Don’t Patronize, Please

Jessica Lee

Jessica Lee volunteers in her free time with Wokai’s Bay Area Chapter as Business Strategy Associate. You can write to her (jessica dot lee at wokai dot org), or visit her blog to get in touch.

 Al Hammond: “…Most of what Mr. Karnani says seems just silly—armchair theorizing. His numbers are wrong—as we have already explained in detail elsewhere, although he does not acknowledge the criticism.  And he misquotes me and attributes words to me that I’ve never spoken, thus underscoring his questionable scholarship and the sloppy editorial work of the journal that published him. But it is his larger critique that is more troubling.”

 Aneel Karnani: “Al, I am sorry that you are not happy with my article…that certainly was not my intention…I take scholarship seriously, and would appreciate it if you would substantiate the charge of ‘questionable scholarship.’”

The above email debate between Ashoka’s Al Hammond and University of Michigan’s Aneel Karnani was posted (with permission) on Next Billion’s blog last Thursday. Their exchange was sparked by an article that Karnani wrote back in December. The article, “Romanticizing the Poor,” was published in the Stanford Social Innovation Review, and it was provocative.

In the article, Karnani argues that market-driven solutions to global poverty are in need of a serious reality check because they assume that poor people are rational consumers and innovative entrepreneurs when in fact they aren’t. To Karnani, this romantic picture of the poor gives multinational companies (MNCs) in the tobacco, alcohol, and consumer products industries license to exploit poor people with harmful, unnecessary products; and it encourages the misguided notion that microfinance is a realistic means of alleviating poverty. For Karnani, the real harm comes when governments begin deferring their responsibility in the fight against poverty to the rosy market. Karnani pleads, “More Government, Please.” A few quotes from his article:

“But poor people seem to lose control more often, for reasons that reflect the realities of their daily lives.”

“Mounting evidence suggests that just being poor hinders people’s ability to make good decisions.”

“I have found little evidence suggesting that poor people are particularly discerning consumers or creative entrepreneurs.”

There is nothing romantic about the poor or being poor – anyone who has experienced poverty can tell you that – but please don’t patronize the poor either because:

1.    Change needs to come from the bottom level. The quest for growth in poor countries has been long and elusive. In his book The Elusive Quest for Growth, William Easterly shows that in the past 50 years, foreign aid, capital investments (both in machines and humans), population control, policy reforms, and debt forgiveness aren’t the answers when it comes to explaining growth. When Easterly spoke at Stanford last spring, he concluded his talk by admitting that experts can only do so much to understand and promote growth. Instead he focused on the individual, specifically on the idea of the creative individual and individual responsibility. 

2.    Entrepreneurship isn’t classy. I agree with Karnani in that governments need to stay involved in the welfare of the poor by investing in infrastructure and reforming policies, but we’ve seen that neither government investments, nor policy reforms are the elixir to sustained growth and improved lives. Before we dismiss the poor as incapable of an entrepreneurial life, we need to consider for a moment that entrepreneurship isn’t just for the elite. Sure, poor people with cool ideas may not have access to the training, resources, and funding that their wealthier counterparts have, but all that can come with time and experience, while the vision of those ideas can never be taught.

3.    Not all MNCs exploit. It’s suspicious that the only examples Karnani refers to in his article are MNCs in the tobacco, alcohol, and consumer products industries. What about, technology? Cell phones have penetrated developing-country markets at rapid rates, leading to interesting and beneficial services that run off the mobile platform, including mobile education (mEducation), mBanking, and mHealth. In the nascent field of mHealth, for example, the cell phone is quickly proving to be an efficient means of healthcare delivery in areas where health infrastructure is severely lacking. The introduction of mobile phones in the developing world means greater connectivity, which means more access to information and heightened transparency. The case study of fishermen in Kerala is a compelling one. When healthy incentives align all players in the value chain, and value is delivered to each player – MNCs, governments, nongovernmental organizations, and the poor people themselves – you can’t call that exploitation anymore.

Everyone has the right to invent and innovate, and to make decisions to buy things without judgment, and if you can free yourself from a life of poverty in doing so, that’s a beautiful thing. “Freedom is just another word for entrepreneurship.” I believe in that.

Note on Image Sources: cartoon is from the Economist, photo is from the Washington Post. 

Comments

[Daniel]

I think that there is a point where governments can get involved, and it is absolutely crucial to the success of BOP strategies.

1. Mitigate Uncertainty

This asks the question, should I invest in... new equipment, new livestock, new business, my childrens' education? If you are uncertain about the future policies or direction of the establishment 10 years down the line, then you might not want to invest in your child's education. However, if you are certain that the government can maintain a certain level of growth and stability so that there will be good job prospects for your children in 10-20 years, then you won't have them work on the farm.

2. Protect property rights

This asks the question, why should I put my effort into growing my business if the government, or some gangster, is just going to take it. If property rights are not protected, indeed celebrated, then there is a great deal of risk in trying to expand any business when it can quickly be taken away from you at great cost.

In a sense, this has been what the Chinese government has been doing. It is shoring up the property rights of folks and has almost guaranteed a certain level of economic growth and stability.

[Jessica]

Hi Daniel, well said. Government regulation is especially needed at the BOP where there's an urgent need for investment, policy reform, and other forms of protection. Government involvement, then, supports growth in poor countries, but it doesn't drive it. Do you agree?

[Daniel]

Jessica, that's a very good point. It can be very difficult for government to drive innovation. There was a great quote by Samuel Broder, former director of the National Cancer Institute:

"If you had demanded that the N.I.H. solve the problem of polio not through independent, investigator-driven discovery research but by means of a centrally directed program, the odds are very strong that you would get the very best iron lungs in the world - portable iron lungs, transistorized iron lungs - but you wouldn't get the vaccine that eradicated polio"

That having been said, I think the money being set aside for alternative energy is great, but it is in the hundreds of billions of dollars. Which will be needed to achieve scale. Whole other thing...

But you're right. Government is really the only institution that can set up the rules to encourage entrepreneurship. I think it is true for poor countries and rich countries.

[Sam L]

On a related note, I do think there is some truth in that microfinance at times get overly romanticized.

The following study provides a fairly well-balanced observation:

http://www.wilsoncenter.org/index.cfm?essay_id=361250&fuseaction=wq.essay

[Lisa]

If having the necessary vision to lay the foundation of successful entrepreneurship (Why Entrepreneurship Isn't Classy...)is a key component in developing a small business, then poor people are going to be at a disadvantage. I see this with the young (poor) kids I work with in San Diego. Without vision you are dead in the water. You can have great government funding, friendly regulations, pro-people business environments, but if your struggle to survive is all-consuming, then the time and mental energy needed to develop vision will face very stiff odds indeed.

"The vision of those ideas can never be taught." True. But vision comes from someplace. Extreme poverty saps your energy, keeps you preoccupied with seemingly mundane yet threatening challenges, and surrounds you with examples of shortsighted actions (because you live life in real time, constantly). I'll never forget how a mother's attempt to get an over the counter inhaler for her son's asthma triggered DAYS of fallout for this family. Living life with every moment a potential crisis does not leave a lot of mental room for contemplation, a prerequisite for vision.

I'm afraid I agree quite a bit with what I've read briefly of Karnani's view. It certainly rings true for the urban poor I work with.

Yet I believe in microfinance very much...is this a contradiction? Something I need to think about more, I guess.