Economic liberalization, political pluralism and business associations in developing countries

WorldDevelopment, Vol. 21, No. 12, pp. 1895-1912, 1993. Printed in Great Britain.

0305-750X/93 $6.00 + 0.00 0 1993 Pergamon Press Ltd

Economic Liberalization, Political Pluralism and

Business Associations in Developing Countries

MICK MOORE* Institute of Development Studies, Brighton

and

LAD1 HAMALAI* University of Maiduguri, Bomo State, Nigeria

Summary - Trends toward economic liberalization and political pluralism in developing countries would seem to presage a more active political and economic role for business associations. The evidence suggests, however, that business associations are unlikely to be such malleable instruments for the promotion of the private sector and of political pluralism as one might initially expect. They often act more in the interests of their own staff than in those of members. The potential for “unproductive” rivalry and conflict between competing associations is high. The more effective associations are those not financially dependent primarily on membership fees.

1. INTRODUCTION

Over the past decade, economic liberalization has largely swept the developing world, displacing public action from its pedestal and installing the private sector in its place. The tide of democracy and political pluralism is also running strongly. There is one category of organization that should stand to benefit markedly from the confluence of these tides of economic and political liberalism: private sector business associations. One might expect not only that they will thrive as business prospers and as controls on political expression and organization are loos- ened, but also that national governments and international aid donors will wish to use them to promote values and institutional arrangements conducive to economic and political liberalism. Business associations (henceforth, BAs) are societally based organizations; supporting them can be held to advance the agenda of sociopolitical pluralism by invigorating “civil society.” Since they represent organized private capital, strengthening BAs should usefully empower, in relation to both the state and other classes or interests, the social group that is central to the success of economic liberalism. In addition, the enhancement of the capacity of BAs to provide business services - information, foreign contacts, contract adjudication, certification of documentation and of product quality, etc. - should contribute to the

success of the private sector economy. The marriage of BAs with political-cum-economic liberalization would indeed seem to be a match made in heaven.

One purpose of this paper is to alert potential matchmakers to the mundane and irksome reality.’ For agencies wishing to intervene are likely to find the connection between intention and outcome complex, indirect and perhaps even perverse. Business associations are not simple, malleable instruments for social engineering. There may be no close or direct connection between their health and prosperity, and the success of economic and political liberalization. For vigorous associational activity may reflect and stimulate wasteful and divisive politics. To explain this conclusion, the paper first explores, at a relatively abstract level, the organizational pecu- liarities of business associations (sections 2 and 3). The argument hinges to a large degree on two points:

*The research for and writing of this paper has been supported by the Association of Commonwealth Universities, the U.K. Economic and Social Research Council, and the British Overseas Development Agency. The views expressed are those of the authors, and do not necessarily carry the endorsement of these agencies. We are indebted to Alan Cawson (Sussex), Frederick Glover (Geneva), Tor Skalnes (Christian Michelsen Institute, Bergen) and an anonymous referee for very helpful comments on earlier drafts. Final revision accepted: July 21, 1993.

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- the existence of differences between the moti- vations and objectives of BA members (firms, businesspeople) and of the “organizers” who run the associations. - the considerable autonomy that accrues to organizers as a result of the wide gap between what may be termed the “logic of membership” (i.e. the factors affecting businesses’ willingness to pay membership fees) and the “logic of activism” (i.e. the reasons for and the extent to which different members are active within BAs).

The result is “pervasive organizational surplus”: the existence of a very large number of (competing) BAs and of unused organizational capacity, manifest or latent, ready to respond to, or to create, political issues. Put in other, more positive-sounding terms, the politics of BAs have strong pluralistic tendencies.

As is explained in sections 4 and 5, however, there are contrary “corporatist” tendencies: preferences for, and attempts to establish, privileged relationships at various levels between state agencies and particular BAs, to the exclusion of actual or potential competing associations. These corporatist tendencies have their roots both in the preferences of state agencies for dealing with a single, authoritative, nonsquabbling representative of any particular interest; and the opportunistic use of corporatist ideas by some BAs that aim to gain privileged access to the state relative to competing associations.

The politics of BAs may therefore be regarded as being in a state of permanent tension between these pluralist and corporatist tendencies. The political processes typically associated with economic and political liberalization in developing countries may exacerbate this tension by fuelling both tendencies.

On the one hand, the “relegitimation” of the private sector and the experience or expectation of the provision of resources from national governments and foreign aid agencies - recognition, status and opportunities to voice views; material support in the shape of subsidies, overseas trips, contracts to manage business promotion projects, etc. - stoke the pluralist tendencies by providing motives to join in the competition for these resources. More companies tend to join BAs. There is more intraassociation competition for leadership positions. More BAs may be established. In addition, there is more inter-BA competition for access to the state and aid donors.

On the other hand, the relegitimation of the private sector and the expectation that it will henceforth constitute the engine of economic growth encourage notions of “government-business cooperation”: consultation of various kinds between government agencies and the private sector at least in policy formula- tion, if not in policy implementation. To be effective, such consultation requires the limitation of the num-

ber of BAs enjoying access to the fora in which consultation takes place, and some mechanism for the prior aggregation and harmonization of the many different agendas and demands of business. Corporatist arguments about the need for the state to reorganize business associations into an “efficient” hierarchical, noncompetitive pattern then fall on receptive ears. Such corporatist arrangements are rarely effective, except as devices to control business politically (section 5). They are certainly contrary to the spirit of political pluralism. They seem attractive, however, at least initially, both to state agencies and to those BAs that believe that they can win for themselves a position of privilege in a corporatist arrangement.

This idea of pervasive tension between pluralist and corporatist tendencies directs attention to the way in which BA politics can easily become unproductive, absorbing energies in conflict over narrow, organizationally defined goals that bear little relation to long-term concerns about effective government-business relations or economic perf0rmance.I The notion of “pervasive tension” is, however, only an abstract analytic framework. It constitutes neither a full nor a satisfactory account of reality. A range of other factors shapes particular situations. In sections 6-9, we use recent case study material from Nigeria and Sri Lanka to see how far it is possible for BAs to function effectively as representatives of business interests without becoming too compromised by quasi-corporatist initiatives or too consumed in inter associational competition and conflict. Reliable income sources that do not require or encourage political aggressiveness - notably sources other than membership fees - appear to play an important role in giving BAs some autonomy from the state and in muting the incentives for BAs to engage in destructive political competition with one another. The policy implication is that relatively stable and “responsible” BA systems may be encouraged by assisting them in developing stable, “non-political” sources of income, mainly through the sale of spe- cialist services.

2. THE ORGANIZATIONAL DYNAMICS OF BUSINESS ASSOCIATIONS

The term “business association” includes all formal membership organizations of businesspeople or firms concerned with business issues.3 It encom- passes an enormous variety of organizations: big or small; national or local; encompassing or (sub) sector-specific; individual membership associations, federations of smaller associations and mixtures of the two; voluntary or statutory; closely associated with government agencies or independent; wealthy or penniless; institutionalized or ephemeral; run by

BUSINESS ASSOCIATIONS IN DEVELOPING COUNTRIES 1897

professional staff or by a single officeholder; exclusive and discriminating over membership or open to all comers; and politically vocal or quiescent. BAs perform a wide range of functions including: political voice; provision of concrete business services such as seminars, information and library services, exhibitions and trade fairs, foreign contacts, contract adjudication, specialized legal advice and assistance, and certification of documentation and of product quality; an arena for social contact between members; an arena and “cover” for cartel arrangements; in the case of more “elite” BAs, the validation of firm status and respectability through grant of membership; and participation in the framing and/or implementation of public policy, including the performance of regulatory duties. Within this range, there appear to be no major discrete subcategories of BAs.~ More detailed description of the range would serve little purpose. Instead, we engage directly with a somewhat puzzling general feature of BAs, asking the reader to continually remember that we are dealing with a wide range of types within the same species.

