman on development cooperation from the Social Democratic Party. She was Minister for Food, Agriculture and Fisheries in the former Government from 2011 to In addition, it might be relevant to mention that she was Vice President of Danish Red Cross from 1999 to I have chosen to interview her by virtue of her current position as spokeswoman on development cooperation from the biggest party in Denmark at the moment, the Social Democratic Party. As former minister, I also hope that Gjerskov is capable of explaining why the Social Democratic Party chose to pursue the development policy they did during their last term in office. The interview took place on September 22, 2015, and can be found in Annex 7.4. Michael Aastrup Jensen, the Liberal Party Michael Aastrup Jensen is spokesman on development cooperation from the Liberal Party. As the Liberal Party is the only party in the current Government, I find it highly relevant to interview Aastrup in order to acquire knowledge of the Government s plans with Danish development cooperation. It would of course have been very interesting to interview Denmark s Minister of Foreign Affairs, Kristian Jensen, but it would be very challenging to arrange such a meeting. The interview took place on September 24, 2015, and can be found in Annex 7.5. Claus Kvist Hansen, the Danish People s Party Claus Kvist Hansen was elected for the Danish Parliament in June He is the spokesperson from Danish People s Party on development cooperation but, according to himself, he still has limited knowledge about Danish development policy. I find it particularly relevant to interview Hansen as Danish People s Party is the largest party within the center-right bloc, which besides the Danish People s Party consists of the Liberal Party, which forms the current Government, Liberal Alliance, and the Conservative Party. Page 15 of 103

16 The interview took place on September 24, 2015, and can be found in Annex 7.6. Martin Lidegaard, the Social Liberal Party Martin Lidegaard is spokesman on development cooperation from the Social Liberal Party. Additionally, he was Denmark s Minister of Foreign Affairs from 2014 to 2015 and Minister for Climate, Energy and Building from 2011 to In other words, he is expected to have extensive knowledge about Denmark s development cooperation as well as the political decisions made by the former Government. The interview took place on October 2, 2015, and can be found in Annex Secondary data Interviews do not constitute all the data used in this thesis. To a minor extent, I have also used secondary data, including papers from Danish Governments, reports from organizations such as the UN, academic journals and journalistic articles. In this section, I will shortly outline the pros and cons by using secondary data. First of all, it would be really time-consuming if I had to collect all the data and as much of the data was already available on the internet, there was no reason to waste energy on collecting these data myself. When using secondary data, the researcher is naturally more distant from the original source of information and might therefore be less familiar with the data. In order to avoid being misled by the data, I have therefore primarily used data from reliable sources such as academic journals and international organizations. Some of the new political initiatives have not been thoroughly discussed in academia yet and therefore I have also included journalistic articles in my work, taking into account that they might be less reliable. In sum, I find these data highly relevant as a supplement to the interviews I have conducted. Page 16 of 103

17 3. Theoretical framework In this chapter, I will present the theories and approaches which will constitute the framework for the analysis and answering of the research question. As mentioned in the introduction, International Political Economy (IPE) is the starting point and thereafter I will explain different theories within IPE and how they relate to development policy. For an overview of the applied theories, see the Figure 2 below. Figure 2 International Political Economy Realist tradition Liberal tradition Marxist tradition Mercantilism Economic Liberalism Marxism Neomercantilism Modernization Theory Dambisa Moyo* Dependency Theory * Not a theory but a person with liberal ideas IPE is a discipline within political science that deals with the relationship between economics and politics, between markets and states (Jackson & Sørensen, 2007: 179). Politics is traditionally concerned with power while economics focuses on wealth. The interplay of these two constitutes an interesting field which embraces various theoretical traditions. The three major paradigms within IPE are; mercantilism, economic liberalism and Marxism. They all have different approaches and I

18 therefore expect that they will constitute a theoretical framework containing various possible answers to how the Danish politicians perceive the involvement of the private sector in the development cooperation. 3.1 Mercantilism Mercantilism has its roots in realist thinking therefore I will start this section by explaining the key characteristics of realism. Realism can be described as having a pessimist view on human nature and a perception of international relations as conflictual (Jackson & Sørensen, 2007: 60). The state is the central actor in international relations and national security is a key issue for realists (Ibid.). One of the leading realist thinkers, Hans Morgenthau, wrote the following about politics: Politics is a struggle for power over men, and whatever its ultimate aim may be, power is its immediate goal and the modes of acquiring, maintaining, and demonstrating it determine the technique of political action (Morgenthau, 1965: 195). Realism is a school within international relations which includes several different perspectives but the above description gives a good impression of the fundamental ideas. Realism is often seen as the antithesis of liberalism, which will be presented later in this chapter. Mercantilism takes from realism its embedded pessimism and protectionist nature and can be described as economic nationalism. Mercantilist philosophy became common in the 16th and 17th centuries when the sovereign states were established in Europe after the Westphalian Treaty. It started as a means to acquire silver and gold from the New World by exporting products from Europe but later on it distinctly became a strategy for gaining power (Barfod, 1971: 5-6). Economy is seen as a zero-sum game and the rulers therefore regulate their nation s economy, e.g. by maximizing exports and decreasing imports via tariffs, in order to build a powerful state (LaHaye, 2008). This mercantile system, as Adam Smith named it, was especially dominant among the Western European countries during their imperial days, when the nation-states fought to become regional powers, and a huge amount of the nations wealth was therefore spend on military forces that could deter the enemies and claim territory (Ibid.). However, in 1776, Adam Smith published the book An Inquiry into the Nature and the Causes of the Wealth of Nations which criticized the mercantilist ideas claiming that a laissez-faire approach with free markets would benefit everybody Page 18 of 103

