5/30/2010

Does China show us the "Fourth Way"?

The Washington post reviews three books (see also aidwatchers.com) arguing that an alternative to democratic capitalism is emerging: state (or authoritarian) capitalism. The success of countries like China, Russia and the those of the Persian Gulf has spawned national wannabes among regimes -- particularly in Africa -- attracted by the prospect of strong growth and limited democracy.

http://www.washingtonpost.com/wp-dyn/content/article/2010/05/28/AR2010052801859.html

5/26/2010

The Rijnland Principles and Development Cooperation


The Rijnland Principles and Development Cooperation

Introduction

This paper is written after I read a book in Dutch by Rienk Goodijk, Herwaardering van de Rijnlandse Principes, on the so-called Northern European Rijnland Principles that are used in governance (both public and private), and that have some basic features that differ substantially from Anglo-Saxon models. The differences in it self are remarkable, but they also might shed an interesting light on different types of influences in Africa. Moreover, it can give important input on the discussions on the ideologies behind development assistance, particularly for private sector development. This paper will therefore first summarise Goodijk’s book and will subsequently brainstorm on some implications for development assistance.

Rijnland Principles versus the Anglo-Saxon Western wind

Not only in Northern Europe, but also in the rest of the world and especially in Africa, corporate governance is more and more defined by typical Anglo-Saxon values. Even the credit crises of 2008 did not totally change the ideology behind many donor-funded activities in Africa. The Anglo-Saxon economic model is a capitalist macroeconomic model in which levels of regulation and taxes are low, and government provides relatively few services[1].

The Rijnland model is usually seen as a strong alternative for the Anglo-Saxon model. It is called the Rijnland approach because it was traditionally exercised in countries of the Rhine, like Switzerland, the Netherlands, Germany and France. Even thought these European countries differ in some details, they all adhere to this social model in its most characterising aspects. Let us now look into two of those characteristics and the main differences with the Anglo-Saxon model.

Stakeholders versus shareholders

A healthy enterprise, according to the extreme version of the Anglo-Saxon model, is perceived as an instrument to create – in the shortest period possible – as much monetary value for the shareholders, those who own a company, as possible. The board of a company will serve first and foremost the interests of the shareholders. Other stakeholders, like the employees, are taken less into account. Employees for that matter are just one of the parties with whom a company signs a contract[2].

The continental European approach attaches far more importance to the interests of all the stakeholders. The management of an enterprise needs to take very different stakes into account of many different actors, both within the company (employees, syndicates, etc.) and outside the company (society, environment, media, civil society, etc). The managers of an enterprise need to undertake a real balancing act between these stakeholders. A European company is thus more focussed on networks and establishes links and relations with partners. In this perspective, the longer term becomes more significant than just the shorter-term wealth creation for the stakeholders. Other values than money and power only are in the Rijnland model given importance as well: solidarity, quality, job satisfaction and even happiness.

Collaboration versus competition

The Northern European approach also has an influence on the relations within a company. Engagement of the employees, often called collaborators, is highly valued and stimulated. Consultation and participation of the employees are used to bind, encourage and motivate them. This is a game that can only be carefully played and might be more time consuming than the Anglo-Saxon model. The management structure in the Rijnland model plays the role of a broker between all the different stakeholders, to achieve balanced relations between employees.

The Anglo-Saxon model gives more significance to clear leadership, the Chief Executive Officer (CEO), as well as to a vertical power structure. Performance based payment and incentives create a tradition of fighting for your job and the zeal of controlling. Everything needs to be cautiously planned in detail, carefully implemented with strong hierarchal structures. Trust between employees gave thus way to an instrumental use of human beings (a horror for one the most famous of philosophers, Immanuel Kant[3]). People are recruited and contracted as instruments of an enterprise. Everything needs to be “covered”, meaning insured. Conflicts are approached in a legal fashion where a company or the employee has the right to claim his due. Collegiality and collaboration in a team are less attractive, because it will be impossible to show your contribution to an end result and the performance of a team cannot be personally attributed.

The Anglo-Saxon approach has several clear advantages for example in the area of running a company, better communication, and individual accountability.

