VOLUME 4, NO.1
SEPTEMBER 2008
FRONT MATTER
3
Editors’ note
ARTICLES & NOTES
4
New Labour, New Aid? A Quantitative Examination of the Department for
International Development
Alan Webster
29
Motivating Altruism: Multinational Enterprises and Corporate Social Responsibility
Victoria Weininger
47
The Power Sharing Experience in Northern Ireland and Sri Lanka
Ayesha Zuhair
61
One State or Two? The Search for a Solution to the Cyprus Problem
Nicola Solomonides
INTERNATIONAL PUBLIC POLICY REVIEW
INTERNATIONAL PUBLIC POLICY REVIEW
Editorial Staff, Volume 4 (2007-2008)
General Editors
Tony Daly, MSc International Public Policy, Sub-editor
Theodora Kalessi, PhD School of Public Policy, Coordinator
Valerie Kirwan, MSc European Public Policy, External Communications
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Rabiah Mumtaz, MSc European Public Policy, Futures Projects
Leila Reid, MSc International Public Policy, Copy Editor
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Academic Review Panel
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Dr Christine Reh
Dr Sherrill Stroschein
Editorial Board
Guy Aitchison, MSc Democracy and Democratisation,
Fabrizio Colimberti, MSc International Public Policy
John Considine, MSc European Public Policy
Tony Daly, MSc International Public Policy
Will de Freitas, MSc International Public Policy
Sam Giller, MSc International Public Policy
Theodora Kalessi, PhD School of Public Policy
Valerie Kirwan, MSc European Public Policy
Jonny Lloyd, MSc International Public Policy
Christopher McCarthy, MSc International Public
Policy
Rabiah Mumtaz, MSc European Public Policy
Olivia Nix, MSc International Public Policy
Aaron John Peters, MSc International Public Policy
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Leila Reid, MSc International Public Policy
Tim Sarraille, MSc International Public Policy
Barbara Sennholz, MSc International Public Policy
Karl Smyth, MSc International Public Policy
Tong Yee Siong, MSc Public Policy
Alexia Williams, MSc International Public Policy
Maurice Wong, PhD School of Public Policy
The INTERNATIONAL PUBLIC POLICY REVIEW (ISSN: 1748-5207) is a peer-reviewed, student-edited, and faculty
supervised academic journal published annually by the University College London’s School of Public
Policy, London, United Kingdom. IPPR welcomes submissions from faculty and postgraduate students of
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INTERNATIONAL PUBLIC POLICY REVIEW, Volume 4, Number 1 (September 2008). [ISSN 1748-5207] © 2008 School of Public Policy,
University College London, London, United Kingdom. All rights reserved.
2
VOL. 4, NO. 1 – SEPTEMBER 2008
EDITORS’ NOTE
Over recent months, we have all paid witness to a series of events which have subverted and
undermined the authority of national governments to manage the challenges facing the world
today. A surge of riots have marked the rising food and fuel prices that have impacted most
severely on the poorest countries, while the breakdown of the international financial regulatory
framework has starkly demonstrated the power of private business over national economic
stability. Multilateral diplomacy was unable to prevent the outbreak of inter-state warfare
between Russia and Georgia, piracy reigns off the Somali coast, and the UN declared GuineaBissau the world’s first ‘narco state’. As we approach 2015, the commitments of the Millennium
Development Goals appear worryingly unfeasible in many countries. These have served both to
highlight the importance of multilateral, cross-national approaches to governance and to paint a
dim picture of it as it stands today. They have also, however, forced the well-worn debates of the
globalisation research project to spill over into the centre of public discourse.
Following in the footsteps of previous editions, this fourth volume of the International Public
Policy Review serves as a space for students, academics and civil society to pursue and advance
these debates. While the authors in this journal touch upon a range of subjects, each exhibits a
strong desire to address the complex, multi-faceted economic, social and security issues of our
time.
In our opening article, ‘New Labour, New Aid?,’ Alan Webster examines the changes in British
aid policy in the years prior to and following the election of the Labour government in 1997. This
is followed by “Motivating Altruism: Multinational Enterprises and Corporate Social
Responsibility”, in which Victoria Weininger seeks to identify the main drivers behind American
multinational corporations’ pursuit of ethical and sustainable business practices.
The second half of this journal explores some of the most protracted civil conflicts of recent
times. In “An Analysis of the Power-Sharing Experience in Northern Ireland and Sri Lanka”,
Ayesha Zuhair takes a timely look at the armed conflict in Sri Lanka through a comparison with
the case of Northern Ireland. Nicola Solomonides’ “One State or Two? The Search for a Solution
to the Cyprus Problem” then evaluates why power-sharing mechanisms have so far proven
ineffective in solving the ‘Cyprus problem’.
Taken together, these articles bear out the widespread and intrinsic problems at the heart of our
global system. Political will, power-sharing, development assistance and business culture all
present significant and unique challenges to the underlying assumptions that order society
today. We hope that these insights contribute to the many tasks and challenges that lie ahead.
On behalf of the General Editors,
Tony Daly
Leila Reid
Karl Smyth
London, June 2008
3
INTERNATIONAL PUBLIC POLICY REVIEW
NEW LABOUR, NEW AID? A QUANTITATIVE
EXAMINATION OF THE DEPARTMENT FOR
INTERNATIONAL DEVELOPMENT
Alan Webster
ABSTRACT
International aid policy under New Labour has been widely praised as one of the world’s
most progressive but it has not yet been subject to critical, quantitative review. This paper
addresses that gap, comparing aid policy in the eight years before and after 1997. It
concludes that New Labour has pursued a policy that has seen significantly larger sums
directed at the countries in most need, and in the form most effective for development. The
paper also argues that British aid has been transformed into a more purely altruistic
policy, with the removal of economic conditions that had typified it in the past. Finally, this
research argues that there has been a revolution in the character of British aid as New
Labour has gradually moved towards initiating genuine partnerships with developing
countries in contrast to the subjugation of old. In short, the paper concludes that British
aid has undergone a dramatic and positive change in the last decade making it largely
deserving of the admiration it has received.
Keywords: International Development, Aid Policy, New Labour, DFID
INTRODUCTION
The New Labour government that came to power in 1997 did so pledging a
comprehensive and sweeping reform of policies after eighteen years of “failed”
Conservative rule.1 British overseas aid was not to be excluded as its manifesto claimed
a Labour government would “attach much higher priority to combating global poverty
and underdevelopment” and to reinstate the party’s tradition, since 1964, of creating a
separate ministry responsible for overseeing this matter. In the ten years since this new
Department for International Development (DFID) was established, British aid policy
has been lauded as “a model for other rich countries.”2
Labour Party, New Labour: Because Britain Deserves Better (Labour Party: London, 1997): 3.
O. Barder, “Reforming Development Assistance: Lessons from the UK Experience,” Centre for Global Development
Working Papers 70 (2005): 3.
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2
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VOL. 4, NO. 1 – SEPTEMBER 2008
Despite more than a half century of Western overseas aid programmes, the United
Nations estimates that today more than one billion people still remain in abject poverty.3
If developed countries are truly committed to assisting the development of the world’s
poorest nations, then it is vital that the apparently successful policies embraced by DFID
are scrutinised.
Thus, this paper aims to identify the changes in aid policy pursued under New Labour
that initiated the positive comments referenced above. It shall proceed by first
examining the fundamental question about aid’s effectiveness in achieving development
through a discussion of the neo-liberal critique of aid before broadening the issue to
consider a more contemporary conceptualisation of the issue. This shall then lead to an
exploration about the changing historical priorities of aid, considering whether past aid
policies were actually targeted at achieving development. Then, the early, largely
positive, reviews of DFID’s work shall be examined, which then shall lead to questioning
whether this praise is deserved, by using a quantitative examination of whether British
policy has actually altered to a more progressive state under New Labour.
Finally, the paper will conclude that New Labour has largely pursued an aid policy that is
both significantly different to that which came before it and systematically targeted at
improving the lives of the world’s most vulnerable individuals.
THE EVOLUTION OF THE CONCEPTUALISATION OF INTERNATIONAL AID
New Labour came to power during a period of reflection and change in the field of
international development. The end of the Cold War, the miraculous economic growth in
East Asia and the failings of previous aid policies raised a myriad of questions about the
future of development policy across the globe. An understanding of the evolution of aid
policy from its post-war birth to the contemporary consensus, examining the changes in
the perceived ‘best practise’ of aid is vital to framing the positive reactions to the first
ten years of the Department for International Development.
TRUMAN TO BURNSIDE AND DOLLAR: SIXTY YEARS OF AID
There are two broad areas into which one can divide the debate around aid: the impact
of aid on recipient countries, and the factors that influence donors’ decisions about aid
spending. The first of these has been particularly controversial since aid-giving
commenced.
AID’S IMPACT
In promising sums of money to developing nations in order to “relieve the suffering of
…people…and help them realise their aspirations for a better life”, it was the 1949
inauguration speech of President Truman4 that initiated the spending of more than $1.6
United Nations, Human Development Report 2006 (Basingstoke: Palgrave Macmillan, 2006).
M. Gronemeyer, “Helping,” in The Development Dictionary: A Guide to Knowledge as Power, ed. W. Sachs (London: Zed
Books, 1992): 61.
3
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INTERNATIONAL PUBLIC POLICY REVIEW
trillion in aid over the last six decades5. However, the existence of more than one billion
people in abject poverty today raises difficult questions about the use of aid as a tool for
assisting development and reducing poverty.
Western aid-giving emerged rashly in response to the speech of President Truman,
preceding the establishment of development economics as an academic pursuit. This
“unprecedented economic experiment”6 led to haphazard spending before it could be
subject to thorough study. By the 1950s and 1960s, however, development economics
was simultaneously measuring aid’s effects and actively shaping aid policies.7
These early academic theories argued that ‘under-development’ was due to ‘gaps’ in
countries’ economies: a savings gap that would be overcome by greater investment, and
a capacity gap that would be overcome by the importing of Western capital and
technical knowledge.8 Consequently, development economists employing Harrod9Domar10 or Solow11 models of economic growth believed that aid could provide the
necessary catalyst for growth through the stages of Rostow’s ‘take-off’ model.12 Such a
belief lead to donor governments focusing resources on discrete, capital-intensive
projects, often dams and roads, in the belief that such an investment would fuel
growth.13 But such policies proved to be largely wasteful. The projects produced only
“islands of excellence”14 which contributed little towards recipient nations’
development:15 a fact recognised as early as 1969 when the World Bank’s own Pearson
Commission reported that such projects had “little impact on....global development
objectives.”16
Development economics progressed, but economic growth still failed to materialise
from the subsequent ‘Washington Consensus’ policies of the 1980s. The unwavering
neo-liberal macroeconomic reforms promoted by the World Bank and International
Monetary Fund proved to be ill-suited for developing countries.17 The requirements for
fiscal conservatism caused a decrease in education and health funding while rapid and
C. Lancaster, Foreign Aid; Diplomacy, Development, Domestic Politics (Chicago: University of Chicago Press, 2006): 2.
P.D. Boone, “Politics and the Effectiveness of Aid,” European Economic Review 40, no.2 (1996): 260.
7 H. Hansen and F.Tarp, “Aid Effectiveness Disputed,” Journal of International Development 12 (2000): 375-398.
8 ActionAid, Real Aid 2: Making Technical Assistance Work (London: ActionAid, 2006): 26.
9 R.F. Harrod, “An Essay in Dynamic Theory,” Economic Journal 49 (1939): 14-33.
10 E.D. Domar, “Capital Expansion, Rate of Growth, and Employment,” Econometrica 14 (1946): 137-147.
11 R. Solow, “Technical Change and the Aggregate Production Function,” Review of Economics and Statistics 39 (1957):
312-320.
12 W.W. Rostow, The Stages of Economic Growth: A Non-Communist Manifesto (Cambridge: Cambridge University Press,
1960).
13 T. Killick, “Policy Autonomy and the History of British Aid to Africa,” Development Policy Review 23, no.6 (2005):
668.
14 R. Young, “New Labour and international development: a research report,” Progress in Development Studies 1, no.3
(2001): 250.
15 A. Hewitt, “British Aid: Policy and Practice,” ODI Review 2 (1978): 54.
16 ActionAid: 31.
17 J. Stiglitz, “The Post Washington Consensus Consensus,” (speech to the Initiative for Policy Dialogue, Sao Paolo,
Brazil, August 22, 2005),
http://www2.gsb.columbia.edu/faculty/jstiglitz/download/speeches/IFIs/Post_Washington_Consensus_Consensus.p
pt.
5
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unmitigated financial and trade liberalisation caused domestic industries to suffer.18 The
resultant “lost decade” of growth occurred despite large sums of aid being spent, leading
to further questioning of its effectiveness, and a subsequent ‘aid fatigue’ setting in
amongst Western governments.19
Such experiences were cited by aid-cynics such as Peter Bauer, who has called for
Official Development Assistance (ODA) to be “terminated.”20 Aid serves only, he argues,
to create corrupt and uncompetitive recipient countries wholly dependent on rich
states.21 Despite lacking empirical analysis or data, Bauer’s argument reflects a view that
has been asserted by many critics for many decades.22
The criticisms frequently levelled at aid’s effectiveness were largely only political or
ideological. However, when, employing a quantitative analysis, Peter Boone23 came to
similar conclusions as Bauer, there was a resurgent interest in the question of aid’s
effectiveness,24 just as New Labour was coming to power. Studying decades of data for
almost 100 developing countries, Boone’s seminal work concluded that aid did not
significantly increase a state’s investment or growth rates; nor did it benefit the poorest
sections of society. Instead, he argued that, in most cases, aid only increased the size of
recipient governments’ consumption rates by around three-quarters of the volume of
aid.25 Boone’s empirics supported what had previously only been political scepticism of
aid’s effectiveness and, while it was published at the very end of the Conservative
government, it appeared to justify the decrease in the aid budget in all eighteen years of
its rule.26
Arguably, however, Boone’s results are neither surprising, nor actually disheartening for
modern advocates of foreign aid. While Boone’s analysis covered more than thirty years
of data, crucially, it ended in 1993.27 As such, the lack of a relationship he found between
aid and economic growth is only reflective of a lack of a relationship between old aid and
economic growth – aid that was not always attempting to assist development, as shall be
discussed in due course. Four years later, and using the same dataset as Boone, World
Bank officials Craig Burnside and David Dollar28 came to a conclusion that would have
very different implications for the policies of a new government that read it.
18 W. Easterly, “The lost decades: Developing countries’ stagnation in despite of policy reform 1980—1998,” Journal of
Economic Growth 6, no.2 (2001): 137-157.
19 J. Simensen, “Writing the History of Development Aid,” Scandinavian Journal of History 32, no.2 (2007): 175.
20 P. Bauer, “Foreign Aid: Mend It or End It?” in Aid and Development in the South Pacific, eds. P. Bauer, S. Siwatibau,
and W. Kasper (Australia: Centre for Independent Studies, 1991): 17.
21 Ibid.
22 See for example M. Friedman, Capital and Freedom (Chicago: University of Chicago Press, 1962); S. Djankov, J.
Garcia-Montalvo and M. Reynal-Querol, “Does Fair Aid Help,” Cato Journal 26, no.1 (2006): 1-28.
23 P. Boone, “Politics and the Effectiveness of Aid,” European Economic Review 40, no.2 (1996): 289-329.
24 W. Easterly, R. Levine, and D. Roodman, “New Data, New Doubts: A Comment on Burnside and Dollar’s ‘Aid, Policies
and Growth’ (2000),” Centre for Global Development Working Papers 26,
http://www.cgdev.org/content/publications/detail/2764, 26.
25 P. Boone, 314.
26 P. Williams, British Foreign Policy Under New Labour 1997 – 2005 (Basingstoke: Palgrave Macmillan, 2005), 17.
27 P. Boone, 289.
28 C. Burnside and D. Dollar, “Aid, Policies, and Growth,” The American Economic Review 90, no.4 (2000): 847-868.
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INTERNATIONAL PUBLIC POLICY REVIEW
Burnside and Dollar’s analysis showed that while development generally failed to result
from aid, this was not the case in some recipient nations. In those developing countries
with good fiscal, monetary and trade policies as well as sound government institutions,
aid had a significant, positive impact on development.29 But they found no evidence that
aid actually caused recipient countries to adopt the same policies that would have a
positive effect on its ability to help development.30 Thus they argued for aid to be made
conditional on such reforms.
Burnside and Dollar’s “extraordinarily influential”31 (Easterly et al., 2003: 1) paper has
subsequently had considerable impact on aid policy worldwide, and gave extra support
to the concept of ‘good governance’ in the development field. ‘Good governance’ has
been a guiding principle for aid-giving for more than a decade32 and has reflected a
change in economic and political thinking since the failure of the structural adjustment
policies of the Washington Consensus. While subject to various definitions, one can
consider good governance as countries’ dedication to transparent, consultative and
democratic forms of government aimed at bettering citizens’ lives.33
Inspired by the growing body of evidence34 that came to a head with Burnside and
Dollar, economists and politicians increasingly saw ‘conditionality’ as a way to ensure
that aid monies would be ‘better spent’ by recipient nations35 and achieve the
development which had failed to materialise in the past. However, the use of such
methods is far from uncontroversial. Non-governmental organisations36 and recipient
nations themselves37 have been critical of conditionality’s intentions, equating it to a reemergence of Western imperialism. While academics, including Svensson,38 have argued
that it actually fails to produce reform because donor inertia means that funds are
dispersed even when recipients miss targets and fail conditions.
As an attempted softening of such criticism, there has been a growing move by donor
countries to embrace ‘partnerships’ in development policy, working more closely
alongside recipients to combat poverty together.39 This commitment towards
endogenous, domestically-owned development policies has manifested itself in
Ibid., 847.