19 (Ibid.). Since then, the liberal ideology of free trade has been dominant in the so-called Western countries and spread to the rest of the world. However, there has been a revival of mercantilism which has been named modern mercantilism or neo-mercantilism. In contrast to traditional mercantilism, neo-mercantilism focuses less on military power and more on economic development. Countervailing, antidumping initiatives or other barriers created by national parliaments to protect domestic companies are some of the instruments that modern mercantilists use to protect the national economy (LaHaye, 2008). Another example could be nation-states that provide loans to companies that wish to export domestic products and thereby contribute positively to the trade balance, as was also done in the old imperial days (Barfod, 1971: 3-4). For this thesis, mercantilism is especially interesting when trade policy and development policy merge. As an example, Japan has had a neo-mercantilist approach in its development assistance for decades. In an article from 1991, Nester describes how Japan provides loans and aid to sub-saharan countries that were [ ] closely connected with the purchases of Japanese goods and services (Nester, 1991: 31). By doing that, Japan created various new markets for Japanese product and thereby became less dependent on specific countries, while the developing countries increasingly depended on Japanese capital, services and goods (Ibid.). The aid and loans where provided to Japanese companies that wished to start businesses in developing countries and can therefore, roughly speaking, be regarded as a subsidy (Ibid.: 35). According to Nester, Japan even chose to provide aid and loans in strategically selected countries that possessed natural resources or large markets, which would benefit the Japanese economy (Ibid.: 40). Modern mercantilists propose a middle road between the two approaches that will be examined later in this chapter; economic liberalism and the Marxist dependency theory. In contrast to economic liberals, mercantilists do not believe that a free, global market is the solution to development. However, neo-mercantilists also reject the dependency theorists argument that the poor countries should delink from the global market in order to end exploitation by the rich countries. Instead, modern mercantilists argue that the market may be imperfect and inefficient (Weiss, 1988: 177) and that supporting industrialization in the South might therefore be necessary, despite high costs in the initial phase (Jackson & Sørensen, 2007: 207). Page 19 of 103

20 I expect that mercantilism can be used to explain if the politicians for example emphasize that it is important that Denmark benefit from the involvement of the private sector in the development cooperation. 3.2 Economic liberalism Economic liberalism is based on liberal ideas. As with the above section, I will therefore start by giving a brief overview of liberalism. Liberalism has its roots in the Enlightenment in the 17 th century when there was economic progress and an increasing focus on individual rights and liberty. Liberalism has an optimistic view on human beings, believing that humans are rational and self-interested. However, it is also believed that individuals are willing to cooperate with other people for their mutual gain (Jackson & Sørensen, 2007: 98-99). Adam Smith is the father of liberal economics. He rejected the mercantilist view on economics as subordinated to politics, campaigning for an economic market without political interference and regulations (Ibid.: 184). Within economic liberalism, it is believed that the market economy has its own mechanisms, which will lead to the best outcomes for everybody if left to itself. According to Samuelson, free trade would enhance countries to use their comparative advantages to specialize in certain industries. This would be mutually profitable for all countries as each country produces what they are best at while importing products that another country can produce cheaper and better (Samuelson 1967: 651). Economic liberals thus perceive the economic system to be a positive-sum game where everybody gains more than they add as production will increase each country s wealth (Jackson & Sørensen, 2007: 185). Though economic liberals are in favor of as little political interference in the market economy as possible, it normally does not mean a total absence of politics. Laissez-faire is a central notion in economic liberalism but there is an understanding that the state should set up the basic framework for the market to function appropriately (Ibid.). Without political regulations there is a risk of market failure which means that the market does not foster mutual gain or efficiency (Ibid.). However, there are economic liberals who advocate for a further involvement of the state in economics. One of these is John Maynard Keynes who spread the idea of political management of Page 20 of 103

21 the market in the 1930s (Ibid.). Ever since, the Keynesian idea of a wisely managed market by the state has received fluctuating support over time depending on the economic and political situation. Modernization Theory has a liberal perception of how developing countries will evolve. In Modernization Theory it is believed that the developing countries will pursue the same path as the developed countries, starting as a traditional, agricultural-based society with limited technology. In 1960, Walt Whitman Rostow published his book The Stages of Economic Growth A Non- Communist Manifesto in which he divided economic growth into five basic stages, which have varying length from society to society. The economic stages, which are also illustrated in Figure 3 below, are: (1) Traditional Society, (2) Preconditions for Take-off, (3) Take-off, (4) Drive to Maturity, and (5) High-mass Consumption. Figure 3 (John A. Dutton E-Education Institute, 2015) Page 21 of 103

22 From an economic liberal point of view, it is obvious that there is a clear connection between economic growth and development. One of the push-effects that will develop a society is a closer relationship with other markets. It is believed that foreign trade will expand the market and create growth (Jackson & Sørensen, 2007: 203). Furthermore, [f]oreign direct investment in the Third World by transnational corporations (TNCs) brings in much needed modern technology and production skills. (Ibid.). For modernization theorists, it is therefore essential that there is a free market without political interference, a growing rate of economic investments, and FDI in order for the developing country to evolve from one stage to another (Ibid.: 204). I expect that economic liberalism can be used to explain if the politicians for example perceive free markets and trade as important for development and hence support the involvement of the private sector in development cooperation Dambisa Moyo Dambisa Moyo is a Zambian international economist with various arguments and suggestion on how to create development. I have chosen to include her in this thesis, because she deals with development aid and also because she shares many of the same ideas as economic liberalism. In 2007, Moyo published a book which has been widely discussed since. The book is called Dead Aid Why Aid is Not Working and How there is Another Way for Africa. The overall objective with the book is to get the donor countries to stop giving aid and instead start trading with the developing countries. In this section, I will take a closer look at the arguments presented in the book, starting with her opposition to aid and then focusing on the alternatives to aid that she proposes. According to Moyo, more than US $2 trillion has been given in aid to the poor countries over the past 50 years and yet a large proportion of the world s population lives in poverty and some especially African countries experience no or little economic growth (Moyo, 2010: 28). The idea of giving aid for the developing countries was inspired by the Marshall Plan, which had worked for Western Europe after the Second World War. However, Moyo argues that the aid given to Africa started out as a tool for Western Europe to stay connected with and influential in their former colonies, while the United States (US) used aid as a tool to enforce capitalism in Africa and the Union of Soviet Socialist Republics (USSR) rewarded communist countries by giving aid (Ibid.: 13-14). In short, aid was the weapon used by the great powers to obtain geopolitical and ideological Page 22 of 103