A recurrent theme in the literature on BAs is the expression of some surprise at the large number of associations found to be in existence in any one country at any one time (Moe, 1980, pp. 191-192; Wilson, 1973, p. 144). Comprehensive data on the number and character of BAs are difficult to obtain even for a single developing country because of the informal and latent nature of many (smaller) BAs: for long periods of time they may exist as no more than an idea, and perhaps not even that. Then, in response to a particular problem or threat, a Match Manufacturers Association, for example, may sud- denly spring to life. It may comprise no more than a meeting of representatives of the handful of substantial match producing firms, orchestrated “naturally,” with no concern for formal procedure, by the chief executive of the largest producer, who is automati- cally termed the “chairman.” Reasonably complete figures are likely to be available only for countries with a degree of effective corporatism in government-business arrangements and, what is more important, an authoritative procedure for registration. Taiwan meets these conditions. In 1991, 239 national level BAs were officially recorded.5

The numerousness of BAs reflects in part the fact that formal jurisdictions are sometimes defined down to great subsectoral detail: rubber producers may have one association, rubber traders another, rubber products manufacturers another, and rubber products exporters yet another - to say nothing of, for example, smallholder producers, tire importers, or rubber factory owners. There is, however, another set of factors: competition between BAs and overlapping sectoral jurisdictions. Several associations might claim to represent, for example, manufacturers of

rubber products. In principle, the reasons why BAs are typically numerous can best be clarified by sepa- rating out two component questions. One concerns the factors that encourage business to establish interest associations with such apparent abandon. The other concerns the reasons why there is typically substantial overlap in formal jurisdiction between different BAs and competition between them for members, for access to government, and for other externally provided resources. We begin below by answering the first question, but in the process also answer the second.

3. WHY ARE BUSINESS ASSOCIATIONS SO NUMEROUSF

On the basis of observations about political organizations in the United States, Wilson (1973, p. 144) listed three reasons why BAs are relatively numerous, compared especially with labor and farm associations:

(a) Firms do not face resistance from workers when forming associations; workers may face resistance from employers. (b) Firms have higher incomes, and the financial cost of supporting associations is thus relatively lower. (c) The small numbers involved make it much eas- ier for firms to organize: the costs of communication among (potential) members are low relative to income, and the “demonstration effect” of a single, large firm joining an association is more visi- ble.’ One may present this point in more general terms as an example of the power of the insight that has led to the recent efflorescence of work on collective action: small groups often have large advantages in organizational activity (Olson, 1965).

Although one can imagine cases where these factors in Wilson’s list could have reverse effect,* his arguments appear generally plausible. They are, however, seriously incomplete. There are six other general considerations, discussed below, which help create the “pervasive organizational surplus” characteristic of BAsg. It is important to note that our dis- cussion assumes a relatively pluralistic and liberal environment with few restraints on associational activity lo.

First, unlike trades unions in particular, BAs typically face few external “reality checks” on the legitimacy of their organizational existence. Trades unions cannot live for long on relatively peripheral activities such as providing insurance services or other selective benefits to members, or on the strength of their political power and access to the


state. If they do continue in existence in such circumstances, they become, in the first case, mutual benefit societies, and in the second, political parties. To remain trades unions, and to continue to levy (voluntary) membership dues, they need to be recognized by employers to have something to offer (potential) members. This is their external “reality check.” The same does not apply to BAs. As is mentioned above, they undertake a wide range of different types of functions on behalf of members. An individual association typically combines elements of two or more, and may shift between different combinations over time. BAs can persist all the time members are willing to pay some fees, and fee demands are relatively less onerous for businesses than they are for labor. Relatively inactive BAs may have long periods of reprieve during which they can find new roles for themselves. Trades unions do not enjoy the same privileges. Operating in an environment where the financial and communication costs of organization are relatively high, they are more likely to collapse if they cease to provide an attractive service, and find it more difficult to start up again”.

Second, while individual firms can quite rational- ly contribute to the multiplication of BAs by joining two or more associations, individual workers rarely find it sensible to join more than one union. The reasons are explained in Offe’s classic essay “Two log- its of collective action” (1985, chapter 7), which explores the differences between the organizational logic of capital and labor respectively. Businesses are able to adopt a utilitarian approach to the question of organizational membership: individual firms can decide to join or not to join any of a number of relevant associations according to some instrumental calculus of costs and benefits. By contrast, because of the relative structural weakness of labor’s bargaining position, effective (voluntary) association of labor can never be constituted on purely utilitarian grounds. To be effective, unions need sanctioning power over capital and the state (i.e. strike power); that sanctioning power depends on the willingness of members to actively participate - and incur costs in addition to membership fees - by joining in a strike; and that willingness depends on the existence of a belief that union membership has positive value in itself, beyond any utilitarian benefit. There is a normative and emotive dimension to union membership (where “membership” also implies willingness to “participate”), and a corresponding attachment to a single union, which characteristically is not present in the case of firms and BAs12. Individual workers will not support more than one organization; firms will.

Third, there are more actual or potential direct conflicts between different business interests than between different groups of labor. Firms are more

likely to find themselves differentially affected and stimulated to adversarial political action by government economic policies. Any tariff increase on raw materials or intermediate products is likely to (dis)please local users and has the opposite effect on local producers of the same product or close substi- tutes. Large public investments in road construction may please road haulage operators but stir up owners of railways and coastal shipping lines. Since business has a relatively high capacity to establish or activate associations quickly, it can exhibit a high (adversarial) organizational response to what appear to be routine government decisions.

Fourth, as is explained in more detail below, it can be misleading to assume that conflicts of interest will normally be mirrored in the creation of organizations devoted to pursuing those interests. There is no necessary “tight coupling” between the existence of an interest and its expression in distinct organizational form. In the kind of cases considered in the previous paragraph, an alternative to particular groups (e.g., cement producers, road haulage operators) forming their own association is that emergent conflicts should be resolved within the framework of existing, more encompassing organizations: for example, the Manufacturers Association or the Transport Federation. Wilson (1985, pp. 10-l 1) explains why, in the case of business politics, such “accommodation” is frequently rejected and issues handled by smaller, (sub)sectorally specific associations. Because of the wide range of sizes of firm within any (sub)sector, the attitudes and behavior of a few large firms tend to exercise a major influence on BAs. These large firms are likely to contribute a high proportion of association membership income, and otherwise exercise a strong influence. BAs are reluctant to do anything to upset large firms that are actually or potentially members. This gives a conser- vative cast to the attitude of established, larger BAs to political issues which (potentially) bring their members in conflict with one another. They tend therefore to remain quiescent, leaving space for smaller associations with more narrowly defined jurisdictions to step in. This helps to explain the coexistence of larger, encompassing and smaller, sectorally specific BAs.

Fifth, BAs may exist to protect and preserve an existing “rent” or privilege, and exclude others from enjoyment of it.

The final reason for the numerousness of BAs is, from the perspective of this paper, the most significant: organizers are active in creating and sustaining BAs because they may have interests in the existence and prosperity of BAs - and the scope to advance those interests -which are separate from, and additional to, the interests of firms in joining and, even more, in actively participating. “Organizer” is a generic term used to refer to the people who play


major roles in keeping BAs active, finding new members, mobilizing members to participate, seeking out new projects in which BAs can become engaged and new issues on which they might attract attention and members by taking a public stand. Organizers are likely to belong in one of two major categories. They may be senior administrative employees of the association, whose salary, status, career prospects and opportunities for supplementary remuneration are perceived to be linked to the success of the organization in terms of its financial turnover, the volume of its activities, and the extent to which it can command the attention of influential external agencies, notably government and, perhaps, aid agencies. Alternatively, organizers could be businesspeople who view office-holding in BAs as an opportunity to enhance their own status, to make valuable business contacts with politicians, bureaucrats and other businesspeople, to advance their own political careers, or to promote particular causes with which they identify closely.

The reason that organizers in BAs tend to have substantial scope to pursue their personal agendas rather than those of the membership lies in the very different balance of incentives that businesses face in relation to joining a BA and actively participating in its affairs (Grant, 1987, p. 97). Compared, for example, to employees, firms face relatively low disincen- tives to simply joining organizations through pay- ment of membership fees: the cost is only relatively small amounts of money. By contrast, the time of senior businesspeople tends to be scarce, and their personal contacts valuable firm-specific assets. They therefore face incentives not to actively participate in BA affairs - not to attend regular meetings, not to accept office, not to lobby on behalf of the association, etc. The reluctance of many businesspeople to participate actively in BA affairs leaves the way clear for the small minority who actively seek high office for the kinds of reasons given above.i4

Behind this particular argument lies a general point about the organization of interests that, although clearly articulated in the theoretical literature on collective action (e.g. Moe, 1980, chapter 3; Olson, 1982, p.40), is widely ignored: there need be no close connection between the pattern of interests or needs that exist in society (in some abstract, pre- organizational sense) and the system of interest organizations that emerges. Even in a fully voluntary context, all kinds of organizational processes, including those mentioned above, can introduce a substantial disjuncture between the actions of organizations and the needs or interests of their members.

The main practical conclusions are that BA organizers may often have more interest in the existence and activism of BAs than (potential) members and considerable autonomy to manage BAs. These factors in turn help explain not only why BAs are so

numerous but also why they often have overlapping formal areas of jurisdiction and actively compete, in the same spheres, for members and for recognition from the state: establishment and maintenance of successful associations can be rewarding to the organizer. In sections 4, 5 and 8, we demonstrate that organizers may be tempted to pursue personal and organizational goals by seeking for their own BAs privileged status in corporatist arrangements for representing business interests. Before that, we examine the notion of corporatism and the checkered history of corporatist arrangements in the developing world.