Ibid., 847.
31 Easterly et al., 1.
32 M. Doornbos, “Good Governance: The Rise and Decline of a Policy Metaphor?,” Journal of Development Studies 37,
no.6 (2001): 93.
33 United Nations Economic and Social Commission for Asia and the Pacific, “What Is Good Governance?” About Us,
http://www.unescap.org/pdd/prs/ProjectActivities/Ongoing/gg/governance.asp (accessed 18 January 2009).
34 See for reference Easterly and Rebelo, 1993; Easterly and Levine, 1997.
35 Easterly et al., 1.
36 ActionAid.
37 L. Green and D. Curtis, “Bangladesh: partnership of posture in aid for development?,” Public Administration and
Development 25, no.5 (2005): 389-398.
38 J. Svensson, “Why conditional aid does not work and what to do about it,” Journal of Development Economics 70, no.2
(2003): 381-402.
39 T. Hattori, “Giving as a Mechanism of Consent: International Aid Organisations and the Ethical Hegemony of
Capitalism,” International Relations 17, no.2 (2003): p.160.
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academic support for direct government budget support by donors, as opposed to the
donor-controlled project-based and ‘technical assistance’ aid schemes of old.40 But, the
concept of ‘partnerships’ in development has been severely criticised as empty rhetoric,
and disguising a continued subjugation of recipients41 that has tainted aid-giving for
decades.
GIVING AID
The rise of good governance and partnerships came at a time of change in the second of
the two broad areas of development research: the motivations for donors’ aid-giving.
Historically these had been far from purely benevolent selflessness as combinations of
commercial, historical and geopolitical ties shaped aid decisions.42 Indeed, Burnside and
Dollar’s own empirical study found that bilateral aid had been most influenced by donor
interests, rather than recipient countries’ genuine need. 43
For the United Kingdom, aid has traditionally been a remnant of its imperial history,
with the overwhelming majority being spent on former colonies44 because of the
“special responsibility” that its Overseas Development Ministry45 claimed the country
had inherited. The economic and social requirements of less developed countries was
clearly secondary to donor’s own political policy.
Generations of governments were also committed to using aid as a tool of British
economic policy, giving rise to the commercial “tying” of aid, with monies being ‘donated’
on the condition that it was spent on British goods and services which were often more
expensive than the competitive world market price.46 The use of tied aid has been
criticised heavily by academics, including Oliver Morrissey who claims that it
significantly decreases the efficiency of aid47 and is “unlikely to be of a net economic
benefit to . . . [developing countries].”48
The use of one form of aid in particular has been subject to vocal criticism. ‘Technical
assistance’, defined by the OECD49 as aid concerned with the use of donor’s expert
knowledge and research, has been argued to have a disappointing record for assisting
Simmensen, 175.
G. Crawford, “Partnership or Power? Deconstructing the ‘Partnership for Government Reform’ in Indonesia,” Third
World Quarterly 24, no.1 (2003): 139-159; Green and Curtis; D. Slater and M. Bell, “Aid and the Geopolitics of the PostColonial: Critical Reflections on New Labour’s Overseas Development Strategy,” Development and Change 33, no.2
(2002): 335-360.
42 A. Alesina and D. Dollar, “Who Gives Foreign Aid to Whom and Why?” Journal of Economics 5, no.1 (2000): 33-63.
43 C. Burnside and D.Dollar (2000), 848.
44 J. Tomlinson, “The Commonwealth, the Balance of Payments and the Political of International Poverty: British Aid
Policy 1958 – 1971”, Contemporary European History 12, no.4 (2003): 413.
45 Overseas Development Ministry, “What is British Aid?: 67 Questions and Answers,” (London: HMSO, 1967), 3.
46 A. Hewitt, “British Aid: Policy and Practice,” ODI Review 2 (1978): 60.
47 O. Morrissey, “ATP is Dead: Long Live Mixed Credits,” Journal of International Development 10 (1998): 248.
48 O. Morrissey, “An Evaluation of the Economic Effects of the Aid and Trade Provision,” Journal of Development Studies
28, no.1 (1991): 104.
49 Organisation for Economic Co-operation and Development, Trade-Related Assistance: What Do Recent Evaluations
Tell Us? (OECD: OECD Publishing, 2007).
40
41
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INTERNATIONAL PUBLIC POLICY REVIEW
development50. One study concluded technical assistance to have had a negative impact
on economic growth,51 while others have claimed it to be rarely demand-driven, but
instead driven by donor governments.52
Developmental needs were still explicitly secondary in British aid policy in 1980 when
the Minster for Overseas Development, Neil Marten, stated that the government would
“give greater weight in the allocation of our aid to political, industrial and commercial
objectives alongside our basic development objectives.”53 As such, the Thatcher and
Major era of British government saw British aid still dominated by stand-alone projects
and a significant proportion remained tied. It was during this administration that the
perceived wisdom of development economics evolved once more, as the structural
adjustment policies of the Washington Consensus gave way to a focus on poverty
reduction as being the most important aim of aid, typified by the 1997 Human
Development Report which considered this to be a “moral imperative and a practical
quest.”54
THE DEPARTMENT FOR INTERNATIONAL DEVELOPMENT
The government that emerged from the 1997 election was one committed to sweeping
reform of British policies. The landslide victory of New Labour was won on the back of a
campaign that had almost exclusively focused on domestic policies.55 Nevertheless, its
manifesto did contain fleeting references to foreign policy and, most pertinent to this
study, is the one short paragraph concerning international development.
The manifesto mirrored the latest Human Development Report published only weeks
earlier, acknowledging the “clear moral responsibility”56 developed countries had to
eradicate global poverty. A Labour government would do this, in part, by establishing a
new, independent Department for International Development headed by a Cabinet
Minister to “attach much higher priority to combating global poverty and
underdevelopment”57 and implicitly suggesting that there would be a significant change
in the policies pursued. The new department was to have a policy remit that went
beyond simply distributing aid but encompassed a broad range of issues including the
global environment, world trade, debt sustainability, and encouraging democratic
institutions.58
ActionAid.
G. Mavrotas and B. Ouattara, “Aid disaggregation and the public sector in aid-recipient economics: Some evidence
from Cote D’Ivoire,” Review of Development Economics 10, no.3 (2006): 441.
52 M. Godfrey et al., “Technical Assistance and Capacity Development in an Aid-dependent Economy: The Experience of
Cambodia,” World Development 30, no.3 (2002): 355-373.
53 House of Commons, Parliamentary Debates, 20 February 1980 columns 464-465.
54 United Nations, Human Development Report 2006, 106.
55 P. Williams, 16.
56 Labour Party.
57 Ibid.
58 J. Vereker, “Blazing the Trail: Eight Years of Change in Handling International Development,” Development Policy
Review 20, no.2 (2002): 135.
50
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Within months of the new department’s creation, it had published a “bold”59 White
Paper promising significant reform of Britain’s development policy: greater spending on
aid policy, an end to tying, and a revised focus on poverty reduction in those countries
with the greatest development needs60 – policies identical to those of the current ‘best
thinking’ identified earlier in this section. The White Paper also dedicated no fewer than
twenty pages to another favoured issue of the development field, by pledging to
establish partnerships with those developing countries that were committed to
democracy and the eradication of poverty.61
The establishment of DFID and its “bold” White Paper led to an initial flurry of positive
writing on the department, receiving praise from academics,62 NGO officials,63 and even
muted approval from opposition politicians.64 Yet, there were still those who were not
convinced by the new department’s actions. Bill Gould65 remained one such sceptical
early voice. While largely positive of the leadership exhibited by the new Secretary of
State for International Development, Clare Short, he was unconvinced by the actual
change in policies promised in the White Paper, which contained, he argued, “little that
is…operationally radical” from the previous eighteen years. 66
However, four years later and with the benefit of seeing DFID working in practise, Slater
and Bell came to a different conclusion, suggesting that New Labour’s policies did
constitute a significant change from those of the past.67 The new government’s emphasis
on the moral basis of aid, as part of its much derided ‘ethical’ foreign policy68 was, they
claim,69 a novel approach to development. Yet, at the same time, they suggest that its
policies of a focus on poverty reduction was merely an extension of those pursued under
Lynda Chalker – the last Conservative minister for international development.70 The lack
of quantitative study, however, makes the divergent conclusions of Gould, and Slater and
Bell largely unfulfilling.
A more recent contribution from Paul Williams71 provides an insightful and detailed
background on the aid policies pursued under successive British governments. He, like
Slater and Bell, found the moralism attached to development policy by New Labour as
59 R. Young, “New Labour and International Development: a research report,” Progress in Development Studies 1, no.3
(2001): 247.
60 Department for International Development, Eliminating World Poverty: A Challenge for the 21st Century, (London:
The Stationery Office): 5.
61 Ibid, 22-41.
62 A. Hewitt and T. Killick, “The 1975 and 1997 White Papers Compared: Enriched Vision, Depleted Policies,” Journal of
International Development 10 (1998): 51-67.
63 A. Whaites, “The New UK White Paper on International Development: An NGO Perspective,” Journal of International
Development 10 (1998): 203-213.
64 A. Goodlad (1998), “The View from the Opposition Benches,” Journal of International Development 10 (1998): 195201.
65 B. Gould, “New Labour, new international development policy?” Third World Policy Review 20, no.1 (1998): iii-vi.
66 B. Gould, 4.
67 D. Slater and M. Bell, 340.
68 C. Allen, “Britain’s Africa Policy: Ethical or Ignorant?” Review of African Political Economy 77 (1998): 33-63.
69 D. Slater and M. Bell, 341.
70 Ibid.
71 P. Williams.
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the key departure from the past72, arguing that its broad aims and rhetoric are not
dissimilar from previous governments’. But, he, like all other authors, is silent about the
specific policies and spending decisions pursued and the extent to which they are
actually a significant break from the past.
Attempting to overcome this shortcoming shall drive the remainder of this paper.
HYPOTHESES
The preceding examination of the evolution of aid identified several substantive gaps in
the existing body of research on British aid policies. Specifically, while there has been a
small number of publications reviewing policy over the last ten years, none of these have
subjected their assertions or conclusions to statistical testing. Therefore, this paper aims
to analyse the specific spending decisions made in the last ten years to more fully
answer the question of “how has British aid policy changed under DFID?”.
More specifically, four identifiable hypotheses can be identified that would confirm DFID
as deserving of its accolades, according to the current “best thinking” on international
aid.
•
•
•
•
H1: the total aid budget under DFID has significantly increased.
H2: economic need has become a more significant factor in determining British
aid flows since 1997.
H3: there has been a shift in British aid spending towards direct budgetary
support away from funding projects
H4: there has been a move from commercially-tied aid to conditionality based
upon political reforms.
DATA AND METHODOLOGY
For each of the first four distinct hypotheses, the analysis will employ a quasilongitudinal approach, comparing eight annual intervals of British aid policy before and
after 1997.73 In order to identify whether the change in government at this critical
juncture brought with it a significant change in policy, analysis of variance (ANOVA)
models shall be used to compare data before and after the critical juncture of 1997.
The key sources of data for the quantitative analysis that is central to this paper were
DFID’s own annual publications ‘Statistics on International Development’, a series of
requests to the department under the 2000 Freedom of Information Act for figures not
previously released before its implementation, and the Organisation for Economic Cooperation and Development (OECD)’s Development Co-operation Directorate’s data on
aid flows.
72
Ibid., 219.
73 The 2005 figures were the most recently available at the time of writing.
12
VOL. 4, NO. 1 – SEPTEMBER 2008
The first variable, total aid budget, was measured simply as the total bilateral aid
spending in any one year. Concentrating on bilateral aid ensured that only those funds
over which Britain has complete control were investigated, removing those monies that
reach recipient countries via multinational organisations.
The second hypothesis stated that a greater share of bilateral aid would be spent on
countries with greater ‘need’. In order to measure recipients’ development status, the
United Nation’s preferred measure, the Human Development Index, was employed as it
provides a broader conceptualisation of development than a solely economic
measurement such as the average Gross National Income, by incorporating life
expectancy and illiteracy rates74. In total, aid receipts for 172 countries were analysed
which consisted of all countries defined by the United Nations as low- or middle-income
countries at some point between 1990 and 2005 as well as the nineteen other countries
that received British aid during this time period. Holding for recipient countries’
population,75 a regression analysis was preformed for each of the annual intervals under
study, establishing the extent to which aid receipts from Britain have been dependent on
need, and then an ANOVA analysis was used to determine whether this did indeed
become a more significant factor under New Labour.
In order to investigate the changing composition of Britain’s aid budget under the
different governments, the British government’s own categories of aid were used which
include ‘direct budget support’, ‘project aid’, ‘technical assistance’, ‘humanitarian aid’,
and ‘debt relief’ (categories which fortunately survived the change in government). The
relevant proportion of each category in each of the annual budgets shall be analysed,
and then an ANOVA analysis performed to identify any significant change in spending
priorities since 1997.
The fourth hypothesised shift in policy, from economic- to political-conditionality, is
more difficult to quantify due to the intricacies of the specific conditions and
requirements attached to British aid. Thus, primary sources were relied upon,
particularly a report produced by DFID and development consultancy firm Mokoro76
reviewing the changing terms of British aid, and DFID’s own official paper on
‘Rethinking Conditionality’.77 In addition, a small number of interviews were conducted
with officials from non-governmental organisations (NGOs) with detailed first-hand
United Nations, Human Development Report 2006.
Population figures for each of the 16 years were gathered from the relevant United Nations Human Development
Report.
76 Department for International Development and Mokoro, DFID Conditionality in development assistance to partner
governments (London: The Stationery Office, 2005).
77 Department for International Development and Mokoro, Partnerships for Poverty Reduction: Rethinking
Conditionality (London: The Stationery Office, 2005).
74
75
13
INTERNATIONAL PUBLIC POLICY REVIEW
knowledge about the realities of British aid, which did not necessarily reflect the official
government policy.78
RESULTS AND DISCUSSION
This section aims to identify the changes in spending and policy decisions that the New
Labour government has pursued using the first four hypotheses above.
H1: TOTAL SPENDING ON AID
The Labour government that swept to power in 1997 did so on a manifesto that had only
one fleeting reference to international development. Yet that one paragraph contained a
pledge for “a much higher priority”79 to international development: a pledge that has
been borne out consistently in the government’s total spending on aid.
Britain’s total bilateral aid budget has increased dramatically in the last two decades
from a little over £800 million in 1990 to close to £4.5 billion in 200580 as figure 1 above
clearly illustrates. Even allowing for the fact that the first two years of DFID’s existence
saw no real increases due to Labour’s manifesto pledge to match the previous
Conservative government’s spending plans, one can see a significant and sustained
increase in total bilateral aid spending under New Labour.
5000
Total bilateral spending (£ million) .
(Unadjusted for inflation)
4500
4000
3500
3000
2500
2000
1500
1000
500
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Figure 1: Total bilateral aid spending 1990 – 2005.
Colour coded by government – red (Labour) and blue (Conservatives).
78 For reasons of brevity, source data, and the ANOVA tests of significance are not shown in this paper. Any interested
readers can contact the author, through the journal, for more details.
79 Labour Party.
80 Department for International Development, Statistics on International Development 2006 (London: The Stationery
Office, 2006).
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VOL. 4, NO. 1 – SEPTEMBER 2008
Data from DFID, Statistics on International Development 2006.
However, Figure 1 above also demonstrated that the most dramatic increases in aid
spending occurred after 2003. More careful study of DFID’s data reveals that a large
proportion of this aid went on post-conflict reconstruction in Afghanistan and Iraq
where £1.5 billion of the UK’s Official Development Assistance was spent in 2005.81
Nevertheless, even if one was to exclude these countries, it is clear that the British aid
budget under DFID has been expanded considerably, thus confirming hypothesis 1 from
the previous section.
Yet merely throwing money at the problem of decades of underdevelopment is not
sufficient, as the $1.6 trillion82 spent since 1950 makes apparent. A truly effective aid
policy, therefore, needs greater attention given to both the recipients and the form of
aid.
H2: RECIPIENTS OF AID
The issue of aid’s recipients was one that Labour’s manifesto mentioned briefly, with a
pledge to shift aid resources to helping “the poorest people in the poorest countries.”83
The post-conflict spending in Iraq and Afghanistan – two countries considered middleincome countries by the United Nations84 – questions whether this has been a pledge
that DFID has been able to fulfil.
An analysis of the spending decisions made, however, shows that there has been a
gradual move towards greater spending on the developing countries with the greatest
need. Figure 2 below shows that there has been a general trend for more of DFID’s
money to be spent on those countries with the lowest HDI scores – those, therefore, that
have the greatest “need”. ANOVA analysis confirms that DFID spending has been
significantly more focused upon the very poorest developing countries.
Department for International Development, Statistics on International Development 2006.
Lancaster, 2.
83 Labour Party.
84 United Nations, Human Development Report 2006.
81
82
15
0
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
-0.05
1990
Regression co-efficients for relationship between aid receipts
and HDI
INTERNATIONAL PUBLIC POLICY REVIEW
-0.1
-0.15
-0.2
-0.25
-0.3
-0.35
-0.4
Figure 2: Trend in relationship between aid receipts and HDI status, 1990 – 2005.
Colour coded by government – red (Labour) and blue (Conservatives).
Data from DFID, Statistics on International Development 2006.