23 influence in Africa. Throughout the following decades, foreign aid changed its focus to industrialization and infrastructure projects in the 1960s, poverty reduction in the 1970s, trade liberalization and privatization in the 1980s, good governance and democracy in the 1990s, and finally a wave of glamour aid, as Moyo calls it, emerged, where celebrities such as Bono and Pope John Paul II campaigned to collect aid for the developing countries (Ibid.: 14-28). Moyo criticizes the donors for pursuing their own interests without looking at the outcomes for the developing countries and for continuing to use an aid-based model, which she claims, is not working (Ibid.: 27). First and foremost she argues that [t]he trouble with the aid-dependency model is, of course, that Africa is fundamentally kept in its perpetual childlike state. (Ibid.: 32). In her opinion, the aid recipients become economically dependent on the rich countries without the possibility of selfdetermination. One of the problems is that aid actually kills local entrepreneurship and businesses. Moyo highlights a case where a local mosquito net maker produces 500 nets a week and employs 10 persons. Then, a movie star or Western government suddenly decides to send mosquito nets to the region in order to fight malaria. The consequence is that the market is flooded with nets and the mosquito net maker therefore has to close his business, as he cannot compete with free nets. In the short run, more people will have a mosquito net and thereby less people will get malaria, but within a five year period, more nets will be needed and there will no longer be anyone to produce new nets. Moyo calls this the micro-macro paradox and sums it up as follows: Certainly when viewed in close-up, aid appears to have worked. But viewed in its entirety it is obvious that the overall situation has not improved, and is indeed worse in the long run. (Ibid.: 44) Moyo suggests a simple solution to the micro-macro paradox: the donors could spend the money on buying mosquito nets from the local producer instead and then donate or sell them locally. This would underpin and encourage the local businesses, create jobs and still fight malaria (Ibid.: 45). Another impediment for development is corruption. Moyo is far from the only person who has identified corruption as a problem but as she writes: [ ] the point about corruption in Africa is not that it exists: the point is that aid is one of its greatest aides. (Ibid.: 48). She draws a picture of a vicious circle of aid where few are interested in investing in countries with corrupt officials, who interferes with the rule of law, and hence concludes that aid by virtue of its role as source of corruption deters investments and local entrepreneurship (Ibid.: 49). With less commercial Page 23 of 103

24 investments, more aid is needed in order to fight the growing poverty and by this the vicious circle of aid has commenced, pulling the developing countries down in poverty and dependency (Ibid.). The following quote sums up Moyo s view on aid: The problem is that aid is not benign it s malignant. No longer part of the potential solution, it s part of the problem in fact aid is the problem. (Ibid.: 47) I will now turn my focus to the dead aid proposal, which, according to Moyo, is the tool to enhance development without using aid. Moyo suggest that aid should be reduced over a 5-10 year period with the ultimate aim of a world without development aid (Ibid.: 76). It is expected that the developing countries will do a lot themselves in order to create growth and reduce poverty as soon as the aid is phased out but as my focus lies on the Danish initiatives, I will concentrate on how Moyo expects the foreign governments and companies to react. Moyo highlights China s activities in Africa as an example to be followed by the traditional donor countries. She argues that China s role in Africa is [ ] wider, more sophisticated and more businesslike than any other country s at any time in the post-war period. (Ibid.: 106). China is investing billions of dollars in projects in Africa and the West claims China for simply exploiting Africa. However, Moyo does not perceive China s role as simplistic: No one can deny that China is at least in Africa for the oil, the gold, the copper and whatever else lies in the ground. But to say that the average African is not benefiting at all is a falsehood, and the critics know it. (Ibid.: 109). Moyo perceives China s foreign direct investments (FDI) in Africa as a win-win situation; China is putting its reserves into work and obtains commodities for its growing production while Africa s infrastructure is developed, unemployment is reduced and know-how and technology is transferred (Ibid.: 112). Additionally, she argues that FDI begets more FDI and hence contributes to a cumulative economic development of Africa (Ibid.: 102). Besides FDI, Moyo points to trade as an important tool in generating growth and development. It is widely accepted that trade benefit to the economy but Africa s share of global trade only accounts for 1% (Ibid.: 118). According to Moyo, this is mainly because of trade barriers between the African countries but also because of the EU s and the US s protectionism, particularly within the agricultural sector (Ibid.: 115). Page 24 of 103

25 Referring to economic theory, she states that an increased trade would at least contribute to growth in two ways: [ ] by exactly increasing the amount of actual goods and services that a country sells abroad, and by driving up productivity of the workforce [ ] (Ibid.: 114). This is very important for the entrepreneurs and small and medium-sized companies. Turning back to the example of the mosquito net maker, it is argued that if he were able of exporting the nets, he might be able of increasing his sales, which would increase his productivity (Ibid.: 114). Opening up the economies and enhancing inter-african trade and trade between the EU and the developing countries is therefore a key factor in catalyzing economic growth and development. Moyo even calls the entrepreneurs the life-blood and the engine for private-sector-led growth (Ibid.: 124). If the West wants to be moralistic about Africa s lack of development, trade is the issue it ought to address, not aid. (Ibid.: 119) Moyo is demanding a market-based approach, claiming that [ ] no economic ideology other than one rooted in the movement of capital and competition has succeeded in getting the greatest number of people out of poverty, in the fastest time. (Ibid.: 145) She is calling for political will to change the aid-based development programs, asking the Western donors to stop protecting their own industries and making the easy decisions such as just signing a check (Ibid.: 148). Greater emphasis is already put on public-private partnerships and the private sector is getting a more influential role in the development work, and Moyo argues that Africa s era of private capital is only now beginning, and this trend has to be nurtured in order for it to continue. (Ibid.: 153). Summing up, as should be clear from the above, Moyo agrees with economic liberals in the sense that they both perceive trade and free markets as the means to create growth and progress for the developing countries. Her view on the current world is in some ways similar to that of the neomercantilists, however, this is what she wants to change. Her description of the current word can also be argued to have similarities to the Marxists, because she argues that the rich countries are using the developing countries in order to gain wealth and power themselves. However, her overall aim with the book is to make the world, and especially the Western countries, understand that economic liberalism is the most effective way to develop the developing countries. I am therefore very interested in hearing the politicians reaction to Moyo s arguments. Page 25 of 103

