Essay: How can business reduce poverty?

Note: The essay below is my entry for the 2014 Webb Memorial Trust essay competition.  Adam Ludlow’s winning essay can be found at the following link and will appear in the January issue of the New Statesman. http://www.webbmemorialtrust.org.uk/home-page/winner-of-annual-webb-memorial-trust-essay-announced/

 

In January 2014 Oxfam reported[1] that the wealth of the top one percent richest people in the world amounts to $110 trillion, 65 times the total wealth of the bottom half of the world’s population, who own the same as the richest 85 people in the world. In this essay I will explain how if we are to reduce poverty through business, we must not rely on the rich to give back, but encourage the brave entrepreneur to venture into business and serve the billions of potential customers in the poorest countries and communities in the world.

To introduce you, the reader, to me, the writer, I am a twenty-four year old graduate of lower middling class stock from Suffolk, currently living and working in London. I have an education behind me and a career in front, family and friends, hot food in my stomach and a warm bed. I am comfortable. I am lucky.

Globally, billions of people are nowhere near this fortunate. They live in abject poverty surrounded by squalor, starvation, natural disasters and death. Some work 16 hours a day to stay alive. Many die as babies, or before they ever reach adulthood. Governments, businesses and NGOs across the world develop policies to try and help, but the reality is that poverty is increasing.

In the West many people in business and government champion so called “trickle-down economics,” the theory that economic benefits gained by particular groups will inevitably be passed on to those less well off. The reality is that trickle-down economics keep the poor alive, but inevitably, it keeps them poor. However, whilst staying poor it makes them grateful to be alive. Their masters have given them jobs and food hand-outs and so they live out their lives of servitude. However, when we look at the bigger picture of the world, billions are not even ‘lucky’ enough to live this life of grateful servitude. Many die. Trickle-down economics simply does not reach the poorest in our world, let alone the poor in our own western countries. Even in London, one of the wealthiest cities in the world, you need only step onto your doorstep to encounter the homeless people that this system of economics has chewed up and spat back out.

Reducing poverty in London, or in the UK for that matter, is a boggy political quagmire which our unfair society seems to be stemming from. Sadly, it seems that because of the accumulative greed of many of the super-rich and those in positions of power, that it will only be when global poverty is properly addressed by all of our businesses, governments and inhabitants, that there will then be precedent for regional western poverty to be eradicated. It is a dirty legacy that because of hundreds of years of divide and conquer and oppressive rule of the world by the western states, that it is now only when third world poverty is reduced, that poverty at home can in turn be reduced or even solved.

Many companies, including the vast majority of major corporations, do, of course, have programmes of ‘corporate social responsibility’ (CSR). There are plenty of examples of fantastic CSR initiatives that do make a difference to the lives of many living in poverty and are correctly applauded. However, CSR can often be a short fix and not a solution. It is therefore crucial that the attitude within the business world as a whole to spending money to reduce poverty changes. It needs to change from just PR boosting charity, into the term which business leaders often know best – investment. Investment is crucial. Investment enables both those in poverty and the business itself, to benefit. A beneficial investment will enable the support given to be continuous in correlation with the return that said business receives. It is a win-win.

It is true that the rich and the super-rich could all “give back” more, especially when many are profiting off the back of cheap, sometimes even slave labour, from the other side of the world. However, the fact is that the top down approach has failed. Charity and aid initiatives are uncoordinated and are often a short term fix to a long term problem. Furthermore, many aid programmes often breed a culture of dependence on these giveaways and limit the potential of the local populations’ aspirations to help themselves. It is through partnership with those in business who want to help, that we can trigger a reduction in poverty from the inside out, from the bottom up. For those who are shrewd enough in business, this is an opportunity to make a profit through helping people.

The most effective way business can reduce poverty is by working on a ‘bottom up’ basis. By ‘bottom’ I refer to the bottom of the pyramid, the very poorest communities in our world. Once these communities have been supported and have been shown a pathway – or better still, have been given the tools to manufacture a pathway of their own – will governments across the world have to take notice and address the problems within their own countries too.

