As we discussed in Can We End Poverty in Just 15 Years? (Part One), ending extreme poverty for the 800 million people in this world who earn less than $1.25 per day is imminently achievable by 2030. And assuring that everyone on the planet is living above the $1.25 per day income line is a noble and worthy goal. So let’s broaden our perspective for a moment and take an in-depth look at the lives of those earning $500 to $3,000 per year.
In my experience, anyone living in extreme poverty is on the fringe of survival. And before they can make a better life for themselves, they need assistance to strengthen their tenuous hold on life itself. Helping those mired in this kind of debilitating poverty should be the primary focus of our charitable efforts around the globe. But what about those who are living just above that extreme poverty line?
There are 2.5 billion people in this world who live right above that extreme poverty line. And while they are earning more than $1.25 per day, they are still living in poverty and have very hard lives by developed world standards. Most still have dirt floors, no electricity, marginal access to clean water, and few opportunities to increase their income. Many are small shareholder farmers living off their land and working hard for a better life for their children. Even those on the high end of that next income tier subsist on an incredibly small amount of money. They are just generally not struggling for their very survival from day to day.
This next tier of poverty we’re discussing represents more than a 1/3 of the people on this earth. And putting the wheels of innovation in motion to create an opportunity for them would do more for this world than just about anything else. So what should we do?
Marie Antoinette famously said, “Let them eat cake,” in response to hearing that the peasants in her kingdom had no bread to eat. That’s a classic and exaggerated example of the excesses of wealth leading to willful disregard, and gross misunderstanding, of the reality of poverty.
Throughout history, wealth and poverty have been considered opposite ends of a very wide spectrum. And yet ironically, increasing wealth is the only known cure for poverty.
We don’t generally link poverty and wealth in this context because the word “wealth” tends to bring to mind images of materialism and excess. But the word “wealth” is actually derived from the Middle English word “welth(e),” meaning “well,” signifying the idea of health. In short, wealth is simply the presence—or abundance—of value, while poverty is the absence of such value.
So if generating wealth is the only known cure for poverty and if our goal is to end poverty, then we must focus our attention on solutions that promote the generation of wealth in poor communities. And that means business must play a key role in global poverty alleviation that goes beyond donating profits to charity.
Business is the only sustainable and scalable generator of wealth at our disposal. If we hope to make real change at massive scale, we need to radically rethink our perceptions of poverty and the poor and the mechanisms we use in seeking to help them. We need to stop thinking of the poor as people who deserve our pity and start thinking of them as potential partners with whom we can build a better future.
This isn’t revolutionary. Many of the great economic development thinkers of our time have been putting forth business as a powerful antidote to poverty for many years. Entrepreneur Muhammad Yunus, who popularized the idea of microfinance, may be the most well known. But many others such as Bill Drayton, the founder of Ashoka Institute, Nobel Prize winner Akhtar Hameed Khan, and more recently Blake Mycoskie, founder of TOMS shoes, have expounded on the power of using business as a catalyst for change. Harvard Business School professor Michael Porter is yet another great example of such thinking.
In his TED Talk from 2013 called, The Case for Letting Business Solve Social Problems, Porter accurately sums up the argument for using business as a tool of change.
What’s the fundamental problem we have in dealing with these social problems? If we cut all the complexity away, we have the problem of scale. We can’t scale. Why is that? Because we don’t have the resources. There’s simply not enough money to deal with any of these problems at scale using the current model.
So if it’s fundamentally a resource problem, where are the resources in society? How are those resources really created, the resources we’re going to need to deal with all these societal challenges? Well there, I think the answer is very clear: They’re in business. All wealth is actually created by business. And business creates wealth when it meets needs at a profit. That’s how all wealth is created. Profit is that small difference between the price and the cost it takes to produce whatever solution business has created to whatever problem they’re trying to solve. But that profit is the magic. Why? Because that profit allows whatever solution we’ve created to be infinitely scalable. Because if we can make a profit, we can do it for 10, 100, a million, 100 million, a billion. The solution becomes self-sustaining.
But just how do we tap into these wealth-generating resources that business brings?
When we started The Paradigm Project, we started by trying to answer a lot of very deep and difficult questions.
As you might imagine, the answers to these questions are as complex as the many forms of poverty around the globe. From the lack of rights to land to corrupt governmental structures and discrimination, the causes of poverty are diverse, deep-rooted, and difficult.
Effective potential solutions require specific and nuanced responses that address geographic, cultural, gender, and other fundamental drivers of behavior in order to succeed.
With The Paradigm Project, we sought to create a sustainable engine to improve the lives of the poor through financial savings, income earning potential, and the power of local economic development.
We designed a business model that not only creates jobs and local industry but also sells products that directly improve the health and economic wellbeing of families living at the base of the economic pyramid. The results of this model are stunning. Empowering families to retain more of the wealth they themselves create is dramatically reducing poverty.
Our clean cooking stoves, for instance, save families up to 50% on their cooking fuel costs. While that may seem insignificant, in the developing world cooking fuel is typically one of the top three most crippling, yet necessary, expenses for the poor—right after food and shelter. In fact, cooking fuel can consume up to 30% of household income.
Try to imagine that same situation in terms of a typical American salary. If you earn $36,000 per year, that would mean you’d be spending over $10,000 of your income to cook your meals—not for the food, just for the fuel to cook it!
In the areas of the world where we work, an investment in an efficient stove like the Jiko Koa Charcoal Cookstove immediately cuts fuel use in half, increasing disposable income for a family by up to 15%. In fact, the savings realized by efficient stoves often allows our customers to recoup the cost of the stove within 8 weeks of purchase.
Additionally, both efficient cook stoves and water treatment technologies have proven effective in reducing respiratory and water-borne diseases, thereby increasing Good Health (Sustainable Development Goal #3).
The financial cost of poor health is often incredibly high to individuals and societies, not only in terms of direct health care costs but also in terms of lost wages and other missed financial opportunities, such as successfully raising a cash crop.
Selling products like efficient cookstoves not only alleviates poverty here and now, it also addresses some of the core drivers of poverty and turns the tide in communities for the long-term.
In most of the countries where we work, women manage the household finances and make decisions about where and how to allocate the family budget. And women are shrewd investors.
When a woman buys an efficient stove, she immediately begins saving an extra 10% to 15% of household income previously earmarked for cooking fuel. After purchase, more than 90% of the women we’ve surveyed report that they reinvest these savings in their children’s school fees, additional food, or farming improvements to increase crop quality and quantity. In other words, they directly invest in their family’s future.
Over time, these savings yield reduced health-related expenses, a better-educated generation of kids, and more robust personal savings for times of need. Granted, these are long-term ongoing impacts with a wide variety of variables influencing their outcomes.
Nonetheless, setting a chain of sustainable, positive improvements into motion is often the impetus that creates momentum for real and lasting change from one generation to the next.
We can end all forms of poverty in the coming decades. But to do so, we should begin to look for ways to deploy business as a change agent to give the poor a hand up instead of a handout.
Most of the world’s poor are incredibly resilient and hard-working people who long for opportunities to better themselves and their families, just as you and I do.
Providing access to efficient cook stoves, solar power, and clean water is a great start. But the power of business to create wealth at scale has only begun to scratch the surface of what’s possible in most parts of the world.
As a social business, The Paradigm Project impacts seven of the 17 Sustainable Development Goals. While we didn’t set out to directly address each of those seven goals, we built a social business that was designed to solve real problems for real people. And in doing so, we set the wheels of change in motion in ways that continue to exceed our expectations.
We believe we can end poverty for good together. What do you think?
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