26 3.3 Marxism Marxism, or Critical Theory as it is often named in development theory, is the third theory within IPE that I wish to include in this thesis. The farther of Marxism is Karl Marx who was German economist and philosopher. Marx rejected the liberal view on economy as a positive-sum game and instead perceived the economy as a scene of class inequality and human exploitation (Jackson & Sørensen, 2007: 186). However, Marxists also rejects the mercantilists view on politics as decisive over economics. The Marxists perceive capitalist economics as a relationship between two antagonistic social classes, where the bourgeoisie owns the production facilities while the proletariat sells its labor power to the bourgeoisie (Ibid.). However, the bourgeoisie earns more money than it pays the proletariat and therefore capitalist profit, in the end, derives from labor exploitation (Ibid.). Still, Marx perceived this relationship between the bourgeoisie and the proletariat as fruitful as capitalism defeated the former feudal societies and formed the basis for socialist revolution that would benefit the majority of the population, the proletariat (Ibid.: 187). The connection to IPE is that Marxists think that the bourgeoisie, who dominates the capitalist economy, also dominates politics because economics is the basis of politics (Ibid.). The bourgeoisie seeks to achieve its own interests and conflicts between states can therefore be perceived as a conflict between the ruling classes of two countries (Ibid.). Neo-Marxists argued that non-territorial power such as markets and economic opportunities are becoming more important (Ibid.: 190). Andre Gunder Frank was one of the researchers who used Marxist thinking in development theory. Frank rejects the modernization theorists belief that underdeveloped countries are countries that are still at a stage where developed countries were long ago (Frank, 1966). Instead, he draws a picture of the world as having a metropolis-satellite structure, where the metropoles exploit the satellites in order to enrich their own ruling classes and promote their own development (Ibid.). However, within the satellite countries there are also provincial capitals with a ruling class which constitute national metropoles and they also exploit the satellites. This results in a global structure in which resources and money flows from the satellites to the metropolis (Ibid.). Underdevelopment is therefore seen as a product of capitalism (Ibid.). Frank justify this by looking at Latin American countries during times of crisis for the Western countries (the metropolis), for example during the First and Second World Wars, and he observes that [t]hanks to the consequent loosening of trade and investment ties during these periods, the satellites initiated autonomous industrialization and Page 26 of 103

27 growth (Ibid.). It was, in other words, good for the underdeveloped countries to become delinked from the rich, developed countries. Wallerstein share many of the same ideas in his World System Theory. Instead of dividing the world into metropoles and satellites, he divides the world into three; core, semi-periphery and periphery as the illustration underneath shows. Though, both Frank and Wallerstein draw on Marxist thinking by arguing that poor countries are underdeveloped as a consequence of the development of the rich countries (Jackson & Sørensen, 2007: 204). Some Marxist theorists argue that the periphery countries should protect themselves from exploitation by limiting the interaction with the rich countries (Ibid.). Figure 3 (Theories of Dependence, 2015) I expect that Marxism can be used to explain how the politicians perceive the involvement of the private sector in development cooperation. Marxism might offer alternative tools to explain if a politician for example fears that the companies use their involvement in development cooperation to exploit the developing countries, or suggests that the developing countries delink from the international markets in order to experience economic growth. Page 27 of 103

28 Having outlined the three IPE approaches in the sections above, I will now summarize the most important points in the scheme below. Approaches within IPE economic relations Development Central actors game Development is enhanced through a mix of state and market, autonomy and integration Nation-states and governments Mercantilism Economic Liberalism Marxism Theoretical tradition Realism Liberalism Marxism Relationship between Politics is decisive Economics is Economics is decisive economics and politics autonomous The nature of Conflictual, zero-sum Cooperative, positive- Conflictual, zero-sum sum game A free market economy promotes growth and development Individuals and companies game Dependence shapes Third World development. Delinking from exploitative international markets will enhance development. Classes The theoretical framework for the thesis has now been explained and I will now move on to the analysis of the collected data. Page 28 of 103

29 4. Analysis This chapter consists of two sections. In the first section, I will give an introduction to the four interviews with the political spokespersons and the senior advisor from DI. For each of the four politicians, I will try to answer the first part of the research question; how do the politicians perceive the involvement of the private sector in the development cooperation. In order to answer this question, I will use the relevant theories from chapter 3 as tools to analyze how the respondents perceive the involvement of the private sector. In the second section, I will try to answer the second part of the research question: how does the engagement of the private sector correspond to the politicians objectives within the development policy. On the basis of The Right to a Better Life and the SDGs, the politicians different point of views will be discussed. In both sections, I will include some of the statements from the interviews. These statements and quotes are my translation and interpretation of the respondents spoken words. The unedited statements can be found in the Annexes 7.3 thru How do the politicians perceive private sector involvement? Marie Gad senior advisor in DI As mentioned in chapter 2.1.1, I have chosen to interview Marie Gad in order to gain knowledge about what the companies think about their involvement in the development cooperation. In this context, it is especially interesting to look into why the companies engage in businesses in developing countries and what differences they think they can make there. I am also interested in finding out how the cooperation between the Danish politicians and the companies work today and what wishes the Danish companies have for future cooperation. In this section, I will therefore highlight the points from the interview with Gad that I find of particular interest. Afterwards, I will connect these statements with the theoretical approaches, which were outlined in chapter 3. By doing that I hope to see a pattern of how DI representing the private sector perceives the private sector s role in Danish development cooperation.

30 Gad argues that businesses create development in the developing countries. In fact, she states that companies create more development than aid projects. According to Gad there have been a lot of examples where companies have had an enormous impact, the mobile banking system, M-Pesa, launched by British Vodafone in Kenya in 2007, is highlighted as one example. However she also refers to the SDGs as good examples of areas within which the private sector can provide marketbased solutions where there are no solutions today or where the development aid goes to civil society organizations that try to resolve these problems. In the end though, donor countries, companies and civil society can only push developing countries in the right direction. It is up to each country and its leaders to make sure that the development occurs. When asked what the companies get out of it Gad answered that companies are only to be found in countries where they see business opportunities. Hence profit is argued to be the key motivating factor for companies. Gad explains that Danish companies have a special interest in big countries with much growth and the richest group of countries among the developing countries. [t]here will be more Danish investments, the richer the countries become as it is easier to offer market-based solution to those who have money. When asked what the companies can do that aid and civil society organizations cannot, Gad answered that [ ] there is simply not enough aid in the world to finance the existing needs. Therefore, she finds it logical to use market-based solutions which are self-financing or even profit generating where it is possible, while spending aid where it is not possible to find market-based solutions. Besides development aid does indeed distorts competition. Gad mentions that local companies from developing countries have set up businesses and then suddenly a NGO or company from a donor country offers the same service and thereby outdo the local company. That logic is totally wrong in her opinion. According to Gad, it is a new approach that the Danish politicians are actually engaging the private sector in creating development for the developing countries. Previously, the private sector was just providers who bid on contracts tendered by the Danish State. She argues that this cannot really be called engagement of the private sector as the companies was not asked where they actually thought they could make a difference. Page 30 of 103

