Solving Global Poverty...

[Boerseun]

Originally Posted by Yahoo

WASHINGTON (Reuters) - The world's estimated four billion people who live under the poverty line represent an untapped global market worth $5 trillion in local purchasing power, according to a new report.
The report by the International Financial Corp., the World Bank's private sector arm, and environmental think-tank the World Resources Institute, measures the size of the market using income and expenditure from household surveys.
It comes as domestic and multinational corporations look closer at breaking into this under-served markets, where microlending is already a mushrooming business.
Development projects have focused on the poorest of the poor, but a much larger group are families with incomes below $3,000 a year, who mainly work in the informal sector, have no bank accounts or access to modern financial services, and lack access to clean water, electricity and basic health care.
The report "The Next Four Billion: Market Size and Business Strategy at the Base of the Pyramid," refers to this group as the base of the pyramid markets, or BOP.

So now the 'poorest of the poor' have been identified as a massive market. That's all good and well, but the nett effect of this will be the transfer of their meagre savings to the pockets of the already wealthy. Is this a good thing?

As far as capitalism is concerned, there's a big pyramid with the rich at the top, the middle class in the, well, middle, and the poor at the broad base. If this model is applied and the multi-trillion market of below-the-breadline tapped by the few at the top, the chances for any of the poor at the bottom to rise any further up the pyramid will be limited.

Not that I'm in favour of artificially manipulating the marketplace, of course. But I think we need a different approach to generating wealth up and down the pyramid. If we can somehow enrich the pyramid's base, then those at the top will have an even bigger market to tap. But if we approach the base of the pyramid from a cynical perspective that sees them as only a faceless mass with a few trillion to be taken, then we are limiting the ultimate wealth in the whole pyramid.

So - solutions?

I think the biggest challenge to the lower rungs in the pyramid, is access to capital and knowledge. It kinda sucks to live in a capitalistic world if you don't have any capital. So, instead of trying to sell stuff to the lower rungs, isn't it an ultimately better idea to loan them money to start their own businesses, which in turn will employ people from the lower rungs, enriching the base to which products and services can eventually be sold to? This should be a priority, right after education that focuses on entrepeneurial skills and knowledge. In the Third World, where most of these 4 billion poor bastards live, its useless to study rocket science when nobody's building rockets. If you want to contribute, you should become an employer. So, education should focus very much on economic studies, accounting, etc., and leave rocket science for a few years.

But concentrate on practical education, and ease access to capital. Any other thoughts as to this? If the quote above is executed and exploited, it will not solve any problems at all - fact is, it will remove even more money from the poor. They currently spend their money amongst each other, keeping the money in the community. If they had to buy products and services from overseas corporations, their money would leave the local economy and go to faceless, already wealthy shareholders living in some affluent country somewhere far away from where the poor are, increasing the poverty and misery even more.

[LJP07]

Originally Posted by Boerseun

So - solutions? So, instead of trying to sell stuff to the lower rungs, isn't it an ultimately better idea to loan them money to start their own businesses, which in turn will employ people from the lower rungs, enriching the base to which products and services can eventually be sold to? This should be a priority

I don't believe that they should be loaned money, I think they have to create a sense of national self-reliance like India did in the 1970's and now it's improving it's economy. Loaned money usually means increased debt because if it fails the interest rates will make it quite difficult and exports will be used to pay international debt and these new loans.

That country needs to identify what it's unique selling point is so to speak, for example Mezzogiorno in southern Italy had an exceptionally poor economy until european markets realised the potential with Citrus Fruits, now they are the leading supplier of Citrus fruits etc. If developing countries identify these and are given help to put them on the right track without interest increasing loans then this will provide jobs for that country as well as increasing exports.

Increasing exports is capitalist ideals. Therefore the exports they create should be used to help the country with increased educational standards and international debt abolished. ( This is quite difficult, it's easier said than done in todays global marketplace and the world banks situation on this ).

However, if most of this occurred, the economy would develop further, but help must be given from first world countries to aid this development.

[Boerseun]

I don't mean loaning the Third World Countries money, beaurocracy is a fail-safe way of destroying any capital invested anywhere. What I meant is make access to capital easier for the individual. The individual, after all, is the guy who's gonna start the business. No government can be trusted with investing in any businesses, because no individual governmental employee is personally liable for any amount loaned. So they simply don't care if a business makes it or not. An individual, however, will feel the pinch, so he'll work his elbows off to get his company up and running.