The Democratic Republic of Congo, for example – one of the least developed countries in
the world – has benefited from a significantly larger investment under DFID, totalling
almost £400 million in the last three years under study:85 a dramatic increase from the
£9 million it received in the first three years of the 1990s. Under the Conservative
government of this period, aid was still concentrated heavily on former British colonies,
making up over 71% of the total bilateral budget, in contrast to the 44% in 2005.86
Thus it appears that DFID has genuinely moved away from the perception of aid simply
being a tool of a broader foreign policy, to becoming a distinct area of government in
itself, with its own goals for which to aim. However, there is still considerable room for a
greater commitment on DFID’s behalf to ensure aid is better focused.
India, a country that has seen a remarkable economic transformation in the last two
decades, still receives extraordinarily large sums of money – in 2005, it was second only
to Iraq, receiving a total of £579 million. While India does have an extremely large
population, it still receives more than five times more per head than Mali, which is
consistently amongst the poorest three nations in the world.87 Guinea-Bissau, a country
amongst the world’s least developed, has not received any aid from DFID since 2001,
despite its average annual income of $736, and an average life expectancy of 44 years.88
Department for International Development, Statistics on International Development 2006.
Author’s calculations from DFID, Statistics on International Development 2006.
87 Author’s calculations from DFID, Statistics on International Development 2006.
88 United Nations, Human Development Report 2006.
85
86
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DFID’s continued ability to concentrate much of its resources on the least developed
nations, despite enormous sums being spent in Iraq and Afghanistan presents somewhat
of a puzzle. However, closer analysis of DFID’s spending priorities reveal that other
‘middle-income’ countries have seen their aid receipts cut dramatically in order to
maintain the department’s development-focus. Pakistan, Peru and South Africa, for
example, saw significant decreases in DFID spending in the aftermath of the conflicts
from combined receipts of £237 million in the year before Operation Iraqi Freedom to
just £136 million in 2005.89 These cuts have occurred despite an explicit recognition by
DFID that middle-income countries are vulnerable to falling back to low-income status,
as 38 countries have done in the last two decades.90
Nevertheless, these failures should not totally detract from what has been a systematic
reform of policy undertaken in the last decade, which now sees British aid more targeted
at the very poorest countries in the world – a significant improvement on the decades of
policy identified by Alesina and Dollar91 as being primarily driven by historical and
geopolitical links.
H3: TYPE OF AID
The form of Official Development Assistance (ODA) is undoubtedly integral to its ability
to promote development, as the ill-fated experiences of early aid’s fixation with capitalintensive projects testifies. DFID’s early publications and reports made no explicit
reference to the type of aid that would be pursued, but analysis of its spending decisions
finds that there has been a sustained shifting of priorities.
The most apparent recent trend in Figure 3 overleaf is the significantly smaller
proportion of funds spent on technical assistance by New Labour, from a peak of 62% in
the year it came to power, to less than 28% in 2005. This has been a move that will have
been welcomed by the non-governmental organisations and development academics
who heavily criticised technical assistance, as was noted previously. Interviews with
development agency officials (conducted July – August 2007) confirm that DFID’s
diminishing spending on this sector is considered an indication of its increasingly
progressive nature. Yet the continued existence of a considerable proportion of ODA
being spent on technical assistance proves frustrating to many advocates of ‘better’ aid.
One NGO official was extremely sceptical about technical assistance even being
considered aid, due to its dubious credentials in supporting development and poverty
reduction, calling it “phantom aid … whose inclusion in ODA is
somewhat…misleading”.92
Author’s calculation from Department for International Development, Statistics on International Development 2006.
Department for International Development, Achieving the Millennium Development Goals: The Middle Income
Countries – a strategy for DFID 2005 – 2008 (London: The Stationery Office: 2004): 5-6.
91 Alesina and Dollar.
92 Anonymous (NGO official), interview by Alan Webster, August 2007.
89
90
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70
Percentage of bilateral ODA
60
50
40
30
20
10
0
1990
1991
1992
1993
1994
Technical As sistanc e
1995
1996
1997
Budget Support
1998
1999
2000
Emergenc y Aid
2001
2002
Projec ts
2003
2004
2005
Debt Relief
Figure 3: Trend in type of bilateral aid, 1990 – 2005.
Data from DFID, Statistics on International Development 2006.
The continued decrease in the proportion of British aid spent on technical assistance
was underlined in 2005 when it was exceeded by the funds spent on direct budget
support. Under DFID, budget support almost trebled its share of British aid spending,
reaching a high of over 28% in 2005.93 The then Secretary of State for International
Development, Clare Short, made her department’s view clear when asserting that
“budgetary aid… in the end, is the most effective” for assisting development.94 The new
government’s pledge to establishing partnerships with developing countries appears to
have been fulfilled, partly confirming hypothesis 2, with more aid provided in a form
that leaves its use up to recipient governments, showing DFID’s “real commitment
to…[recipient] country ownership…which is really good” as one NGO official put it.95
The proportion of aid spent on projects has seen a slight, but significant increase under
DFID, contrary to hypothesis 3. However, the nature of aid projects sponsored by DFID
has changed dramatically from the disjointed infrastructure projects identified as being
ineffectual for development in the literature review.
DFID has increasingly utilised endogenous, demand-driven programmes run by nongovernmental organisations as a means to furthering its broad goal of poverty reduction.
Its Partnership Programme Agreement scheme invites proposals from British, as well as
recipient countries’, civic society organisations for programmes which they consider to
be beneficial for development, which are then assessed against DFID’s own development
aims.96 Interviews (conducted July-August 2007) with officials from British-based NGOs
See Appendix 2, tables 2 and 8.
House of Commons, Parliamentary Debates, May 14 2002 column 130.
95 Anonymous, August 2007.
96 Department for International Development, “Partnership Programme Agreements,” About DFID,
93
94
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confirm that DFID is “easy to work with… and … in no way, [tries] to micro-manage the
projects they fund.”97 DFID’s concept of genuine co-operative partnerships has extended,
therefore, beyond recipient countries to include other organisations which have a stake
in reducing global poverty.
Aid classed as humanitarian relief, usually provided in response to a natural emergency,
has seen no discernible pattern in the last two decades but has fluctuated considerably
year-by-year, which is unsurprising given its nature. As such, ANOVA analysis found no
significant difference between policies of the two government. Likewise, there has been
no significant difference in the proportion of aid spent on debt relief since 1997.
However if the data were to be extended to include the following year’s figures, there
would, one would expect, be a significant increase in debt relief due to the accord signed
by the UK at the Gleneagles G8 Conference pledging amnesty for the debts of 18
developing countries.98
H4: AID CONDITIONALITY
The fourth question concerning DFID’s work raised earlier hypothesised a move from
commercially-tied aid to aid conditional on political reform. This too was largely borne
out by an examination of the policies pursued by the new department, and interviews
with development observers.
The first White Paper published by DFID,99 Britain’s first for more than two decades,
pledged to outlaw the Aid and Trade Provision, the most obvious vestige of the previous
commercial aims of aid, in a move that was almost universally welcomed. The one
notable exception was the Confederation of British Industry100 – opposition that, one
suspects, was not unappreciated by DFID as indicative of its new focus on poverty
reduction. In spite of this, the White Paper retained the option for DFID to use “mixed
credits” as long as there was a commitment to poverty reduction. The distinction
between ATP and mixed credits was one that academics had perceived to be only
nominal.101 However, in 2002, the International Development Bill passed after DFID’s
second White Paper102 (2000), made all forms of tied aid illegal, apparently putting an
end to the decades-old tradition of British firms’ profits being a factor in aid provision.
Nevertheless, interviews with NGO officials provide anecdotal evidence that the realities
of DFID programmes may not equate to the legislation passed. One official with a large
aid organisation suggested that while there were no explicit commercial links, “habits…
http://www.dfid.gov.uk/aboutdfid/DFIDwork/ppas/partnerprogagreements.asp.
97 Anonymous (British-based NGO official), interview by Alan Webster, July 2007.
98 BBC News, “Government defends G8 aid boost,” 9 Jul y, 2005, http://news.bbc.co.uk/1/hi/business/4666743.stm.
99 Department for International Development, Eliminating World Poverty: Making Governance Work for the Poor,
White Paper on International Development (London: The Stationery Office, 2006).
100 House of Commons, Select Committee on International Development, Parliamentary Debates, 14 May 1998 column
66.
101 Morrissey 1998.
102 Department for International Development, Eliminating World Poverty: Making Globalisation work for the Poor,
White Paper on International Development (London: The Stationery Office, 2000).
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informal agreements [between] ex-pats who know each other … and career ambitions”
meant that DFID officials overseas usually granted contracts to British firms over local
competitors.103
Official figures released by DFID confirmed this, showing that in 2004 and 2005 (the
only years for which such data was collected), fewer than 27% of aid contracts awarded
by DFID were to firms based in the recipient country.104 While it is possible to argue that
recipient countries’ firms may not be able to manage projects whose budgets often run
into seven- or eight-figures, DFID was also forced to reveal that in those same two years,
only 5% of contracts worth less than £100,000 were even tendered competitively.105
Thus, it appears that the complete commercial untying of British aid that legislation
attempted to bring about has yet to be fully implemented ‘on the ground’ in developing
countries.
The review of the development field’s current thinking posited a move in British policy
from commercial to political conditionality, identifying the rise of ‘good governance’ as a
recent dominant trend in the development sector. DFID has indeed broadly followed the
lessons of good governance’s importance, but has taken a different approach than the
asymmetric conditionality conceived by the literature review.
A policy paper produced by DFID106 set out the department’s approach on
conditionality, stating that it had moved away from specific policy conditions imposed
on developing countries to fostering equal partnerships with those recipient countries
that share its commitment to poverty reduction. This was a move that only occurred
taken under the leadership of Hillary Benn (Secretary of State, October 2003 – July
2007). Before this time, DFID had imposed conditions ensuring “the ‘right sort’ of
economic liberalisation”, resembling the policies of the Washington Consensus,
according to one NGO official.107 Instead, under Benn, British policy moved to requiring
three broad conditions of recipients’ commitment to poverty reduction, open systems of
government and respect of citizens’ human rights.108
This was a move welcomed by development organisations who criticised other notions
of good governance because “conditionality is still being driven through it” (Interview 2,
August 2007). Instead, DFID has embraced a pragmatic approach, stipulating only the
outcome desired, namely poverty reduction, and leaving it largely up to recipient
countries to determine their own path. As part of DFID’s commitment to establishing
genuine partnerships with recipients, Hillary Benn also introduced aid programmes that
Anonymous, August 2007.
Author’s calculations based on data from Hansard, 28 November, 2005.
105 Author’s calculations based on data from Hansard, 28 November, 2005.
106 Department for International Development, Partnerships for Poverty Reduction: Rethinking Conditionality (London:
The Stationery Office, 2005).
107 Anonymous, August 2007.
108 Ibid.
103
104
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were committed to last for at least ten years and stated contractual responsibilities for
both recipient and donor (DFID, 2007).109
However, a report commissioned by DFID found that British officials in the field were
unclear about the terms of such agreements, which were, it claimed, ambiguous and
included specific policy requirements purported to no longer be used by DFID.110 In
addition, the report found that there were only two countries where written agreement
had been drawn up between DFID’s local offices and recipient governments. Again,
DFID’s supposed progressive nature has failed to materialise in its dealings with
recipient countries, and it appears that more time is needed for the central department’s
message and priorities to be taken up by its staff overseas.
The changes identified in this section portray a dramatically different aid policy than
that which was inherited by New Labour in 1997. Aid is now systematically targeted
towards the least-developed countries in the world; more and more is donated direct to
governments able to spent funds in the manner which they find most appropriate, while
less is spent on the projects and technical assistance found to have failed in the past.
DFID has also set in motion the beginnings of a policy that will see genuine partnerships
developed with recipient governments, no longer tainted with overly-prescriptive policy
conditions. In short, British aid is now best suited to help improve the lives of the
world’s poorest individuals and countries.
CONCLUSIONS
The issue of international development remains one of the most pressing areas for
government action. The fact that more than one billion people live in abject poverty in a
world of such wealth ought to shame every developed country’s government into action.
However, development policies, and those relating to aid in particular, have generally
failed to significantly evolve from those of the past. Despite the fall of the Berlin Wall and
continued Western prosperity, many countries still fail to target their aid efforts at the
poorest countries and fail to use the most efficient and beneficial aid.
One notable exception has been the United Kingdom. Since 1997, the Department for
International Development has implemented dramatic changes to Britain’s aid policy.
The quantitative analysis performed in an earlier section demonstrated that it has
pursued an aid policy that mirrors the current ‘best thinking’ in aid policy identified in
previously. British aid has begun to be systematically targeted at the poorest countries,
moving away from the geopolitical and colonial influences that, until recently, usurped
human needs. It is also increasingly targeted directly at recipient countries’ government,
away from the technical assistance so despised by both academics and NGOs. Contrary
109
110
Department for International Development, “Partnership Programme Agreements.”
Department for International Development and Mokoro, 5-6.
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to this paper’s hypothesis, DFID has actually increased the proportion of aid being spent
on projects, despite the critical voices over their use as a tool for development. However,
greater investigation found that DFID’s commitment to establishing partnerships with
civil society had broadened to funding projects proposed and managed by NGOs
committed to reducing poverty levels.
DFID’s emphasis on partnerships went beyond NGOs, extending to recipient countries
themselves. Official British policy has abandoned all forms of strict policy conditionality
and embraced what appears to be a more equal standing with those developing
countries whose governments have committed themselves to the concept of ‘good
governance’ now favoured by the field of international development.
However, DFID’s progress has not been perfect. The conflicts in Iraq and Afghanistan
have had deleterious consequences for aid spending by drawing considerable funds
away from middle-income nations that are particularly vulnerable to relapsing into lowincome status. In addition, interviews with NGO officials revealed that policy
conditionality and contract-awarding have been slow to reform to official policy, and are
not yet truly progressive. This remains an area of deep concern and risks undermining
much of DFID’s work and, as such, deserves further research to examine whether official
policy has yet been implemented on the ground.
Nonetheless, these criticisms should not detract from the considerable successes DFID
has made in the last ten years, and it is deservedly named “one of the most progressive”
agencies. 111
Aid cannot claim to be a panacea for development. Other issues, notably global trade, are
vitally important to undoing generations of underdevelopment. Nevertheless, it has an
important part to play. This paper has argued that worldwide reform of aid policy,
emulating the progress made by DFID would help achieve what would be the most
important achievement of the 21st Century – the eradication of global poverty.
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VOL. 4, NO. 1 – SEPTEMBER 2008
MOTIVATING ALTRUISM: MULTINATIONAL
ENTERPRISES AND CORPORATE SOCIAL
RESPONSIBILITY
Victoria Weininger
ABSTRACT
This paper argues that the activities of modern multinational enterprise (MNE) are not
driven solely by profit maximisation, and that social contemporary norms incentivise
additional ethical and sustainable business practices. This work, never before believed to
be the responsibility of business, has become an increasingly prevalent business model. The
author explores the drivers for US-based MNEs to engage in corporate social responsibility
(CSR), and evaluates the extent to which external or social pressures, the need to maintain
or improve company profile, and philanthropic reasons contribute to a MNEs decision to
engage in CSR activities. The central finding is an apparently strong commercial belief in
the existence of a positive relationship between engagement in CSR and a company’s
profitability, as well as the mutual reinforcement of concern for company profile and
increased social awareness of and pressure for socially responsible behaviour.
Keywords: Corporate Social Responsibility; MNEs; stakeholders; shareholder profitability;
INTRODUCTION
There is one and only one social responsibility of business - to use
its resources and engage in activities designed to increase its
profits so long as it stays within the rules of the game.112
Welfare and society are not the corporation’s business. Its
business is making money, not sweet music…In a free enterprise
system, welfare is supposed to be automatic; and where it is not it
becomes government’s job.113
The central responsibility of enterprises always was the delivery of products to
customers while attaining maximum financial returns for its shareholders. The mandate
of business then was rather simple; people wanted plentiful goods at a high quality as
112 Friedman, “The Social Responsibility of Business is to increase its Profits”, The New York Times Magazine,
September 13th 1970, p.4
113 Levitt in Sorell & Hendry, Business Ethics, Oxford, Butterworth-Heinemann, 1994, p.33
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cheaply as possible.114 Businesses sought and still seek to make profit, a rational
procedure which all citizens, not only businesses, adhere to in daily life. An economist
would argue that, in a market of perfect competition, they can do nothing else as any
effort directed elsewhere than at profit must be at a cost to the company. Thus in a
perfectly competitive market a business which occupies itself with anything other than
making profit would eventually be forced out by competitors.115 Nevertheless, we seem
to be able to observe a change in the norm, and this paper will question why the
responsibilities of business appear to have shifted from maximising the production of
goods at the minimum price, to engaging in additional ethical and sustainable business
practices at, if necessary, higher costs.
There is not yet one universal definition of CSR.116 Carroll and Buchholtz provide the
following definition: “Corporate Social Responsibility encompasses the economic, legal,
ethical, and philanthropic expectations placed on organizations by society at a given
point in time”117. The UNDP definition describes CSR as “a concept whereby companies
integrate social and environmental concerns in their business operations and in their
interaction with their stakeholders on a voluntary basis” 118. A major discussion has
developed around the issue of whether legal duties can be seen as a form of CSR or
whether business practices can only be described as ethical if they are voluntary
engagements. Indeed, this is the major difference between the two definitions.
The core idea of the CSR concept is that the business sector should
play a deeper (non-economic) role in society than only producing
goods and making profits. This includes society and
environmentally driven actions, meaning that the business sector
is supposed to go beyond its profit-oriented commercial activities
and increase the well-being of the community.119
In an ideal world doing the right thing would give businesses a big enough incentive to
overtake these added-on responsibilities, but in real terms following the principle rather
than profits can easily lead to economic failure. The US government began correcting the
social behaviour of firms as early as in the 1890’s, but the modern understanding of
regulation on CSR is particularly linked to the institutionalisation of societal problems in
government which began in the 1970’s.120 Only a modest amount of current literature
has engaged with US policy and regulation as a reason for companies’ engagement in
DeGeorge, Business Ethics, New Jersey, Prentice Hall, 1995, p.13
Baumol in Kitson & Campbell, The Ethical Organisation, Basingstoke, Macmillan Press, 1996
116 The research on company’s individual CSR engagements was greatly impeded through the lack of a universal
definition on CSR. Different companies had very different ideas on what corporate responsibility actually comprises
especially in relation to legal standards.