31 Today most companies which are investing in developing countries invest together with the Investment Fund for Developing Countries (IFU). However, this is primarily done in order to get the royal crown, which means that the companies will experience less closed doors, less attempts of blackmailing, etc. In Gad s opinion, Danida s projects are also very successful and create a lot of development. However, DI and its member companies are not satisfied with Danida s business instruments. The problem is that the rules concerning how and where the instruments can be used has been frequently changed and therefore the companies do not dare to count on support from Danida when planning to do business in a developing country. Looking at the World Bank s Doing Business Index it is evident that the poorer a country is, the more difficult it is to do business there. Gad therefore advocates for a diversified range of financing instruments. She thinks it is silly that Danida only provides grants to companies today. Instead, she suggests that Danida should offer instruments such as loans, guarantees and capital investments to the Danish companies that wish to do business in developing countries. These instruments are less expensive than grants because the State is expected to get the money back if the companies succeed. The aid-based grants should be given to companies that wish to do business in the poorest and most challenging countries, while loans and guarantees should be given to companies that wish to do business in developing countries where risks are lower. These were the main points from the interview with Gad. Before moving on to the interviews with the four politicians, I will shortly use the IPE theories to classify Gad s comments as having economic liberalist, mercantilist or Marxist influences. Economic liberalism Mercantilism Marxism Gad is strongly influenced by economic liberalist thinking, favoring market-based solutions. Like modernization theorists, she believes that Danish companies can push the developing countries to evolve. Gad agrees with Moyo that trade creates more development than aid but argues that as long as the rich countries are not ready to liberalize the market totally, statefinanced instruments for private sector involvement is the second best solution. Strongly rejected that Denmark pursues this approach in the development policy: So we do not experience in any way, I would say, that the Ministry of Foreign Affairs or the Government prioritizes Danish businesses wish to create development [ ] However, her wish for state-financed instruments could be interpreted as mercantilist. Some companies especially within the mining sector exploit the developing countries resources without benefiting the local communities. However, she could not imaging that a Danish company would do that, and she also added that only very few Danish companies operate within these Page 31 of 103

32 sectors. So she recognizes the Marxist perception of the relationship between rich and poor countries but rejects that Denmark should be part of that. There is no doubt that economic liberalism best describes how Gad perceives that involvement of the private sector in development cooperation. However, mercantilism and Marxism can also be used in explaining part of her arguments. I will now proceed to the analysis of the four spokespersons statements. Mette Gjerskov spokeswomen from the Social Democratic Party As Gad, Gjerskov believes that the private sector can create development for the developing countries. She says that the private sector must play a role in development cooperation and that it also does that today. However, Gjerskov stresses several times that the development assistance should not be organized in accord with the wishes of the Danish private sector but rather in accord with the developing countries wishes. This could indicate that Gjerskov is rejecting the neomercantilist protection of Danish companies through development policy. I therefore chose to ask if Danish development assistance should not benefit Denmark at all. To Gjerskov, this is not important at all but she also argued that the Danish companies benefit from Denmark s development policy though the aid is not targeted at enhancing private sector initiatives. As examples, Gjerskov mentions that Danish companies benefit from the Danish embassies local knowledge and contacts. Furthermore, the private sector enjoys the good reputation that Denmark has acquired through decades of development cooperation with the developing countries. In sum, Gjerskov rejects the mercantilist idea of using development aid to underpin Danish companies in doing business in developing countries. Gjerskov spent a lot of the interview talking about the labor conditions in the developing countries. She mentions the International Labor Organization (ILO) conventions and worker s rights as important for the development. As an example, she tells about a textile factory in Asia, that she visited, where the workers had poor working conditions. Gjerskov then explains how the local factories improve the working conditions when collaborating with Danish companies, as the Danish companies export their values to the local community. However, foreign companies do not always have a positive impact on the developing countries. Gjerskov mentions that it is a huge problem for Page 32 of 103

33 many African countries that foreign companies exploit their resources without benefiting the African countries, for example by paying taxes or hiring from the local workforce. This fits well with the dependency theorists approach which says that the core and semi-periphery countries exploit the periphery countries, such as many African countries. Gjerskov s focus on the workers conditions also conforms to Marxist thinking which cares about improving the conditions for the working class. When I asked Gjerskov why the Danish Parliament gave IFU a new mandate in May, 2015, which makes it possible for IFU to invest in the richest developing countries, for example China, Mexico, Turkey and Brazil, she answered that if we could improve these countries economies, then they would be able of enhancing development in the whole world. Gjerskov s comment makes great sense from a Marxists perspective, as it can be perceived as a wish to transform some of the semiperiphery countries into core countries or metropoles. She then hopes that these new metropoles will develop the periphery countries in their region. However Gjerskov also stresses that the Danish Parliament has ensured that a certain amount of IFU s investments will go to the world s poorest countries. Gjerskov also mentions that one of the obstacles for development in especially Africa is the tariff barriers between that exist between the countries. Moyo also mentions this as a huge problem but where Moyo suggests that the countries should remove the barriers completely, Gjerskov instead suggests that the African countries do like Europe and form a single market among. This single market would not have trade barriers among the countries within the market but they would still have trade barriers against countries outside the market. This recalls the dependency theorists suggestion of delinking the developing countries from the rich countries in order to avoid exploitation. However, this comment can also be interpreted from an economic liberal perspective arguing that there will be a free market benefitting all the countries within the single market this is a typical institutional liberalist view. The Social Democratic Party opposes the Government s plans of reducing the Danish development aid to 0.7% of GNI. Gjerskov argues that reducing the development aid immediately after adopting the new SDGs is a very bad signal to send to the rest of the world. Among other things, the SDGs aim at ending poverty in the whole world by 2030 and cutting the Danish aid is therefore a scandal, according to Gjerskov. Furthermore, she argues that the only solution to the current refugee situation in Europe is to develop the countries where the refugees are coming from. She is Page 33 of 103