When business is taken as its whole, all-encompassing term, it can act in many different ways to reduce poverty. However, the stages of development are often very similar. Step one is to speak to the local communities in your target area. It is important to get to know these people as they are all potential future customers. Step two is to identify what above all else is lacking the most in lives of those in the target area. Although this may seem like an impossible task, especially when food, water, shelter and medicine are all lacking and therefore needed in equal amounts, there is usually something which is needed more urgently. After distinguishing what key ingredient of change would prove a catalyst to the local people, a solution must be engineered. This solution could be the core of the business, based on a life-saving or improving product which is easy to produce and replicate. The final stage is to distribute the product(s) and idea(s) to an ever larger area targeting all who fall within the same target market as originally identified.

All sizes and types of business will have different aims and goals when going into business with those in poverty. However, whether it is an entrepreneur, an SME (small or medium enterprise) or a multinational giant, there is opportunity for business growth and profit.

The entrepreneur, assuming they have some capital behind them, is extremely well placed for getting to know a community and establish what is needed for the development of the people. For example, in an area or for a family where subsistence farming is not the main source of food and people have to buy their food in, a nutritious milkshake which contains all the calories, vitamins and minerals needed for a person for each day – as used in the west to help undernourished and sick people – could be developed and distributed for a lower price than importing food freeing up funds to use on education or transport to work. However, in an area where subsistence farming keeps people alive but water is often contaminated by rains washing sewage into wells, a product for keeping the wells clean and safe could be developed.

An SME, could engage in a knowledge and talent sharing partnership with communities in the third world. Employees could be sent to these areas to learn and find opportunities for the SME. In return people from the local community could travel to the West to work with the SME to learn about business and acquire skills, which will help educate and grow their communities. Many people in the third world never get the chance to travel and knowledge advancements in farming, healthcare, business and even the daily news of the world, is often extremely slow to travel to these areas, if not non-existent. Developing a partnership between a business and a community can be jointly beneficial in areas such as knowledge sharing, talent acquisition and creating a loyal customer base and workforce.

It is now time for multi-national giants to tap into the impoverished areas of the world to increase profits even further, whilst creating fairly paid jobs for local communities. Rather than factories making cheap clothing for the West, workplaces can be developed which produce life-advancing products which can be easily replicated. There are billions of potential customers and if the right product is developed and shows its worth to the world, then there are huge profits to be made from a tiny and for once, moral, profit margin. It is time that multinational companies reassess their impact on the world. Creating jobs is one thing, but creating jobs where the employees are treated well and paid fairly is another. Multinationals need to realise that if they do not rethink their engagement with the poor of the world, then they are in danger of being outmanoeuvred by those in business who the billions will flock to if they can deliver the right product(s) at the right price.

It is down to all involved throughout the business world to realise the possibility of working to reduce poverty whilst building profits. Furthermore, it is down to the collaboration of the SMEs through working together with impoverished communities, whilst muscling out the all-consuming multinational money making machines, who continue to ignore the harm they cause through exploiting these communities, and who continue to disregard the existence of this huge potential customer base.

Paul Polak and Mal Warwick describe in their brilliant book The Business Solution To Poverty, how poverty can be reduced and how millions can be lifted into the middle classes, by large scale corporations tapping into these people’s needs for clean water, renewable energy, affordable housing and accessible healthcare and education. Their solutions explain that businesses ‘must set a 10-year goal of building a customer base of at least 100 million, achieving revenues of $10 Billion or more per year, and realizing sufficient profitability to attract both the indigenous and international commercial investors while minimising its environmental impact to the greatest extent possible’[2].

It is the industrious and those who realise the potential buying power and instant loyalty to be gained from the bottom of the pyramid that will reap the rewards of this heavily untapped market. Those people who react to poverty and turn the entitled question on its head into “how can poverty increase business?” or, “how can poverty improve business?” will be the ones who can reduce poverty whilst being successful.

The biggest challenge is changing the attitudes of those in the business world. Reducing poverty through business is hard but not impossible. It is an opportunity. The easy options in business can often fail, but a revolutionary product or business based on the advancement of the bottom of the pyramid will not. A successful engagement and ongoing collaboration by people in business with people in poverty, will prove that business can be the catalyst and the vehicle by which poverty is reduced around the world.

 

[1] http://policy-practice.oxfam.org.uk/publications/working-for-the-few-political-capture-and-economic-inequality-311312

[2] The Business Solution to Poverty: Designing products and services for three billion new customers. By Paul Polak and Mal Warwick. Berrett-Koehler Publishers, Inc.  San Francisco, 2013. Page 9.

 

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