4. THE EXPERIENCE OF CORPORATKW5

As a full-blown ideology - a normative program for societal reorganization - corporatism is old and relatively well tested in practice, and rarely with good results. Corporatist doctrine rests on two main premises. One is that society will function more naturally, efficiently and harmoniously if it is regulated by a strong state acting in concert with functionally based organizations representing the major socio- economic interests - especially labor, capital, the professions, and agriculturists, and perhaps also stu- dents, the Church and the military. There is an explicit recognition of the potential for damaging conflict between different interests, and an assumption that group organization along interest lines provides the appropriate framework for mediating these conflicts. The other premise is that efficient concertation of these (potentially) conflicting interests requires that the state takes a hand in shaping the way in which they are organized. In its more extreme forms, corporatist doctrine requires that each interest be fully organized in a nonvoluntary, hierarchical and monopolistic fashion.

In fact, corporatist doctrine has tended to prosper rather more than corporatist practice, especially if the criterion for success of corporatist practice is taken to be the existence of political systems dominated by corporatist arrangements, rather than simply colored at the edges. I7 This is true even of the Iberic-Latin cultures (Latin America, Spain and Portugal), which constitute the major repositories of corporatist ideas and experiences in the world. More important for present purposes is the observation that the organizational and political outcomes of serious attempts to establish corporatist systems have often been very different from (declared) intentions. A major variable to consider here is the extent to which governments have, on their own initiative, attempted to establish corporatist arrangements in the face of the opposition or reluctance of the societal interests affected. Business has generally exhibited a greater capacity than labor to either negotiate full or partial exemption from these arrangements to begin with, or


to continue to exercise some organizational autonomy while formally committed to working within them.

Brazil in the 1940s represents one end of the spectrum. Corporatist institutions were established under the inspiration of fascist ideas. Larger scale business from the beginning negotiated exemption and the right of its existing organizations to survive and to be recognized for purposes of negotiation and consultation with state agencies alongside the new corporatist organizations. Labor was accorded no such privilege (Leopoldi, 1984, pp. 391-395). Mexico has since the 1930s constituted a more stable and relatively successful case of corporatism.‘* Compared with organized labor and with small farmers, business has enjoyed a much greater degree of political and organizational autonomy in relation to the permanent ruling party, the PRI. The official corporatist institutions representing business are weak, and most larger private business interests have for several decades been affiliated with the main opposition political party. More recently, in the context of political, economic and foreign debt crises, and now the negotiations over a North American Free Trade Area, private business has become increasingly influential in relation to government, despite the apparent distance between them in organizational and party-political terms. Noting also that the reward reaped by labor and small farmers for close integration into the corporatist political network centered on the ruling party was political emasculation and a declining share of national product over several decades, observers of Mexican corporatism might conclude that the experience illustrates that there is some validity in the argument that, in capitalist societies, business has structural power in relation to the state that transcends and to some degree dispenses with the need for privileged links to the state of an overtly political and organizational nature.19

Evidence from a range of other contemporary cases is consistent with the Mexican example. Thailand has laws governing the structure of BAs that are of broadly corporatist inspiration: all Chambers of Commerce are required to become members of a single peak organization, the Chamber of Commerce of Thailand. In practice the law is dis- regarded. The government implicitly encourages competition between different “peak” organizations. When in 1981 a set of high-level fora for government business consultation was created - the Joint Public-Private Consultative Committees - business was chosen to be represented not only by the Chamber of Commerce of Thailand, but also by the rival and nonofficial Bankers Club and the Association of Thai Industries (Laothamatas, 1988 and 1992, pp. 92-94). In accord with its general ideological and political stance, the New Order govem- ment of Indonesia has established an elaborate statu-

tory network of BAs on corporatist lines. It imple- mented this.~ legislation by absorbing many preexist- ing BAs, and creating others. One result has been the political emasculation of private business, as was no doubt intended. The corporatist organizations, however, especially at the peak levels, are despised and ignored by most businesspeople. When they want to bring pressure to bear on the state, they use other channels. Insofar as these are BA channels, they tend to be sectoral associations, some formally incorporated in the official system of business representation, and some not. They can be powerful in some circumstances; and the system of corporatist representation of business interests, never very effective, is gradually disintegrating (MacIntyre, 1990 especially chapter 3). The attempt by the Pakistani state to establish a corporatist system for representing (read, “controlling”) business in the 1950s and 1960s in the name of “development” and export promotion was even less effective: despite (or because of?) compulsory membership, the official organizations were weak. An important factor was that the pre- existing business organizations were few and feeble because of the circumstances of Partition in 1947: the centers of formal business organization remained in India. The result was that informal, particularistic and personalistic networks - connections of kin- ship, caste, ethnicity and locality - continued to play an unusually prominent role in shaping both the functioning of BAs and, more generally, the political relationship between business and the Pakistani state (Kochanek, 1983, pp. 70-71 and chapter 7). Even where no explicit corporatist ideas exist, dominant political parties may attempt to assume the role of representing societal interests, and find business relatively hard to capture.20

It would not be accurate to conclude, however, that the “failure’‘-of corporatist-minded regimes to fully incorporate private business into an elaborated structure of corporatist organizations represents a simple victory for capital. Incomplete incorporation is also in part a strategy used by the state to deal with a relatively powerful interest. For, from the perspective of governments, the disadvantage of “textbook” corporatism is that it can legitimize and empower societal interests in relation to the state. This is especially problematic in the case of business, because of its potential power. A monopolistic, peak business organization, properly constituted under legislation to embody the core principles of the corporatist state, could become too powerful a voice. The Indonesian government, for example, has therefore preferred to keep the peak official business organization, KADIN, in the position of a perpetual supplicant seeking legal monopoly, maintaining the possibility of recognizing competing organizations for particular purposes (MacIntyre, 1990, chapter 3, especially pp. 51-53). Similarly, the Egyptian government has


in practice used in a tactical fashion the legislation that was formally designed to establish a full corporatist structure of interest representation. Bianchi comments:

An eclectic and alterable mixture of corporatist, pluralist and hybrid structures may be attractive to authoritarian modernizers for several reasons. It alleviates the need for sustained and widespread campaigns of coercion involved in more ambitious efforts to recast entire associational systems into a common mold. It promotes a shared sense of weakness and disorganization among groups isolated in differentially structured compartments that can be reshuffled at the whim of the ruling elite. A mixed system of representation can help to preserve the autonomy of the authoritarian state not only vis-a-vis potential opponents, but also vis-a-vis ambitious allies. . . Finally, such a system can provide authoritarian modernizers an important degree of flexibility and adaptive- ness in reordering their relations with dominant and subordinate social groups (Bianchi, 1989, p. 23).

The most successful and stable contemporary corporatist system, that of Mexico, has never been structured along textbook lines: the major societal interests have each been represented by more than one national organization, which has been kept in actual or potential conflict with rivals (Stepan, 1978, p. 68).

5. THE ATTRACTIONS OF CORPORATISM

It is evident that corpora&t principles are attractive to authoritarian regimes purely on political grounds. Why, however, given the uninspiring character of most corporatist experiences, especially “state corporatist” initiatives taken by governments, do the core ideas continue to attract attention from a wider audience, including people concerned to establish institutional arrangements that will enhance economic performance?

Ignorance of the results of existing corporatist arrangements is one obvious explanation.*’ Another is that the general notion of bringing regularity and order into the representation of business interests and into the interface between business and state agencies has a strong prima facie appeal in terms of effi- ciency and fairness. The patterns of interest organization and of government-business interaction that arise “naturally’ in a pluralistic environment may easily be characterized as “arbitrary” and “chaotic.” In addition, the bureaucrats and politicians interacting directly with business may easily become irritat- ed with a situation in which (a) different organizations lay competing claims to represent particular interests; (b) some areas of economic activity in which governments want advice, information or assistance may lack effective BAs; and (c) the state has limited capacity to induce what it would define as “responsible” behavior on the part of BAs.~* From

that starting point, what can be more appealing than an arrangement in which every sector of the economy will have a corresponding, properly constituted, association that, if it behaves unsatisfactorily, can be reorganized or replaced by the state? Military regimes, with their characteristic affinity to ideas of order, discipline and hierarchy, appear to be especially susceptible to such arguments.

