The Bottom of the Pyramid Strategy for Reducing Poverty

Topics: Poverty, Bottom of the pyramid, Poverty reduction Pages: 18 (7001 words) Published: February 11, 2012
E c o n o m i c

& S o c i a l

DESA Working Paper No. 80 ST/ESA/2009/DWP/80 August 2009

A f f a i r s

The Bottom of the Pyramid Strategy for Reducing Poverty: A Failed Promise

Aneel Karnani

Abstract The movement emphasizing free markets to reduce poverty has found strong expression in the ‘bottom of the pyramid’ approach in recent years. It views the poor as “resilient and creative entrepreneurs and value-conscious consumers”. This romanticized view of the poor harms the poor in two ways. First, it results in too little emphasis on legal, regulatory and social mechanisms to protect the poor who are vulnerable consumers. Second, it overemphasizes microcredit and underemphasizes fostering modern enterprises that would provide employment opportunities for the poor. More importantly, it grossly underemphasizes the critical role and responsibility of the state in poverty reduction. JEL categories: O10 General (Economic Development), I30 General (Welfare and Poverty) Keywords: Poverty reduction; bottom of pyramid; consumption choices; micro-entrepreneurs.

Aneel Karnani is Professor at the Ross School of Business, University of Michigan, Ann Arbor. Comments should be addressed by e-mail to the author: akarnani@umich.edu

Contents The Poor as Value-Conscious Consumers .............................................................................................. Empirical Evidence ................................................................................................................................ Poverty and Alcohol .............................................................................................................................. Whitening Cream ................................................................................................................................. The Poor as an Attractive Market ........................................................................................................... The Poor as Entrepreneurs ..................................................................................................................... BOP Proposition Under-emphasizes the Role of the State ..................................................................... Conclusion ............................................................................................................................................ Fortune or Mirage at the Bottom of the Pyramid (BOP)? ...................................................................... References .............................................................................................................................................. 2 2 4 5 6 7 8 9 10 11

UN/DESA Working Papers are preliminary documents circulated in a limited number of copies and posted on the DESA website at http://www.un.org/esa/desa/papers to stimulate discussion and critical comment. The views and opinions expressed herein are those of the author and do not necessarily reflect those of the United Nations Secretariat. The designations and terminology employed may not conform to United Nations practice and do not imply the expression of any opinion whatsoever on the part of the Organization. Typesetter: Malgorzata Juszczak

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The Bottom of the Pyramid Strategy for Reducing Poverty: A Failed Promise Aneel Karnani

A libertarian movement that emphasizes free markets to reduce poverty has grown strong in recent years. The think tank World Resources Institute advocates ‘development through enterprise’ and emphasizes business models driven by a profit motive that engage the poor as producers and consumers. The Private Sector Development network, part of the World Bank, focuses on private sector led growth in developing countries. CK...

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