Continuing discussions of "eco-chic," I'm turning this week to another Brazilian company, Linax, that works with perfume and oil ingredients. Of course the concept of sustainable cosmetics is hardly original, but the sector deserves a little good news after having been ravaged by scandal and disillusionment- particularly following high profile exposés of the Body Shop in the late '90s. BSI was accused of using largely synthetic ingredients in supposedly "natural" products as well as essentially exploiting Kayapo indians in the Amazons for good PR. If only the Body Shop had had Linax to consult.

Dr. Aneel Karnani has posted a critique of Professor Prahalad’s book, The Fortune at the Bottom of the Pyramid and its thesis—as Karnani describes it—that multi-nationals will enrich themselves and the poor by participating in the base of the pyramid (BOP) market. Karnani describes this thesis as "at best a harmless illusion and potentially a dangerous delusion." He raises questions about the size of the BOP, its relationship to poverty, and calls for a focus on the BOP as producers.

While Karnani’s characterization of the Prahalad thesis is questionable, we can certainly agree with him that improving the productivity and welfare of BOP households is an important component of poverty alleviation. Our BOP work at Development through Enterprise has always been focused on improving both the productivity of the BOP as micro-producers and their welfare as micro-consumers-through access to information and connectivity, to financial services, to health care, to agricultural prices and inputs, and to more competitive and hence more equitable markets.

In response to Professor Karnani’s concerns about previous estimates of BOP size, we agree that a more sound empirical grounding is necessary to inform the debate. Our forthcoming publication, joint with the IFC, is based on a re-analysis of national household income and expenditure surveys—each with sample sizes in the tens of thousands and relevant to entire populations—from more than 110 developing countries.

Entitled "Tomorrow’s Markets", the publication will describe the BOP market based on purchasing power - by income level, by country and region. It will also analyze expenditure patterns by sector and by income level, focusing particularly on sectors that enhance productivity.

The point is that BOP households collectively spend money, lots of it, on a wide variety of goods and services, and are clearly willing to pay for services such as connectivity, clean water, financial services, energy, health care, and education for their children, as well as food, housing, and consumer goods. The BOP is already an economic actor, not just a passive, dependent group, and its collective actions define a market.

The pertinent development question is whether the BOP is well served by the present (often informal) markets, and whether there are unmet needs that could be better served by more competitive markets and broader participation by the legitimate private sector. Our analysis will attempt to answer such questions, with empirical data and well-documented examples. It will also clarify the difference between a poverty analysis (which seems to underlie Professor Karnani’s concerns) and a BOP market analysis.

Earlier this week the Los Angeles Times reported that over 100,000 cooperatives have been formed in Venezuela in the last year, forming “the centerpiece of President Hugo Chavez's new socialist model to create jobs and redistribute this oil-rich country's wealth.” By providing tax exemptions and interest free loans, as well as hundreds of millions of dollars in subsidies from oil and tax revenue, the Venezuelan government has given “groups and existing companies” all the reason in the world to form cooperatives.

And while cooperatives have done much to alleviate poverty and redistribute wealth, a remarkable feet in this economically stratified petrocracy, I remain highly suspicious of the project. What it comes down to is that I don’t entirely trust Chavez. Olly Millan, Chavez’s minister of popular economy, has fought off allegations that the cooperative program is a top-down, soviet-style operation, explaining that, “The state is a non-invasive facilitator.” It provides money to the cooperatives, Millan says, but once the cooperatives are fully functional, private mangers, not government bureaucrats, make business decisions. While this is a relief, I am still a bit incredulous, especially because the movement is so heavily dependent on oil, a finite resource disappearing before our very eyes.

So I am inclined to think that Venezuela is not the best place, after all, for examining successful cooperative models. Perhaps a better, or at least a less controversial, place is India, where cooperative success stories abound.