It is likely that the attractions of corporatist ideas have been enhanced in recent years as “free market” interpretations of the economic success of capitalist East Asia (Japan, South Korea, Taiwan, Singapore, Hong Kong) have been increasingly exposed as sim- plistic. Alternative explanations are numerous, but some conception of “government-business cooperation” is common to many of them. The East Asian experience is therefore sometimes reduced to the notion of such “government-business cooperation” - as illustrated for example by the popularity of variants of the notion of “Japan Incorporated.“23 This interpretation can in turn be used to justify the corporatist structuring of business representation to facilitate effective “cooperation.”

The explanations offered above for the continu- ing attractions of corporatist ideals lie essentially in the realm of ideas. There is, however, another category of explanation that arises within the realm of interests: the proximate stimulus behind attempts at establishing corporatist arrangements may come from those we have characterized above as “organizers” - the political and bureaucratic entrepreneurs who establish, maintain and expand BAs because they find it in their personal interest to do so. They are likely to do so only if their associations are already sufficiently politically powerful that they have a chance of establishing them as exclusive channels for access to state agencies by business. In other words, corporatist initiatives are strategies for those BAs that are already “insiders.”

The potential advantages of occupying a senior position in a BA that receives recognition and monopoly (within a defined sphere) in a corporatist system are various and diverse. Salaries and allowances may be generous, especially if state agencies regard BAs as important to their political or economic objectives. Opportunities to represent the association, or business more generally, at confer- ences and consultative meetings, or in international fora, may bring considerable material and nonmater- ial rewards. The position may provide a range of political resources and opportunities. It can often make sense for organizers who are likely to capture official position in corporatist institutions to sponsor corporatist legislation. This is the case with the officials of KADIN, the peak official BA in Indonesia (MacIntyre, 1990: especially chapter 3); as we have seen above, the state has preferred not to grant their demand for a legal monopoly, but to use the prospect


of such a monopoly as a bargaining chip. The Association of Thai Industries also tried in 1987 to persuade the government to extend the scope of corporatist legislation by establishing a Council of Thai Industries to which all industrial firms and sectoral and regional industrial BAs would be obliged to affiliate. The Association intended itself to constitute the core of this Council (Ldothamatas, 1988, p. 459). As we explain in more detail in section 8, the recent reestablishment of a climate of relative closeness between government and business in Nigeria has also provided the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture with an opportunity to advocate a corporatist structure that would place it in a position of ascendancy over its old rival, the Manufacturers Association of Nigeria.

6. NIGERIA AND SRI LANKA: THE CONTEXT

The patterns of interest organization in Nigeria and Sri Lanka still reflect in part a common political culture derived from British colonial rule. In particular, both inherited the British (or Anglo-American) pluralistic and adversarial tradition: interest groups are purely voluntary associations, with no compulsory statutory statusxJ few or no statutory obligations, and a relatively random overall configuration: there are no mechanisms to ensure that all interests are organized; there is considerable overlap and confu- sion between territorial and functional bases of asso- ciating or federating individual BAs; and there is no clear hierarchical structuring of representation - individual firms may be affiliated to a peak or encompassing association both as individual members and as members of a sectoral association which is in turn affiliated with the peak association. The priorities of BAs lie in acting as advocates for the interests of their members in relation to the state rather than (a) participating in making and imple- menting policy in association with state agencies or (b) providing technical and business services to their members. This Anglo-American pattern tends to dominate the English-speaking world, and is different from the continental European model, which has more corporatist (or statist) features: a statutory framework; a clearer division of labor between BAs serving different purposes; a logical and coherent pattern of aggregating smaller associations at higher levels; limited competition and rivalry between associations; and a greater degree of formal integration into state policy making apparatuses (Coleman, 1990; Wilson, 1985, p. 16). One significant corollary of this difference is that the fortunes and relative standings of particular BAs tend to be more affected by changes in government or in leading government

personnel in the Anglo-American cases (Coleman, 1990, p. 247).

Besides sharing the same inherited political culture, Nigeria and Sri Lanka have a very similar history concerning the origins and structure of BAs. Reflecting the primacy of British commercial capital among the societal interests that were recognized by the British colonial governments, in both countries the contemporary pattern of BAs was built up around, and in reaction to, the dominance of a single, powerful Chamber of Commerce originally representing British colonial trading interests.

In Sri Lanka, the Ceylon Chamber of Commerce (CCC) has been in continuous existence since its establishment in 1839, and is indeed one of the old- est surviving business associations in the world. While it began to admit selected non-British firms to membership in the last century, it remained dominated by British firms and officers after Independence (1948), arguably well into the 1960s. In the 1930s and 1940s non-European business reacted to the de ,fticro ethnically exclusive character of the CCC by forming a series of alternative Chambers of an explicitly ethnic character.‘5 Once political independence was assured, economic sector or function, rather than ethnicity, became the dominant axis along which new BAs were established, although the use of the term “national” in titles constituted a visi- ble reminder of the questionable “national” status of the CCC. The National Chamber of Commerce of Ceylon - now Sri Lanka - (NCCSL), formed in 1948, was originally formed by Sri Lankan importers to push for a more active government policy of reserving areas of business, especially importing for “national” firms. The Ceylon National Chamber of Industry (CNCI), formed in 1960, has represented local manufacturing interests against both the few large transnationals who dominate some sectors of manufacturing and, what is more important, the trdd- ing, import-favoring interests which manufacturers tend to view as dominant. Two other BAs of relatively wide formal scope but limited power and significance are the Sri Lanka Chamber of Small Industry (SLCSI), formed in 1964, and the Federation of Chambers of Commerce and Industry of Sri Lanka, founded in 1970. The latter has never lived up to its claims to be the apex body. The most overt. but certainly not the only, reason is that the Ceylon Chamber of Commerce has refused to coop- erate, avowedly because of its reluctance to become involved in “politics” (see below).

The whole configuration of BAs in Sri Lanka has been very much shaped by the fact that the CCC has occupied the “commanding heights” in terms of age. size, traditional validation, status and wealth.2h It is more representative of different sectors of the economy than the other large “general purpose” BAs, and tends to share its member firms with the other asso-


ciations to a greater extent than they share members with one another. The CCC remains the one BA in Sri Lanka whose membership is restricted by concerns about “appropriateness.” Membership remains to some degree an indicator of status and acceptabili- ty. Formal approval by the CCC, which guarantees representation on its Committee, also constitutes a valuable testimony to the “soundness” of sectoral and subsectoral BAs. Many such associations are closely linked to the CCC in organizational terms, with the latter providing secretariat services. This is especially true of the associations concerned with the auctions for Sri Lanka’s main export commodities, particularly tea, but also rubber and spices. This close connection with the commodity auctions has been a major source of income for the CCC. As is explained in section 9, this in turn shapes the general stance of the Chamber and, less directly, BA politics in Sri Lanka more broadly.

Because of the large size of the country, the Nigerian Association of Chambers of Commerce, Industry and Mines (NACCIMA) has a slightly more complex history than the Ceylon Chamber of Commerce. Its origins lay in the establishment of the Lagos Chamber of Commerce in 1888. Local African traders were involved from the beginning, but racial tension between Africans and Europeans sapped the vitality of the organization. It died at least three times during 1888-96. Restrictions were placed on African participation, and colonial govem- ments gave explicit preference to Europeans in consultation and representation. The Chamber only set- tled down to a stable organizational existence after 1948 when these restrictions and preferences were abolished (Iyanda, 1989, pp. 9-19). In the meantime other independent Chambers of Commerce had been founded in other major cities, such as Ibadan in Western Nigeria, Port-Harcourt and Calabar in Eastern Nigeria and Kano in Northern Nigeria. Independent Nigeria’s federal constitution encouraged the creation of a national federation of Chambers to deal with central government, leaving individual Chambers to deal with lower levels of the administration. It is significant that this federation - NACCIMA - was formed only in 1960, the year of independence. Its creation indicated expectations and fears about the increased salience of political power to business activity.

Conflict between African and foreign business did not disappear in Nigeria. It took a different form than in Sri Lanka because of differences in the ownership pattern of capital, and led to a different pattern of BA politics. Whereas in Sri Lanka the bulk of newer post-WWII manufacturing was in the state sector, in Nigeria it was associated particularly with European-based transnational corporations. Especially after the creation of NACCIMA in 1960, these European manufacturing interests became

apprehensive about African dominance in the Chambers. For not only did African capital take a nationalist stance, but it had a strong trading orientation and preference for an open trading policy, especially for imports. By contrast, European capital tended to unite around the interests of manufacturing, and protection against imports in particular.

