Wednesday, February 1, 2012

Development 2.0: what’s wrong with the “bottom of the pyramid” way to development?

One of the important shifts in development thinking to occur over the past three decades is the emphasis on “bottoms-up” market forces. Hallmarks of this shift include privatization, entrepreneurship, and access to capital through institutions such as microfinance.  Many of these hallmarks are encapsulated in a development approach now commonly glossed as the “Bottom of the Pyramid” (Prahalad and Hart, 2002; Prahalad, 2004).  One of the hallmarks of BoP thinking is a newly imagined role for multinational corporations and a de-emphasizing of the role of the state. Prahalad and Hammond assert that “prosperity can come to the poorest regions only through the direct and sustained involvement of multinational companies” (2002:49).  Information technology similarly looms large in such analyses. Markets that were once either too difficult to reach or too poor and informal to be of interest can, so the thinking goes, be made accessible through the use of information and communications technologies (ICTs). Conversely, market forces are recognized as a key to the sustainable deployment of ICTs (e.g., Best and MacLay, 2002). Clearly, the proliferation of information and communications technologies (ICTs), especially mobile phones, seems to bear witness to the benefits such resources can bring to low income people around the world.

Beginning over a decade ago, a growing body of literature espoused what was regarded as an alternative to statist, top-down approaches to development in favor of more bottoms-up, market driven approaches. Elements of  the argument of ‘the bottom of the pyramid’ are: (1) there is a vast untapped purchasing power opportunity among the poor and private companies can profit by selling consumer goods to the poor; (2) selling to the poor and creating new markets can be both an effective approach to overcome the obstacles of underdevelopment and an opportunity for corporations to profit; and (3) the direct use of the private sector and business-driven strategies, especially the business savoir faire of large multinational corporations, to tackle the ills of underdevelopment in the areas of agriculture, cosmetics, education, health, hygiene, nutrition, and telecommunications. This business proposition has been adopted by various development agencies.  These  claims rest on a set of business school case studies including Unilever in India and Casas Bahia in Brazil, and uses these examples to link the expansion of consumer goods sales (i.e. soap and credit) to educational interventions focused on the prevention and elimination of disease and micro-credit loans targeting the poor.  For Prahalad (2004) and like-minded business experts (Prahalad and Hammond 2002; Best and Maclay 2002; Hammond et al. 2007), such business forays into the world of the poor represents a win-win solution for all stakeholders in the sense that economic and social objectives can be simultaneously attained.  Consequently, they contend, that selling products to the poor is not only a wise economic transaction but also a poverty alleviation strategy in its own right.

Moreover, using the examples of the Grameen Bank’s business model to provide small loans to serve the needs of the poor and Unilver’s innovations in marketing soap as a social good, Prahalad and Hammond argue that the private sector has created a framework for development agencies to draw on in their efforts to deal with poverty alleviation. Within the logic of inclusive capitalism, corporations have been scrambling to expand market share of their brands among the poor, and have gone to the extent of collaborating with consumers and government and non-government organizations to publicize concerns about publics issues (i.e. health and micro-credit) so as to position their products (Simanis et al. 2008; Cross and Street 2009). 

This shift has implications to the ways in which ‘development’ is framed, pointing to a fundamental re-assessment of the ways in which poverty is tackled.  Using Foucault’s work on knowledge and power, anthropologists have challenged the assumptions undergirding the notions of development and modernization theories. They have argued that development industry with its institutions and ideologies while presented as scientific, objective, and politically neutral, actually construct their target populations in specific ways and exercise power and influence over them (Escobar 1990; Ferguson 1990; Gardner and Lewis 1996). 

Escobar (1995), for instance, has probed the history and discourse of development and modernization in the so-called Third World,  viewing  these practices as part of the exercise of power, what he refers to as “mechanisms though which a politics of truth is created and maintained, through which certain forms of knowledge are given the status of truth” (1995:45).  Development and its modernizing practices, he argues, use a repertoire of instruments and techniques to organize and arrange a particular form of knowledge and a particular type of power.  The expertise and knowledge base of development planners transcends the social reality of the clients of development projects, who are identified and thus structured into particular roles, categories, and attributes (women-headed households, backward, irrational, poor, isolated, inefficient, underserved communities, emerging, and so on…).  While clients are seen as individuals who are in need to be lifted from poverty, Escobar argues, development planners control target populations and limit their room to be creative.  The implications are that development, especially top-down initiatives, will transform and modernize target populations and areas; and, second, that change is driven by outside developers (Escobar 1990).  

