The Business Solution to Poverty: is business special?

Business Solution to Poverty

Readers of this blog don’t need to guess why this book title attracted my attention: The Business Solution to Poverty: Designing Products and Services for Three Billion New Customers, by Paul Polak and Mal Warwick. At this writing, I’ve read through part one of three.

The world economy has expanded 17-fold since 1950, yet more than one-third of the planet lives extreme poverty. Polak and Warwick estimate that 2.7 billion people in the world live on $2 a day or less. Most of these people reside in India, Africa, and Asia, including China; they define this population as “The Global South.” You can sense the authors’ feelings of unfairness at this situation. I agree.

In response to this lack of progress and fairness, the authors contend that only private business, not government or philanthropy, can create the necessary products and services, and distribute them at scale, to solve poverty.

They consider nearly all the government and philanthropic endeavors since 1950 to end poverty a failure. The private sector, they believe is the answer, because “Private business possesses three overarching and undeniable advantages in addressing the challenge of poverty:

  • Profitable businesses attract substantial capital
  • Successful businesses hire lots of people
  • Successful businesses are capable of reaching scale”

I disagree that only private business has the ability to attract capital, hire significant numbers of people, build large-scale production and distribution, and solve poverty. To wit:

  • Capital: The authors point out that “$1 trillion is invested every year in the Global South.” I think that the ability to attract capital to where it is needed already exists.
  • Hiring: Government can hire people, as well. In many regions, developed and developing, government is one of the top employers.
  • Scale: Business can reach large scales, true, even multinational scale. But business can also cherry-pick scale, deciding what offerings to expand where. UPS and FedEx don’t have to deliver to every address. The U.S. Postal Service does.

I think that the current rules and culture in government and philanthropy make it difficult for these sectors to solve poverty on a large scale. Allowing more of a marketing mindset in the public sector, and allowing the public sector the necessary investments and time horizons, I believe could equally result in poverty reduction.

In fact, Polak and Warwick cite two sectors where government and philanthropy have made great progress to end poverty, with two exceptions: health care and education. For example, they state that “overseas development assistance from rich nations and from the United Nations has brought about spectacular improvements in health over the past half-century.” In these two arenas, they concede the public sector has made great contributions and should continue efforts in these areas.

One example they cite of successful philanthropic health care is Partners In Health, originally started in Haiti. But for the authors, it’s not enough for Partners In Health to deliver great health care for free. They write, “But what if Partners In Health put as much energy into helping its patients improve their livelihoods from agriculture as it does now on treating illnesses?”

Still, there are things to like about this book, even in the first part I’ve read thus far. I’ll be covering those in future posts.

(The Business Solution to Poverty: Designing Products and Services for Three Billion New Customers and other books mentioned in this blog are available in the bookstore.)

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