The first significant break came in 1968 in the textile sector, which was both large and foreign- dominated. The Nigerian Textile Manufacturers Association (NTMA) was formed. The Ikeja and Apapa Manufacturers Associations were created at around the same time (Iyanda, 1989, p. 7.5; Biersteker, 1987, pp. 52-69 and 187). Government officials advised the manufacturers to form a single national body. The Manufacturers Association of Nigeria (MAN) was formed in 1971, more or less in explicit opposition to NACCIMA.

Most of the 90 or so BAs currently registered with the Nigerian federal authorities were formed later, 73% of them after 1980. Most are sectoral associations and are not immediately relevant to this paper. It is, however, important to note that the competition between BAs that we discuss below extends beyond NACCIMA-MAN relations. For there is also tension between MAN and one of its founders and most important corporate members, the National Textile Manufacturers Association (NTMA). There is considerable overlap between their individual members, at least from the perspective of the NTMA: as of 1989, 41% of its 97 members were also individual members of MAN. Although the NTMA has few members compared with MAN, it has a relatively large income.27 Shifting membership between the two organizations is a strategy of which textile firms are aware. There is thus a continuous likelihood that firms will pay their membership fees elsewhere - a serious problem for BAs, such as NACCIMA, MAN and NTMA, which depend mainly on membership fees for their income. The latent tension between MAN and NTMA has become open conflict, especially in the 1980s when, at a time that MAN was active and NTMA had internal problems, MAN succeeded in terminating the NTMA’s corporate membership (of MAN) in the hope of severely weakening the latter. The tactic did not work; as of 1990, most of the larger textile firms remained members of the NTMA, and not of MAN. The significant point is that overt rivalry, extending to whispers of “treachery” where firms became members of competing BAs, has been characteristic of BA politics in Nigeria generally. We explore this further in section 7. In the meantime, we note the strong possibility that the conflictual nature of inter-BA relations in Nigeria and Sri Lanka is partly consequence as well as cause of their relative lack of influence over government. In both cases, larger scale (expatriate) capital was relatively united and influential during colo-


nial rule; BAs, and the larger private sector generally, lost legitimacy after independence because of their colonial and alien identities; and the BA arena has become more fragmented and contested. BAs

would probably behave less divisively if they had real influence with government that could be compromised by overt disunity.28

A final point to be made about the Nigerian and Sri Lankan contexts is that both countries share a feature that appears characteristic of developing countries generally: the limited impact of the existence and activities of labor organizations on the structure and activities of the organizations of capital. In the advanced industrial countries,’ the very emergence of formal BAs has largely been a reaction to the “challenge” posed by the emergence of trades unions. As with all organizations interacting with one another in an antagonistic fashion, successful changes in the structure or tactics of one party tend to be reflected in the other: antagonists come to resemble one another (Wilson, 1985, p. 9; Wilson, 1973, p. 153). The literature on the developing countries of Africa and Asia suggests that the evolution of BAs has been less shaped by challenges from organized labor.29 It is the state to which BAs have above all been responding: to new political threats or opportunities arising from changes of regime of policy.

7. BUSINESS ASSOCIATIONS AND ECONOMIC LIBERALIZATION

There are major differences between Nigeria and Sri Lanka in the way in which their major, national BAs have been involved in and affected by economic liberalization. In Nigeria, BAs have been much more activist and partisan in the political arena, being much involved in the key policy debates, and having some influence on economic policy. To that degree they have genuinely represented the interests of capital. They have at the same time, however, become deeply embroiled in disputes with one another, and left themselves vulnerable to - indeed, participated in - an initiative to establish a quasi- corporatist formal structure for representing business interests that could, if actually pursued, lead to a high degree of state control - and undermine the credibility of the officially recognized BAs as representatives of their members’ interests. Even if formal corporatism is not adopted, Nigerian BAs have already found themselves in a position where the state is breathing closely down their necks.

In Sri Lanka, to the despair of some observers, BAs generally have been relatively quiescent in relation to economic policy and the government generally: in particular, they have played very little role in the major switch from statist to liberal economic

policies effected since 1977. Insofar as BAs have become involved in open debate or confrontation with the government, the participants have not been the major, established, general purpose BAs, but smaller, sometimes more ephemeral, sectoral associations concerned with relatively specific and sec- ondary issues. Yet this relative quiescence at the macro level has been counterbalanced by the gradual acceptance by the government of BAs as representatives of legitimate interests. They have been increasingly involved in formal and informal consultations with government agencies at various levels, and are becoming an accepted voice. At the same time, some of the larger associations that were overtly partisan and political in style and activities have adjusted to become less political, more stable, and oriented more to provision of business services as a way of generat- ing revenue, status and acceptance in government circles. It is this contrast between the two national experiences that we seek to explain in the succeeding sections.

8. THE NIGERIAN CASE

There is a close connection between (a) the high degree and intensity to which Nigerian BAs participate in public debates over economic policy and (b) the relatively high degree of overt interassociational conflict at higher levels, especially between NACCI- MA and MAN and between MAN and NTMA. Part of the reason appears to lie in the absence of any substantial funding basis for the associations beyond membership fees30 The search for funds involves competition for members, and this tends to drive them into public confrontation - confrontation that has been described as “war” in the newspapers. Another part of the reason lies in government policy toward BAs.

First, economic liberalization, in the form of structural adjustment policies, came to Nigeria in 1986 not as a result of an agreement between the government and the international financial institutions, but after a prolonged public debate, stimulated by a government faced with an acute economic and fiscal crisis and an offer of a loan from the International Monetary Fund (IMF) which was con- ditional upon the adoption of drastic policies of structural adjustment and economic liberalization. The result of the debate was that the government decided to reject the IMF loan, but to go ahead with a structural adjustment program even more radical than that which the IMF had required. Responding to the government’s invitation, the BAs were very active in propounding their views through newspaper articles and other mass media. The significant difference was that NACCIMA, which represents largely trading and financial sector interests, supported eco-

BUSMESS ASSOCIATIONS IN DEVELOPING COUNTRIES 1905

nomic liberalization, especially the reduction of import controls and import tariff rates, deregulation of interest rates and of access to foreign exchange, and the removal or reduction of government subsidies to public utilities. Conversely, MAN and the NTMA, representing manufacturing activities that had been nurtured under protection and various kinds of preference, were generally resistant to any substantial change in economic policy. It was the line preferred by NACCIMA that generally prevailed.

Second, not only did the Nigerian government now show much greater willingness to formally con- sult with the organizations representing the private sector but, true perhaps to the general preferences of military regimes, it was unimpressed by the discord that prevailed between the leading BAs, hankered after a single, coherent and authoritative channel for the expression of the views and interests of the private sector, and was willing to take steps to ensure that this channel was created. In 1988 government institutionalized the idea of the Organized Private Sector, with three regular annual meetings, chaired by the President or Vice-President, oriented to the government’s budgetary process, and additional ad hoc meetings as required. Attendance at those meetings is restricted to the three larger general purpose associations: NACCIMA, MAN, and the Nigerian Employers’ Consultative Assembly, which is concerned solely with labor relations. In addition, NAC- CIMA was granted the status of lead organization within the Organized Private Sector. To a large degree, government agencies adhered to the letter and spirit of this quasi-corpora&t arrangement. For example, in October 1990, when a garment manufacturing firm belonging to the NTMA applied directly to the Tariff Review Board for a special concession, the Board referred the application to MAN. The NTMA’s pre-Budget memorandum, which had hith- erto been sent directly to the Minister of Budget and Planning, had in 1991 to be addressed to MAN. The NTMA thus appeared to have lost direct access to government; it was obliged to work through its old rival, MAN.

The imposition of quasi-corporatism did not resolve conflicts between BAs; they took new forms, and were to some degree exacerbated. A relatively trivial example stems from the fact that in 1990 the Ministry of Trade and Tourism gave NACCIMA the responsibility of coordinating all trade fairs, which had historically been organized by various BAs. MAN organised an exhibition in Ikeja without con- sulting NACCIMA. The resulting dispute became very public. A more substantial outcome has been that NACCIMA, buoyed up by the dominant position that it has attained, has moved to consolidate it further by proposing legislation to establish a more formally corporatist arrangement, with compulsory

membership by firms, a clear hierarchical organizational structure, and, at the apex, a “Nigerian National Chamber of Commerce and Industry.“3i The conflict between NACCIMA and MAN over this proposal is conducted in public along established lines: MAN is presented by NACCIMA as a representative of foreign transnational corporations, while NACCIMA is said not to represent manufacturing.

