Solving Global Poverty...

[Boerseun]

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]

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]

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?:hihi:

[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]

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

[Michaelangelica]

I saw an interesting show last week about Mini or Mico-banks that give tiny loans mainly to women to start businesses. Loans with low interest and no security. A loan may be as little at $10.

These banks are having great success with 95% repayments and helping people from the worst poverty. One is about to list on the stockmarket!

One has started in Brooklyn NY, USA!(loans about $3,000+)

 

Even more interesting was how groups of retirees in the USA would meet and collect a little money to help fund a Third world bank.

This is a movement that is changing millions of lives for the better.

Giving dignity, pride, a sense of achievement, education and jobs to millions.

[hug]

I haven't read some of the above material, but I do have a few thoughts.

 

First, and perhaps most foundationally, according to my understanding of "morality" (which is what I study), from a scientific and philosophical standpoint, I do believe that it can be shown, with a high degree of confidence, (avoiding the word "proven") that letting global inequality continue to increase, unabated, or actually fueling it, would be immoral. Thus, I don't believe that we are talking, here, about something that would be "nice" to do, or something inconsequential. I think the topic is vitally important. For example, (just as one example of what could happen), even though these issues (to follow) alone may not bring complete catastrophe (although a couple of them could), the combination of them could do so. The issues: Global warming, instability caused by global inequality, nuclear proliferation, and terrorism. There was a great article written recently, I think by Robert Wright, (but I could be wrong on that), in The New York Times, discussing that combination of factors or something like it (it might have included three of these four, I can't remember). In any case, the destabilizing changes and pressures caused by global warming and/or substantial global inequalities, combined with the availability of weapons and people ready to harm others, is a bad combination. Very bad.

 

That said, I question single solutions or solutions that some countries impose on others, in this area, i.e., poverty and income disparity. I think that we (wealthier countries) should create and offer a multiplicity of wise and helpful choices. One solution won't fit for everyone. And, people like choices. And, we can't be sure of the best choice in any given situation. And, some of these choices could be contingent on some sort of action on the part of the receiving party, as long as the link makes sense and is fair and is well-intentioned. For example, . . .

 

You could offer lots of choices, . . . i.e.,

 

"We want to help but aren't sure of the best solution for you. So, here are some things that we could do, if you like . . .

 

* We'll loan you (individual, group, or country) up to this amount, at zero or low interest rate, if you use it for A, B, C, D, or E type things.

 

* We'll give you $XXXX, yours, if you use it for F, G, H, or I type things.

 

* We will have our companies in these industries (X, Y, Z, etc.) NOT enter your markets for 20 years, as long as you develop your own industries in those areas and not merely buy the stuff from other countries, and especially not country 1, 2, 3, or 4.

 

* We will not do many of these things if you build certain types of plants that will spew carbon dioxide for years to come. Instead, we will help you finance and build other types of plants for your energy needs that are much more clean.

 

And so forth. My point is, if we think smartly and responsibly, and if we give other humans help and choices, and if our intentions are honorable, then I think we can help make some progress on this issue. But, for that to happen, it seems that some attitudes must change.

 

I hope this helps. If someone is interested in the moral argument that indicates that we really should (!!!!!) be smart and help mitigate global inequality, and that it would be downright immoral for us to ignore the issue or fuel it and make it worse, please let me know. Here, I'm not speaking of "morality" as a relatively arbitrary set of rules or norms. I'm talking about "morality" from the standpoint of a rooted science-based understanding of morality's origins, roots, universal dynamics, and etc.

 

If you haven't read the recent Robert Wright article, I suggest it, and you can find it on the Times's website, using a search. Cheers. "hug"

[Boerseun]

Thanks, Hug. Interesting post.

 

There are problems to this, however. Simply put, removing global inequality isn't simply a matter of taking from A to give to B. After all, if you think about it, if everybody had a million dollars, money would lose all worth and meaning. Or even simpler; wealth cannot exist without poverty to define it.

 

So what we need to do (and think about this for a minute), is the following:

 

Instead of exporting Wealth to the Third World, maybe we should be importing Poverty. This might sound contradictory, but bear me out:

 

Say you've got a standard neighbourhood in the States, for instance. This neighbourhood consist of ten houses, of which three are upper class, and six are broad middle class, and the remaining one is lower class. Compare this to a representing neighbourhood in Africa, where one house might be comparable to the American lower class, and the rest are below-the-breadline tin shacks. Now think about this...

 

What the current model tells us is that we should be exporting Wealth to the Third World, whilst protecting our own wealth at home. Our own domestic wealth rises, with the nett effect that there's a permanent and continuous migration from the lower rungs to the higher rungs. This removes our population from the harsh reality and value of a single dollar's worth. The nett effect is inflation and devaluation of our own currency, as domestic wealth keep on rising. A car wash cost maybe $5. The price of a car wash is measured against what someone would charge for an hour's manual labour. If the poorest of the poor have millions of dollars (if the altruistic 'spreading of wealth' realises) then they would charge considerably more than $5 for a carwash. So, a certain amount of poverty is necessary for capitalism to work, unless you want your trust funds and pension funds and savings accounts to become completely and utterly meaningless.

