Document Type

Article

Publication Date

1-1-2010

Comments

http://sbeonline.org/?page_id=4894

Abstract

Six defective mental models that obstruct multinational enterprises from efforts at global poverty alleviation are identified. These include mindsets that define poverty in terms of individual daily earnings, that contend that global poverty is unsolvable, and frame global poverty as a human rights issue. In addition, there are the biased mental models that contend that the poor are incapable, that making money from the poor is unseemly, and that partnerships between multinational enterprises and public organizations are unlikely. It is claimed that such mental models challenge business leaders to be morally imaginative, and specific examples are cited that dispute each of these faulty mindsets. The topic of global poverty is of central and critical interest to the United Nations, the World Bank, the International Monetary Fund (IMF), and myriad other international foundations, governmental and non-governmental organizations. Additionally, many scholars, including Jeffrey Sachs (2005) and Paul Collier (2007), have devoted themselves to making a difference in the lives of the global poor. Poverty is a dreadful and intolerable human condition, and not merely an issue confined to regions where it is prevalent. There are enormous spill-over effects from global poverty, including environmental degradation, urban slums, refugee movements, and violence toward innocents, all effects that are costly to the developed as well as the developing world. Yet, as William Easterly reminds us, the industrialized world neither has been remiss in trying to confront poverty nor has it been entirely unsuccessful. On the other hand, although international organizations and developed countries have contributed over $2.13 trillion dollars to poverty reduction since the end of the Second World War, significant alleviation of extreme poverty certainly remains well out of reach (Easterly, 2006). In the last decade, a number of observers have challenged multinational business enterprises (MNEs) to address the global poverty problem. Prahalad (2005), for example, has directed attention to the market potential of the global poor at the base of the pyramid (BoP) and has called upon multinational enterprises (MNEs) to look there as markets in the developed world over-saturate and stagnate. Such market entry necessitates new products, new distribution channels, and financing schemes; but Prahalad contends that selling to the global poor promises an enormous profit potential (Hammond & Prahalad, 2004). His approach has been termed, inclusive capitalism in Wikipedia. A contrasting perspective was advanced by Bill Gates in January, 2008 when he introduced the term creative capitalism into the lexicon of global poverty reduction. According to Gates, MNEs should enter BoP markets not just to earn a profit but also to create and to sustain a positive social reputation for the firm (Gates, 2008). Unlike inclusive capitalism, creative capitalism rests on the expectation that good deeds will be rewarded with enhanced brand recognition and an attractive corporate image. A third and much more theoretically tenable justification for MNE activity at the BoP is provided by Porter and Kramer (2006). They argue that MNE anti-poverty efforts are consistent with a type of corporate social responsibility they call Strategic CSR (corporate social responsibility). In their formulation, in order for an MNE to invest in commercial opportunities at the BoP, there must be a convergence of its business goals and capabilities with its social and, we might add, ethical responsibilities. Each of these conceptual rationales has its strengths and weaknesses, and it is not our intention to evaluate them in this paper. Rather, our central argument is that, whatever the reason, MNE entry into the BoP is prone to distorted mental models about poverty, about business, and about business’ role in poverty alleviation. In this paper, we will describe six mental models of this kind, tracing their origins and demonstrating how existing profitable enterprises in poverty markets dispute their validity. While these mental models appear rather innocuous, they are both morally offensive and effectively problematic. When harbored, they lead to decisions concerning whether and how to enter poverty markets that are wrong-headed and hurt the poor.

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