117 Carroll and Buchholtz in Henningfeld et al., The ICCA Handbook on CSR, Chichester, John Wiley & Sons, 2006, p.6
118 UNDP, First regional project launched by UNDP to accelerate implementation of CSR in 8 European Countries, UNDP
website, 2007, p.1
119 Malovics et al., “The Role of CSR in strong sustainability”, The Journal of Socio-Economics, 2007, p.7
120 Ibid, p.13-14
114
115
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CSR or lack thereof.121 Government can promote or enhance CSR through regulation and
control, and government can also exercise the arbiter role by setting minimum
standards to help society overcome free-rider problems.122
Another more specific aspect of regulation with an impact on CSR is the US company
law, which can differ depending on the state the company is based in. Whereas in some
states, company law stipulates that the interests of stockholders of public companies
and thus the maximisation of profits take precedence, other states’ legal obligation is to
stakeholders.123 The literature does highlight differences, but is yet to engage in a
discussion of whether firms are legally allowed to engage in social responsibilities if no
positive relationship between CSR and a company’s profitability exists. This paper thus
explores whether businesses have in fact become more ethical or if they have turned the
new responsibilities to their own profit. It will be argued that companies, if they want to
prosper economically and retain their present social power, must fall within the
guidelines set by society because “the business of business was, and is, decided by the
people of each society.”124
As legal regulation of businesses’ social responsibilities are still relatively low, and
considering their varying nature, I shall examine why and if most MNEs have decided to
move towards greater social responsibility than that mandatory by law. To engage with
the reasons why companies have adopted CSR practices, this research will utilise the
existing body of literature to propose seven explanatory independent variables. Each of
these will then be reviewed in turn on the basis of 29 questionnaire responses from
American Fortune 350 companies.
LITERATURE REVIEW
Existing research has had little predictive outcome on the reasons why companies
engage in CSR as it is difficult to gain an insight into the development and reasoning
behind individual business strategies. Although an extensive body of literature is dealing
with CSR, concrete and concurrent findings are modest at best and the difficulties
associates with quantifying environmental and social value creation. The research
closest to this paper is that of Matten (2006), Freeman (1997, 2001), Davis (1973),
Burke (1996) and Carroll (1979, 1991, 1996, 2000) who have equally concentrated on
the broad reasons why companies engage in CSR.
The academic discussion on CSR is mainly caught between two contrasting ideological
positions, classical economics and stakeholder theory. Classical economists assume that
Such as Kitson & Campbell (1996) and Davis (2005)
Bichta C. (2003) “Corporate Social Responsibility: A role in government policy and regulation”, CRI, University of
Bath, p.24
123 Kitson & Campbell, Op. cit.
124 De George, Op. cit., p.13
121
122
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INTERNATIONAL PUBLIC POLICY REVIEW
all human behaviour, is motivated by self-interest; we are rational economic actors
making choices through cold cost-benefit analysis.125 According to theorists like Milton
Friedman, MNEs sole purpose lies in the creation of shareholder value and as no
congruent link has yet been established between CSR and a firm’s profitability,126 any
social engagement is a zero-sum trade-off with a firm’s corporate economic interests.
Social programs, they believe, add to business costs which lead socially responsible
companies to encounter competitive disadvantages. To Friedman “few trends could so
thoroughly undermine the very foundations of our free society, as the acceptance by
corporate officials of a social responsibility other than to make as much money for their
stockholders as possible.”127
The major impediment of this body of literature is that it fails to acknowledge the effects
of change in society’s expectations towards firms’ responsibilities, as well as the
possibility of a positive relationship between stockholder value and CSR. Stakeholder
theory, however, sees business as an integral part of society with responsibilities
beyond those to the stockholders. The theory thus broadens companies duties to “any
group or individual who can affect or is affected by the achievement of the organisation’s
objectives.”128 It accepts that businesses need to make a profit as the bottom line, but see
stockholders as merely one key stakeholder group, whose support has to be sustained in
exactly the same way that customer, supplier and employee support must be acquired. It
is thus a matter of balancing these interests, not choosing one at the expense of the
other.129
The work acknowledges the change in society’s expectations and supposes that if
executives ignore the interests of one group of stakeholders systematically over time,
that these stakeholders will eventually use the political process to protect their rights by
law. Davis and Arlow & Gannon posit that avoidance of further legislation is in fact the
main reason why companies engage in CSR, while Goodpaster considers companies’
realisation of the potential of CSR on consumer behaviour equally critical.130 Building on
these theories Matten suggests increased employee motivation when working for a
responsible company may also be a key driver for forms engaging in CSR.131
Porter’s “value chain” model focusses on the ways in which companies can improve the
effectiveness of their CSR activity so that “rather than merely acting on well-intentioned
impulses or reacting to outside pressures … [firms] can set an affirmative CSR agenda
Trevino & Nelson, Managing Business Ethics, New York, John Wiley & Sons, 2007
Such as Burke et al. (1996), Aupperle, Carroll & Hatfield (1985), Cochran & Wood (1984), Matten in ICCA
Handbook (2006), McWilliams & Siegel (2000), Waddock & Graves (1997) and Wright & Ferris (1997)
127 Friedman in Carroll, “A three-dimensional conceptual model of corporate performance”, The Academy of
Management Review, Vol.4, No.4, 1979, p.497
128 Freeman & Liedtka, “Stakeholder Capitalism and the value chain”, European Management Journal, Vol.15, No.3,
1997, p.286
129 Zenisek in Wartick and Cochran, “The evolution of the corporate social performance model”, The Academy of
Management Review, Vol.10, No.1,1985
130 Goodpaster, “The Concept of CSR”, Journal of Business Ethics, Vol.2, No.1, 1983
131 Matten in Henningfeld et al., The ICCA Handbook on CSR, Chichester, John Wiley & Sons, 2006
125
126
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VOL. 4, NO. 1 – SEPTEMBER 2008
that produces maximum social benefit as well as gains for the business.”132 The value
chain depicts all the activities a firm engages in and suggests that competitive advantage
cannot be understood by looking at a firm as a whole but rather that each of the firm’s
activities can contribute to a firm’s relative cost position or create potential for
differentiation.
Looking more broadly, Carroll sees the social responsibility of business encompassing
the economic, legal, ethical, and discretionary expectations of society on business. His
four stage model illustrates that the motives of businesses are not mutually exclusive
and can generally be categorized as primarily one of four. The first and foremost social
responsibility of business is of an economic nature, to produce goods and services
wanted by society and to sell them at a profit, while the second involves society’s
expectation for business to adhere to legal requirements. The third stage concerns
‘ethical responsibilities’ and “although the first two categories embody ethical norms,
these are additional behaviours and activities that are not necessarily codified into law
but nevertheless are expected of business by society's members.”133 Finally
philanthropic activities, which are purely voluntary and guided by a business's desire to
engage in CSR which is neither mandated, nor required by law and not even generally
expected in an ethical sense. While the model provides a certain structure, it does not
clarify what happens if one or more responsibilities are in conflict with one another.
Only a modest amount of current literature has engaged with US policy and regulation as
a reason for companies’ engagement in CSR or lack thereof.134 Government has a
potential role to play towards promoting or enhancing CSR through regulation and
control, and government can also exercise the arbiter role by setting minimum
standards to help society overcome free-rider problems.135 The US government began
correcting the social behaviour of firms as early as in the 1890’s, but the modern
understanding of regulation on CSR is particularly linked to the institutionalisation of
132 Porter & Kramer, “Strategy and Society: The link between competitive advantage and CSR”, Harvard Business
Review, HBR Spotlight, 2006, p.86
133 Carroll, Op. cit., p.501
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INTERNATIONAL PUBLIC POLICY REVIEW
societal problems in government following the increase in public interest in the
1970’s.136
Another more specific aspect of regulation with an impact on CSR is the US company
law, which can differ depending on the state the company is based in. Whereas in some
states, company law stipulates that the interests of stockholders of public companies
and thus the maximisation of profits take precedence, other states’ legal obligation is to
stakeholders. 137 Both Davis and Kitson & Campell highlight differences, but do not
engage into a discussion of whether managers are legally allowed to engage in social
responsibilities, if no positive relationship between CSR and a company’s profitability
exists.
DATA COLLECTION AND METHODOLOGY
The dependent variable used for this research is termed ‘degree of engagement’. All
companies that participated in this research were included in the CSR ranking of the
Corporate Responsibility Officer (CRO), relying on data collected by KLD Research &
Analytics, which rank the best 100 corporate citizens from a list of approximately 1100
US companies every year. From the Fortune 350 companies which were contacted, 29
participated in this research: American Electric Power, Aramark, Bank of New York,
Consolidated Edison, Fidelity National, Heinz, Hess Corporation, Lockheed Martin,
Procter & Gamble, Sara Lee, Texas Instruments, Travellers, Xerox and 16 companies
which preferred to remain anonymous. The dependent variable is measured in an
ordinal fashion by classifying the companies engagement in CSR on whether the
companies were ranked in the KLD/CRO ‘100 Best Corporate Citizens 2007’ ranking,
whether they engage in CSR with or without a stated social mission, and those who have
not engaged in CSR activities.138 Companies’ survey responses will then be used to
assess the following three broad areas using seven independent variables:
Internal Pressures
1) Increase shareholder profitability - attract new shareholders
Type 1
2) Augmentation of employee motivation /applications
3) Differentiation of the brand
External Pressures
4) Media campaigns or society’s expectations
Type 2
5) Group pressures – other MNEs have engaged in CSR
6) Legal governmental liabilities
Philanthropy
Type 3
7) Increase in stakeholder value
138Three of the companies taking part in this research, Xerox, Heinz and a company which preferred to stay
anonymous were ranked as ‘Best Corporate Citizens 2007’. See CRO, 100 Best Corporate Citizens 2007,
http://www.thecro.com/files/ 100BestGatefold.pdf
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VOL. 4, NO. 1 – SEPTEMBER 2008
FINDINGS
In order to assess the reasons why many US-based multinational companies engage in
CSR, questionnaires were sent to the 350 top Fortune businesses. These companies
gross the highest annual profits in the US and were accordingly seen as good examples
for ‘functioning businesses’. This relatively large sample size was chosen due to an
anticipated low response rate, common to mail surveys. To the best of the researcher’s
knowledge, the survey technique had not previously been used to identify the reasons
why companies engage in CSR.139 This research is of a qualitative nature, with the
incorporation of some descriptive statistics.
One significant impediment to the research was the lack of a universal definition of CSR,
as well as missing efforts on behalf of some companies to centralize their data on CSR
activities. Many firms, seeing the novelty of CSR reporting, were unable to provide
concrete data on their spending, especially as involvement is spread over different
regions and departments. While CSR is new to some firms, several participants asserted
a history being engaged in some form of CSR, though they only started reporting and
ameliorating these activities in the last couple of years. This is in line with the reports of
the European CSR conference in Finland (2006) which highlighted that CSR can in many
cases be seen as a “new label for old wine.”140
INTERNAL PRESSURES
SHAREHOLDER PROFITABLITY
All businesses listed in the annual Fortune ranking share the US as their host country
and are accordingly all subject to American company law. Seeing that company law in
the US generally141 gives precedence to the interests of shareholders of public
companies, it can be hypothesised that profit maximisation is of highest concern to the
majority of these companies.142
Hypothesis 1: The Fortune 350 companies engage in CSR to increase their shareholder
profits.
139 The UN has previously used the same method for gathering data on the Global Fortune 500, however with a
different scope in research. Other papers generally used content analysis of annual reports.
140 Finnish EU Presidency Conference: CSR policies promoting innovation and competitive-ness, 2006,
http://asiakas.poutapilvi.fi/p4lite/files/125/Finnish_EU_ Presidency_Conference_ Final_Report_211206.doc
141 Company law in the US is not standardised and states vary between giving legal primacy to shareholders and
stakeholders. The majority of states opted to give precedence to shareholders.
142 Kitson & Campbell, Op. cit.
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Previous studies concerning CSR and a company’s profitability have led to few
concurrent results. Some have indicated no relationship143, while Waddock & Grave
(1997) observed a positive relationship and again another body of literature144
concluded that there was a negative relationship between the two variables.
To gain another perspective, employees in charge of their companies CSR activities were
asked to judge the relationship between CSR and a company’s profitability. 28 out of the
29 companies supposed a positive relationship between CSR and a company’s
profitability, while only one company judged the relationship to be neutral. Enterprise
Heinz explains this by saying: “Simply put, CSR makes good business sense. It helps key
audiences view Companies as good citizens and has positive financial impacts i.e. saving
money through reducing utility usage or packaging.”145
Most of the companies believed CSR to be profitable both in the long- and in the short
term, while seven assumed profitability only in the long term. From the 28 companies
assuming a positive relationship, 25 felt able to judge the extent of this relationship.
Table 1 shows that 68% of companies believed the relationship between CSR and a
company’s profitability to be either high or very high. The only company not engaging in
CSR saw that a low relationship existed between CSR and a company’s profitability.
Table 1: Degree of Engagement in CSR and the relationship between profit and CSR in percentages
Extent of positive relationship: profit/CSR
Total
Degree of Engagement
No social mission and no CSR
No social mission but CSR
Social mission
Best Corporate Citizen 2007
Total
Low
Average
High
Very high
4
0
0
0
4
0
12
8
0
20
0
16
36
12
64
0
0
12
0
12
4
28
56
12
100
The employee of the company not engaging in CSR explained their position as follows:
“I have yet to see strong evidence that companies that commit great time and
resources, especially financial resources, see a payback from many of these
efforts…
we have yet to see a significant level of willingness on the part of
consumers
to pay adequately for higher-cost products ... They expect the "socially
responsible" company to give that to them for free. That, to us, is a considerable
Such as McWilliams & Siegel (2000) and Aupperle, Carroll & Hatfield (1985)
Such as Wright & Ferris (1997)
145 Heinz, Response to questionnaire, 2007
143
144
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VOL. 4, NO. 1 – SEPTEMBER 2008
disconnect
between reality and the perceived notion that corporate social
responsibility pays dividends.”146
It is surprising to see that this company did not opt for a negative relationship between
CSR and a company’s profitability, but instead believed the positive relationship to be
low. This example illustrates that engagement in CSR is less likely to occur when
companies see no or a very low relationship between CSR and profitability. It may
further be assumed that companies will only engage in CSR if it does not lead to
additional costs to the business.
Hypothesis 2: Companies will not engage in CSR if the engagement results in additional
costs to the company.
Employees were asked directly whether their company would engage in CSR at
temporary financial losses. Of the 19 companies answering this question, 69% stated
that they would at times engage in CSR even at temporary financial losses, while 21%
stated that this would never be the case. While this could lead us to reject the second
hypothesis, it has to be kept in mind that employees are likely to respond in a manner
that they believe to be socially desirable. An indication of this could be that only two
companies said they would ‘always’ engage in CSR irrespective of temporary financial
losses.
Profitability is, not surprisingly, an important reason for companies’ engagement in CSR
and while it is possible that companies would engage in CSR even with temporary
financial losses, the likelihood of this happening seems to be relatively low.
There are a growing number of forums and indexes solely concerned with ethical
investments, and companies were therefore asked to judge the importance of CSR for
potential shareholders. Of the 16 companies which had gathered enough data to answer
the question, 69% assumed low or no importance of CSR for potential shareholders. This
could lead us to conclude that investors have not yet established a link between CSR and
a company’s profitability.
AUGMENTATION OF EMPLOYEE MOTIVATION / APPLICANTS
Both Davis (2005) and Baron (2007) believe that engagement in CSR can improve the
productivity of a firm, as employees are often willing to work harder if their social
values are in line with the company’s. CSR, when found on a company’s ‘value chain’,
typically suggests that employees are offered safe working conditions, fair wages, job
training, health care and other such benefits.147 This leads us to suggest that employees
146
147
Company X, Response to Questionnaires, 2007
Porter & Kramer, Op. cit.
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INTERNATIONAL PUBLIC POLICY REVIEW
and prospective job seekers are increasingly paying attention to a company’s social
profile.
Hypothesis 3: Companies which have a high social engagement are more likely to have a
motivated workforce.
Hypothesis 4: Applicants are increasingly paying attention to a company’s engagement in
CSR when making the decision to apply.
The majority of the companies judged their workforce to be more motivated since the
business began engaging in CSR, while only 3 companies could not observe any change.
Table 2 illustrates that the companies ranked as ‘Best Corporate Citizens’ believed that
their workforces’ motivation had improved. In turn, two of the three companies who
saw no impact still engage in CSR but have not formulated a social mission.
All employees in charge of their firm’s CSR activities believed that a company’s CSR is
taken into account by prospective job applicants. From the 26 MNEs who replied to the
question, 35% believed applicants consider the company’s CSR activities to some
extent, 46% believed applicants to regard the activities highly and the remaining 19%
believed the company’s CSR engagement is taken into account very highly by job
applicants (see Table 2).
The findings therefore suggest a positive relationship between a company’s degree of
CSR engagement and the motivation of its workforce. It is also apparent that MNEs are of
the opinion that applicants are increasingly aware of a company’s CSR activities when
making the decision to apply. Two companies specifically mentioned employee
motivation and attracting and retaining employees as drivers for their engagement in
CSR activities.
