Friday, July 28, 2006

A cure for poverty

While surfing around, Pascal Zachary's 'A capitalist cure for poverty' caught my attention.

It is a catchy title. Zacharay illustrates an example of how global capitalism alleviates poverty by creating job opportunities for the poor. Far from from its developed and high-cost shores, a US company is setting up an electronics factory in Kuching, on the island of Borneo in East Malyasia. Many would argue that clearing up the rain forest to give way to put up a factory providing employment to the tribes deep in the jungle has negative consequences, notwithstanding the short term benefits.

Charity is not what is at work here, it is the opportunity provided for the impoverished workers living in the surrounding vicinity to earn a decent wage and provide for their family.

C.K. Prahalad, a business consultant and management expert, postulates that the goal of the corporate world should be to 'eradicate poverty' rather than just to alleviate poverty. This a noble and lofty ambition which so far the World Bank and other lending agencies together with the support of the philanthropists have yet to achieve.

Prahalad talks of the poor as an untapped market. He presents his own, very simple, solution to poverty: Give the poor decent products at affordable prices. In short, treat the poor as consumers. Companies who do, he argues, will find "the fortune at the bottom of the pyramid."

The phrase, which is the title of Prahalad's latest book, refers to the world's wealth pyramid. Out of six billion people, one third are relatively wealthy and one third are absolutely poor, living on a $1 per day or less. Prahalad says these people, plus two billion more who live on between $1 and $2 per day, make up the "bottom of the pyramid,"(BOP). Prahalad says this the BOP approach.

Traditionally, businesses have always wanted to increase their profits and those that provided for the poor have also gouged them, extorting extra-high profits as a "reward" for going through the trouble of dealing with them in the first place.

Sceptics and the downtrodden will eagerly await to see what the multinational corporations do next.

No comments: