Summary

• Both economic growth and the eradication of poverty depend on the private sector's energy and drive. Business is the engine of all successful development efforts.
• But small-minded conflicts between business, government, and civil society can thwart these efforts. A new approach is needed.
• Short-sighted companies make fundamental mistakes; enlightened self-interest should send business leaders to the development table.
• There is too much mistrust of business; governments should have higher expectations of what it can deliver. Development that fails to leverage the best of business is development that aims too low.

When business, government, and civil society work together in public-private partnerships, our world works better. But mistrust and misunderstanding prohibit us from working together more often, and when that happens we all lose: business loses opportunity, government loses credibility, but society loses most of all.

Economic growth and our ambitions for the eradication of poverty depend upon the energy and drive of business and commerce. In fact, I cannot envision an effective development strategy that is free of or uninformed by the private sector. When we examine instances where development has succeeded, in every case business was the engine of development.

That is true because business kick-starts a virtuous economic cycle: new enterprises are formed, new jobs are created, new skills are gained, and incomes begin to rise. Soon growth and productivity follow, spurring more innovation and efficiency and generating the products and services that people want and need. And in parallel, people gain opportunity, empowerment, and dignity.

Of course it does not always work that way, and there are many reasons-well-chronicled reasons. But I want to suggest that what underpins all the causes of failure is partisanship, partisanship that prevents all of us from opening our minds to the possibilities of what each party can and must bring to achieve the goals of Monterrey.1 Although government, society, and business must be completely linked in reaching these goals, in reality we operate as partisans.

Partisanship is a failure of mind-sets: because we are too often at odds, we fail to explore avenues of cooperation, fail to work together. In short, we fail to see the simple truth that there is no hope for development without business, and in the long term there is no hope for business without development.

Let me start with business. The very vitality of the business sector is growth. Growth is demanded by shareholders, but, more important than that, it's what inspires workers. Today companies are relentless in pursuing new technologies, new product markets, and new economies. But as many of these product markets and countries are still developing, a new approach is required.

Companies that take a shortsighted view make fundamental mistakes. They make the moral mistake of seeing profits but not people. But they also make a management mistake, of investing only where there is a short-term return. They fail to build long-term markets and long-term opportunities-the crux of business success.

Enlightened self-interest should send business leaders to the development table to be co-architects of development strategies, to join in public-private partnerships, and, as may be appropriate, to engage in philanthropy. And I say to business leaders, don't do this under pressure; do it because you will be building stronger communities filled with prosperous citizens soon to be your employees and your customers.

As for governments, they cannot hope for development without business, and business needs them to be successful. Whenever we see evidence of the private sector driving development, in every single case government got the conditions right. Governments, and they alone, get to set these conditions-conditions that promote prosperity.

First of all, in the most underdeveloped economies, the aid and innovative financing provided by the rich countries can create the minimum threshold required for the private sector to truly prosper. It is only when these basic requirements are met that the virtuous cycle of development can take hold.

Then, too, in every country, government leaders set the framework for local entrepreneurship: for setting up businesses and closing them down, for formalizing economies. Further, governments set the framework for national competitiveness, protect workers, enforce contracts, and protect intellectual and other property rights.

And I believe that government also needs a mind- set shift. There is too much mistrust of the intentions of business and misunderstanding of the role it can play. I urge governments to have higher expectations of what business is capable of delivering: of how it can bring not only investment but also expertise and capabilities, of how it can not only provide enterprise but also help governments build infrastructure and deliver public goods. These may sound like excessively high aspirations, but development that fails to leverage the best of business is development that aims too low.

All of us need to raise our game. I know that many of the government reforms I speak of require courage and political risk. But I also know that most of the CEOs I meet are aware of that. There are many political statesmen, but in my encounters with corporate clients around the world I see more and more businessmen becoming statesmen, too. Growing evidence suggests that the partisan mind- sets threatening cooperation can become something of the past. So I urge governments, as well as my fellow business leaders, to embrace the opportunity to act in our enlightened self-interest and to work together in the spirit of real partnership.

Source: McKinsey & Company