DIFFERENTIATION OF THE BRAND
By engaging in differentiation strategy, firms seek to be unique in its industry in one or
more attributes that are perceived as important by its clientele.148 Participating firms
were therefore asked whether they believed CSR to be a way of differentiation. 92% of
participating MNEs assumed a link between CSR and differentiation from its
competitors. One of the two exceptions was in fact the company not engaging in CSR.
The company believed this to be explained by their particular working sector (housing),
as clients were not willing to pay additional costs when buying a home. This implies that
CSR as a method for differentiation is dependant on the company’s product and the
sector, while social engagement is more likely to occur when a company can generate
advantages from the commitment.
148
Porter, Competitive Advantage: Creating and Sustaining Superior Performance, New York, Simon & Schuster, 1998
38
VOL. 4, NO. 1 – SEPTEMBER 2008
Table 2: Impact of the degree of engagement on the motivation of the workforce and the applications of
employees
1.
2.
Since you have engaged in CSR do you believe your workforce to be more motivated?
Do you believe that job applicants take into account a company’s CSR when making the decision to apply?
Degree of Engagement
Motivation of the Workforce/ Impact on
Employee Applications
Workforce Motivation
No
Yes
Impact on employee applications
No
A bit
Highly
Very highly
CSR but no
dasfvadf
Social Mission
Social Mission
Best
Corporate
Citizens
2
2
1
19
0
2
0
4
0
0
0
5
10
5
0
0
2
0
It could be inferred, especially in relation to Porter’s ‘value chain’ framework, that CSR as
a method for differentiation is strategic and undertaken only when it supports core
business activities of a firm.
Hypothesis 5: CSR is only strategic, undertaken when it supports the business activities of
the firm.
All companies rated as ‘Best Corporate Citizens’, and most with a social mission,
reported to have depicted the majority of their social activity on their value chain. This
suggests some degree of accuracy to this hypothesis. While this form of social
engagement surely provides a possibility to enhance long-term business practices and
outputs, the actual process of successful differentiation is only given if potential
customers are fully aware of the company’s CSR activities. To evaluate the potential
client’s knowledge, companies were asked to firstly provide the researcher with their
method of engagement and secondly to judge their client’s awareness of their social
activities. As demonstrated in Graph 1, firms were proportionally more likely to judge
their customer’s knowledge as high when CSR was not supporting daily business
activities and thus was not depicted on the value chain (VC) but instead was directed
towards other activities such as donations to charities.
While most companies carried out the bulk of their CSR activity within the production
process, a method which seems strategic due to both the enhancement of business
practices and long-term commitment, the findings suggest that outside activities such as
donations have a higher influence on consumer awareness. If these initial findings were
to be proven correct by further investigations, the value of Porter’s model as a method
for engaging in strategic CSR could be highly diminished and companies could be
confronted with a need to re-evaluate their business strategies.
The method of engagement aside, companies’ replies have shown that CSR has become a
successful tool for differentiation, while the extent of its value can depend on the sector
the company engages in.
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INTERNATIONAL PUBLIC POLICY REVIEW
Graph 1: Depiction on value chain (VC) and consumer awareness
12
10
10
8
6
6
4
4
2
1
4
2
0
No VC- no consumer awarenes s
No VC- a bit cons umer awarenes s
No VC- high cons umer awarenes s
VC- no cons umer awarenes s
VC- a bit consumer awareness
VC- high cons umer awareness
EXTERNAL PRESSURES
MEDIA CAMPAIGNS AND CONSUMER LOBBYING
The high-profile collapses of large MNEs such as Enron, WorldCom and Tyco have
increased public awareness of companies’ behaviour.149 Further examples, such as Nike
and Shell, have highlighted that external agencies are increasingly holding companies
accountable for their social and environmental actions. These new demands are not
merely claims of a marginal group which is prone to disappear quickly; CSR has become
an issue of great public interest worldwide. This is highlighted by a remark from
Consolidated Edison: “I believe it is hard for any business not to be engaged in CSR
activities … especially if they want to do business globally, it is now an expected
practice.”150
Companies are increasingly aware of the risks of ‘unethical’ business conduct but often
face issues of ethical relativism in their day to day business life. This means that
corporations are frequently hesitant to use domestic values as a guide to what is right or
wrong. Firms have become cautious in buying products at the best price possible, as
companies which do not adhere to domestic ethical expectations often face extensive
financial losses through consumer boycotts. Della Costa estimates that the yearly losses
to corporations due to unethical practices “equal more than the profits of the top forty
corporations in North America.”151
Porter & Kramer, Op.cit.
Consolidated Edison, Response to questionnaire, 2007
151 Della Costa in Carroll, “Ethical challenges for business in the new millennium”, Business Ethics Quarterly, Vol.10,
No.1 , 2000, p.5
149
150
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VOL. 4, NO. 1 – SEPTEMBER 2008
The power of public opinion was shown when Mc Donald’s in 1990 changed their
packaging methods from polystyrene claims to coated paperboards after public lobbying
campaigns, despite being aware that there was no basis for claiming that using paper
products was environmentally superior to using polystyrene materials.152 This example
illustrates the growing demand for companies to act ‘socially responsibly’, but equally
questions the extent to which companies should satisfy all demands of society.
From the companies participating in this research, only three companies said to have
had no media coverage on their CSR engagement. While only 12 businesses felt able to
judge whether the media coverage had an impact on their CSR activity, the ratio of
companies (10/12) assuming an impact was high.
Many companies participating in this research specifically mentioned growing consumer
demands as a major reason for engaging in CSR. One business highlighted the “improved
disclosure to society in areas other than the traditional financial measures” as their
major reason for engagement, while Aramark and Sara Lee specifically mentioned the
need to connect with their clients CSR requirements and pressures.
Consumer lobbying and media campaigns thus seem to have a major impact when
companies decide whether or not to engage in CSR.
GROUP PRESSURES
This research suggests that companies are bound in their capacity for choice and often
decide to follow CSR trends simply to avoid drawing negative attention to their
company. While it is difficult to prove a relationship between group pressures and
companies’ engagement in CSR, there are some indicators suggesting possible affiliation
between the two variables. Society is evidently more sensitive to negative than to
positive CSR information which heightens societal pressures on companies with low or
no social engagement.153 It is argued that as more companies engage in CSR, societal
pressures on other companies will become stronger, which will eventually lead them to
follow the trend to avoid strategic disadvantages. As can be seen in Table 3, 66% of the
companies taking part in this research believed that the majority of their competitors
equally engaged in CSR. This could lead us to assume that once several companies in a
business sector have started engaging in CSR, others are likely to follow. Indeed the only
company not engaging in CSR also believed that none of its competitors engaged in CSR.
De George, Op.cit.
Sen & Bhattacharya, “Does doing good always lead to doing better?”, Journal of marketing research, Vol. 38, No.2,
2001
152
153
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INTERNATIONAL PUBLIC POLICY REVIEW
Table 3: Degree of engagement and the amount of competitors engaging in CSR
Amount of competitors engaging in CSR
Degree of Engagement
No social mission - no CSR
None
Only some
Majority
Total
1
0
0
1
No social mission but CSR
0
2
3
5
Social mission
1
5
14
20
Best Corporate Citizens
Total
0
1
2
3
2
8
19
29
A further indicator for group pressures is that 67% of the companies providing
information on the time of their competitors’ engagement believed to have personally
engaged in CSR around the same time. 62.5% of companies further believed to be at an
equal level with their competitors’’ CSR activities, which does not suggest a will for
differentiation but the desire to avoid attention. Additionally Sara Lee specifically
mentioned peer pressures as one of their reasons for engagement.
LEGAL GOVERNMENTAL LIABILITIES
McWilliams and Siegel (2001) as well as Davis (1973) agree that in order to classify as
CSR social business practices have to be of a voluntary nature and thus begin where
legislation ends. According to Davis, “a firm is not being socially responsible if it merely
complies with the minimum requirements of the law, because this is what any good
citizen would do.”154 While this view is widely accepted, the question whether legal
expectations should in fact be seen as a form of CSR is still ongoing. This factor has also
become observable at various points during this research. In fact one of the 29
companies participating in this research named changes in legal requirements as the
main reason for the evolution of its CSR activity. Therefore the lack of a universally
accepted definition on CSR is seen, especially in this context, as a potenial impediment to
successful research as findings can easily be distorted.
Disparate understandings of the nature and scope of CSR was also noticeable when the
employees responsible for their companies CSR activities were confronted on whether
the company was subjected to any legal governmental standards on CSR. From the 29 US
based MNEs only 12 (41%) companies reported to engage in countries with existing
legal governmental standards. While it is true that there is no legally binding
international framework on corporate liability and that many frameworks developed by
government, the UN and the OECD such as the Global Compact, the Rio declaration on
environment and development and the OECD guidelines for MNEs, the US government,
has introduced a number of minimum legal standards.
154
Davis, 1973, Op. cit., p.2
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VOL. 4, NO. 1 – SEPTEMBER 2008
Subsequently the 12 companies were asked to assess existing legislation. All companies,
except for one, Hess Corporation, believed legislation to be sufficient. When asked to
judge their company’s engagement in relation to existing legislation only four companies
considered their social engagements to be always higher than those foreseen by
government, while the remainder believed this to be only sometimes the case. This
paper suggests that companies might engage in CSR so that costly legislation on CSR will
not be deemed necessary. Additionaly, once companies have to comply to social
legislation, their engagements are no longer seen as philantropic, additional and
voluntary.
Companies were equally asked to state whether they believed it to be the governments
or the companies’ duty to act in order to sustain the environment. While most
companies thought that both government and company should play a role, it was
observable that the company not engaging in CSR was alone to presume sole
government responsibility and that those companies with a high dependent variable
generally presumed a greater duty of the firm.
PHILANTROPHY
STAKEHOLDER VALUE
As mentioned earlier, most US Companies work for their shareholders (seeing that they
are the owners of the corporation). Yet most individual investors have little if any
control over the companies’ activities. Most public firms nowadays are primarily “owned
by small investors, often through the intermediary of institutional investors who
manage their funds.”155 It therefore seems improbable that companies solely work in the
interests of their shareholders as long as they provide reasonable profits. Some
companies might decide to engage in philanthropic engagements for the triple
advantage of giving something back to society, the satisfaction of observing positive
results as well as the advantages from independent variables already discussed.
To provide clarification, companies were asked whether their primary responsibility
was directed towards their shareholders or stakeholders. The majority believed both to
be equally important and could not place one above the other. It was surprising however
that those listed as ‘Best Corporate Citizens’ generally believed their shareholders to be
more important, whereas the companies without a social mission commonly directed
their efforts towards their stakeholders. This could be explained by the earlier
observation, that companies with a high value on the dependent variable generally
direct their CSR engagement towards their daily business activities, which is of value to
society as well as the production-process of the firm.
155
De George, Op. cit., p.327
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INTERNATIONAL PUBLIC POLICY REVIEW
CONCLUSION
It is evident that by engaging in a topic concerned with internal managerial business
strategies, it is often difficult to gain sufficient information on company’s motivations to
be able to understand why firms engage in certain activities and not others. To advance
previous studies this research programme directly contacted the US-based Fortune 350
companies and invited them to provide information on their reasons for social
engagement. While the findings are assumed to have advanced previous studies, the
possibility for bias could never be excluded. It is only natural that employees are trying
to portray the activities of their company in a socially desirable way, while trying to
conceal any negative information.
The seven independent variables used in this research have been treated separately for
reasons of structure and clarity, but are in fact strongly interlinked. The findings have
shown that companies believe there to be a positive relationship between CSR and a
company’s profitability, which is especially interesting as no congruent findings have
been found between these two variables in existing research. While it has been shown
that some companies might engage in CSR even at financial losses, companies will
generally only commence engagement if they see a strong business case for it. CSR may
therefore provide firms with the triple advantage of doing something good for society,
improving their social image as well as increasing profits.
The findings further suggest that CSR is a valuable tool for differentiation in a
competitive market, although consumer recognition does not necessarily refelect the
‘good’ that the activity produces. Consumers generally tend to have only partial
knowledge of a company’s CSR activities, the results seem to suggest that for successful
differentiation outside activities, such as donations to popular causes, gain greater
recognition for the company than social engagements that enhance business processes.
While the latter approach surely seems more valuable in the long-term, companies must
individually evaluate the advantages and disadvantages of both approaches.
Heightened interest of society and media in CSR may also have led to engagement in
responsible business practices as a method for avoiding negative media attention.
Companies operating in more visible, competitive markets are thus influenced by their
competitor’s CSR activities, when deciding on the extent of engagement, in order to
avoid harmful media campaigns and consumer boycotts.
The findings finally suggest that companies have increasingly realised that if they want
to achieve long-term success they have to update their corporate behaviour to a level
that is consistent with the prevailing norms, values, and expectations of society. They
would therefore seek to find a balance between their social, environmental as well
economic and profit-orientated responsibilities.
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VOL. 4, NO. 1 – SEPTEMBER 2008
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VOL. 4, NO. 1 – SEPTEMBER 2008
THE POWER-SHARING EXPERIENCE IN
NORTHERN IRELAND AND SRI LANKA
Ayesha Zuhair
ABSTRACT
This article seeks to identify the lessons that can be learnt by Sri Lankan policymakers
from the experience of power-sharing in Northern Ireland since the establishment of the
Northern Ireland Assembly and Executive as part of the 1998 Belfast Agreement. By
comparing the power-sharing mechanisms created by both the Northern Irish and Sri
Lankan governments in recent years, the author argues that the institutional devices
created under the Belfast Agreement are paving the way for the successful
transformation of a deep-seated conflict in Northern Ireland because of their adherence
to the principles of consociationalist theory. In contrast, the Sri Lankan government
have not been able to achieve their intended goals primarily because the essence and
spirit of power-sharing have been largely ignored by the country’s policymakers.
Consequently, the author argues that Sri Lankan policymakers should put forward an
alternative choice based on the Draft Constitution of 1997 as a solution to the current
shortcomings in governance—one which incorporates elements of consociationalism
and federalism, creating a consensual decision-making process and genuine autonomy
for ethnic groups over issues directly relevant to themselves.
Keywords: Conflict Resolution; Consociationalism; Northern Ireland; Sri Lanka
INTRODUCTION
As the armed conflict in Sri Lanka snakes its way into its twenty-fifth year, the All Party
Representative Committee tasked by the Government of Sri Lanka to formulate powersharing proposals is due to visit Northern Ireland to learn from the much acclaimed
power-sharing arrangement there. Among the key questions the Sri Lankan delegation
will seek answers for are: (a) what institutional factors lead to the successful process of
conflict transformation in Northern Ireland, and (b) what policy lessons can Sri Lanka
draw from Northern Ireland?
In this paper, I examine the pertinent experiences of these two deeply divided
democratic societies, and present answers to the above-mentioned questions by
considering the themes of consociationalism – of which power-sharing is a key
47
INTERNATIONAL PUBLIC POLICY REVIEW
component. In presenting my argument, I evaluate the key institution created by the
Belfast Agreement of 1998, namely the Northern Ireland Assembly and Executive, as
well as two efforts at power-sharing in Sri Lanka through the establishment of
Provincial Councils under the Indo-Lanka Peace Accords of 1987 and the proposed
Draft Constitution of 1997.
I argue that one of the primary reasons for the failure of power-sharing efforts in Sri
Lanka is because principles of consociationalism have not been adequately invoked.
Although not all the favourable conditions for full-blown consociationalism to work
holds true for Sri Lanka, its key principles of executive power-sharing and group
autonomy can still be used to mitigate ethnic violence and restore stability. Addressing
the genuine aspirations of marginalised ethnic groups, and giving them adequate power
to determine their destinies by incorporating important elements of consociationalism
would help charter ethnic relations in Sri Lanka toward more placid waters.
Why Consociationalism?
Leaving aside the Northern Irish experience, one needs to answer preliminarily why
consociational approaches have the potential of managing identity driven conflicts.
Consociationalism is widely regarded as a viable solution for stabilising societies that
are divided along ethnic, religious or sectarian lines. As Lijphart,156 the foremost
consociational theorist, avers “...consociational democracy is not only the most optimal
form of democracy for deeply divided societies but also, for the most deeply divided
countries, the only feasible solution.”
A consociation is “an association of communities”157 and it is generally the result of
bargains between leaders of conflicting ethnic or religious groups. According to
McGarry and O’Leary,158, consociational theory “is one of the most influential theories in
comparative political science. Its key contention is that divided territories, be they
regions or states, with historically antagonistic ethnically, religiously, or linguistically
divided peoples, are effectively, prudently, and sometimes optimally governed
according to consociational principles.”
This approach, however, has been criticised for its centrifugal tendencies. As Horowitz
suggests,159 consociational practice – in contrast to consociational theory – has
provided groups with explicit recognition and made their representatives the bearers of
156 A. Lijphart, “The Wave of Power-Sharing Democracy,” in A. Reynolds, ed., The Architecture of Democracy:
Constitutional Design, Conflict Management, and Democracy (Oxford: Oxford University Press, 2002).
157 B. O’Leary,“The Belfast Agreement and the British-Irish Agreement: Consociation, Confederal Institutions, a
Federacy, and a Peace Process,” in A. Reynolds, ed., The Architecture of Democracy: Constitutional Design, Conflict
Management, and Democracy (Oxford: Oxford University Press, 2002), p. 295.
158 J. McGarry and B. O’Leary, The Northern Ireland Conflict: Consociational Engagements, (Oxford: Oxford
University Press, 2004), p.1.
159 D. Horowitz, “Explaining the Northern Ireland Agreement: The Sources of an Unlikely Constitutional
Consensus,” British Journal of Political Science 32, (2002): 193-220.
