Poverty
June 8, 2015

The Rule of Law: Common Cause Between Business and the Poor

By Ritu Sharma

The rule of law is often thought of as a priority for companies wanting to operate overseas, but it’s just as important to the poor. There is common cause between these two important stakeholders in the global economy. Though the application of enforceable contracts may look different applied to multinational agreements with local businesses, the poor also want admission to an accessible, affordable, transparent, fair and predictable legal system.

An impoverished woman in Sri Lanka sells her home-woven cloth to a middleman for half the price he originally promised her. The contract was only written on a scrap of paper.

A buyer for a major global retailer accidentally finds out that half his order of shirts was produced in women’s houses, not in the factory as promised. He doesn’t have the time to get into a lengthy and messy legal fight in a country where the system is rigged.

These two fictitious, but reality-based people couldn’t be more different, but they have essentially the same problem: a void in the rule of law.

Over the last twenty years, I have spent many days talking with women who are working as hard as they can to leave poverty behind. They hold down several jobs from selling cigarettes on crowded streets to manufacturing widgets for globally traded electronics. And yet, they are still poor. Why?

In addition to the lack of access to well-paying jobs and financial services to grow their businesses, women often cite the perennial problem of being swindled by middlemen, harassed by police, robbed of their savings, or prevented from getting needed services because it’s not safe to get there. So they stay poor.

Women from Haiti to Ghana have endless stories about buyers showing up with bags clearly larger than what is really a kilogram. The women growers have no recourse because their Ministry of Agriculture has not established standard weights and measures for all products. So they stay poor.

The rule of law is often thought of as a priority for companies wanting to operate overseas, but it’s just as important to the poor. There is common cause between these two important stakeholders in the global economy. Though the application of enforceable contracts may look different applied to multinational agreements with local businesses, the poor also want admission to an accessible, affordable, transparent, fair and predictable legal system.

For women living in poverty, the Rule of Law agenda includes:

  1. Access to small claims courts to enforce contracts and settle disputes in a timely manner
  1. Clear national laws governing contracts at all levels of business. For example, what constitutes an enforceable contract? Does an order written on a napkin and signed by both parties qualify?
  1. Standardized and nationalized weights and measures, with definitions of allowable measurement tools.
  1. Basic safety and security to conduct business with customers, banks, and suppliers. Safety along roads and in public transportation is a very high priority.
  1. Clear, transparent and fair taxation policies.

A multinational corporation could have just as easily written this list.

So what are the implications for businesses, the working poor, governments, and NGOs?

First, corporations that are working to improve legal standards in contracts, labor, environment, or other areas are greatly assisting the poor and should be recognized for that. If corporations could also include calls for improved rule of law and accessibility to legal systems at every level of society, that would benefit the poor even more.

For the working poor, it will mean a reliable and predictable business environment that will enable them to start businesses, expand their farms, and conduct business in a fair and transparent system. This means greater income and possibly a departure from poverty as the reward for their hard work.

For NGOs and other donor groups, they should work closely with business and governments to support policies and programs that expand access to the rule of law at the ground level. For example, support local level small claims courts, community paralegals, and basic commercial law education for farmers and informal entrepreneurs.

And lastly, for governments, it is important to know that the constituency to improve the rule of law is vast and numerous. And given the broad base of support, they should embrace efforts to end corruption, enhance transparency, and partner with businesses and workers to expand the rule of law for all citizens.

About Author

Ritu Sharma is author of Teach a Woman to Fish: Overcoming Poverty Around the Globe, and founder and former president of Women Thrive Worldwide. She is a Senior Advisor to Fontheim International and a Senior Visiting Fellow at the Center for Strategic and International Studies working jointly with the International Youth Foundation. The opinions expressed here represent hers alone.