John’s discovery of Value and subsequent post prompted me to probe a bit deeper into the site. First of all, it’s nice to see a business magazine that has the phrase “Tomorrow’s Markets” in the sub-title. Nicer still is that Value provides content of...well, value. Take for instance this excellent interview, The Global Economy's Immune System, conducted by John Elkington with Paul Hawken, the noted environmentalist and businessman.
Their conversation gets right to the point, and Hawken expresses some serious criticism of the bottom of the pyramid hypothesis. Excerpts:
I’m also more than a little concerned about the thinking that there are three billion new consumers out there, that the next big thing is the “bottom of the pyramid.” From the view of the global south that is not trained in corporations and business schools, it smacks of colonialism and imperialism all over again... It is about this idea that we can open up the bottom of the pyramid to a flood of Western-made goods that will vault them into the lower to middle classes. But then what? What the poor want are rights, not foil packets. I hope that you take these issues head on.
Strong words from a well-respected author. Is Hawken missing some key insights into the BOP, or is he latching onto the tired criticism of Prahalad’s work? I think that it’s easy to take the HLL example out of context, but would agree that capitalism for capitalism’s sake isn’t going to alleviate poverty or help us live more sustainably. I suppose I fall somewhere in the center: we can’t ignore business but to champion the cause of capitalism all the time ignores key issues around sustainability. I think Stuart Hart does an admirable job trying to tie these seemingly contrasting themes together in Capitalism in the Crossroads, which Hawken doesn’t mention. What else has he hit on, and where else has he missed?
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Take Hawken’s example of Hindustan Lever. To be honest, I hate this example. When you mention the ‘fortune at the bottom of the pyramid’, it’s the first thing people bring up. And more often than not, the comments are similar to Hawkens’: “It is about this idea that we can open up the bottom of the pyramid to a flood of Western-made goods that will vault them into the lower to middle classes. But then what? What the poor want are rights, not foil packets.”
True. And ignoring for the fact that HLL produces the goods locally in India - creating jobs and income not only for the producers, but also for the shop owners and Shakti women who distribute the sachets – its easy to look at the example as a model for greedy Western companies to extract the little consumer surplus that people living in poverty have.
According to Hawken, this “smacks of colonialism and imperialism all over again.” In my opinion, however, viewing the BOP as a mass of easily exploitable people who should be protected from capitalism does the same.
In fact, the majority of successful companies that are producing new goods and services both valued and needed by poor people are not multinationals, but are indigenous to the countries in which they operate. We have found that multinationals that do succeed in these markets do so often by partnering and empowering local industry. We track hundreds of such examples in our Activity Database, and have written Case Studies on several.
The more we learn, the more we see the market at the ‘base of the pyramid’ as a source of innovation, job creation, and ultimately the source of civil society empowerment that Hawken refers to as the ‘Sustainable Civil Society’. After all, people not mired in poverty are much more likely to vote with their dollars and make their voices heard than those struggling daily to survive. In my mind, businesses developed by the Acumen Fund are more indicative of the entrepreneurship and economic potential waiting to be unleashed in these markets than the oft-mentioned HLL shampoo sachets. So while I’m thankful for the note of caution that Hawken strikes regarding the true motivations of capitalism, I think framing the BOP on those terms obscures its real potential.