But the quoted reference in my original post simply sees the poor as a big pool of potential customers. Take a little from each, and you'll have a lot - simply because there's a hell of a lot of poor people in the world. But to them, that little amount might be all they have. So, ease access to capital for them, and the whole pyramid will ultimately benefit.

[LJP07]

Yeah, I understand your point, but it's not going to happen on a global scale, it takes years for successful business' to come about and even if there was success, larger TNC's could come in, reduce prices and dominate the country, this problem of TNC's must be dealt with as well if your idea were to succeed.

TNC's are more powerful than countries alone ( poorer ones ), and can dominate the countries laws. Otherwise the country would be losing capital which it wants for employment and education in that sector.

[Boerseun]

Exactly. And the reference in the original post was a classic TNC-inspired piece of bull, that will simply serve to maintain (or even worsen) the status quo.

Multinational Corporations are the new dictators. They will come in to the poor countries, spreading love, goodwill and a few temporary jobs to a few temporarily lucky locals whilst at the same time pressuring said poor country's government to slacken labour laws, lower minimum wages, etc. They will then take their profits and send it back again to their overseas shareholders. The shareholders might be your mom or dad, happy in their ignorance of what the company they've invested their retirement funds in are doing in the Third World. The money have effectively been removed from the Third World to the First World. The wages paid by the TNC to the local staff, doesn't make a drop in the bucket to the amount they're taking out of the community.

What you stated in your above post, I have no qualms about. You are right. And the reference in the original post I also have no qualms about. It is stating the status quo, too. But the status quo sucks, and in maintaining it and prolonging it, the whole pyramid will eventually stand on a very broad but very wobbly base. A paradigm shift is needed, and what I propose will eventually strengthen the whole pyramid, starting at the base.

[LJP07]

Yes, that's what I believe too. So what should be done about the TNC's. Even though they cause these problems all the time even in non-poor countries, even in Ireland, will poorer countries want them, I think so. So your trapped in a corner if countries want this capital coming in, but taking more out, thus not helping the country.

As a side note about TNC's, theres a massive TNC from America that ships processed milk over to poorer countries, so women don;t have to breastfeed. Statistics show that 33% of all babies fed this will die and the only label there given by a Global Concern unit was label them??? LABEL THEM?? The label is Breastfeeding is best!, but there still exporting for the profits. That's just sick.

[Boerseun]

Originally Posted by Prolu2007

As a side note about TNC's, theres a massive TNC from America that ships processed milk over to poorer countries, so women don;t have to breastfeed. Statistics show that 33% of all babies fed this will die and the only label there given by a Global Concern unit was label them??? LABEL THEM?? The label is Breastfeeding is best!, but there still exporting for the profits. That's just sick.

Beyond sick. Got any links? It's bloody amazing what these guys can cook up.

The biggest problem with TNC's is their unaccountability, in my view. Sure - you've got a high-flying CEO, presidents and vice presidents, chairmen et al, but at the end of the day, they are all expendable. If the company screwed up, easy - fire the CEO, get a new one, repeat the screwup seeing as it was profitable, wait to get caught again. If you get caught again, repeat the process.

Also, blind funds creates a barrier between the company and the ultimate owners. The owners are, after all, the shareholders. But if you've invested in an annuity or a similar investment vehicle, and the annuity is managed by fund managers who invest in bulk in top 40 companies, who's responsible for that share? Say, I've got ten dollars invested in an annuity. Their fund managers combine all the member contributions in one big bucket and then decide to buy a hundred different shares at various losses and profits. They didn't take my ten bucks out of the bucket and said 'okay, we buy these shares for Boerseun'. I'm a faceless member of a share-buying 'club'. But now the company in which the annuity invested screws up badly. Who's morally responsible for them causing the deaths of millions of innocents, when they knew their product was poisonous? Of course, the culpable people must be the shareholders, seeing as the Board does everything to the shareholders' benefit, the Board are responsible to the shareholders, the members are voted on and off the Board by the shareholders, so the shareholders must take the brunt of whatever the company did. Me, I owned a piece of the pie via my annuity buying into their shares. But nobody told me about it. I didn't know I owned a slice of company X. So where does the liability lie now? Where does the moral responsibility lie? Definitely not with the board - they must keep the shareholders happy, and will do what they have to do via the mandate they've received from the shareholders. Definitely not the chairman, because anything decided by the board is voted on, and he merely carries a vote. Definitely not the CEO, because he just does what the board tells him to in the day-to-day running of the company. So the ultimate bastards in the whole saga are the shareholders, of which I'm one without knowing it. So how can I be culpable of something when I didn't even know I was involved?