34 also strongly disagrees with the Government s plans of spending more of the development aid on improving the conditions for the private sector in developing countries. She says that the Government should not spend more money on supporting Danish companies in developing countries: It is no need for the countries to be subjected to unfair competition it is bad enough as it is now. Again she rejects the neo-mercantilist approach saying that it does more harm than good. However, the Social Democratic Party also supported Danish companies work in developing countries while they were in office. Gjerskov says that it is good if the private sector can make money on developing countries but that the Danish aid should rather aim at creating development for the poor countries than at helping Danish companies. She argues that Danish companies might still benefit from Denmark s development policy and that this was also why the former Government had a Trade and Foreign Minister. Gjerskov does not think that Danish companies can create development in all developing countries. As an example she mentions that it is almost impossible for companies to offer marked-based solutions in Southern Sudan. However, she mentions that it is possible in for example many developing countries in Asia. This could indicate that she does not agree with the liberalist idea of a free market as the tool to enhance development in any developing country, but that it might be possible in some. Gjerskov mentions that some Danish companies might provide solutions such as transportable solar cells which can be used in remote villages and help the people living there, but she also says that projects like this will not necessarily create growth. Finally, I presented Gjerskov to Moyo s liberal ideas of how a free markets and the private sector can create development for all the developing countries. Gjerskov does not believe that Moyo s suggestions will ever become reality. She calls it utopian and says that it will happen when hell freezes over. Economic liberalism Mercantilism Marxism The suggestion that the African countries should form a single market fits well with liberal thinking. Gjerskov thinks that the tariff barriers between the African countries are obstacles for development. Gjerskov rejects that Denmark pursues a mercantilist development policy, which protects Danish companies and benefits Denmark. She says that it is not important at all that Denmark benefit from its development policy. Marxism and dependency theory can be used to describe many of Gjerskov s arguments. Among other things she states that there is a risk that the companies will exploit the developing countries when involving them in the development cooperation. Furthermore, she has a special focus on improving the conditions for the working classes. Page 34 of 103

35 Michael Aastrup Jensen spokesman from the Liberal Party Aastrup tells that he thinks that the Danish private sector plays an important role in developing the developing countries. He argues that when a country wishes to transform from being dependent on handouts into a country which can sustain itself, jobs and trade are necessary components. In this transition phase, the Danish companies are relevant actors as they can contribute with job creation and enhance trade, which will lead to growth for the developing country. There is a clear reference to the liberal modernization theory in Aastrup s assumption that trade will make it possible for a country to transform from one stage to another. Aastrup present the Liberal Party s development policy as a two-step approach; the first step being that the Government reduces the Danish development aid to 0.7% of GNI and starts redistributing the aid, focusing on Africa and the EU s neighboring countries. The second step is Peter Taksøe- Jensen s proposals of how Denmark s foreign policy, including the development policy, should be in the future. As Taksøe-Jensen is not presenting his proposals until May 2016, Aastrup is reluctant to tell about how the Government will shape the development policy. However he does tell that the Government intends to stop giving aid to countries that Denmark has supported economically for decades but where the money is no longer making a difference. Five days after the interview with Aastrup, the Government presented its proposal for the financial bill for 2016, revealing that Bolivia, Pakistan, Indonesia, Mozambique, Nepal, Zimbabwe and Vietnam were the countries, Aastrup were talking about. In the interview, Aastrup also states that improving the conditions for the private sector is part of the Government s development policy, however, he cannot give any concrete examples of how the Government intends to do this. Asking Aastrup if he believes that Danish companies can create development in all developing countries, he answers that he does not believe that they can make a difference in the very poorest countries with wars and conflicts, but where people are just living below the poverty line, he believes they can make a huge difference. Aastrup states the he, as a liberal person, thinks that free trade will create growth and that fewer restrictions on trade will benefit the developing countries. He therefore argues that the African Union should do more in order to break down customs barriers and open up for trade with the rest of the world and within the African continent. Economic liberalists would undoubtedly agree with these statements. Page 35 of 103

36 Aastrup also stresses that he is against all kinds of subsidies: I think it is wrong. I think that free trade on equal terms is the absolute best. It creates better competition, it creates more wealth. This statement fits perfectly with liberal thinking, which also favors free markets without political interference. Moyo also highlights these points as important for creating development. However, Denmark is still supporting Danish companies through its development policy and IFU. Gad from DI also proposes that the Government offers new investment instruments such as providing loans and guarantees to Danish companies that wish to do business in a developing country. Aastrup is very supportive of Gad s ideas and he also advocates for a continuation of IFU s work and the economic support to companies through the development aid. Confronting him with the contradictory statements, he says: [ ] I am not libertarian, I am liberal, and this also means that I recognize that it is not the case that the pure libertarian approach to the world can solve everything it cannot. He argues that there has to be a balance and that it is necessary to use the carrot approach in order to make the private sector engage in the developing countries. Using a Keynesian approach, this can be understood as if Aastrup wishes a liberal market free from political interference, but because markets failures exist, the politicians have to regulate and make incentives for the companies to engage in the developing countries. During the interview, Aastrup mentions China s activities in Africa. He explains how China sets up businesses exclusively with Chinese labor and how China avoids paying taxes to the African countries. He highlights Zambia as one of the African countries in which Chinese companies exploit the large mining industry without benefiting to growth and job creation in Zambia. The notion of one country exploiting another country s resources has been described by various dependency theorists. In this case, China can be referred to as the semi-periphery country who exploits the periphery country, Zambia. This perception of the relationship between China and Zambia is in great contrast to Moyo s liberal approach. Moyo, who is Zambian, says that though China may have favorable agreements in Zambia, the Chinese companies still benefit Zambia and create more growth than the aid coming from the Western world. Aastrup argues that Danish companies would never exploit a developing country and thereby rejects that dependency theory can be used to describe the relationship between Denmark and the developing countries. Page 36 of 103

37 Aastrup says that he does not oppose to the objectives presented by Moyo. He is in favor of Moyo s liberal view on development but he does not believe that a lot of the developing countries are ready to engage in a free, liberal market without any economic support. Aastrup mentions that he has talked with a number of high level government officials from African countries who explain that the problem in Africa is that people still tend to expect that a white man will help us. He believes that many African countries have all the possibilities minerals, oil and a strong labor force but that the countries are simply not ready to fend for themselves. To some extent, Moyo agrees with Aastrup and she proposes that the donor countries call the African leaders and tell them that they will stop giving aid within a 5-10 year period. She argues that this will be a wakeup call that will force the African leaders to act. To this, Aastrup states they he would not dare making such a wakeup call because Denmark has other political objectives, for example in relation to the control of the entire migration explosion. He argues that if the wakeup cure does not work, the consequences might be extensive. Furthermore, he stresses that Denmark should never give less aid than the UN recommendation of 0.7% of GNI in order to maintain Denmark s strong position in the UN. Though not included in the theoretical framework of this thesis, Joseph Nye s theory on soft power could be relevant in this context. Instead, I will conclude that though Aastrup shares many of the same thoughts as modernization theorists and economic liberals, he rejects Moyo s solutions, arguing that they are not realistic to carry out on this stage. Returning to the subsidies to Danish companies through the Danish development aid, Aastrup explicitly states the Denmark is pursuing a neo-mercantilist approach. He says that the Government also does it because it wants to create a foundation that might create Danish jobs, Danish investments and so on. He mentions that he cannot think of any country which is not giving aid for its own sake as well as for the sake of the developing countries. At the end of the interviews, Aastrup stresses that trade is the solution for the developing countries. He suggests that the African countries form a trade union with inspiration from the European Community, arguing that if the African countries increase free trade within the African continent, the private sector will generate growth and investments. Institutional liberals would agree with this idea, arguing that it will benefit all the involved countries. Page 37 of 103