 

So, to cut a long story short:

 

In order for the dream of 'Wealth Redistribution' and 'Helping the Third World' and all that, to actually work, then somehow, a certain amount of poverty must be imported from the Third World to the West. Maybe 'offshoring' certain businesses to the Third World is exactly that, seeing as it's taking jobs away from the West.

 

I don't know how the heck this is supposed to work, but it'll require a definite paradigm shift. The alternative is an endless spiral of devaluating western currencies and inflation.

[Michaelangelica]

Thanks, Hug. Interesting post.

 

There are problems to this, however. Simply put, removing global inequality isn't simply a matter of taking from A to give to B. After all, if you think about it, if everybody had a million dollars, money would lose all worth and meaning. Or even simpler; wealth cannot exist without poverty to define it.

The reality is, we take more from the developing world than we give.

 

Instead of exporting Wealth to the Third World, maybe we should be importing Poverty. This might sound contradictory, but bear me out:

I can't follow your logic

 

 

What the current model tells us is that we should be exporting Wealth to the Third World,

No just stop ripping them off

the nett effect that there's a permanent and continuous migration from the lower rungs to the higher rungs

.

This might be the American (Usan) Dream but it does not necessarily follow logically, in reality and is no economic model I am aware of.

and devaluation of our own currency, as domestic wealth keep on rising.

The only thing that is stopping the USA inflation is a devalued Chinese currency and the powerhouse of the Communist System in China. Otherwise the US could not be conducting expensive, illegal wars.

So, a certain amount of poverty is necessary for capitalism to work, unless you want your trust funds and pension funds and savings accounts to become completely and utterly meaningless.

Amen brother; Isn't it the truth.

 

So, to cut a long story short:

 

In order for the dream of 'Wealth Redistribution'

Most of the several trillion dollars of "wealth" is in off shore British (about 1/3) or other offshore accounts so the richest in the world can avoid tax.

What do you think is propping up (and why do we have? ) the pound, and not a Euro?

 

I don't know how the heck this is supposed to work, but it'll require a definite paradigm shift. The alternative is an endless spiral of devaluating western currencies and inflation.

Again your economic logic eludes me. How, and for what reason, do you export poverty?

[Highlander]

I see two problems.

 

1) If ALL the poor were fed and given all the chances the world population would explode to even more unmanageable levels. Bad as this sounds and it breaks my heart too, but we need to have humans die off... and at a bit of a faster rate too.

 

2) Capitalism is a wasteful, destructive and immoral giant in the world. The world's wealth is locked up in multinational corporations that simply sit on it. Sure they have what is called disposable revenue but in the end what they spend, give to charities, waste, lose etc is no where near the amount that is kept. What needs to be done (but will not be lets face it) is get rid of capitalism entirely. Capitalism is the engine of our destruction.

[Michaelangelica]

I see two problems.

 

1) If ALL the poor were fed and given all the chances the world population would explode to even more unmanageable levels.

Um if you haven't already noticed it has already we are aiming for 7 billion

Once born, you cannot let people die (as we now do). Especially long, lingering deaths like starvation, diseases like malaria, TB and AIDS. We would shoot a starving animal.

2) Capitalism is a wasteful, destructive and immoral giant in the world.

Yes, all true, but to paraphrase Churchill "It's a **** of a system but show me a better one."

We don't have to be wasteful, destructive and amoral. Many are making stands against all three. Even in the hard-nosed, money-driven corporate world.

[Boerseun]

"A **** of a system" - isn't that the truth! :phones:

 

My logic is that if we keep on enriching the Third World (or try to, at least), and we reach the dream of bringing them to our standards of income and living, then currencies would lose value. The Wealth we export (through investing in the Third World) needs to be offset by 'exporting' (okay - probably not the best term, but bear with me) a certain amount of poverty to the West. This isn't done as some sort of 'thermodynamic' balance or any such thing, it's simply necessary to maintain the value of money.

 

If the west keep on getting richer, and offloads enough of that wealth to the Third World to make them get rich as well, global economy would collapse because money will have no further worth. Look at my carwash example above. If everybody has money, nobody will be rich. So, instead of having a scenario of nine rich guys and one poor guy in the West, and one rich guy and nine poor guys in the Third World, a balance need to be struck where there are maybe six rich guys and four poor guys in both the West and the Third World. That would maintain the value of the currency in question. The problem is, for this to work, the Third World will gain five rich guys, but the West will have to gain a few poor guys. That's what I mean with importing poverty.

 

Selling this idea to the West will be impossible, but unless such a 'rebalancing' is achieved, no help in any form to the Third World with the express intent of raising their levels of Wealth could be attained without spiralling inflation and devaluation of the currencies employed by the West.

 

Capitalism might be a **** of a system, but unfortunately, it seems to be the system most in tune with human nature. All other systems have come and gone. It resonates with human nature, and that doesn't guarantee it to be a good system. After all, there are many human traits that leaves a bad taste in the mouth, like greed and avarice. But it's in our makeup, nonetheless. And all we can do is to accept it for what it is and manage it to our best interest. And making everybody stinking rich won't work - it'll be worse all round.

 

It's a dilemma. A conundrum. An enigma. But our current approach is pointless to the extreme.