The World for Sale

The private sector is the best weapon against mass poverty.

By C.K. Prahalad

October 13, 2009, 3:00 PM

The world's persistent crises -- genocide in Africa, failed and failing states like Bangladesh, Nepal, Pakistan, and Sri Lanka, illegal immigration to the United States from Mexico -- seem to send us one common message. These problems persist when abject poverty is coupled with a loss of hope. The benefits of globalization seem to have bypassed more than 3 billion of the world's neediest people. We can debate whether globalization is good or bad for the poor. That is academic. Globalization is like gravity; there's no point denying its existence. Our job is to defy gravity and build a plane that flies. Our responsibility is to secure the benefits of globalization for all, to turn despair into hope and poverty into opportunity. That endeavor must start with a clear goal. We must democratize commerce. Each person, as a "microconsumer" must have access to world-class products and services. Simultaneously, each person must have access to global markets, as "microproducers," for his or her labor at fair prices. Sounds utopian? It’s more realistic than you think. Multiple examples abound. New business models, such as pay-per-use Internet kiosks, small-unit packs of aspirin or shampoo, and monthly payments have made consumption easier for the poor. The poor as microproducers can also be a reality. Take Amul, a dairy in Gujarat, India, built as a cooperative with 2.5 million farmers in 12,000 villages. It has emerged as the largest producer of raw milk in the world -- nearly 6.5 million kilograms per day -- and is rapidly becoming a global brand. China and India have shown that in just one lifetime, hundreds of millions of people can move out of abject poverty.

The world’s persistent crises — genocide in Africa, failed and failing states like Bangladesh, Nepal, Pakistan, and Sri Lanka, illegal immigration to the United States from Mexico — seem to send us one common message. These problems persist when abject poverty is coupled with a loss of hope. The benefits of globalization seem to have bypassed more than 3 billion of the world’s neediest people. We can debate whether globalization is good or bad for the poor. That is academic. Globalization is like gravity; there’s no point denying its existence. Our job is to defy gravity and build a plane that flies. Our responsibility is to secure the benefits of globalization for all, to turn despair into hope and poverty into opportunity. That endeavor must start with a clear goal. We must democratize commerce. Each person, as a "microconsumer" must have access to world-class products and services. Simultaneously, each person must have access to global markets, as "microproducers," for his or her labor at fair prices. Sounds utopian? It’s more realistic than you think. Multiple examples abound. New business models, such as pay-per-use Internet kiosks, small-unit packs of aspirin or shampoo, and monthly payments have made consumption easier for the poor. The poor as microproducers can also be a reality. Take Amul, a dairy in Gujarat, India, built as a cooperative with 2.5 million farmers in 12,000 villages. It has emerged as the largest producer of raw milk in the world — nearly 6.5 million kilograms per day — and is rapidly becoming a global brand. China and India have shown that in just one lifetime, hundreds of millions of people can move out of abject poverty.

What’s been the key to their success? We know aid is not the answer to that kind of massive poverty. Subsidies, grants, and philanthropy may have a role to play, but the real solution is local development of the private sector. That requires specific actions that take into account the historical background of the country at hand. Amul has prospered because it anticipated a commercial need of India’s poor, agrarian population. In China, Communist Party leaders are finally recognizing the importance of property rights to protect their country’s entrepreneurial success.

The governments — and companies — that understand that what pulls the poor out of poverty in Bangladesh won’t necessarily work in Haiti will not only prosper but do their part to add millions of new producers and consumers to the global economy. It is possible for the private sector to do well and to do good. The poor are ready. Are we?

C.K. Prahalad is Paul and Ruth McCracken distinguished university professor of corporate strategy at the University of Michigan's Stephen M. Ross School of Business.