38 Economic liberalism Mercantilism Marxism Aastrup is undoubtedly inspired by economic liberalist think. He argues that he believes free trade and economic growth is the key solution for the developing countries to evolve. Like in Modernization Theory, he believes that the developing countries can move from one stage to another if they engage in international trade. He though argues that some countries are not evolved enough yet to do so. Aastrup argues that he cannot think of any country which is not giving aid for its own sake. He explicitly states that Denmark s current development policy can be argued to be neo-mercantilist. However, he does not believe that the neo-mercantilist approach is the best to create development. Marxism can be used to explain the current relationship between China and Zambia but not between the Denmark and the developing countries. Claus Kvist Hansen spokesman from the Danish People s Party Hansen believes it is a very good idea that the private sector is involved in Danish development aid. He tells that Denmark has a whole industry concerned with helping the developing countries. He also says that it is good that Denmark s development policy benefits Danish companies but he stresses that it is not the main objective. However, he believes that the Danish politicians should do more to involve the private sector in the development cooperation, arguing that it is better than giving the money to Finland and ask them to provide the solutions for the developing countries. This first part can easily be interpreted from a neo-mercantilist approach, perceiving the development cooperation as a zero-sum game; if Denmark is not providing the solutions, then some other country will do it. Though he says that the objective with Danish development aid is not to support Danish companies, he still values that it benefits Denmark. Hansen agrees with the Government s plans of reducing the Danish development aid to 0.7% of GNI and calls it normalizing the aid, which he thinks has been too high for a long time. Furthermore, he believes it is a good idea to improve the conditions for the private sector s engagement in the developing countries. He hopes that the Danish companies can reduce poverty in the developing countries by creating jobs and growth and hereby prevent migrations. However, he also refers to the so-called white elephants in the 1970s, stressing the importance of maintaining the focus on helping the developing countries and not on the companies interests. From a liberal perspective, it makes sense to limit state-financed aid and instead enhance private sector engagement, as jobs and economic growth are seen as important tools in creating development. Page 38 of 103

39 Hansen does not believe that the Danish companies can help the very poorest people in the developing countries. However, he says that helping some of the more resourceful people in the developing countries may spread to the rest of the society and thereby also to the very poorest. Furthermore, Hansen disagrees with the decision to allow IFU to invest in all DAC-countries. He does not consider investing in for example Turkey or Mexico has anything to do with development policy. Hansen mentions that there might exist some complicated, national economic model which describes how investing in a middle-income country will also benefit the poorest countries, but he stresses that he thinks Denmark s development policy should be focused on the countries which need help the most instead. By saying this, he again stresses that he does not perceive Danish development policy as primarily an instrument to underpin Danish economy and growth. Thereby, he rejects the pure mercantilist idea of using development cooperation to secure Danish interests. Hansen agrees with Gad s argument that if we really want to enhance development for the poor countries then we should implement the initiatives from the Doha Round and remove all trading barriers. As an example, Hansen mentions that we produce tobacco and bananas in Europe with subsidies from the EU. He believes that if we end the subsidies in Europe, it would benefit the developing countries as they could then produce what was previously produced in Europe with subsidies: it will definitely give a boost to that country s economy. This is a clearly economic liberal argumentation as Hansen here argues that a free market will create development. Furthermore, Hansen s comments match Samuelson s idea that free markets will make the countries specialize and produce what they are best at. Furthermore, Hansen considers corruption as one of the most damaging factors to development. He believes that corruption is not only damaging to the donor countries and their taxpayers but that is also is harmful to the recipient country as it maintains a culture of corruption. Presenting him for Moyo s argument that development aid might actually feed corruption, he states: If this is the central idea, then it would not be a problem for me to say that we phase out the development aid. Asking Hansen what he would do with the Danish development aid if Danish People s Party had the majority in Parliament, he answers that the aid should be allocated to Africa and the Middle East in order to protect Europe and Denmark from threats such as migrations. Hansen would also continue involving Danish companies in the development work as it is important to him that the Danish taxpayers also feel that they get something out of the money. In sum, the development aid Page 39 of 103

40 should work as prevention and serve Danish interests. This seem like Hansen suddenly has a more positive attitude towards mercantilist thinking. Economic liberalism Mercantilism Marxism This approach can to a large extent be used to explain how Hansen wishes the Danish development cooperation to function. As an example, he agrees with Gad that if Denmark would do more to enhance development, all trade barriers and subsidies should be removed. As Samuelson, Hansen believes that free trade will make each country specialize in what they are best at. Hansen sees trade as a zero-sum game where it is important that Denmark provide the solutions for the developing countries. In the end, it also seems that Hansen embraces the mercantilist idea that Danish development cooperation should be used to secure Danish interests and protect Denmark against threats. Cannot be used to explain Hansen s perception of private sector involvement in the development cooperation. Martin Lidegaard spokesman from the Social Liberal Party According to Lidegaard, there is no doubt that the private sector should be involved in Danish development cooperation. He mentions that many politicians, including politicians from the Social Liberal Party, have been afraid of involving the Danish companies but that this is a historical mistake. However, he also stresses that the politicians who perceive private investments as the only tool in creating development are also wrong. He argues that bilateral aid is important in order to secure stabile regimes which make it possible and interesting for the private sector to invest in the developing country. Lidegaard states that there is an enormous export potential as well as a welfare potential for Denmark when looking at development cooperation. He explicitly says that Denmark should benefit from the development aid that is given but that it is not important that Denmark earn the same amount of money as it donates because the most important is to fight poverty and create development. From a neo-mercantilist perspective, it makes great sense that Denmark should benefit from its development cooperation. The mercantilist approach is further expressed when Lidegaard calls Denmark a superpower within the development field and argues that this gives Denmark unique export potentials. In other words, Lidegaard perceives development cooperation as a source to international power. Page 40 of 103