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VOL. 4, NO. 1 – SEPTEMBER 2008
group guarantees. In addition, scholars like Chandra160 point out that the politicisation
of ethnic differences is considered a major threat to democratic stability, and this
concern is not completely unfounded.
But for those working within the consociational prism, ethnic cleavages are an
inescapable reality, and therefore it is only prudent to design the system of government
and public policy to deal with that reality161. Moreover, consociational mechanisms can
facilitate cooperation and compromise among political elites in states that have deep
ethnic, religious, cultural or linguistic cleavages by maximising the number of winners
in the system – thereby promoting peaceful coexistence.162
As Vivien Hart163 aptly reminds us, “The issues of recent conflicts are concerned with
the recognition of identities as well as with provisions for the legitimate exercise of
power.” What becomes crucial to bear in mind is that ethnic violence is the result of
(real or perceived) historical injustices and marginalisation of communities. It is the
group identity that acts as the mobilising trigger, not individual identity.
In reality, traditional majoritarian democracies propel a winner-takes-all system and
ethnic minorities are usually excluded from political power. As a result, conflicts
involving minorities are easily channelled into extra-parliamentary and violent forms.
Although certain liberal thinkers such as Horowitz164 and Barry165 reject the idea of
giving ethnic groups a permanent political identity or constitutional status, it is
becoming increasingly clear that minority rights cannot be subsumed under the
category of human rights166. Where friction is fuelled by decades of mistrust and
violence is used as a vehicle to attain group goals, it is practically inconceivable to
address those grievances without politically recognising groups.
Hence, the risk of furthering ethnic consciousness is a less costly alternative to
continued armed hostilities. Indeed, “attempting to erase ethnic cleavages will not
simply make them go away. Rather, successful state structures must acknowledge and
address their divided house dilemmas.”167. And as the case of Northern Ireland would
attest, consociational structures are capable of fostering cross-community cooperation.
Equally, it is probable that in the long-run if institutional guarantees are able to make
K. Chandra, Why Ethnic Parties Succeed: Patronage and Ethnic Head Counts in India, (New York: Cambridge
University Press, 2004).
161 J. Uyangoda, “Ethnic Conflict, Ethnic Imagination and Democratic Alternatives for Sri Lanka,” Futures 37, no 9
(2005): 973.
162 P. Norris, “Ballots Not Bullets: Testing Consociational Theories of Ethnic Conflict, Electoral Systems, and
Democratization,” in A. Reynolds, ed., The Architecture of Democracy: Constitutional Design, Conflict Management,
and Democracy (Oxford: Oxford University Press, 2002), p. 207.
163 V. Hart, “Constitution-making and the Transformation of Conflict,” Peace and Change 26, no. 2 (2001): 153-176.
164 D. Horowitz, Ethnic Groups in Conflict, (Berkeley: University of California Press, 1985).
165 B.Barry, Culture and Equality, (Cambridge, MA: Harvard University Press, 2001).
166 W. Kymlicka, Multicultural Citizenship, (Oxford: Oxford University Press, 1995).
167 S. Stroschein, “What Belgium Can Teach Bosnia: The Uses of Autonomy in ‘Divided House’ States,” Journal on
Ethnopolitics and Minority Issues in Europe 3, (2003).
160
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groups - minority groups in particular - feel less insecure about their societal status,
centrifugal tendencies will give way to the more desirable centripetal forces.
Theoretical Aspects of Consociationalism
The two primary characteristics of consociationalism as propounded by Lijphart168,
namely, (1) sharing of executive power, and (2) group autonomy, have been accepted
broadly as the key ingredients for successful democracy in divided societies. To
strengthen power-sharing and group autonomy, Lijphart169 recommends two
additional ingredients: (3) proportionality and (4) mutual veto. Some attention will be
paid in this paper to the two supplementary elements of consociationalism but greater
emphasis will be placed on the primary elements.
Lijphart also goes on to list as many as fourteen different favourable conditions, but
only four of them are present in all the overviews170. These four are variations of:
distinct lines of cleavage among segments of the community, a balance of power among
the sub-groups, external threats to a country’s existence and small size, since small states
are usually more manageable than large ones171.
Power-sharing
The central theme in power-sharing is that two or more ethnic groups jointly rule the
common polity and make decisions by consensus. In such a set-up, all groups are
ensured access to political power on the basis of informal or formal rules172. As
Lijphart173 puts it, “power-sharing means the participation of the representatives of all
significant groups in political decision-making, especially at the executive level.” To
elaborate, power-sharing encompasses:
“constitutional norms calling for the inclusion of minority parties and
major ethnic and religious groups in the legislature, government, and
administrative positions of the country, as well as to the laws or
constitutional arrangements providing for territorial or functional
decentralisation or electoral systems.”174
Group Autonomy
Autonomy or ‘self-rule’ is defined as “the granting of internal self-government to a
region or group of persons, thus recognising a partial independence from the influence
Lijphart (2002), p. 38
Ibid.
170 M. Bogaards,“The Favourable Factors for Consociational Democracy: A Review,” European Journal of Political
Research 33, no. 4 (1998): 475-496.
171 Ibid, p. 478
172 U. Schnekener, “Making Power-Sharing Work: Lessons from Successes and Failures in Ethnic Conflict
Regulation,” Journal of Peace Research 39, no. 2 (2002): 203.
173 Lijphart (2002), p. 39
174 D. Rothchild, “Settlement Terms and Postagreement Stability,” in S.J. Stedman, Rothchild, D. and Cousens, E. M.,
eds., Ending Civil Wars: The Implementation of Peace Agreements, (Boulder: Lynn Rienner Publishers, 2002), p.121.
168
169
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of national or central government.”175 As defined by Lijphart, “...group autonomy means
that these groups have authority to run their own internal affairs, especially in the areas
of education and culture.”176. Gurr177, on the basis of a global empirical study, confirms
that autonomy agreements can be an effective means for managing regional conflicts.
He concludes that there is nothing inherently destabilising about autonomy as alleged
by critics.
Northern Ireland and Sri Lanka
A plethora of geographical, cultural, and economic factors set Sri Lanka apart from
Northern Ireland. Her strategic location in the Indian Ocean, population of 20.1
million,178 65,610 square kilometres of land mass179 are but a few of the many respects
in which Sri Lanka differs from Northern Ireland, a constituent country of her former
colonial ruler. Comparatively, Sri Lanka’s population is more than 10 times the size of
Northern Ireland, and is five times larger in land area180.
Despite differences, there are many parallels between the two situations which make a
comparative study meaningful. Politically, they are electoral democracies which have
witnessed extreme polarisation leading to violent, identity-driven conflict. Both
conflicts have their roots in socio-economic discrimination based on ethnic, religious
and historical differences. Crucially, in both situations, the monopoly of power in the
hands of one group formed the basis of the conflict.
The conflict in Northern Ireland is between the Unionists or Loyalists, comprised
mainly of the Protestant majority who have sought to preserve the union with Great
Britain, and the Nationalists or Republicans, comprised mainly of the Catholic minority
who have traditionally wanted to unify the island of Ireland. For much of the twentieth
century, the Catholics accounted for one third of the total population181, and they
currently represent 43.76 percent182. After the British Government’s partitioning of the
six counties of the North - which had built-in Protestant majorities - from the rest of
Ireland in 1921, tensions between the two groups grew intense.
H.J. Heintze, “On the Legal Understanding of Autonomy” in M. Suksi, ed., Autonomy: Applications and Implication,
(Cambridge: Kluwer Law International, 1998), p. 7.
176 A. Lijphart, “Multiethnic Democracy” in S. M. Lipset, et al., eds., The Encyclopedia of Democracy, (Washington, D.C.:
Congressional Quarterly, 1995), p.856.
177 T.R. Gurr, Minorities at Risk: A Global View of Ethnopolitical Conflicts, (Washington, D.C.: United States Institute
of Peace Press, 1993), pp. 300-301.
178 United Nations Population Fund (2007) “World Population Datasheet: Sri Lanka” Population Reference Bureau,
http://www.prb.org/Countries/srilanka.asp
179 Encyclopaedia Britannica (2007) “Sri Lanka,” World Data, http://www.britannica.com/nations/Sri-Lanka.
180 K. Howells, British Foreign Office Minister, “Statement on Sri Lanka”, House of Commons Hansard Debates, 02
May, 2007, Column 1551, http://www.publications.parliament.uk/
181 J. Darby, “Conflict in Northern Ireland: A Background Essay,” in S. Dunn, ed., Facets of the Conflict in Northern
Ireland, (New York: St. Martin’s Press, 1995), p.19.
182 Northern Ireland Office UK (2007) “The Agreement,” http://www.nio.gov.uk/theagreement.
175
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Since then, a number of factors including political and economic discrimination against
the Catholics (denied by some Unionists even today), the population balance between
the two religious communities, the launch of the Civil Rights Movement by the
Catholics, and the rise of a violent campaign against British rule lead to the ‘Troubles’
which commenced in 1960 and led to some of the most horrific events in Irish
history.183
In Sri Lanka, political disagreements between the Sinhala-speaking, largely Buddhist
majority and the Tamil-speaking, largely Hindu minority surfaced after the island
gained independence from British-colonial rule in 1948. According to the last islandwide census conducted in 1981, Sinhalese made-up 74 percent of the population while
Tamils accounted for 18 percent.184 During the post-independence era, the Sinhalese
who resented what they saw as British-favouritism towards the Tamils during their
rule, disenfranchised Tamil migrants who had been brought by the colonial rulers to
work in the tea and rubber plantations, made Sinhala the sole official language of the
country, and promulgated a new Constitution which accorded Buddhism the foremost
position among the country’s religions.
The Liberation Tigers of Tamil Eelam (LTTE), whose key goal is to establish a separate
state for Tamils in the North-East, was born in this context. Following the LTTE’s
ambush of thirteen soldiers in the North of the country in 1983, ethnic pogroms
targeting the Tamils in the country’s South resulted in the deaths of at least 1,000
Tamils and caused severe destruction of their property.185 It was this episode which
sparked the civil conflict that has claimed as many as 70,000 lives and displaced
200,000 persons.186
Northern Ireland has been able to successfully design a political and constitutional
agreement for power-sharing. Although it took eight years for its full implementation,
the Northern Irish Agreement is laying the foundation for a more inclusive and stable
society. Sri Lanka, however, has so far merely unsuccessfully flirted with the concept of
power-sharing and a political arrangement to contend with the country’s ethnic
divisions appears to be a distant dream. These factors make a comparison worthwhile
and it is the Northern Irish success that ignites a curiosity as to whether Sri Lanka’s
solutions also lie in consociational approaches.
Evaluating Northern Ireland’s Power-sharing Arrangement
The Northern Ireland Act of 1998 established a single-chamber Assembly and Executive
with full legislative powers and executive competence for economic development,
Darby, pp. 18-23
Department of Census and Statistics, Sri Lanka (1981) “Census of Population and Housing,”
http://www.statistics.gov.lk.
185 International Crisis Group (2008) “Conflict History: Sri Lanka,” http://www.crisisgroup.org
186 Ibid.
183
184
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education, health and social services, agriculture, environment and finance. While a
substantial degree of autonomy was devolved to Northern Ireland, Westminster
continues to retain control of policy areas such as defence, taxation, immigration and
the monarchy.
What makes Northern Ireland a consociational democracy is (a) its permanent grand
coalition vis-á-vis the power-sharing Assembly and Executive; (b) the considerable
degree of autonomy particularly in the areas of education and culture enjoyed by the
two main ethno-national groups187; (c) the extensive use of evidence of proportional
representation; and (d) the introduction of the principle of mutual consent.
All the main parties in Northern Ireland are – in effect – members of a permanent
coalition government where decisions are taken on a joint basis. The cross-community
executive power-sharing is manifested in the election of First Minister and Deputy First
Minister on a joint ticket by the Assembly, with the mandate of presiding over the grand
coalition of the ten-member executive Council of Ministers. To facilitate crosscommunity decision-making, elected members are required to declare themselves
‘nationalist’, ‘unionist’ or ‘other’. The concept of group autonomy can be seen in the
explicit recognition of the political identities of unionists, nationalists, and others as
well the decision to leave alone the existing forms of the equally-funded Catholic and
Protestant schools.
Norms of proportionality are evident in the electoral system used to elect the
Assembly188; the procedure used to determine the composition of the Cabinet; the
procedure used to allocate assembly members to Committees with powers of oversight
and legislative initiative189; and the existing and additional legislative provisions to
ensure fair and representative employment, throughout the public sector, and including
the police service.190 To strengthen the power-sharing mechanism, a powerful minority
veto has been imposed in order to ensure that decisions on issues of concern to both
communities are taken only with broad consent of representatives of the two
communities. This refers to the doctrine of parallel consent: a majority of unionist and
loyalist representatives have to vote in favour of the proposed legislation. This requires
a weighted majority where 60 percent of all members have to vote, including at least 40
percent of each of the delegations.
A degree of cultural autonomy in education and language has existed even prior to 1998. For example, Catholic
schools have been subsidised by the British Government to the same level as Protestant schools since 1992.
188 The system used in Northern Ireland is called the Single Transferable Vote. Every voter has only one vote, but they
can ask for it to be transferred from one candidate to another to make sure it is not wasted. This is done by numbering
the candidates 1, 2, 3, 4, 5 and so on instead of just putting an “X” against one of them - Electoral Office for Northern
Ireland (2006), PR/STV Voting System, http://www.eoni.org.uk.
189 Northern Ireland uses the D’Hondt system, also known as the highest average method. Under this system, seats are
won singly and successively on the basis of the highest average – Northern Ireland Assembly (2007), Allocation of
seats in the Assembly Executive and Chairs and Deputy Chairs of Committees, http://www.niassembly.gov.uk.
190 O’Leary, p. 55.
187
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What the above implies is that a cross-community consensus is required for agreement
on issues related to both communities. So evidently, the agreement is abundant with
group guarantees as propounded by consociational theorists. It also becomes apparent
that the arrangement has been designed to ensure that politicians engage in a
continuing balancing process on issues of concern. In this context, McGarry and
O’Leary’s191 assertion becomes centrally valid: “What makes consociations feasible and
work is joint consent across the significant communities, with the emphasis on
jointness.”
Furthermore, Northern Ireland features the conditions that are favourable for
consociational structures to work: distinct lines of cleavage (sharp divisions between
the two main communities, balance of power (Protestants who comprise much of the
unionist population at 53.24 percent, and Catholics who make-up most of the
nationalist population at 43.76 percent), external threats (scare tactic whereby Great
Britain and Ireland threatened Northern Ireland with partition), and small size (5,456
square miles).
Due to the mutually acceptable political arrangement currently in place, Northern
Ireland is overcoming its volatile past and emerging as a stable society. Some of the
figures speak volumes about the progress made: 102 cross-border roads closed by the
army during the Troubles have reopened; 32 security bases have been closed; and
3,500 troops have left since the peace process began bringing troop levels to the lowest
level since 1970.192 Among the many economic dividends are the creation of 31,000
new jobs since the signing of the Belfast Agreement and the present unemployment
level of 3.8 percent, a historically low level.193
Consociational theory was first applied to Northern Ireland by Lijphart himself in 1975.
Although consociational thinking was implicit in the Sunningdale Agreement of 1973,
Lijphart was unconvinced about the prospects for consociational democracy and the
key problem in his view was the absence of support for it among Protestants. Northern
Ireland had a majority that was “capable of exercising hegemonic power” and was
normatively attracted to the Westminster majoritarian tradition of democracy.
Democracy by consensus was deemed unacceptable. Sri Lanka, today, is where
Northern Ireland was then.
The Sri Lankan Power-Sharing Experience
In the last few decades, the Sri Lankan government has tried several approaches to
resolve the ethnic conflict but these measures were either too little or too late. The most
McGarry, J. and O’Leary, p. 15.
R.N. Haass,“The Northern Ireland Peace Process: Remarks to the National Committee on American Foreign
Policy”, US Department of State, New York, 07 January, 2002.
193 Department of Enterprise, Trade and Investment, Northern Ireland (2007) “Unemployment in Northern Ireland
Remains Low,” Statistics and Economics Research Branch, 14 November, http://www.detini.gov.uk.
191
192
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salient among the string of unsuccessful efforts are the establishment of the Provincial
Councils and the proposed Draft Constitution of 1997.
Evaluating the 13th Amendment to the Constitution
The 13th Amendment enacted on 14 November 1987 sought to devolve power to the
regions and provided for the establishment of Provincial Councils with legislative
powers and the appointment of a Governor with executive powers for the respective
provinces. It created three lists; the first contained powers that were retained by the
central government (reserved list); the second listed the powers devolved to the
provinces, and the third detailed shared powers between the government and
provinces (concurrent list).
Members to the respective regional bodies are elected under the proportional
representation electoral system, introduced by the Second Republican Constitution of
1978.194 The imprecise division of power between the centre and peripheries and the
latter’s inability to exercise exclusive competence or jurisdiction in any policy area are
some of the significant shortcomings of the 13th Amendment. Authority in two crucial
spheres – land settlement and maintenance of law and order – was left entirely to the
prerogative of the central government, with serious implications for Tamil security in
the North-East. The Councils also had no independent fiscal powers – it could neither
borrow nor tax – and was completely dependent on finances from central government.
Thus, it is no surprise that despite the 13th Amendment, Sri Lanka remains a heavily
centralised state with no real autonomy ceded to the Tamils. As Edrisinha195 notes,
“Continued centralisation was strikingly symbolised by the conspicuous strength of the
executive presidency, although in some areas, such as health and education, devolved
powers could be reclaimed by simple ministerial directive”. Edrisinha196 also points out
that the greatest obstacle to practical devolution was the first phrase of the Reserved
List which provided for ‘National Policy on all Subjects and Functions’ to be determined
by Parliament; this totally undermined powers apparently devolved to the provinces. As
the conflict escalation patterns have shown, the experiment with devolution vis-á-vis
the 13th Amendment to the Constitution has been wholly inadequate.