A careful reading of the BoP literature and examination of associated efforts suggest similar critical vulnerabilities. We summarize these in terms of four key critiques:

  1. BoP literature ignores the effects of social inequality. In its theorizing of “the poor” the BoP literature ignores forms of social stratification within societies; either because it assumes these to be homogeneous or because it hopes eventually economic growth will level the playing field for everyone.  And yet, as research has shown, structural inequities can be reinforced by BoP interventions. In his ethnographic account of the Grameen Bank lending practices in Bangladesh, for instance, Rahman (1999) demonstrates that in targeting women for microloans and the use of women groups as social collateral, microcredit actually creates debt, violence, and perpetuates social hierarchies among women. Rahman also shows that the assumption that women can be empowered with microcredit is problematic. He clearly shows that the discourse of gender and development assumes that all women are equal and homogeneous, thus neglecting the underlying structural factors such as patriarchy and the code of honor and shame that play a significant role in shaping and perpetuating gender inequalities. Thus, women do not necessarily benefit from their loans, and some women obtain loans on behalf of their male relatives. Consequently, through the deliberate use of patriarchy and its network of cultural values and social obligations to expand capital penetration, microcredit programs succeed in exacerbating gender inequalities and disentitling women rather than empowering them.  Like Rahman, Rankin (2001) examines the impacts of microcredit in Nepal and argues that microloans constitute obstacles to women’s empowerment.  She contends that women’s perceived lack of empowerment is not due to the lack of capital, but due to “constraints on the ownership of property and on women’s mobility outside the household limit their capacity to expand markets, invest in technology, or innovate in response to new opportunities” (2001:31). Rankin argues that microloans, far from empowering women, are channels for the state to mediate the articulation of the global discourse and practices of neoliberalism with local development concerns. In essence, microcredit programs serving the bottom of the pyramid, she states,  provide strategies to deepen the reach of global capitalism and in a way that also serves state power and presence at the local levels of decision-making (Rankin 2001). This ideological lapse present in both original development agendas and their current neoliberal manifestation, downplays the power dynamics that have made the poor poor and partially visible in the first place.

  1. Emphasis on market-based solutions depoliticizes poverty. Some (Sen 2000) regard this emphasis on market-based solutions as a deliberate attempt on the right to depoliticize the debate surrounding human development and the right to make demands on the state. Regardless of intentions, an overly simplistic or optimistic embrace of privatization can clearly highlight such tensions. Consider the example of the Cochabamba water wars in Bolivia.  In 2000, with the support of the World Bank the government of Bolivia sold control of its public water utility to a consortium of private companies (Aguas Del Tunari).  The people of Cochabamba refused to pay higher water prices and when the government failed to reverse its water privatization decision, a coalition of peasants, teachers, students, and workers formed and joined in public protests to keep water under local public control.  These demonstrations led to the declaration of a state of emergency and the suspension of rights to strike and legitimization of the use of the armed forces to quell civil discontent and unrest.  Ultimately, Aguas del Tunari withdrew from the deal and the protests organizers terminated the strikes.  As the demands for privatization of government water delivery services are increasing on a global scale, with proponents claiming that the poor will benefit from the dividends of privatization, grassroots movements are increasingly contesting the direct intervention of private corporations in these critical economic and social spheres. There is also growing evidence that privatization results in higher fees for basic services and is failing to reach poverty-strapped segments of society and those who have no access (Olivera and Lewis 2004; water makes money 2010).

  1. Market-based solutions overemphasize consumption at the expense of political agency. To enlist multinational corporations in market-based solutions to poverty entails an imagination of the global poor as a vast, untapped “market” of consumers. As (Karnani, 2007) has pointed out, there is no single, vast market in any sense. More to the point, in the BoP business case studies, the poor are primarily imagined as consumers, whose agency, if imagined at all, is primarily construed in terms of choice exercised with respect to product offerings.  This technique of labeling the poor in apparently value-neutral categories does not simply redirect discourse on basic human needs and services away from the political but also disempowers supposed recipients of any real economic agency. Few of the technologies, programs, or institutions examined in the BoP literature represent resources that local entrepreneurs are able to own, appropriate and master in ways that suit their level of skill and recognition of local opportunities. Rather, initiatives such as the Grameen Bank and Unilver’s soap tend to focus the entrepreneurial urge, structure activities, and even appropriate local resources (such as local coping mechanisms and funds of social capital) to deepen the reach of non-local interests (Elyachar 2005; Karnani, 2007). 

  1. Market-based models overlook the role of local entrepreneurial agency in the making of networks of value.   On close examination, particularly in light of the critiques of BoP, our data on the use of mobile phones in Morocco show that there is much more going on, and point to some important considerations in market-based approaches. Perhaps at the base of all insights is the recognition that entrepreneurism requires a considerable amount of agency – in particular agency with regards to the creation and activation of networks for the creation of value. “Value networks” are an assumed unit of analysis in contemporary business literature for mature markets and industrialized settings, yet this seems to be an underappreciated concept in the market-based development literature. As our research also shows, given the scarcity of material resources in places such as our research site, these value networks will, we argue, artfully blend both social capital and financial and business relationships. 

Hopefully, insights such as these will help us achieve a greater sophistication in our understanding of market-based development strategies. 

Hsain Ilahiane
University of Kentucky

John Sherry
Intel Corporation


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