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Antonio Ruggiero

May 30th, 2022

Paradigm Parallelism: Conceptualizing the role of the private sector in development

0 comments | 3 shares

Estimated reading time: 8 minutes

Antonio Ruggiero

May 30th, 2022

Paradigm Parallelism: Conceptualizing the role of the private sector in development

0 comments | 3 shares

Estimated reading time: 8 minutes

This article by MSc student in Development Studies Antonio Ruggiero reconsiders the role of the private sector as an agent of development. Antonio uses a concept he terms ‘paradigm parallelism’ to examine how the Washington Consensus created a pattern whereby businesses have strived tokeep up with the evolution of a neoliberalism-induced policy paradigm.
Policy vs. strategy paradigms

The rise of the private sector as an increasingly “institutionalized” development agent has sparked heated research debates. In 2011, the OECD advocated for the participation of the sector in the design and implementation of development policies and strategies to foster sustainable growth and poverty reduction. The present analysis was inspired by this stated OECD strategy, which conflates what this essay conceptualizes as two distinct development paradigms evolving in parallel to each other: the first is policy-based and led by International Financial Institutions (IFIs); the second is strategy-focused and guided by businesses. Through appreciating this distinction, this work explores whether the increasing engagement of the private sector in development constitutes a paradigm shift or, simply, the new “face” of an existing one.

The past four decades saw the evolution of a development policy paradigm governed by International Financial Institutions (IFIs). In the 1980s, the inception of the Washington Consensus (WC) marked a distinct abandonment of interventionist economic policies favoured in the post-WW2 decades, advocating instead for a market-based modus operandi. The reason why this transition represents a paradigm shift is that the WC introduced a competing new way of conceiving development, one that radically altered both the hierarchy of goals, and the instruments employed to guide policy. Development policies were no longer associated with, say, state ownership of strategic industries or import-substituting industrialization but, instead, with the privatization of such state-owned industries, removal of trade barriers, and decreased reliance on state intervention. Coercive and normative forces act as two key enabling conditions of a paradigm shift. Indeed, their presence is vividly influential in this statist development-WC shift. The normative force refers to expert knowledge, that is, trends in economics scholarship influencing which policies should come to power. Therefore, while there might have been evidence suggesting that statist policies were failing, and that an alternative paradigm was perhaps warranted, the Consensus was, primarily, a response to a fervid intellectual climate in favour of market-oriented policies. The origins of this favouritism reside in the fact that, at the time, American economics incorporated the internationalization and mathematization imperatives which better resonated with a market-based approach to doing things. Consequently, the shift was so ideology driven that it practically “lost touch with reality”: the WC did not necessarily emerge as an objective response to the needs of the “failing” economies of developing country. Instead, it was seen as a be-all, end-all fix that would work independently of the targeted country’s contextual environment. Instead, coercive forces are embodied by the same IFIs, and refer to their role in promulgating the Washington Consensus principles in policy format across developing countries.

Following the WC, the policy paradigm did not encounter any other major shifts. Instead, it faced two additional paradigm “refinements”. The MDGs are an augmentation of the market-based development approach promulgated by the WC with a social dimension. In other words, the inclusion of such social standards (e.g., poverty alleviation) would facilitate the process of global integration. Later, The MDGs morphed into the SDGs, which further broadened the range of development goals through the inclusion of environmental sustainability. Overall, with their hierarchical architectures imbued with Anglo-American economic thinking, IFIs led this policy evolution. Consequently, the principles enshrined in WC were so entrenched in such institutions that they became self-sustaining and resistant to change. Therefore, SDGs do not signal a paradigm shift for people and the planet, rather they constitute a multi-dimensional upgraded version of the same old Washington Consensus.

Inter alia, the consensus focused on the private sector: with state-owned enterprises being privatized, the sector contributed more significantly to countries’ economic development. Perhaps it was the consensus that originally legitimized the role of businesses as a development agent, although one of a rudimental and primitive nature. Consequently, the private sector, as a constituent of the WC’s policy umbrella, embarked upon its own distinct, yet parallel, paradigm evolution in trying to “keep up” with the more policy-based structural paradigm transformation discussed above. This evolution saw the sector embracing the Corporate Social Responsivity (CSR) imperative and, consequently, internalizing the Creating Shared Value (CSV) concept. CSR was criticized extensively, as it was conceived by managers as a mere masquerade for the pursuit of financial considerations. This “patchy” transitory phase is being, however, strengthened by the rise of the CSV imperative, which demands a new way for firms to achieve economic success.

What is “Creating Shared Value”?

