chapter  11
Pages 10

MNCs. Seeing the poor as largely neglected consumers proved controversial, as encouraging needy people to buy unnecessary goods, perhaps at the cost of their children’s education or diet, seemed a questionable ambition. Furthermore, the definition of the BoP excluded most of the very poor as it was wage earners who had an income, however small, that were the target, and as we have seen they are not the majority at the real BoP. This was a model that fostered development through increased consumption of manufactured commodities, encouraging Western consumerism to become the standard everywhere. It offered nothing to the budding entrepreneurs in the developing world. It is debatable whether encouraging the developing world to adopt the habits of the developed world with its excessive use of resources would be sustainable. The celebration of entrepreneurship at the BoP is premised on the notion that the poor possess ‘natural entrepreneurial talent’ and lack, not creativity and initiative, but opportunity. This is a simplistic view of the situation. While entrepreneurial intent may be ‘natural’, the knowledge and skills required to set up, run and grow an enterprise at the BoP or elsewhere, are not. Much of the economic activity at the BoP is ‘me too’ trading. A lack of paid employment and desperation means many of the poor engage in trading activities, often with little chance of success. They have little education and live literally from hand to mouth. Seeing beyond tomorrow, an essential ability for entrepreneurs, is a luxury most of the poor cannot afford. The very poor are quite naturally risk averse, have to think short term to stay alive and often feel helpless to alter their situation. This suggests that much must change before entrepreneurial activity can take a strong hold. Entrepreneurship requires a set of skills that emphasises the values of responsibility, discipline and a positive attitude to growing a business rather than living hand to mouth. Not only do most developing countries not have training to support entrepreneurial growth, there are also too few examples of success that can act as role models. There is little evidence internationally of grassroots growth of entrepreneurial enterprises. One reason why the original BoP model does not work is because it does not acknowledge or use the existing informal sector, which may well provide an outlet for a range of needed products and services. These traders have knowledge of the markets and form a ready-made distribution network. The idea also fails to recognise the almost total lack of effective distribution infrastructure in many developing countries, infrastructure that is needed if goods are to get to poor consumers in a cost-effective way. After a long period of being seen as an indication of a failed economy, the informal sector needs to be recognised as a legitimate and long-term fact of economic life in developing economies. Exploitation by the developed world, which was characterised in the past by colonialism, continues under the banner of globalisation, and includes multinational employers who pay very low wages, who do not pay sufficient tax in the country in which they operate and who do

not train locals so they can work in skilled jobs. Large organisations, particularly in mining and agriculture, can often displace many thousands of survival farmers and traders without thought of their future. As we have seen, governments are often not able to resist the opportunities apparently on offer when MNCs approach them. Globalisation is at best a mixed blessing. In the continuing search for competitive advantage companies often move into developing economies to take advantage of their resources and low labour costs, but when somewhere else offers a greater competitive advantage they move on, often leaving behind them a vacuum, unless the society has been able to build on the injection of money and expertise and create and hold on to their own talent bank. The growing income gap between nations and individuals can be traced to the global market place, where talent and labour are traded across national boundaries. The faster an economy grows the bigger becomes the gap between rich and poor (Handy 2006). We are all part of what is now a global problem. The international economy has a decreasing number of jobs for unskilled workers. This is true in the developing as well as the developed world. Developing countries do not have time to go through their own ‘industrial revolution’. The World Bank does not foresee substantial growth in jobs in the developing world as technology is rapidly replacing unskilled workers. The informal sector, and the ability to generate a reasonable standard of living here, appears to be one of the possible ways forward. This requires an appreciation of how such a change can be brought about, of how support and training can be provided, as well as recognition of the importance of understanding the informal sector and how it can be made more productive. It is also worth noting that no two developing countries are the same – solutions for one context may not work in another. Even the informal sector means different things in different locations. Going back in history, poverty was a way of life for the majority of people around the world. Today, in the developed world, people expect electricity, running water in their houses, roads on which to drive and access to healthcare and education. These services are not available to the majority of people in developing countries and the gap between rich and poor appears to be getting greater. How far can this continue? With the advent of international travel and electronic communication the plight of the poor is a regular news topic. Yet, poverty continues. The poverty we have examined in this book is absolute chronic poverty that affects billions of people across the world, but is at its worst in sub-Saharan Africa. The reasons for this poverty are many and varied and the solutions are generally long term. The poverty that the international community responds to most effectively is the poverty caused by crises, whether that is war (Syria) or natural disasters (Nepal). In this situation, the need is graphic, dramatic and easy to understand. Here, there is considerable generosity from around the world because people can see these crises in their living rooms. Once the crises are over, however, the international community is much less generous than it first appeared.