The Golden Mean

Goodijk argues that the European model can influence positively the cold, legal and hierarchal Anglo-Saxon approach in its purest sense. Or even better, several of the best practices can be combined. All types of nuances are already in vogue, both in Europe and more and more in the United States and the United Kingdom. The end result will probably be a golden mean between the two typical models. The European approach, or the Rijnland Principles, will contribute the four following perspectives:

  1. 1. A distinct vision on organisation structures and the way people function in such a structure.
  2. 2. A focus on good governance in growing globalisation.
  3. 3. Stimulating and organising of input, engagement and accountability of all stakeholders.
  4. 4. Embedding of these typical forms of engagement and participation in the organisation.

The core argument that Goodijk makes is that people make the company or organisation. This is a vision – it seems – that Europe does not want to loose. This vision implies several other aspects. A company does not only exist to increase shareholders’ value, but can create a much larger value, including mutual trust, stability in relations, teamwork, quality of collaboration, loyalty to the structure and contributing to the overall organsation. The Anglo-Saxon approach can teach us more flexibility, unambiguous communication, sufficient accountability and clear leadership.

The European approach argues that the management of an enterprise will need to be organised according to the principle that certain interests cannot become too dominant (those of shareholders or the CEO). A typical European company will thus maintain a balanced structure of its enterprise. Learning from the Anglo-Saxon model, the management should also pursue a balanced vision between loyalty to the organisation and sufficient flexibility for short-term contracts.

In this perspective, the European approach has a distinct vision on the ownership of a company. Formally the shareholders own a company, but a company as a collaborative structure, also belongs to those related to the company: loyal shareholders and loyal employees, those who deliver long-term capital and those who deliver long-term services. Long-term engagement and loyalty should be coupled with a right of say about the company.

The European model avoids as a consequence a “one size fits all”, top-down and legal approach. It therefore is characterised by a large amount of decentralisation and self-regulation. The European model requires a different kind of leadership, less hierarchal but more inspirational, participatory and binding; leaders who are able to encourage and stimulate the input and the engagement of staff. Horizontal consultations between employees and staff participation in decision-making structures are a welcome alternative to exaggerated fighting and controlling traditions.

The Anglo-Saxon experiences show us the usefulness of tailor-made solutions and contracts, as well as the dynamics of performance-based structures. Europeans might on the other hand have more longing for coherence and cohesion.

As already mentioned above, good governance in the European understanding is not solely focused on shareholders, but also on other stakeholders. The managers will thus need to activate the engagement of all the stakeholders and the Corporate Governance Codes of a company could reflect this vision. Such a vision has an implication for the composition and the functioning of the Board of Directors, which should become more professional (Anglo-Saxon) but keep a particular attention to the interests of all the stakeholders (Rijnland).

Each company could be thus asked to develop a covenant that explains the structure of consultations and forms of dialogue with all the stakeholders in order to promote genuine engagement of everybody and a bottom-up social innovation.

Some implications for Development Cooperation

Anglo-Saxon, Rijnland and African Principles?

If the fundamental statement of Goodijk is true that a basic difference exists between the Anglo-Saxon and the Rijnland business model what could be the implications for Africa? Might it be true as well that an African approach exists? And could it be true that this approach is very different from the Anglo-Saxon and Rijnland models? If they exist, how would we discover these differences? It will not be my task here to discover these differences, but if they exist or – worse – if we even don’t know whether or not they exist, this has large repercussions for the way we, Americans and Europeans, work in African countries.

Private Sector Development Programmes

The most obvious example can be drawn from the large programmes that we develop in the area of Private Sector Development or the Investment Climate. It is understandable that African countries, so badly looking for Foreign Direct Investments, should moderately adapt to those Foreign Investors. But does this mean that African countries should copy and paste someone else’s model, be it Anglo-Saxon or European? Let us look into this a bit closer.

The World Bank measures every year the ease of doing business in 183 economies. The results are published on a specialised webpage[4]. Ten indicators have been selected and are measured in each of the 183 countries by standardised case scenarios. The data are collected in a standardised way by around 8.000 experts and subjected to numerous tests for robustness. This way of proceeding has the clear advantage that a potential investor can compare one country with another country. Nevertheless, the standardised way of investigating has the great danger of comparing the incomparable, of thinking in blueprints, in a one-size-fits-all manner.

Moreover, the underlying philosophy or ideology seems to be more Anglo-Saxon than Northern European. Interestingly enough, in 2009, eight out of the top ten of Doing Business were typically Anglo-Saxon[5]. Most of the Doing Business indicators presume that less regulation is better. It is therefore difficult to tell whether the top-ranked countries have good and efficient regulations or simply inadequate regulation[6].