41 According to Lidegaard, the private sector is a huge driver of development. As a consequence, he thinks the current Minister of Foreign Affairs, Kristian Jensen, is right in increasing the focus on the private sector. However, Lidegaard says that it is a historically bad timing to reduce the Danish development aid to 0.7% of GNI while refugee flows to Europe are historically significant. Additionally, Lidegaard predicts that the reduction in development aid will decrease Danish exports and Danish influence. Again, he considers development aid to be an important tool in generating growth and power to Denmark, which fits perfectly with mercantilism. When introducing Lidegaard to Moyo s suggestion of ending the aid-based development approach and increase trade with the developing countries instead, he answers that she is 80% right. He says that it is right that aid causes unhealthy mechanisms when money is just coming but that aid is essential in order to underpin civil society organizations and institutions, which form the basis for stabile and democratic regimes. The Danish aid thereby provides the foundation for trade and investments with the developing countries. Furthermore, Lidegaard stresses that he agrees with Moyo that more countries should open up for trade with developing countries. In other words, Lidegaard does perceive trade as a tool to develop the poor countries but he believes that aid is a prerequisite for trade. Another important tool that Lidegaard highlights several times is cooperation between authorities. He mentions that Denmark spent DKK 280 million on authority cooperation, especially within the energy sector, while he was Minister of Foreign Affairs. Through authority cooperation, Denmark advices the developing countries on legislative matters and explain how Danish products and solutions may solve a certain problem. By doing this, Denmark has an impact on the developing countries domestic policies. Again, this fits will with a neo-mercantilist perspective. Realist tradition, which is embedded in neo-mercantilist thinking, has a state-centered approach where the authorities are the main actors. In the section above, it is evident that Lidegaard believes that authorities should push for trade and make the developing countries choose Danish solutions. Lidegaard thereby rejects the liberal idea that the politicians should not interfere in trade and investments. Furthermore, there is an underlying argument in Lidegaard s comments, stating that if they do not choose Danish solutions they will go to some other country. This is clearly a zero-sum perception. However, Lidegaard suggests that future development aid should be managed through international institutions such as the World Bank or the UN. By doing this, the development cooperation will go from being bilateral to multilateral which implies that the states will have to agree on how the Page 41 of 103

42 development aid should be spend. Assuming that Denmark is a superpower within development cooperation, Denmark might become a powerful player in this multilateral cooperation. However, this can also be understood from a liberal perspective. Economic liberalism Mercantilism Marxism Liberal thinking can to some extent be used when explaining why Lidegaard believes that development aid should be managed by international institutions. Through most of the interview, however, he rejects economic liberalism by saying that the State should play a significant role in Danish development cooperation. Mercantilism is very useful in explaining how Lidegaard perceives the involvement of the private sector in development cooperation. He believes that there has to be a mix of strong states and market forces in order to create development this is clearly neo-mercantilist thinking. Furthermore, he links development policy and international power. Finally, he explicitly states that Denmark should benefit from its development aid. Lidegaard does not mention anything that could be interpreted as Marxist. Categorization of the politicians perceptions As mentioned in the above, the four politicians present several ideas of how they perceive the involvement of the private sector in the development cooperation and some of their arguments might even seem conflicting when using the IPE theories to categorize them. Though simplifying the politicians thoughts, I have categorized their perceptions of the private sector in the development cooperation in the scheme below. The politicians perceptions of the involvement of the private sector in the development cooperation Economic liberalism Mercantilism Marxism Gjerskov X Aastrup (X) X Hansen (X) X Lidegaard X X = how the politicians perceive the actual development cooperation (X) = the politicians ideal perception of the development cooperation Page 42 of 103

43 I find it interesting that Gjerskov, belonging to the Social Democratic Party, stresses Marxist concerns, Aastrup and Hansen, belonging to the center-right bloc in Danish politics, highlights economic liberal arguments as the ideal, while Lidegaard from the Social Liberal Party, which can be argued to be located between the Liberal Party and the Social Democratic Party in Danish politics, highlights mercantilist ideas in his argumentation. As mentioned in chapter 2, these finding cannot necessarily be used to explain all Danish politicians views but I have made a small contribution to understanding how Danish politicians perceive the involvement of the private sector in development cooperation. 4.2 Private sector involvement and political objectives In this section, I aim a answering the second part of the research question: how does the engagement of the private sector correspond to the Danish politicians objectives within the development policy? On the basis of objectives from the strategy The Right to a Better Life and the recently adopted SDGs, I wish to discuss whether the involvement of the private sector in development cooperation is actually contribution to accomplishing these objectives. As mentioned earlier, the SDGs consist of 17 different goals. Due to limited time with the politicians, we were not able to focus on all the goals. Instead, I let the politicians highlight the areas, in which they believe the private sector should play a key role. I will start the section by shortly summarizing the objectives The Right to a Better Life and the UN s SDGs, respectively. Afterwards, the politicians arguments will be discussed. As mentioned in the Introduction, The Right to a Better Life has two central goals; to fight poverty and secure human rights. In the strategy, trade and investments are mentioned as important tools to achieve these goals. I therefore find it interesting to ask the politicians if they believe that poverty can be fought and human rights secured by involving the private sector in the development cooperation and how this should be done. The SDGs contain a range of goals and as something new, the private sector is mentioned as an important player in achieving the goals (UN Sustainable Development, 2015b). In Figure 4 below, all 17 goals are listed. Page 43 of 103

44 Figure 4 (Impact 2030, 2015) As fighting poverty is both a goal in Right to a Better Life and the first goal in the SDGs, I will start by discussing this topic. Afterwards, I will discuss the other central goals in Right to a Better Life, human rights, and the SDGs. Poverty All the politicians state that Danish companies cannot contribute to the reduction of poverty in countries with wars and conflicts. Lidegaard highlights Syria as one of the countries where companies have no change of changing anything at the moment. However, he adds that [ ] it is clear that the short-term, humanitarian aid is a governmental responsibility but already at the next step, I think that we should think in the businesses. He argues that the private sector can do a lot for the neighboring countries where there are more or less permanent refugee camps. As an example, he mentions that Turkey and Jordan should benefit from the extra labor that will be available for the next 10, 20, or maybe 30 years. He also states that Denmark should be ready to invest in these countries as this would drive economic development to the region. Aastrup agrees with Lidegaard and states that companies can actually help stabilizing a region by creating trade and growth. This is also why Aastrup believes it is important that IFU is able of investing in middle-income countries, as these countries might still be fragile. Gad actually also pointed out job creation as an important Page 44 of 103

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