One result of this conflict between BAs is that the associations are very concerned about their relationships with government, and have begun to adopt policies and stances that are intended to advantage them in this public political arena, qua organizations, independently of, or even contrary to, the interests and expressed wishes of their members. One example is that NACCIMA, in conformity with its claim to be the apex association representing all business interests, begun in 1990 to advocate a selective return to a more protectionist policy to support local industry. There is no evidence that this initiative originates from, or is supported by, NACCIMA’s dominantly commercial and financial membership. An even clearer example of contradiction between the actions of an organization and the interests of its members is provided by the attitude of the NTMA to the import of yam. In 1987, local yarn production capacity was so limited that the bulk of the textile firms, and the NTMA, were opposed to restrictions on imports and in favor of low tariffs. Relatively high tariffs (60-70%) were, however, imposed, and by 1990 so many textile firms, supported by the Nigerian Industrial Development Bank, had embarked successfully on local yarn production that high tariffs on imported yarn were now generally acceptable. A proposal from the NTMA secretariat to continue to push for tariff reductions on yarn was supported by only one of its members during consultations about proposals for the 1991 budget. Yet the NTMA went ahead regardless, again proposed a tariff reduction to government, and, ironically, this time had some success. It seems that the organization was primarily concerned not to lose credibility with the government by abandoning the platform on which it had been so vociferous over previous years.

One of the consequences of this increasing orientation of Nigerian BAs to access to the state, independently of members’ interests, is predictable con- sidering the information given in section 4 about business reactions to BAs integrated into the formal corporatist network in Indonesia: an increasing degree of disenchantment with such associations,32 and thus the danger that the corporatist initiative will be undermined from within, leaving the organizations that are encapsulated within it deprived of membership support.


9. THE SRI LANKAN CASE’”

Overt conflict or friction between BAs is rare in Sri Lanka. This is not due to lack of major policy differences, including some as basic as those which divided MAN and NACCIMA in Nigeria.‘” As was described in section 6 above, all new wide-ranging BAs in Sri Lanka have been obliged to validate their existence by identifying and promoting an interest supposedly neglected by the existing associations, especially by the Ceylon Chamber of Commerce (CCC) - ethnic or “national” interests in earlier decades, then industrial or small-scale industrial interests, and, since economic liberalization in 1977, exporters’ interests. The dearth of overt friction and the absence of attempts by particular associations to initiate privileged, exclusionary arrangements with government does not seem due to any differences between Sri Lanka and Nigeria in the pattern of “objective” interests of business, but to two other related reasons.

One is that, since the ending of the very close and privileged relationship between the CCC, the Planters Association and the colonial state, BAs, as representatives of a somewhat suspect interest during an era in which nationalist and socialist discourses were dominant, have generally been relatively peripheral to the political process. The association best organized to make a play for a privileged relationship to the state, the CCC, has been the most suspect on ideological and historical grounds, and thus the one least likely to initiate such competition. Other BAs have on occasion been keen advocates of particular interests, but there has been no hint of the possibility of any kind of exclusionary, corporatist arrangement to fuel tensions between BAs.j5

The reason the CCC has not been under pressure to “indigenize” more quickly and make political capital from its organizational and financial muscle also constitutes the second reason why BAs have not been more overtly competitive: the CCC draws a substantial reliable income from sources other than membership fees, does not therefore feel obliged to maximize membership at all costs, can charge high fees, and maintains a selective stance toward membership applications. In sum, the relative lack of conflict in inter-BA relations in Sri Lanka can be attributed in part to the historic dominance of the CCC on the basis of control of income resources for which other BAs are unable to compete.

These privileged resources that the CCC controls are mainly the fees generated from the weekly commodity auctions (tea, rubber, spices) which it hosts. Other resources are, however, associated: because of its role in hosting the commodity auctions and the status it commands, the CCC is able to sell secretariat services to quite a number of the sectoral associa-

tions that it recognizes and represents on its Committee. The direct income is small, but not only is the CCC thereby assisted in employing a substantial cadre of professional staff, but it also becomes the place where a great deal of organizational activity is conducted.3b

Advocates of an activist approach to political and policy issues by the Sri Lankan business community are quick to deride the CCC for its low profile and its quiescence. To a far greater extent than the major Sri Lankan BAs, the CCC generally attempts to insu- late itself from controversy. Details of membership and finances are published regularly and in detail. Chairmen serve for only two years, and always suc- ceed after a period of service as Vice-Chairman. Distinguished businessmen are always selected, and chosen without competition, voting or any public contention. The CCC can look with disdain on other BAs whose membership claims are not always veri- fiable, and which readily become involved in “politics” of various kinds: publicized internal disputes, sometimes leading to sudden changes of leadership; public campaigns conducted in the newspapers; or dependent relationships with politicians in power. The CCC’s quiescence and discretion are rational responses, most directly from the perspective of its professional staff, to the relatively privileged situation in which the organization finds itself. This quiescence is evident both in relation to more overtly political issues and in relation to exploiting opportunities to provide new services to (potential) members. The latter provides opportunities for organizers, in the sense in which the term was used above, of other associations either to claim to represent particular business interests allegedly “neglected” by the CCC or to provide business services that the CCC does not provide sufficiently eagerly or efficiently.”

The changes in economic structure and the pattern of economic relations following economic liberalization in 1977 have led to further modifications in the configuration of BAs in Sri Lanka. There has, however, been little conflict, and indeed a more har- monious and effective relationship has been emerging between the state and organized business interests. One can illustrate and explain these claims by examining three particular processes.

First, export orientation has been a significant component of economic liberalization policies. Partly coincidentally, Sri Lanka began in the late 1970s to develop a large garment industry, dependent almost entirely on imported textiles and accessories. The emergence of new exporters’ associations that have been highly vocal - and relatively effective - can be attributed to the interaction of three particular factors, beyond the simple expansion of exporting sectors. One was the establishment in 1979 of an Export Development Board charged inter ulia with disbursing to registered exporters the


import duty rebates to which they were entitled. Exporters not only came to have an immediate common interest in the operations of the import duty rebate scheme, but the Export Development Board actively encouraged them to form product specific exporters’ associations and played a major role in establishing the Exporters Forum as an annual event in which exporters could state their problems openly to the President or another very senior member of the government. Another factor was that the garment industry was almost totally dependent on import quotas, mainly into the United States, and therefore needed both to organize itself very effectively and operate in close concert with government agencies to negotiate for quotas. The Sri Lanka Apparel Exporters Association, founded in 1982, has become a highly effective and well-resourced organization. The most important factor, however, is that virtually all exporters found themselves faced with serious “bureaucratic” problems, essentially stemming from the fact that the government apparatus was still attuned to the statist era of economic controls. These problems extended over many areas, including con- tinuing restrictions on the entry of foreign air and sea freight carriers to the Sri Lankan market and the per- sistence of a wide variety of “border controls” and complex border procedures affecting economic transactions: customs procedures, exchange controls, etc. These border controls weighed especially heavi- ly on the garment producers who, while trying to respond rapidly to overseas orders attuned to fast- changing fashions in clothing, were obliged to clear these borders twice - once in importing textiles and accessories, and again while exporting. A major public campaign was conducted in the late 1980s. The Sri Lanka Apparel Exporters Association (SLAEA) provided much of the intelligence and organizational competence. The spearhead was, however, one particularly vocal and active businessman who established the National Exporters’ Association in 1987 and in its name carried out a very aggressive campaign against “bureaucratic terrorism.” These com- bined forces were able to capture the attention of the President and achieved significant successes in bringing about changes in policy and bureaucratic procedures. It appears that these positive experiences - the presence of effective and articulate BAs able to make concrete contributions to solving economic problems clearly of a national rather than a particularistic character - paved the way for the state to adopt a more favorable attitude to BAs (see below).

Second, as it has become evident that some variant of the “open economic policy” is almost certain to be continued in Sri Lanka, regardless of actual or potential governmental changes, two significant relatively all-encompassing BAs that had historically been relatively “political” spokesmen for “national” and manufacturing interests and thus opposed in

spirit to the “open economy” - have changed their style, stance, income sources and leadership selection and succession procedures to become more “responsible” or “establishment” - more in fact like the Ceylon Chamber of Commerce.39

The National Chamber of Commerce of Sri Lanka (NCCSL) had originally represented the interests of local importers seeking government preferences in relation to European firms. It had become loosely associated with the more nationalist and statist economic policies of the Sri Lanka Freedom Party, which governed during 19X-66 and 1970-77, in the same way that the Ceylon Chamber of Commerce was loosely identified with the other main party, the United National Party.40 During 197743 the President of the NCCSL was a businessman closely associated with a leading Minister responsible for economic affairs. When his term of office expired there was a major change of strategy in favor of “non-political” Presidents serving short terms and succeeding to the position through the Deputy President’s post. At the same time, and responding to the new significance of the export sector, the NCCSL came to concentrate on providing business services to exporters. It is perhaps an indicator of changed status that one of the first Presidents under the new dispensation was simultaneously Vice-Chairman of the CCC, and went on to become its Chairman in 1987.