Our experience shows that low-ranking countries, like my current country of residence, Burundi, are eagerly pushed by donors to improve their ranking on the Doing Business index. Do these countries have a choice on what type of reforms would fit their situation? Do they choose between easy firing of redundant workers (Anglo-Saxon model) or creating engagement and loyalty of employees (Rijnland approach)? Do they easily give permits for construction, with high risks for safety and the environment? Are all the stakeholders being taken into account when as few as possible permits are needed? The bitter reality is that the discussion is not even encouraged. It seems that no Burundian institution, independent think-tank or university is advancing this debate.

“White Man’s Burden” once more

In 2009, William Easterly published his now famous White Man’s Burden. He criticises energetically neo-colonial behaviour of mainly Europeans and Americans, who come to Africa with a blueprint plan, “the Planners”. They seem to have THE solution for ending poverty. He vigorously argues for more modesty because our (the white man’s) interventions have the same problems as the ones of the old colonials: the excessive self-confidence of bureaucrats, compulsory top-down planning, slight knowledge of the local conditions and little feedback of the local population about what works and what doesn’t.

The differences between the two White Man’s models – the Anglo-Saxon and the Rijnland models -, makes visible the ideologies behind our interventions and how little we leave to local approaches.

Yash Tandon shows how grants and loans are very often tied to explicit or implicit ideological conditions; that the recipient country needs to create an enabling environment for foreign investments, that is needs, for example, to open up its economy to trade and financial liberalisation, that is must not undertake any nationalisation or appropriation of assets tied up with the grants or loans without market-based full compensation, that intellectual property rights must be protected, ... and so on[7].

Conclusion


We have given a short summary of the differences between the Anglo-Saxon and the Rijnland approach. What will be our mindset when we develop projects or programmes in African countries? Will we use one of these approaches as our ideology? Will we use the Anglo-Saxon model “pure-sang” when we propose to improve the business climate, with extreme deregulation and short-term value creation as the main aspects of it’s philosophy?

Or will we introduce the more Northern European model, with it’s focus on consultations, “not money only” value creation and sustainable entrepreneurship.

Will there be a third model possible: The African model? Will we, the neo-colonials, be able to listen to the propositions for such a model? Do we have the time, with all our short-term contracts, to reflect and search for the characteristics of a possible African model? Will we have the patience and the modesty to listen to the outlines of it and to appreciate its benefits? And, finally, will we start funding those who dare to describe this “Third Way” and those who develop alternative strategies?


Further reading:

- François Giovalucchi and Jean-Pierre Olivier de Sardan, Planification, Gestion et Politique dans l’Aide au Développement : le Cadre logique, outil et miroir des développeurs, dans La Revue Tiers Monde 198, avril-juin 2009. It shows the ideological configuration behind the Logframe approach. According to the article, a logframe matrix tells us a story of easy causal relations, of easy measurable indicators and of any given group of people as a community. Moreover, it give the (false) impression that the author of the logframe will be able manipulate any social phenomenon. Elements that are not fall out of his or her control are “hypotheses”.



[1] http://en.wikipedia.org/wiki/Anglo-Saxon_economy

[2] This article starts by resuming the book. This whole chapter therefore gives citations or summaries of the book in Dutch by Rienk Goodijk, Herwaardering van de Rijnlandse Principes. Over governance, overleg en engagement, Assen 2008. I did not indicate the exact pages or chapters of the book.

[3] Kant stated in his Kritik der praktische Vernunft that one has to « act so as to treat people always as ends in themselves, never as mere means. » The idea here is that everyone, insofar as he or she is a rational being, is intrinsically valuable; we ought therefore to treat people as having a value of their own rather than merely as useful tools or devices by means of which we can satisfy our own goals or purposes. Other people are valuable not merely insofar as they can serve our purposes; they are also valuable in themselves.

[5] 1) Singapore, 2) New Zealand, 3) Hong Kong, 4) United States, 5) United Kingdom, 6) Denmark, 7) Ireland, 8) Canada, 9) Australia, 10) Norway

[6] World Bank, Can a Civil Law Country Succeed in a "Doing Business" World? Chapter 1.

[7] Yash Tandon, Ending Aid Dependence, 2008, p. 26. He would call this kind of ideological tied aid “Red Aid”. Similar to this reasoning is an article by François Giovalucchi and Jean-Pierre Olivier de Sardan, Planification, Gestion et Politique dans l’Aide au Développement : le Cadre logique, outil et miroir des développeurs