You see my problem with TNC's. There is no single person who can take responsibility, and the TNC's simply steamroller ahead in order to fulfill their promise to the shareholders. Of which 99% are unaware of the fact that they are, indeed, shareholders (obviously not 99%, but you get the idea).

[hallenrm]

Interesting thread indeed! More so because I was contemplating on the effect of the emerging shopping Mall culture in the metropolitan cities in India. Big industrialist in India like Reliance, Tata and Bharti are vying with one another to capture the middle class customers to fulfil all there needs. To begin with they offer goods at slightly lower prices in swanky shops. Like in our neighborhood, a shopping Mall tcalled Reliance Fresh has come up that is selling all kinds of food stuff through a rather swanky shop. Now, the place it is located, most people had been buying the vegetables anf fruits through street hawkers, who come to the city to earn slightly more than what they caqn earn back home, in an poverished and poor region. The rich industrialists are now setting up malls, so that the greedy middle class does all their shopping from these malls and in the proccess pushes all these enterprising poor people into their slavery.

So, it is not sufficient to teach poor to be enterprizing, the big greedy fish can devour them all, by enteringt into JV's with still bigger MNCs.

So, what can people like me do? Resist the temptation to save a few pennies, realizing the future?

[LJP07]

Maybe Governments should be given Strategic Economic Plans by leading Economists. The plan should make the people the subject of their own economic development, this plan could include:

1. Banning TNC AND MNC.
2. Developing their potential home market.
and more.....

Although banning TNC might sound good on paper, countries might not export to their countries either or stop any incoming aid that was there. The US did this to Turkey when the was started to they could be used as a base, when Turkey said no, they stopped all aid.

There are problems when potential solutions arise.

[jungjedi]

Originally Posted by Boerseun

So now the 'poorest of the poor' have been identified as a massive market. That's all good and well, but the nett effect of this will be the transfer of their meagre savings to the pockets of the already wealthy. Is this a good thing?

As far as capitalism is concerned, there's a big pyramid with the rich at the top, the middle class in the, well, middle, and the poor at the broad base. If this model is applied and the multi-trillion market of below-the-breadline tapped by the few at the top, the chances for any of the poor at the bottom to rise any further up the pyramid will be limited.

Not that I'm in favour of artificially manipulating the marketplace, of course. But I think we need a different approach to generating wealth up and down the pyramid. If we can somehow enrich the pyramid's base, then those at the top will have an even bigger market to tap. But if we approach the base of the pyramid from a cynical perspective that sees them as only a faceless mass with a few trillion to be taken, then we are limiting the ultimate wealth in the whole pyramid.

So - solutions?

I think the biggest challenge to the lower rungs in the pyramid, is access to capital and knowledge. It kinda sucks to live in a capitalistic world if you don't have any capital. So, instead of trying to sell stuff to the lower rungs, isn't it an ultimately better idea to loan them money to start their own businesses, which in turn will employ people from the lower rungs, enriching the base to which products and services can eventually be sold to? This should be a priority, right after education that focuses on entrepeneurial skills and knowledge. In the Third World, where most of these 4 billion poor bastards live, its useless to study rocket science when nobody's building rockets. If you want to contribute, you should become an employer. So, education should focus very much on economic studies, accounting, etc., and leave rocket science for a few years.

But concentrate on practical education, and ease access to capital. Any other thoughts as to this? If the quote above is executed and exploited, it will not solve any problems at all - fact is, it will remove even more money from the poor. They currently spend their money amongst each other, keeping the money in the community. If they had to buy products and services from overseas corporations, their money would leave the local economy and go to faceless, already wealthy shareholders living in some affluent country somewhere far away from where the poor are, increasing the poverty and misery even more.

im reading banker to the poor from your reading list.got it off amizon dot com.very good.it describes a sceme for micro loans to the poorest nations.iraq,balgladesh.in bangladesh the grameen bank has grown to 3.8 bill with 2.4 million families participating.they arganize in cells of about 5 with people recieving very small loans,which they must pay back before the next person in the cell can start to recieve a loan