INTRODUCTION

The topic of global poverty is central and of critical interest to the United Nations, the World Bank, the International Monetary Fund (IMF), and myriad other international foundations, governmental and nongovernmental organizations. Additionally, a large group of scholars including Jeffrey Sachs and C. K. Prahalad have devoted themselves to making a difference in developing countries. Poverty is a dreadful and intolerable human condition, and not merely an issue confined to regions where it is prevalent. There are enormous spillover effects from global poverty, including environmental degradation, urban slums, refugee movement and market stagnation, all effects costly to the developed as well as the developing world. Yet, as William Easterly reminds us, the industrialized world neither has been remiss in trying to address poverty nor has it been entirely unsuccessful. However, although international organizations and developed countries have contributed over US$2.13 trillion to poverty reduction since the end of World War II, significant alleviation of extreme poverty certainly remains well out of reach (Easterly, 2006a). Our thesis is that poverty can be reduced, if not eradicated, both locally and globally. But this will occur only if we change our shared narratives about global free enterprise, and only if we recalibrate our mindsets regarding how poverty issues are most effectively addressed. We argue that the contention that poverty alleviation is best achieved only by aid or philanthropy is flawed. Poverty amelioration cannot be effected merely by the traditional means employed during the last century-foreign aid from developed nations and/or from nonprofit international organizations. Rather, evidence we shall present demonstrates that initiatives developed by global corporations, which represent a new mindset in response to the poverty challenge, are significantly more effective. Such poverty-reducing initiatives should not focus on social responsibility, charity or philanthropic corporate citizenship, even though these are all worthwhile ideas. Instead, companies should seek profitable partnerships with the poor for mutual gain. By developing new markets for their products and creating new jobs and opportunities for economic development, profitable partnerships hold the potential to create valueadded for shareholders as well as for these new stakeholders. Some of these markets may be developed through public-private alliances, partnering with NGOs or interested government agencies with capabilities in a host country. But the catalyst for these initiatives should be multinational for-profit enterprises (MNEs). They are the key to effective and enduring global poverty alleviation. If C. K. Prahalad (2005) is correct, there is a huge untapped market located at what he and Stuart Hart call the “Base of the Pyramid” (BoP). There are

between two and four billion people living in extreme poverty, almost all unemployed or underemployed, and therefore without economic resources or opportunities and with little ability to buy goods and services. But the BoP is also a potential market for goods and services. If economic growth is a continuing and positive goal for the planet and for global companies (arguable, though not necessarily universally accepted), then, as we saturate markets in rich nations, these new markets provide fresh opportunities for accomplishment of this objective. These markets are not merely new sources for product sales. In order to truly expand as markets, economic development needs to take place in these poor and remote areas of the world in terms of new job creation and productive capacity. This buttress will not be a defense of sweatshops-those factories that pay less than subsistence wages in the countries in which they operate. Sweatshops, by definition, do not contribute to economic development since their underpaid workers cannot afford new purchases and consequently do not contribute to market expansion. Therefore, an important proviso to our proposal is that entry into these markets includes job creation at living wages. Only then will companies be able to create new markets for their products and services. Similarly, we do not have in mind economic expansion that ignores the ecological interdependence that joins all life into a single awe-inspiring system. MNEs should never again opt for forms of economic development that degrade this system or transfer costs to future generations. Profitable partnerships only work when they are sustainable. All of this sounds idealistic, but there is a compelling practical narrative. To entice MNEs to form profitable partnerships, it is not enough to merely report data on the enormous size of the BoP market and reiterate population and poverty statistics. Indeed, if one follows the lead articulated by Tom Friedman in his book The World is Flat (2006), one would redraw the pyramid as a diamond, taking into account the growing economic development of the two countries that once constituted the lion’s share of the BoP-China and India (see, e.g., T. Friedman, 2006; Figure 1.1, this volume). More importantly, for an MNE to take BoP markets seriously requires reframing the corporate value proposition. In other words, profitable partnerships require changing the corporate narrative about its purpose and reconceptualizing our worn-out notions of poverty and the abilities of the poor. This includes thinking about long-term global market development in new markets with unusual challenges, framing economic valueadded not merely in terms of increasing shareholder value but also increasing key stakeholder returns, and taking a systems perspective on the company and its global interactions. The latter involves decentering the corporation as the core player and imagining the company as an interactive player in a complex and multicultural global system (see Figure 1.3 for a graphic depiction of such a perspective). Through this reconception, not only are derivative profits sustainable, thus creating economic benefits for stakeholders, but also the partnerships with the poor flourish. As a result, the notion of a “future,” previously a novelty for those living in extreme poverty, becomes realized. This will certainly put to rest many fears and preconceptions about global companies, for example, that they exist to exploit rather than to develop these burgeoning new markets. Moral imagination will be required to overcome these among corporate critics. And it will also be required to reform corporate management thinking as well.