Developing a world that works
Imagine that global poverty was presented to you as a Harvard Business School problem. Here's the set-up: While the economies of the industrialized nations generally expanded in recent decades, commercial development remains stagnant in most of Africa, Asia, and Latin America. The developing world's primary work force of self-employed "small producers" - 2 billion entrepreneurs involved mainly in agriculture and low-tech manufacturing - aren't competitive in the global marketplace and have a hard time turning a profit. Most earn less than $2 per day; inefficiencies abound, resources are underutilized, business infrastructure is woefully lacking, and unsustainable production methods are damaging the environment at an alarming rate.
Now the exam question: What's the best strategy to enhance workers' productivity, increase their income, and help them connect with the global economy?
The answer: Fight poverty with profit - by employing the following principles:
*Focus on helping small producers in the developing world upgrade their businesses in economically and environmentally sustainable ways.
*Do this by sharing the industrialized world's most valuable asset: its technical knowledge of how to improve product quality, add value to products through innovation and better promotion, expand and streamline production, and create links with new and larger markets. This, not grants or hand-outs, will lead to higher incomes in the developing world.
*Link loans and investments to business planning assistance: Money with no business plan is wasted; a plan that lacks money won't get off the ground.
*Implement this strategy on a massive scale.
Pie in the sky? We're closer than you think. Our knowledge about how to stimulate commerce has never been greater, and many model enterprises are now up and running. In a dozen countries in Africa, for instance, new local manufacturing companies are producing foot-powered irrigation pumps that allow small farmers to expand their cropland - often doubling incomes. And in Bolivia, alpaca herders are tripling their incomes thanks to a new processing plant that spins fleece into cord and yarn for sale in Europe and Japan.
Think what would happen if we could implement these programs on a global scale. It can happen, but it's going to require a coordinated effort. The world's non-governmental organizations must continue to focus on business development, while government and international financial institutions have to play a supportive role. Philanthropic funders need to contribute as well.
And most important, the private sector has to become a major player.
One key strategy is for international corporations to "partner" with local enterprises by providing producer groups with a modest loan or investment to upgrade facilities. The corporate partner agrees to buy the producers' upgraded products once they meet commercial standards. In 1997, for example, the Starbucks Coffee company financed the upgrade of two Guatemala coffee-processing plants at a cost of $37,500 each. Starbucks bought the region's entire 1998 processed coffee- bean crop. The Guatemalan coffee growers' incomes rose 20 percent, and they now have a reliable outlet for their new product. Meanwhile, Starbucks has gained a new, competitively priced supplier, and helped forge an important economic link between the global economy and a group of small producers.
Global poverty is a problem, all right - and the welfare of billions of individuals, as well as our hopes for a prosperous, stable, and peaceful world, are riding on the outcome. Small-business development is the big answer that works for everyone.
*Thomas Downey, a former Democratic congressman from New York, is chairman of the Downey McGrath Group Inc. in Washington. Richard Williamson, an assistant secretary of state under President Reagan, is a partner in the Chicago-based law firm of Mayer, Brown, and Platt. They co-chair the board of trustees of EnterpriseWorks Worldwide, an anti-poverty organization in Washington.
(c) Copyright 2000. The Christian Science Publishing Society