Evaluating the proposed Draft Constitution of 1997
194The
proportional representation system was introduced with the new constitution so that a change to the
constitution could be prevented, by rendering it virtually impossible for any one party to muster a two-thirds
majority.
R. Edrisinha, “Trying times: constitutional attempts to resolve armed conflicts in Sri Lanka,” Conciliation Resources,
London, August, 1998.
195
196
Ibid.
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In many ways, the Draft Constitution presented by the People’s Alliance Government on
03 August 1997, represented a huge leap forward for power-sharing in Sri Lanka. The
full constitutional reforms presented to Parliament in October offered substantial
concessions on representational, juridical, and financial matters and envisaged a
sweeping restructuring of the existing system, introduced by the 13th Amendment.
The powers of the centre and the regions were to be reconstituted, with greater
autonomy granted to new “regional councils”. The existing list of concurrent powers
was to be abolished and most powers on this list were to be transferred to the proposed
regional councils. The draft also proposed to curb the excessive concentration of power
vested in the executive presidency and distribute greater autonomy to the peripheries.
However, there were no guarantees of equality as propounded by consociational
theorists to reflect the plural nature of the country. In fact, the proposed draft very
explicitly accorded Buddhism, the religion of the majority of the Sinhalese population,
the “foremost place”. In addition, the draft did not require that recruitment to the public
service and the police service should reflect ethnic diversity. In mixed ethnic regions,
the lack of clarity can indeed be dangerous197.
But more centrally, a direct voice for the regional representatives in the central
institutions was not provided for, although a considerable devolution of financial and
administrative power was proposed. The essence of power-sharing where the common
polity is jointly ruled was thus totally overlooked.
The Need for Consociational Thought
Throughout the early years of independence, Sri Lanka invited international admiration
because of the leading position it commanded in Asia not just in terms of economic
prosperity, but also for the peaceful co-existence of its diverse ethnic communities.
However, the relative stability of the 1950s and 1960s was soon replaced by growing
hostilities between the two principal ethnic communities. This has been correctly
attributed to the shift to the increasing centralisation of power and the denial of
autonomy to the Tamil-dominated provinces under the growing influence of Sinhala
Buddhist nationalism198. The classic majoritarian system handed over by the British
was rapidly defined by the Sinhalese political elite in terms of dominance by an ethnic,
linguistic and religious majority – the Sinhalese Buddhists.
The cosmetic transfer of administrative power through the 13th Amendment proved
unsatisfactory not just to the Tamil rebels waging a guerrilla-style war, but also to the
more moderate Tamil political leaders. Even the most radical constitutional reforms
M. Chadda,“Between Consociationalism and Control: Sri Lanka,” in U. Schneckener and Wolff, S., eds., Managing
and Settling Ethnic Conflicts: Perspectives on Successes and Failures in Europe, Africa, and Asia, (New York: Palgrave
Macmillan, 2004), p.100.
198 Chadda, p.98
197
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proposed by the Sri Lankan Government in 1997 which featured regional devolution of
power as its centre-piece, did not transcend the majoritarian-style of governance, one of
the root causes of the conflict. Where Lijphart’s favourable conditions for an elite
commitment to cooperate are concerned, Sri Lanka does not meet all the required
criteria. Although there are distinct cleavages and the country is relatively small in size,
there are no external threats to unite the main communities and is there the balance of
power requirement is absent for the Sinhalese make-up 74 percent of the population
while the Tamils account for only 18 percent of Sri Lanka’s population of 20 million. But
as Lijphart himself concedes, these conditions are neither necessary nor sufficient:
“even when all of the conditions are unfavourable, consociationalism, though perhaps
difficult, should not be considered impossible.”199
Conclusion
Based on a comparative analysis, I have argued that the power-sharing devices
established under the Belfast Agreement of 1998 is paving the way for the successful
transformation of a deep-seated conflict in Northern Ireland, and is creating a
considerably more stable society. Contrastingly, the various mechanisms designed to
mitigate conflict in Sri Lanka have not able to achieve their intended goals. This is
largely because the essence and spirit of power-sharing have been largely ignored by
the country’s policymakers.
As ethnic frictions in Northern Ireland are sedated by consociational prescriptions,
hostilities continue to escalate in Sri Lanka despite the many attempts to formulate a
mutually acceptable power-sharing formula. What Northern Ireland shows is that even
in seemingly intractable civil conflicts, it is possible to create a break-through in
negotiations if the parties are willing to rethink the framework for a settlement. In the
Sri Lanka case, the principles of consociationalism and asymmetry may be necessary
innovations of this kind.
Thus, Northern Ireland teaches Sri Lanka that consociationalism, despite its alleged
deficiencies, is a viable method of resolving conflict in deeply divided societies.
Consociational democracies feature a consensual decision-making process at the
central level on issues of joint concern, and genuine autonomy for ethnic groups to
decide on matters of particular relevance to them. To promote stability, Sri Lankan
policymakers should put forward an alternative choice based on the Draft Constitution
of 1997, preferably a system which has elements of consociationalism and federalism.
Elements of consociationalism are necessary for settlement: consociational mechanisms
don’t always polarise ethnic communities further as critics have alleged and can – and
indeed does – promote cross-community cooperation as I have argued. When faced with
a past of oppressive majority rule, simple plurality is not feasible. The reality is that in
199
A. Lijphart, Democracy in Plural Societies: A Comparative Exploration, (New Haven: Yale, 1977), p.54.
57
INTERNATIONAL PUBLIC POLICY REVIEW
the face of few alternatives, consociationalism has become a prudent pathway for
regions plagued with a history of communal differences.
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ONE STATE OR TWO? THE SEARCH FOR A
SOLUTION TO THE CYPRUS PROBLEM
Nicola Solomonides
ABSTRACT
The island of Cyprus has been the site of severe ethnonational conflict. As a result, there
have been numerous attempts to deal with the situation, ranging from a power-sharing
constitution, the partition of the island with the separation of the Greek- and TurkishCypriot communities, to the Annan Plan, which attempted to establish a federal solution
for the island. As such, Cyprus provides a useful case study of the effectiveness of various
methods of ending ethnic conflict. Due to the failure of the 1960 Constitution and its
attempt at consociational democracy, and as a result of the rejection of the Annan Plan,
the possibility of a two-state solution merits consideration. This paper evaluates the
reasons for these failures by measuring up the practical facts of the Cyprus situation to the
relevant political theory, and, in light of renewed efforts to solve the ‘Cyprus Problem’,
attempts to determine the best possible future solution for Cyprus, and whether this is
more likely to be along the lines of a bizonal, bicommunal federation, or the emergence of
two separate states.
Keywords: ethnic conflict; divided society; consociationalism; partition; population transfer;
federalism; Annan Plan
INTRODUCTION
The divided society of Cyprus, having been regarded as “a hotspot of ethnic violence”,
and “exemplary of intractable ethnonational conflicts”,200 provides a useful case study of
consociational democracy, partition and federalism as attempted solutions for ethnic
conflict. The 1960 Constitution provides an example of a failed attempt at consociational
democracy; the partition following the 1974 Turkish invasion, while successful in terms
of ending violence, has still left dissatisfaction on both sides; and the Annan Plan,
proposing a federal solution, was largely rejected. This essay seeks to examine each of
these approaches and will attempt to determine the best possible future solution for
Cyprus: whether this is more likely to be along the lines of a bizonal, bicommunal
federation, or the emergence of two separate states.
200
Pollis 1979, in Papadakis, Peristianis, and Welz, 2006, 5
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It will first be necessary to look at a brief historical outline of the island’s ethnic conflict.
I will then consider the constitution of 1960 as a failed experiment in consociational
democracy, by looking at the conditions necessary for successful implementation of
power-sharing agreements and determining the absence of these conditions in Cyprus.
Next I will look at the issue of partition, by examining the theory of partition as a means
of ending conflict, and by looking at how partition was implemented in Cyprus, and how
it has fared over the years at keeping conflict at bay. The Annan Plan proposed a federal
solution for Cyprus, so I shall consider the conditions necessary for federalism to be
successful, and then consider whether these conditions are present in the case of
Cyprus. I will argue that, as with the experiment in consociationalism, the necessary
conditions for federalism are markedly absent. I will conclude that, as a result of the
successful outcome of partition in keeping conflict at bay, and due to the hardening
identities and hostilities between the communities over time, it is necessary to either
consider the option of a two-state solution, or to gingerly attempt, over time, some form
of shared decision-making which could potentially create the conditions necessary for a
federal structure. However, I will argue that, at least for the time being, no such
structure is appropriate.
A TURBULENT HISTORY
The British colonial period, beginning in 1878, witnessed the rise of Greek and Turkish
nationalism in Cyprus: Greek-Cypriots strove for enosis, the union of Cyprus with
Greece; Turkish-Cypriots demanded taksim, partition of the island. From 1955, the
enosis movement took the form of an armed insurrection led by EOKA201, and in 1957,
Turkish-Cypriots set up their own armed organization, TMT202. The opposed aims of the
two major ethnic groups and the British policies of exacerbating divisions, for instance
by enrolling Turkish-Cypriots as auxiliary policemen against the EOKA insurrection, led
to violent interethnic confrontations203.
British colonial rule ended in 1960, and an independent state, the Republic of Cyprus,
was created as a compromise solution reflecting the opposed interests of the two
antagonistic ethnic groups; however, independence did not satisfy the aspirations of
either group. Both continued to pursue their respective aims of enosis and taksim,
resulting in interethnic violence in 1963.
In 1964 the United Nations came to Cyprus to maintain peace. By 1967, interethnic
violence had died down. A coup on July 15, 1974, against the then president of the
Republic, Archbishop Makarios, by the pro-union faction EOKA B, prompted Turkish
military intervention, dividing the island: Greek-Cypriots fled to the south and TurkishCypriots moved to the north. Since then, the Greek-Cypriot-controlled Republic of
National Organization of Cypriot Fighters
Turkish Resistance Organization
203 Pollis 1979, in Papadakis, Peristianis, and Welz, 2006, 2
201
202
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Cyprus has remained the only internationally recognized state in Cyprus, while the selfdeclared Turkish Republic of Northern Cyprus (TRNC), established in 1983, has not
gained international recognition.
Since 1974, the largest international effort to solve ‘the Cyprus Problem’ was the ‘Annan
Plan’, a negotiated UN-brokered constitutional arrangement. It called for a federal,
bicommunal, bizonal solution, and culminated in referenda on both sides. The plan was
rejected on the Greek-Cypriot side by a majority of 76%, even though it was accepted on
the Turkish-Cypriot side204. The attempt therefore failed, as had the previous attempt at
a solution: the 1960 Constitution.
THE 1960 CONSTITUTION: AN ATTEMPT AT CONSOCIATIONAL DEMOCRACY
When it comes to managing and settling ethnic conflicts, power-sharing arrangements
often seem appropriate: the former antagonists have to work together and make
decisions by consensus, the ultimate goal being to turn opponents into partners. This
concept of conflict regulation, called ‘consociational democracy’ (a form of government,
involving guaranteed group representation), is often suggested for managing conflict in
deeply divided societies. This concept can only be successful under specific conditions.
Lijphart205 has identified four key characteristics of consociational democracies: (1)
Government by grand coalition – the government includes representatives from all
groups in society; (2) Proportional representation – all groups are adequately
represented within the executive, parliament, legal system and public service; (3)
Mutual veto – each group has the opportunity to block political decisions using its veto
rights, the aim being to foster consensus-building and compromise; (4) Segmental
autonomy – each group enjoys some degree of self-government, maintaining its own
elected bodies and institutions, leaving only few issues to be coordinated with other
segments of society, thus allowing for different culturally-based community laws.
The 1960 Cyprus constitution embodied all the principles of consociational democracy.
The president, a Greek-Cypriot, and the vice-president, a Turkish-Cypriot, were to be
elected by their respective communities and were to share prerogatives and executive
power. A 50-member house of representatives was composed of 35 Greek- and 15
Turkish-Cypriots elected by their respective communities. Either the president or the
vice-president could veto legislation passed by the house of representatives in the areas
of foreign affairs, defense, and internal security, but not legislation passed in the
communal chambers. The principles of grand coalition and proportionality were further
strengthened by the provisions that the council of ministers, the legislature and the
public service were all to be apportioned in a ratio of 70% Greek-Cypriot and 30%
Turkish-Cypriot, while the army was to have a 60:40 ratio. Measures for autonomy
204
205
By 66 percent
Lijphart, 1977
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included separately elected communal chambers as well as provisions for separate
municipalities in the five main towns, reflecting the separation of the ethnic populations
in urban areas.
However, the state of affairs established by the constitution lasted only three years, due
to “[c]hronic disagreement, growing deadlock, and mounting acrimony between the
communities”206. It is thus necessary to examine certain favorable conditions207 under
which consociationalism is more likely to be successful, and see whether these were
present in Cyprus.
The first favorable condition is a balance of power, whereby the state or region is not
dominated by a clear majority group. Instead there exists a relative equilibrium between
groups, either through the existence of a number of groups, none of which constitutes a
majority, or the existence of two practically equal segments. Secondly, similar
socioeconomic conditions across the groups are favorable. Indeed, “[t]he smaller the
economic and social differences between the groups, the better the conditions for
consociationalism”208. Thirdly, the existence of overarching loyalty is very important, as
the disparate groups share a feeling of belonging to one nation/region, and are held
together by a common loyalty. Fourthly, a multi-party system ensures that each group is
represented by several political parties or movements. Fifthly, the existence of crosscutting cleavages is important, whereby the population is characterised by cleavages
which cut across ethno-national/linguistic lines, preventing the creation of
homogeneous groups. The sixth favorable condition is that of comprehensive
participation: all relevant groups are represented at the negotiating table and in the
power-sharing system itself. It is important that the agreed consociational structure was
developed by the groups themselves and not forced upon them by external powers. This
will help ensure the seventh favorable condition: that the consociational solution is not
questioned by any side, and all parties to the power-sharing arrangement are interested
in maintaining the agreed status quo. Eighth, it is important that elites occupy a
dominant position in society, whereby the political leadership of each group is able to
win internal support for compromises and agreements209. Finally, territorial
segmentation is believed to be helpful, as, where groups live territorially segregated, it is
possible to combine consociational democracy with territorial arrangements to allow
more regional self-rule for each group.
We shall now consider whether these conditions were present in Cyprus. Firstly, there
was no equilibrium between the two communities, but clear domination by the GreekCypriot group210. Secondly, there were huge socioeconomic disparities between the
groups: the Turkish population was clearly disadvantaged in comparison to the Greek
Bose, 2007, 75
Lijphart, 1977; Schneckener, 2002
208 Schneckener, 2002, 211
209 Over time, experiences of such compromises and agreements could serve as reference points of cooperation, thus
creating a tradition of elite accommodation.
210 Which represented almost 80% of the population
206
207
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majority, and this split deepened after independence. Thirdly, and possibly most
significantly, there was no overarching loyalty which united the two communities, nor
was there the concept of a common, inclusive Cypriot identity. Indeed, “[t]he Cypriots
were not a single people with differing tendencies but, rather, two different
peoples...Greeks and Turks on Cyprus thought of themselves as Greeks and Turks, not as
Cypriots”211. Fourthly, there was no multi-party system in Cyprus, but rather, national
fronts existed in each camp, marginalizing any internal, potentially more moderate
position. Fifthly, there were no cross-cutting cleavages (this was reinforced by the
constitution, which separated the population into two electorates), and bi-communal
parties did not exist at all. Sixth, there was no comprehensive participation in the
negotiating process. The guarantor powers (Turkey, Greece and Great Britain)
established a solution, while the two ethnic groups in question were only partly and
indirectly involved in negotiations. As the power-sharing constitution was written and
tabled by international mediators, it was viewed, especially by the Greek-Cypriots, as
having been forced upon them. According to Lijphart, “consociationalism cannot be
imposed against the wishes of one or more segments in a plural society and, in
particular, against the resistance of a majority segment”212. As for the seventh favorable
condition, respecting the status quo, the Greek-Cypriots did not want to give up their
former hegemonic position, while the Turkish-Cypriots largely supported separatist
options. With both sides oriented towards the nation-state model, power-sharing was
seen as insufficient for safeguarding the ethno-national identities. Eighth, the leaders of
the two communities did not exhibit a spirit of moderation and refused to compromise.
Finally, regarding territorial segmentation, while the groups lived in segregated
neighborhoods, the population was still, to a large extent, mixed.
Furthermore, “the infant Cypriot state’s experiment in consociational government was
doomed to break down because...it lacked any provision for close, neutral, international
supervision and mediation during its implementation”213. But more importantly, the
constitution itself proved to be unworkable, especially with the mutual veto power
resulting in repetitive deadlock. In short, the conditions prevailing in Cyprus at the time
of the implementation of the constitution did not favor success.