The rationale behind shared value is that competitiveness of a company and the health of the communities and environment around it are closely intertwined. This implies that firms must actively protect and bolster the health and prosperity of, for example, their procurement sources to improve the quality and efficiency of their productivity, ultimately achieving greater profits. One might infer that shared value emphasises the instrumental value of providing societal and environmental benefits for the pursuit of profit. Indeed, shared value has no intention to weaken the role of the private sector, it respects its profit-driven nature and, most importantly, it does not pluralize firms’ objectives. Indeed, business is not a “magic bullet” that can simultaneously maximize profits while constructing development policies to regulate potentially adverse activities. Therefore, echoing the parallelism framework proposed, the entwinement of the private sector in the development policy design discourse blurs the separation of the private sector’s own paradigm evolution from the broader policy-based one led by IFI’s. Indeed, this tendency to conflate the two paradigm fields prevented policymakers from fully acknowledging firms’ complicity in creating some of these development problems in the first place and, consequently, that change must originate from within the business paradigm. CSV represents the solution in institutionalized form.

Moreover, the CSV logic is of a strong procedural nature considering that it calls for firms to restructure internally. Instead, such policy transitions as the MDGs-SDGs involve a goal-setting stance of acute purposive character. However, a purposive approach can be self-defeating, as it is usually hard to find common purposes when setting goals. Through CSV, instead, the firm re-thinks its internal productive processes. This way, it can pursue its own profit-maximizing objectives through achieving a myriad of development “goals” (e.g., Nespresso providing advice on farming practices). Should a procedural approach be maintained, one might even speculate that firms will progressively distance themselves from their parallel policy-based paradigm evolution, and experience modifications which recall a shift-like change of their own. For example, an increasingly observed development today sees vertically integrated enterprises dismantling into a multitude of laterally scaled micro-enterprises, each one actively invested in co-creating shard value with their respective customer base. Indeed, it is not surprising that the World Bank’s reluctance to accept an alternative paradigm was due primarily to a rigid hierarchical structure that “locked in” WC principles while proliferating them profusely.

Is CSV a paradigm shift or an evolution of an old one?

To respond to our opening question, it is important to turn to coercive and normative forces. Firstly, it is noteworthy that the private sector as a development agent does not constitute the policy paradigm itself. The sector ramified from the locus of its inception (i.e., WC) and embarked upon its own development paradigm evolution. As it lacks that policy element characterizing the paradigm evolution dictated by IFIs, CSV could have not possibly have emerged out of a rich intellectual climate (i.e., normative pressures). And even though there might have been conversations in academia about the unsustainability of corporate performance modes prior to CSV, normative pressures suggesting that a change was necessary did not emerge until such exogenous shocks as climate change and pandemics illuminated executives of the unsuitability of such corporate performance approaches. This dynamic is antithetical to the academia-led policy shift described above. Regarding coercive forces, it is not that they were absent; they were self-defeating in that they ran counter to the legitimization of CSV. Indeed, governments and NGOs have undermined the competitiveness of firms because they never recognized the synergies that an integrated approach to societal and environmental sustainability and corporate performance could generate. Instead, policymakers institutionalized the incorrectly presumed trade-offs between economic efficiency and social progress in decades of policy choices. A final reason that refuses the shift proposition is that, as explained above, although CSV might seem to envisage the private sector as a development agent, the concept asserts that firms should pursue the sole goal of profit maximization, but that the way in which this is done must change (procedural approach). More generally, it seems unlikely that the private sector as a development agent could have broken away from the policy paradigm that conceived it in the first place and embraced a competing paradigm autonomously.

In conclusion, the above analysis has demonstrated that the guiding principles of the Washington Consensus, as intended by IFIs, persist at present. Indeed, such international institutions remain the key agents of the structural policy-based paradigm evolution informing development policies today. On the other hand, the private sector should construe development through its strategic lenses and experience its own parallel paradigm evolution, one that recently saw the adoption of CSV. Specifically, having depicted the evolution of the policy paradigm until the most recent SDGs phenomenon (section one), this article sees the rise of the private sector in development as an additional refinement of a “developmental” sector which was legitimized by WC in the 1980s, and that now attempts to reflect dynamic changes occurring in the parallel policy-based paradigm domain.


The views expressed in this post are those of the author and in no way reflect those of the International Development LSE blog or the London School of Economics and Political Science.

Image credit: The United States Treasury building in Washington D.C. via Rchuon24 on Wikimedia Commons.

About the author

Antonio Ruggiero

Antonio Ruggiero is enrolled in the MSc Development Studies at the London School of Economics and Political Science. He holds a BA in Business and Management at the University of Durham. His broader research interests include state-led development, developmental states, digitalization, and the development role of small- and medium-sized enterprises in LMICs.

Posted In: Development Economics | Political Economy of Development

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