The Bottom of the Pyramid Strategy for Reducing Poverty

E c o n o m i c

& S o c i a l

DESA Working Paper No. 80 ST/ESA/2009/DWP/80 August 2009

A f f a i r s

The Bottom of the Pyramid Strategy for Reducing Poverty: A Failed Promise

Aneel Karnani

Abstract The movement emphasizing free markets to reduce poverty has found strong expression in the ‘bottom of the pyramid’ approach in recent years. It views the poor as “resilient and creative entrepreneurs and value-conscious consumers”. This romanticized view of the poor harms the poor in two ways. First, it results in too little emphasis on legal, regulatory and social mechanisms to protect the poor who are vulnerable consumers. Second, it overemphasizes microcredit and underemphasizes fostering modern enterprises that would provide employment opportunities for the poor. More importantly, it grossly underemphasizes the critical role and responsibility of the state in poverty reduction. JEL categories: O10 General (Economic Development), I30 General (Welfare and Poverty) Keywords: Poverty reduction; bottom of pyramid; consumption choices; micro-entrepreneurs.

Aneel Karnani is Professor at the Ross School of Business, University of Michigan, Ann Arbor. Comments should be addressed by e-mail to the author: [e-mail]

Contents The Poor as Value-Conscious Consumers .............................................................................................. Empirical Evidence ................................................................................................................................ Poverty and Alcohol .............................................................................................................................. Whitening Cream ................................................................................................................................. The Poor as an Attractive Market ........................................................................................................... The Poor as

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