Sunday, July 10, 2011

The pot of gold at the base of the pyramid

A "supamarket" in Bujumbura July 2011
It is no longer at the end of the rainbow we will find the pot of gold - it is at the Base Of the Pyramid. To produce for the poor has become a much noticed market niche. The four billion people at the Base Of the (economic) Pyramid (Called BOP)—all those with incomes below US$3,000 in local purchasing power—live in relative poverty. Yet together they have substantial purchasing power: the BOP constitutes a $5 trillion global consumer market (WRI 2007). Most people, even the companies themselves, were utterly surprised by how rapidly cell phones spread in developing countries. Between 2000 and 2006, the number of mobile subscribers in developing countries grew more than fivefold—to nearly 1.4 billion. Growth was rapid in all regions, but fastest in sub-Saharan Africa—Nigeria’s subscriber base grew from 370,000 to 16.8 million in just four years (WRI 2007). One reason for this spectacular growth was of course that most African countries had failed to bring landlines to their population. Inspired by this success, many companies tailor-make products for the poor and innovations occur. One can transfer money quicker and easier in Kenya than in Sweden via the cell phones, an enormous leap in a country where normal bank transfer seemed to go with camel caravan, often got lost and fees of transfer were very high. As low income countries are not as stuck in infrastructure investments, we might actually see quicker uptake of some innovative technology, such as distributed power solutions, than in developed countries. Many of these products, such as cell phones, undoubtedly improve quality of life. And mobile banking certainly makes running a business both cheaper and easier. They are also to some extent "democratic" in nature, they reach many people and are not linked to a certain position, corruption or privilege. So this is all good.

Many of the "things" do take money away from local consumption though, as most of these products are imported, so it is not clear to me how they, if at all, can contribute to local economic development. Earlier, many of the poor countries could at least export agriculture products to pay for the imports, but now more and more poor countries are net importers of agriculture products. What is clear is that making people buy things is one of the most efficient strategies to integrate them into global markets. The increased need for money force people into money based employment or market oriented production.  

More people working for the Man, so to say.

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