The Ceylon National Chamber of Industry (CNCI) has had a fragile organizational existence, and has been known very much as a “voice” organization. It too has begun to change very recently, placing more emphasis on a kind of business service that has become much more common in recent years: organizing seminars and workshops to discuss policy issues of current concern to business. The CCC, the NCCSL and the CNCI are now all competing in this respect - but competing very much in “market mode,” and without overt rancor.

The third change has been the increasing willingness of government to grant business a formal consultative role. As was explained above, in the decades after independence private business was not generally recognized as a legitimate interest. The shift to an open or liberal economic policy in 1977, and the gradual expansion and consolidation of that general policy, owe almost nothing to direct business pressures or influence. External economic assistance and, more recently, dependence on the international financial institutions, have played the dominant role. One indicator is that the extent of representation of BAs on government boards and committees actually declined after the change of government in 1977. The Ceylon Chamber of Commerce (CCC), which had ideological and historical affinities with the United National Party that came to power in 1977, had under the previous government been represented


on five boards/committees. This figure declined steadily, and during 1981-84 the CCC was represented only on the National Committee on Population and Family Planning. The figure then began to rise rapidly, reaching 11 in 1989 and 1990. Similar processes were evident elsewhere. The Exporters Forum became significant in the mid- 1980s. After the accession of a new President in late 1988, this was effectively replaced by regular monthly meetings between representatives of all the main general-purpose BAs and the extremely powerful Secretary to the Ministry of Finance.

The representation of business interests does not necessarily involve only the nominees of BAs. For example, it was individually prominent businessmen, nominated directly by the Minister of Industries, who represented the private sector on the committee that drew up the industrialization strategy document in 1989 (Ministry of Industries, 1989). The statutory Council of Industry that has subsequently been established accommodates both individually selected businessmen and representatives of a number of BAs. These events, however, lead us to our final point about Sri Lanka: the extent to which a stable, pluralistic and relatively nonconflictual system of representing private sector interests in the public arena is indeed emerging. For the Council of Industry is purely the initiative and responsibility of the Ministry of Industries, and is not intended either to supplant other modes of interaction between organized business and the state or to privilege particular BAs.

That such a stable and pluralistic system of business interest representation is emerging in Sri Lanka is due to the coincidence of a number of contingent factors. The factors that we would identify as being of general relevance are those which mute potentially destructive interassociational conflict: (a) the existence of stable income sources from service activities rather than solely membership fees; and (b) the toleration by state agencies of the genuine plurality of business interests, and the consequent minimiza- tion of the degree of discretion exercised by state agencies in selecting among equally plausible voices of organized business.

10. CONCLUDING OBSERVATIONS: POLICY

A degree of corporatism is inherent in any stable arrangement for consultation between societal interests and state agencies. Those interests need to be organized, and state agencies inevitably play some role in structuring the way they are organized, even if they do no more than indicate limits on the number of voices to which they are prepared to listen. The substantive arguments about corporatism are not about whether it is good or bad in some abstract

sense, but how much, and of what type, is desirable in particular situations. The answer depends, inter alia, on policy objectives. Suspicion of corporatist arrangements, and a corresponding adherence to pluralist principles, are valid attitudes to the extent that the role of BAs is interest representation. Insofar as they become involved in the implementation of public policy, it becomes necessary to give more permanent recognition and privilege to BAs to establish them as effective and authoritative in relation to individual firms. The situation to be avoided is one in which corporatist arrangements are established without the intention or capacity to involve BAs in policy implementation. The outcome is likely to be some combination of (a) the suppression of the capacity of BAs genuinely to represent the variety of business interests; and (b) the undermining of the status and credibility of those BAs most enmeshed in corporatist arrangements.

Whether in genuine ignorance or because they perceive the possibilities for political control, many government officials who are required as a result of economic liberalization to interact with the private sector on a relatively nondirective basis are likely to find attractive the notion of reorganizing business representation on corporatist lines. Initiatives of this type are likely to generate disappointing results. Yet they may obtain active support from organizers of BAs who detect organizational and personal advantages. The information above suggests that one way of muting such initiatives is to encourage BAs to develop stable sources of income from the provision of “expert” services that cannot easily be appropriat- ed by rivals with political backing.

11. CONCLUDING OBSERVATIONS: THE ANALYSIS OF INTEREST GROUPS

This paper has articulated some scepticism about the notion that a particular category of interest group - BAs in developing countries - are unambiguous “goods” deserving public support. This scepticism was fuelled initially by field observations about the behavior of BAs. We later found the language and concepts of collective action theory useful in organizing and presenting our observations. Further, we found ideas and suggestions in the collective action literature that appear to presage the ideas developed here. This is particularly the case in the second major book by Mancur Olson, the prime mover of contemporary collective action theory. The central focus of The Rise and Decline of Nations (Olson, 1982) is the circumstances in which organized interest groups (“distributional coalitions”) might (a) be so successful in extracting rents through lobbying and cartel activity that suppresses or distorts competitive markets that (b) they become constraints on economic


growth. In sum, the prime focus is on the adverse plexity of regulation, the role of government, and the effects of interest group organization on economic complexity of understandings” (1982, p. 74). This performance. There is, however, a subsidiary theme, paper may be seen as an exploration of this latter line dealt with relatively briefly in the book, which has of thinking: an investigation of the circumstances received less external attention. This is the effect of under which (larger, national) BAs will tend to gen- dense interest group organization on the “govemabil- erate political conflict for reasons that are at least ity” of nations. Olson suggests that this will “make partly organizational and distinct from their mem- political life more divisive” and increase “the com- bers’ interests.

NOTES

1. The ideas and material for this paper derive principal- ly from our recent research in Sri Lanka and Nigeria respectively. The paper also owes much to stimulating books dealing with government-business relations in advanced capitalist countries (Grant, 1987; Offe, 1985; Olson, 1982; Wilson, 1973, chapter 8; Wilson, 1985), and to a small number of case studies of other developing countries (especially Kochanek, 1974 and 1983; Laothamatas, 1988 and 1992; and MacIntyre, 1990; see also Bianchi, 1989, chapter 6; and Garrity and Picard, 1991).

2. This type of argument about the wasteful and unproductive nature of competitive politics may strike a sinister note, as it has often been used to legitimate authoritarian- ism. This is not our intention, nor do we fail to recognize the validity of classical democratic arguments about the intrinsic value of this kind of politics in creating a responsible and politically aware citizenry. Our point is simply that, in contrast to the optimistic scenario sketched out in the opening paragraphs, encouragement and support for BAs can lead to a great deal of activity which is unproductive from the perspective of promoting economic development.

3. It thus excludes (a) organizations such as Rotary Clubs which draw their members from the business community but are largely concerned with charitable or other nonbusiness issues; and (b) associations whose members work in the private sector but are recruited on the basis of their professional status rather than their positions as owners or controllers of firms - e.g., an Association of Chemical Engineers.

4. The main exception, as Alan Cawson has pointed out to us, is the distinction between (a) employers associations, which tend to have a large number of members but a restricted focus on labor relations and perhaps also training and employment policy, and (b) other BAs, generally termed “trade associations.”

5. These comprised 133 manufacturers associations, 85 commercial associations, and 21 exporters associations. There were in addition 1908 local-level commercial and manufacturers associations registered in 1990 (Civic Organizations Activity Centre, 1991).

6. There is considerable overlap between the reasons why BAs tend to be numerous and the reasons why, at least in advanced capitalist countries, association membership density tends to be much higher in the case of capital than of labor - “the proportion of actual members to eligible

members is regularly much higher in business associations than in unions” (Offe, 1985, pp. 190-191). The latter issue, however, is not our concern here.

7. BAs with a membership of thousands are rare, and hundreds are not common. It seems likely that the great majority of BAs in existence have less than 50 members, and some much less.

8. For example, the “demonstration effect” of a large firm refusing to join a sectoral association could be just as damaging to the association as its decision to join is benefi- cial.

9. In addition to the arguments put forward here, particular factors might help explain the large number of BAs in particular countries at particular times. Developing countries may be affected by the characteristic ethnic diversity of the business population. Social heterogeneity is a con- straint on social interaction and thus on common interest organisation (Olson, 1982, p. 24). For case material, see Kochanek (1983) and section 8 below.

10. This assumption is, of course, invalid in many cases. In general, political restrictions on the associational activity of labor appear to be more common than those on capital; this may constitute a further reason for the relative numerousness of BAs in addition to those discussed below.