THE “SOLUTION” OF PARTITION
Sustained wars produce and reinforce hatred that does not end with the violence214, so
how can groups of people who have been killing one another come together to form a
common government and/or society? According to Kaufmann215, they cannot. His theory
is based on the premise that, in ethnic wars both hypernationalist mobilization rhetoric
and actual atrocities harden ethnic identities to the point that cross-ethnic political
Coughlin, in Gai, 2000, 224
Lijphart (1977: 160), in: Coughlin, in Gai, 2000, 227-8
213 Bose, 2007, 79-80
214 Licklider, 1995, 681-690
215 Kaufmann, 1996
211
212
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appeals become futile; indeed “restoring civil politics in multi-ethnic states shattered by
war is impossible because the war itself destroys the possibilities for ethnic
cooperation”216. Furthermore, intermingled population settlement patterns create
security dilemmas due to the escalation of each side’s mobilization rhetoric presenting a
real threat to the other, and because intermingled population settlement patterns create
defensive vulnerabilities and offensive opportunities. Such security dilemmas intensify
violence, and de-escalation is not possible unless the groups are demographically
separated, as “[s]eparation reduces both incentives and opportunity for further
combat”217. Furthermore, while Kaufmann does not deny the existence of other possible
solutions such as peace enforcement by international forces, he claims that they only
last as long as the enforcers remain. Ultimately, “as long as either side fears, even
intermittently, that it will be attacked by the other, past atrocities and old hatreds can
easily be aroused”218.
There are, however, objections to this theory. Groups may not necessarily see their
identity as ‘hardened’ as Kaufmann suggests; there may be divisions within ethnic
groups. Kaufmann’s theory also raises problems for people of mixed ethnicity – to which
side of the partition do they belong? Moreover, it has been suggested by Sambanis219
that partition quite possibly not only fails to address the issues, but moreover results in
conflict on a different level. Furthermore, as Kumar220 suggests, the process of partition
is hardly straightforward, and can create problems. For instance, there is a clear human
rights issue involved in population transfers221.
Following the outbreak of violence in Cyprus in 1974, the two communities were strictly
separated, resulting in the partition of the island with the Turkish-Cypriots occupying
the North, and the Greek-Cypriots the South. However, this was hardly a straightforward
process, taking about 14 years to establish. Following the collapse of the constitution in
December 1963, the governmental machinery of the Republic of Cyprus was operated by
Greek-Cypriots. Turkish-Cypriots were confined to decisions affecting the
administration of their own communities. During this period, a quarter of the TurkishCypriot population became refugees and more than half of these gathered in armed
enclaves. The intercommunal violence in 1963 and 1964 led the Turkish-Cypriots to
conclude that physical, geographical separation of the two communities was essential to
their safety and security. In 1963, the ‘Green Line’ divided Greek- and Turkish-Cypriots
in Nicosia, the island’s capital, after which, ethnic conflict intensified. In 1964 the
Turkish-Cypriot community declared support for partition. Conflict continued to
escalate until, in 1974, the Turkish invasion reinforced the de facto partition of the
Ibid, at p 137
Ibid
218 Ibid, at p 174
219 Sambanis, 2000
220 Kumar, 1997
221 This can be seen in Cyprus, concerning property of Greek-Cypriots in the North and, to a lesser degree, that of
Turkish-Cypriots in the South. People on each side claim it is a violation of their property rights that they cannot use
and/or profit from their properties on the opposite side of the ‘Green Line’, and many cases have been taken to the
European Court of Human Rights on this precise matter.
216
217
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island. Forced population movements from 1963, and especially in 1974, produced
internal flows and disruptions involving displaced persons. Approximately 200,000
Greek refugees moved south of the ‘Green Line’, and around 60,000 Turkish-Cypriots
moved north222. Movements of people from Anatolia and other parts of Turkey to the
north have since been induced to alter the demographic balance.
While the partition of Cyprus was hardly smooth and uneventful, it succeeded in ending
the violence that had previously plagued the island. In fact, the situation has remained
remarkably stable since 1974223, especially in comparison with the escalating ethnic
violence from 1955-1974. Nevertheless, critics have argued that, regardless of the fact
that there have been virtually no casualties since, the partition and the population
exchange actually made the conflict worse. According to Kumar, “the division of Cyprus
is little more than a long standoff that remains volatile and continues to require the
presence of UN troops”224.
Admittedly, the partition of the island, while it quelled the violence, did not solve the
problem behind it. The first attempt at power-sharing in 1960 was unsuccessful, and
over the years identities have certainly hardened. This, along with over 30 years of
partition, does not bode well for the possibility of a shared future for the island. Indeed,
partition is said to entrench differences and possibly even institutionalise them.
According to Varshney225, interethnic networks and communication are necessary to
build bridges between communities and prevent ethnic violence. The argument is that,
because interethnic and intraethnic networks of civic engagement “build bridges and
manage tensions, interethnic networks are agents of peace, but if communities are
organized only along intraethnic lines and the interconnections with other communities
are very weak or even nonexistent, then ethnic violence is quite likely”226. By extension,
a multiethnic society with few connections across ethnic boundaries is very vulnerable
to ethnic disorders and violence. Applying this theory to Cyprus, we conclude that
violence is likely as there are no such interethnic networks. While, in the 1990s an
energetic bicommunal movement for change emerged, seeking to address the past and
look to a shared future through dialogue and bicommunal activities, it had limited
impact on society at large. This was largely due to the ‘damage’ done by history, and the
biased presentation of this history on both sides, especially through the education
systems. There is undeniably a presentation of opposed historical claims. Indeed, in the
divided capital, there is on each side a Museum of National Struggle, the historical
narratives of which express both sides’ official constructions of the past, ending up with
totally opposed stories227. Indeed, “history is often quoted as proof of the impossibility
of rapprochement and cohabitation”228, largely as a result of the fact that “the hegemonic
Cranshaw, ‘Cyprus Revolt’, p 395; Polyviou, ‘Cyprus’, p 203, Kaufmann, 1998, 151
Kaufmann, 1998
224 Kumar, 1997, 29
225 Varshney, 2001
226 Ibid, p 363
227 Papadakis 1994, in: Papadakis, Peristianis, and Welz, 2006, 6
228 Papadakis, Peristianis, and Welz ,2006, 112
222
223
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discourse within each of the two main ethnic communities on the island has been
emphasizing their very different cultures and each group as a part of two separate
‘mother-nations’”229.
Yet despite the lack of reconciliation, the situation has remained relatively calm for over
30 years. Nevertheless, neither side is entirely happy with the current arrangement. The
Greek-Cypriots have still not accepted the partition of the island as the end of the story,
calling for reunification. Turkish-Cypriots, on the other hand, are more in favour of
division, however, the TRNC is not currently internationally recognised. It is worth
noting, however, that since the opening of the checkpoints in April 2003, people from
both communities have crossed over in substantial numbers230, and the absence of
violence is noteworthy, perhaps giving some hope for the future. However, as Kumar
points out, “ethnic partitions have never been reversed; their implementation has
inexorably driven communities further apart”231.
A FEDERAL SOLUTION?
Following the population transfer and definitive separation of the two communities, it
became possible to consider a solution of territorially based federalism. Classical
arguments in favour of federalism assert that some form of federalism or
decentralization of government power “enhances national unity and consensus,
promotes security, protects citizens against encroachment by the state, limits ethnic
conflict, and safeguards individual and communal liberty”232. There is some debate
concerning the merits of symmetric devolution of power233 versus asymmetric
devolution234. The idea of symmetric devolution is that, by dividing up an ethnic enclave,
conflict is diffused. Indeed, federalism has significantly contributed to peace-making
processes, as it offers a balance between unity for common purposes and separation for
ethnic or other local reasons.
Majorities tend to favour the option of federations235, while minorities tend to prefer
confederations236 or asymmetrical devolution/autonomy. Heintze237 defines autonomy
Ibid, at p 102
About 40% of Greek-Cypriots say they have never crossed, about 50% say they have crossed once or a few times in
the past but no longer, and about 10% still cross over. By comparison, about 30% of Turkish-Cypriots have never
crossed, about 25% have crossed once or a few times in the past but no longer, and about 45% still cross over. (‘The
UN in Cyprus: An Inter-Communal Survey of Public Opinion by UNFICYP’,
http://www.unficyp.org/UNFICYP%20Survey.htm)
231 Kumar, 1997, p33
232 Wibbels, 2006, 167
233 Ie federalism
234 Ie autonomy
235 Watts (1998) defines a federation as “a compound polity combining constituent units and a general government,
each possessing powers delegated to it by the people through a constitution, each empowered to deal directly with
the citizens in the exercise of a significant portion of its legislative, administrative, and taxing powers, and each
directly elected by its citizens” (p 121)
236 Watts (1998) defines confederations as “a species of federal system in which the institutions of shared rule are
dependent on the constituent governments, being composed of delegates from the constituent governments and
therefore having only an indirect electoral and fiscal base” (p 121)
229
230
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as where parts of a state’s territory are authorised to govern themselves in certain
matters by enacting laws and statutes, but without constituting a state of their own238.
According to Rothchild and Hartzell239, autonomy mitigates the problem of security
issues by reassuring groups and giving them a degree of control. They also note that
there is a positive correlation between autonomy and stable peace-agreements.
However, Mozaffar and Scarritt240 draw attention to the fact that in creating
autonomous units, drawing the boundaries can increase conflict. Cornell241 appears to
agree with this view and notes that creating an autonomous unit could be a step towards
secession. Indeed, this is the chief concern with autonomy, and Brancati242, while
conceding that decentralized systems can have the positive effect of reducing rebellions,
points out that autonomy encourages the creation of regional parties and increases local
incentives to rise to power within local institutions; over time, increasing the power of
local parties could potentially lead to secession. It is precisely for this reason that GreekCypriots would be most unwilling to consider granting autonomy to the TurkishCypriots in the North.
Due to the prolonged separation of the two communities on Cyprus, any settlement will
have to assume a territorial dimension. A federation is often advanced as the best way to
manage the nationalistic problems of the two communities. However, while the GreekCypriot community is in favour of a unitary federal state, the Turkish-Cypriot
community favours a looser confederation243, chiefly due to concerns that, in a federal
state, they would become an impoverished minority. However, the Greek-Cypriot
community rejects the option of a confederation because they believe it would allow the
TRNC to become a sovereign state.244
Ultimately, whether federal structures provide an adequate solution depends on the
existence of several factors, similar to those conducive to consociationalism. However,
“echoing Lijphart’s analysis of the conditions conducive to consociational democracy,
Maurice Vile asserts that no two-unit federation has ever survived... ‘the danger of an
irreconcilable confrontation between the units in a two unit federation is so great that
sooner or later it would lead to a civil war, secession, or both’”245. This does not bode
well for Cyprus.
One factor favourable to the establishment of a federation is the existence of crosscutting cleavages. Where the member states’ alliances are subject to more than one
cleavage, political tensions will be cancelled out since an individual cleavage does not
Heintze, in Suksi, 1998
Ibid, p 7
239 Rothchild and Hartzell, 1999
240 Mozaffar and Scarritt, 1999
241 Cornell, 2002
242 Brancati, 2006
243 ‘The UN in Cyprus: An Inter-Communal Survey of Public Opinion by UNFICYP’,
http://www.unficyp.org/UNFICYP%20Survey.htm
244 Bindebir, Handshin, Jovanovic, Rieck, 9
245 Coughlan, in Ghai, 2000, 237
237
238
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become entrenched in the system. Indeed, it is the absence of alternative coalitions in bicommunal systems that results in the confrontation of the two communities on every
issue. In Cyprus, there are no cross-cutting cleavages, but two homogeneous groups.
Disagreements over issues can potentially destabilise the system because they may lead
to the dissatisfaction of the minority group. In the absence of an overarching Cypriot
nationalism, the result is the confrontation of two ethnies (if not nations) on the same
island.
Connected to the factor of cross-cutting cleavages is the number of units of a federation:
“the Canadian case shows the necessity of a substantial number of member states in a
federation. Only in this way, can the competing interests of the units be pacified”246. Yet,
the ideal federation for Cyprus is considered to be bicommunal and bizonal, yet “to
reduce any state to only two sectors, brings intolerance and the ability to control
tensions becomes more difficult”247. This would therefore be problematic, since both
communities are very nationalistic and lack commitment to a common authority; they
would find themselves in “a zero-sum-game situation”248. Furthermore, in federations,
decision-making is majoritarian. Due to the numerical imbalance between the two
communities, the Turkish-Cypriots, as the minority, would have to place their trust in
this mode of decision-making, yet this does not seem likely.
It is also important that there exists goodwill and commitment in order to make a
federation successful. Indeed, the success of a federation depends on tolerance and
compromise among the leaders and the communities, and “unless co-operation and
basic consensus exist, the viability and the success of a federation will be in doubt”249.
Yet these factors are absent in Cyprus: the two communities both fear and mistrust each
other, as do the respective community elites, looking protectively toward the outside
motherland states.
Ultimately, a federal arrangement is a second-best solution for both communities250.
Greek-Cypriots, as the majority, prefer a unitary state but would settle for a federation
with a strong central government251 to secure the reunification of the island, hence their
emphasis on the ‘three freedoms’: freedom of movement, freedom to own property, and
freedom to settle anywhere on the island. By contrast, Turkish-Cypriots, having
exercised self-rule for so long, prefer to maintain a separate Turkish-Cypriot state, but
would settle for an arrangement that creates two sovereign and loosely connected
states252. However, “Greek-Cypriots consider acceptance of Turkish-Cypriot sovereignty
Khashman, 1999
Beaufays, 1988, 77
248 Ibid
249 Khashman, 1999
250 Bahcheli, 2000, 203
251 ‘The UN in Cyprus: An Inter-Communal Survey of Public Opinion by UNFICYP’,
http://www.unficyp.org/UNFICYP%20Survey.htm
252 ‘The UN in Cyprus: An Inter-Communal Survey of Public Opinion by UNFICYP’,
http://www.unficyp.org/UNFICYP%20Survey.htm
246
247
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as tantamount to legitimating the island’s partition”253, and have therefore rejected it.
Indeed, there is a general fear among Greek-Cypriots that a federation will serve as a
stepping stone to secession.
Therefore, the essential prerequisites for an integrated government are absent in
Cyprus. This was the reason for the collapse of the 1960 power-sharing agreement.
Without sufficient trust and a sense of shared identity, a federal solution is unlikely to
fare any better. Regarding the option of a confederation, in a bicommunal setting such
arrangements create a risk of mutual vetoes and immobilisation. There is thus no reason
to assume that a confederation would be any more viable than a federation in Cyprus254.
In November 2002 the first version255 of the ‘Annan Plan’ was circulated. It proposed a
loosely federal union in which the constituent territorial units would have maximal
autonomy, and the limited joint institutions at the federal level would operate on the
basis of consociational norms. The United Cyprus Republic would consist of a GreekCypriot constituent state over 72% of the island’s territory and a Turkish-Cypriot
constituent state over the other 28%. The constituent states would have jurisdiction
over all matters except foreign policy, EU affairs, and central bank functions, which
would be the province of the federal government. On April 24, 2004, 64.9% of TurkishCypriots said Evet (Yes) to the Annan Plan, while, across the Green Line, 75.83% of
Greek-Cypriots said Oxi (No). In his post-mortem Annan noted that “the sheer size of the
No vote raises... fundamental questions”256.
CONCLUSION: A FUTURE SOLUTION?
The island of Cyprus has been the site of severe ethnonational conflict. As a result, there
have been numerous attempts to deal with the situation. Practically every conceivable
formula has been attempted to accommodate the interests of Greek- and TurkishCypriots: a power-sharing agreement in 1960, the de facto partition of the island and the
separation of the two communities in 1974, and finally, an attempt in the form of the
Annan Plan to establish a federal solution for the island. However, each attempt at
‘solving’ the island’s problem has failed. The 1960 constitution only lasted three years
because the conditions necessary for consociational democracy were absent, and 44
years later the Annan Plan and its proposed solution of a confederation was rejected.
Nevertheless, “[d]espite the failure of the latest peace efforts...both sides remain
committed to the principle of federalism”257. However, without the presence of a shared
identity and trust between the two communities, there is no reason to expect that a
Bahcheli, 2000, 207
Ibid, p 214
255 There were to be four subsequent versions of the plan, incorporating minor modifications on various issues, but
the fundamentals would remain unchanged.
256 Bose, 2007, 100
257 Pollis 1979, in Papadakis, Peristianis, and Welz, 2006, 24
253
254
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bicommunal federation would fare any better than the power-sharing experiment of
1960.
The most ‘successful’ measure has been that of partition. Ethnic violence on Cyprus,
which reached crisis on several occasions between 1960 and 1974, has been negligible
since the partition and population exchange following the Turkish invasion. As a result,
the possibility of a two-state solution merits serious consideration. Naturally, there is
resistance from most Greek-Cypriots regarding such action, as it would seem in effect to
legitimise the Turkish occupation. However, an acknowledged two-state solution may be
unavoidable. It would naturally involve partition, predictably along similar lines to those
which already exist, and measures would need to be taken regarding the issue of
property. For those individuals who have property on opposite sides of the Green Line,
there would have to be some form of compensation, either in monetary form258, or in the
form of a scheme of ‘property exchange’, whereby, for instance, a Greek-Cypriot with
land in the north can trade properties with a Turkish-Cypriot who has land of equivalent
value in the south259. This way both are able to take advantage of their property rights. It
must be stressed, however, that a two-state solution would not be regarded as ideal,
especially by the majority of Greek-Cypriots. Nevertheless, it cannot be completely
excluded from the list of possible options, as, in light of the literature explored earlier,
the most popular option of a bizonal, bicommunal federation, is hardly promising in the
existing circumstances.
It must, nonetheless, be noted that since the opening of the checkpoints, there has been a
great deal of coming and going without incident, and this is certainly positive. Therefore,
another possible option, instead of a two-state solution, could be to tentatively take
modest steps toward some degree of shared decision-making and communication
between the two communities. This strategy could perhaps, in time, build the conditions
necessary for a more confident use of federal structures. Indeed, the more exposure to
each other across the dividing line, hopefully the more open the climate will become
towards reconciliation. However, unless and until such a situation is achieved, nothing
could be worse for either community than to place themselves within inappropriate
constitutional arrangements yet again260.
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