How to finance a Better World without increasing inequalities

Nano Kleiterp’s shared 30 year experiences in Development Financing Institutions [DFIs] at his book presentation to Austrian Development Bank audience enticed me to share some thoughts. Having been being a life time explorer with 35 years entrepreneurial track record whereof I have been building new businesses from Technology for over 25 years. In a post Paris-COP21 business makers‘ world trying to sell their tokenisms at premium costs under do-gooder paradigms, DFIs are often challenged to support quite ineffective undertakings, but don‘t know any better. Time spirit within donor countries has become infected by all kinds of „indulgence“ business models, to an extend that more and more developing or emerging countries‘ projects are getting structured as Public Private Partnership cases for getting supported by DFIs. So donor countries‘ industries can explore new export markets, developing or emerging countries politicians can brag with their „Green Economy“ achievements while private individuals in the countries of project realization get hung for a generation with cost, their governments could not afford to absorb in their public budgets. But the question dawning on me whenever perceiving such Export success stories is, whether the people really got what they would have need?

Tailored solutions however often result in first of a kind innovations, which DFIs exclude from their scope of activities. Usually the bigger the exporter‘s economy, the less sensitivity is afforded to assess what recipients need. Because anything falling under „more of the same“ is considered a statistically proven perfect solution the more often it had been replicated somewhere else already. However the environment, locally available workforce, quality of supplies, logistics, etc. can become huge show stoppers. For example, when I had the second factory built in China by my former enterprise we redesigned all the workflow and fixtures to suit the locally available skills. And we developed automated quality monitoring systems giving all parties involved transparency on how we did. Providing the right feed-back turned out as an enormous help to develop our human capital in an organic way. In a dematerializing world the building of human capital should be seen the most important value created from any Capital Expenditure [CAPEX]. Employment effects from a macro-economic point of view may be being considered already in the decisions for investment. But to ensure they will comprehensively support qualitative growth in a recipient‘s nation consequential educational efforts should become part of the decision process.

Over the years DFIs have experienced that it’s the private sector that creates employment. In other words the private sector needs development help more importantly than their governments. Sustainable Development Goals need even more facilitation. 20-25 years ago Corporate Social Responsibility started a paradigm change by paying more importance to Values for Society. Previously just Shareholder Value had been focusing on short term results, often achieved by massive lay-offs in industry concentration reorganizations. Today DFIs insist that good businesses must create new jobs, have to be profitable and need to contribute towards sustainability. For the last point investments in human capital building would be the actual key.

In times of Free Trade Agreements [FTAs] exports are facilitated and Infrastructure Investments generated in developing or emerging countries. But First World Export Championship drives inequality by loading importing countries‘ Trade Balances with debt while accumulating surpluses on the exporters’ part. Unfortunately FTAs so far do not yet foresee mechanisms to oblige owners of surpluses to spend a certain part as Foreign Direct Investments [FDIs] in a trade deficit burdened country to create local jobs there. Namely into the private sector! Because as we have seen from a macro-economic study for Carbotopia, the fiscal return for an economy on the jobs created by private investments should be considered a key parameter in investment decisions. For Carbotopia it may be so significant because it enables a local closed loop economy that keeps money shipped out to be plunged into foreign oil wells today circulating in local economies. So for Carbotopia this might explain the distribution of 25% direct, 45% indirect and 35% induced employment of 1.5 jobs per million CAPEX. At an employment overhead system like in Austria the National Budget enjoys already a double digit annual return on 3rd parties‘ CAPEX triggered employment charges. So I would say, a Better World could probably be financed most effectively if it generated qualitative employment by human capital building in local closed loop economy furthering activities. So those should be given DFIs‘ financing preference irrespective of whether it implemented an Innovation for the first time or fell under a more of the same paradigm.

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