11 These propositions are less true, for example, to the extent that trades unions obtain income from sources other than members contributions: from renting property assets or from “protection rackets” which require employers to make covert payments to the union leadership before they can begin to hire workers.

12. The full argument is set out fully in Offe (1985, especially pp. 176184). While Offe’s essay is deservedly much quoted, we find it in some respects misleading in relation to BAs, above all because he tends to assume that they simply play an instrumental role in relation to the interests of their membership. He thus ignores the issues that shape much of this paper: the possibility of considerable “autonomy” in the purely organizational instance. A detailed critique of Offe’s work would, however, take us well beyond the scope of this paper.

13. One corollary of this pattern is that larger, diversified firms may simultaneously belong to several sectorally specific BAs.


14. Some corollaries, which appear supported by casual observation, are (a) that senior businesspeople may have to be cajoled into assuming office in BAs (if ofticeholding is anything but honorific); and (b) that they are more likely to accept if selection is achieved without overt competition - which could be damaging to personal status and business relations.

15. There is a very large literature on the theory and practice of corporatism. The best single source is perhaps Cawson (1986).

16. Each shopkeeper would, for example, be required to join the local branch Shopkeepers’ Association; local branches would be federated up to the national level, at which point the National Shopkeepers’ Association would become a constituent member of the peak National Business Association. Political and policy issues concem- ing retail trade would be dealt with only within these fora, and no other agency would be recognized to speak on behalf of retail interests.

17. The more general point is that, while the corporatist ideal is unworkable, there are elements of corporatism in the functioning of all modem states. Relatedly, there are a wide variety of types of corporatist arrangements. One important general distinction is between (a) societal (or liberal) corporatism, where initiative and power are located largely in independently organized societal interests which are imposing their own agendas on the state; and (b) state (or authoritarian) corporatism, where initiative and power lie with the state. Generally speaking, the former type is found in advanced industrial countries, and the state variant in developing countries.

18. There are many sources on Mexico. See, for example, Bailey (1988); Hamilton and Harding (1986); and Stepan (1978, pp. 6169).

19. The classical statement of this case is Lindblom (1977, chapter 13). The core of the argument is that govem- ments are ultimately obliged to adopt a favorable stance toward the needs of capital (in general) because governments depend on capital to invest to generate the resources (revenues, employment) that governments need to stay in power. Capital has a greater ability than labor to bargain with government because it has a greater capacity to defer investment than labor has to withold its services (i.e. strike for long periods of time). The argument has some power, but has not yet been explored or specified in detail. One would need to look at such issues as (a) the sources of government revenue and their vulnerability; and (b) the effect of debt obligations on firms. The argument was directed at developing capitalist countries rather than developing countries.

20. For example, during the late colonial period, Indian farming and labor interests only achieved a limited kind of national organization through agencies created by and sub- ordinated to the Congress Party. By contrast (Indian) big business, although loosely associated with the nationalist movement, demonstrated early on that it had a capacity for autonomous organization. The Congress Party never had a subordinate business wing. Indian business went on to join

and then capture powerful national business federations originally dominated by British- owned capital, and to use them to successfully protect their interests against the “socialist” ideas of Congress governments (Kochanek, 1974, pp. 9-10).

21. For example, we have seen a confidential memorandum advocating corporatist legislation for Nigerian BAs which cited, inter alia, Indonesia as a case of a country which had prospered partly as a result of legislation establishing an effective framework for government business cooperation.

22. The general point is made by Wilson (1985, p.10). We came across many expressions of such views by public officials in the course of our fieldwork in Nigeria and Sri Lanka.

23. For example, in 1988 the President of Nigeria initiat- ed an annual dinner with about 400 business leaders and characterized the event as the annual general meeting of the Board of Directors of “Nigeria Incorporated.”

24. Nigeria is slightly restrictive in that registration with federal government agencies is a condition for recognition by the federal government. There are, however, two channels of registration open -under the Companies Act or the Land Perpetual Act respectively - and neither are very demanding.

25. The Moor Chamber of Commerce, the Sinhalese Chamber of Commerce, the Indian Chamber of Commerce, the Chettiar Chamber of Commerce, the Ceylon Merchants Chamber, etc.

26. In 1990, the CCC had 466 members, almost twice the numbers of the National Chamber of Commerce of Sri Lanka (NCCSL), the Ceylon National Chamber of Industry (CNCI), and the Employers’ Federation of Ceylon (EFC). Its income in 1987-88 was four times that of the NCCSL, 37 times that of the CNCI, and 170% of that of the EFC.

27. In 1989, the NTMA had an income 40% of MAN’s, although its membership amounted to only 3% of MAN’s

28. We are grateful to Tor Skalnes for this point. It

reflects in part the (apparently) unusually high degree of

unity exhibited by BAs in contemporary Zimbabwe

(Skalnes, 1993).

29. On Thailand, see Laothamatas (1992, pp. 108-109 and 156). There is one significant exception to this claim in the Sri Lankan case. As is explained above, the creation of a separate Employers Federation in 1928, in large part on the initiative of the Ceylon Chamber of Commerce, was a response to the emergence of a militant and powerful labor movement. At that point, the politico-economic structure of Ceylon (Sri Lanka) was in many respects very similar to that of an advanced industrial country (Moore, 1990). This labor militancy, however, waned within three decades, and for the last three decades or so labor organization has had no perceptible influence on the structuring of the organizations of capital.


30. The main exceptions are that (a) the Lagos and Kaduna Chambers of Commerce are able to obtain significant additional income - around half a million Naira each in recent years - from organizing international trade fairs; and (b) the Lagos Chamber also owns an office building from which it obtains rental income. There are, however, 31 constituent Chambers to NACCIMA, and the others depend almost entirely on membership fees, as do MAN, the NTMA and other BAs.

3 1 NACCIMA may not accept that it is the author of this proposal, at least the more formal versions - for example, that contained in a 1990 memorandum to the government from the National Council of Trade and Tourism; its imprint is, however, clear and the same proposal was put directly to the President when he attended the annual general meeting of NACCIMA in 1990.

32. We base this claim in particular on conversations with the senior management of textile firms.

33. In Sri Lanka there is no registration requirement for private associations. While doing research during 1988-91, we came across mention of 73 BAs that had claimed some kind of current or recent existence.

34. For example, after economic liberalization in 1977, some local industrial capacity was wiped out, notably small-scale metalworking and engineering enterprises which had arisen on an import-substituting basis during two previous decades of statist and protectionist economic policies. At the end of the 1970s and during the early 1980s in particular, the Ceylon National Chamber of Industry was a vociferous spokesman for such interests and for a (protectionist) “national” industrial policy more generally.

35. A significant but less evident causal factor is the complete failure of corporatist doctrines of any kind to pene- trate Sri Lankan political culture (Moore, 1992, pp. 78-80).

36. In 1987-88, the CCC drew only 36% of its income from membership fees; this was a much lower proportion than any other national BA. The figures for more recent years are misleading because the CCC engaged in a major property development and moved into new premises. It has

become more dependent on membership fee income, at least temporarily. The figures for earlier decades are more relevant: in the 195Os-1970s. the CCC typically derived about a quarter of its income from membership fees; anotb- er quarter from selling technical services to firms and sec- retarial services to sectoral BAs (especially those related to commodity sales and exporting); a third from hire of building services (mainly for commodity auctions); and a 10th from miscellaneous sources.

37. For example, the Sri Lanka Chamber of the International Chamber of Commerce lives mainly by providing business documentation services and arbitration facilities, while the National Chamber of Commerce of Sri Lanka was able to convert in the early 1980s from an essentially “voice” organization to one living from providing services and documentation to exporters.

38. In Sri Lanka as in many other countries, there has been a degree of collaboration (or concertation) in lobbying between these business interests and the staff of the Washington-based international financial institutions.

39. Other, smaller all-encompassing BAs have to some degree moved in the same direction. In particular both the Sri Lanka Chamber of Small Industries and the Federation of Chambers of Commerce and Industry of Sri Lanka have become executing agents for a large industrial training program funded from German sources. In addition, although so far only to a limited degree, the CCC has moved in the opposite direction, becoming somewhat more vocal politically (and rather more dependent on membership fees for income - see note 37). Public protests made by the CCC in 1992 about alleged secret ownership links between Indian plantation companies and some of the Sri Lankan firms awarded management contracts to run the public sector plantations may turn out to represent a symbolic turning point. Here was an organization long identified as less than fully “national” taking a firm “national” stance.

40. Historical membership figures for the CCC and the NCCSL reveal a clear pattern of shift of membership from one association to the other according to which political party was in power.

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Economic liberalization, political pluralism and business associations in developing countries

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