At the domestic level, state intervention is generally justified to correct for market failure: if a good is collectively valued but under-supplied, the state often steps in.  A similar rationale applies at the international level. Domestically, welfare states are justified on the grounds that certain goods and services necessary to support the conditions for basic human dignity are not provided by the market. Internationally, inter-governmental humanitarianism is similarly justified by the assumed inability of the market to provide an analogous basket of goods. Because the "invisible hand" of the market is assumed not to be able to provide the food, shelter, health and security of the most vulnerable, an array of international and non-governmental organizations frequently step in and provide those goods and services.  Some goods are assumed to be "private goods" provided by the market but others – like humanitarianism - are assumed to be "public goods", which can only be offered by the state or its international analogue, the inter-state.

In the area of humanitarianism in which I work – refugee protection – responses have traditionally been defined by this implicit logic.  In an emergency, when refugees flee across a border into a neighbouring state the public international – acting through international organisations - effectively annexes a territorial space within that state within which is collectively provides humanitarian assistance. The implicit reason why it is seen as necessary for this role to be played by an intergovernmental actor is to fill a market failure: it is supplying a public goods that would not otherwise be supplied by the market.  However, relying almost exclusively on what might be referred to as an "inter-governmental welfare statist" approach beyond the initial emergency phase creates a range of challenges. First, it risks creating dependency among refugees.  Their own skills and talents may be under-used when refugee situations endure beyond the emergency phase and become protracted. Second, it may not be sustainable given that there is a finite funding pool at the intergovernmental level, often constrained by the generosity of donor government taxpayers.

Of course the intergovernmental part of humanitarianism is crucial for ensuring the provision of assistance that would not be provided by the market. However, the danger is that over-reliance on a purely statist logic risks "crowding out" the provision of humanitarian assistance by the market. At the local level, where refugees have been given opportunities for livelihoods or meaningful participation in markets, they have usually been able to use their own resources and skills to find their own methods of survival or forms of self-protection. At the national level, where free interaction between refugee and host communities has been allowed, business opportunities have frequently emerged to provide goods and services to refugee populations. At the global level, a range of private actors may find a business case for working sustainably with refugee populations that risks being crowded out by an exclusively statist approach.

UNHCR – as the main international organisation working with refugees – has gradually begun to recognise the potential contribution of private actors to refugee protection. Initially, it saw private actors as mainly philanthropic contributors. However, it has gradually begun to recognise the role of multinational corporations as prospective partners – capable of making a contribution to humanitarianism through expertise and innovation.  One of the keys to meaningful UNHCR engagement with the private sector is to map out the incentive structure underlying private engagement in refugee protection. Three incentives in particular seem likely to drive engagement from companies like IKEA, which recently made a 62 million Euro donation to UNHCR. First, values: the leadership of corporations is made up of individuals and within an oligopolistic industry those individuals have the discretionary space within which to act partly on the basis of values as well as just the profit motive. Second, brand: even working within the constraints of the profit-motive, MNCs may engage in corporate social responsibility as a means to developing brand association with humanitarian causes. Third – and most importantly – scalability: where piloting and prototyping a product within a particular context promotes innovation, it may enable opportunities for scalable products to emerge for which there may be a wider market.

It is the last of these – scalability – that offers the greatest but most neglected potential incentive for private sector engagement in UNHCR’s work. The organization’s 43 million population of concerns provides an almost ideal context for reverse innovation that can emerge from the field level, and then be scaled to meet the needs not only of refugees but potentially also other people within the world’s bottom 2 billion. By working with UNHCR, corporations such as IKEA, Formens Hus, Bechtel, Google, Facebook, CAT, for example, have the potential to develop innovations in shelter, health, water, sanitation, education, markets, managerial process, information and communications technology, which not only enhance the quality, efficiency and sustainability of humanitarian assistance but are also potentially scalable and more widely marketable. 

Embracing ‘scalability’ as a motive for private sector participation in humanitarianism has normative dimensions. On balance, though, and if done well, the moral case seems strongly in favour. When refugees are consulted about what they want, most do not want to be in an intractable state of limbo, dependent on welfare. What they generally want is a return as quickly as possible to autonomous engagement in markets.  Of course, there is no guarantee that MNC engagement guarantees that. However, done in the right way, incentives for private sector innovation may open up opportunities for greater refugee autonomy and a reduction in dependency. This would come through both process and outcome. Through directly involving refugees in the innovation process, they can become active participants in both problem-identification and solution development. Better innovation leading to the development of new educational resources, new market opportunities, the availability of better communications technology, and more efficient forms of remittance-sending, for example, would ultimately enhance the degree to which refugees can use and develop their own skills and talents, even within whatever wider political constraints are imposed by the host government.

The purpose of the state at the domestic level should not be to create indefinite dependency on welfare and nor should it be one that leaves vulnerable people deprived of assistance. It should be one that nurtures people to be capable of autonomously and sustainably participating in both society and markets. The analogy applies to the humanitarian context as well. The challenge of the refugee context is that states sometimes impose political restrictions on what refugees can and cannot do. But this does not mean that innovative ways of enhancing autonomy and minimising dependency cannot be found. The scalability motive potentially offers the opportunity to achieve this by combining the talents and resources of refugees with the greatest private sector innovation talents in the wider world.

But achieving this requires a new role for international organisations. Rather than simply being a direct provider of humanitarian assistance based on state funding, an additional facilitative role would be needed. It would be almost a "regulatory" role, seeking to recognise and channel incentives for particular kinds of private sector engagement. New Institutional Economics, for example, has long recognised the important interaction between states and markets. The right regulatory and incentives structures are needed for markets to work effectively. Analogously, for a humanitarian organisation like UNHCR, the challenge would be to create the right balance of incentives – at the global, national and local levels – to ensure "crowding in" rather than "crowding out" of market opportunities. Recognising and channelling those incentive structures in the right way has the potential to massively increase the potential source of funding available to humanitarian organizations, even in an "age of austerity", while transforming the very nature of protection and humanitarian assistance for the better.

                                                                                                                                                
                                     Alexander Betts
11/10/2014

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