Why Only Social Entrepreneurship Can End Global Poverty

Submitted by Mal Warwick

By Mal Warwick

At the Social Enterprise Alliance Summit '14 in Nashville, I’ll be introducing The Business Solution to Poverty, a book I co-authored with Paul Polak. If you attend, as I hope you will, you’ll learn why Paul and I believe that only business can bring an end of world poverty—and why I believe that the only sort of business that can accomplish that is social enterprise.

Little Progress Against Poverty

You’ve no doubt heard some of the noise that emanates from the World Bank, United Nations and the likes of Professor Jeffrey Sachs that “we” (collectively) are making great headway against poverty.

They’ll fill your head with statistics about percentages of this and that, if you give them a chance.

However, the harsh reality is this: there are today more than 2.7 billion people living on $2 a day or less—and that number is greater than the total population of the planet in 1950, when the global fight against poverty really began. That doesn’t sound to Paul or me as though we’re really on track to end poverty anytime within the foreseeable future, certainly not if we can’t even keep up with population growth!

Why Poverty Hasn't Been Eliminated

The reasons for the failure of traditional methods to end poverty are many and varied, and they’re well known to practitioners everywhere. People wearing suits in air-conditioned offices plan most anti-poverty programs. Anti-poverty programs are typically top-down, hierarchical affairs.

Amazingly, efforts to eradicate poverty have only rarely been directed at poor people or the challenges they face. Giveaways, popular among many NGOs and faith-based organizations as well as some governments, breed dependence and self-doubt instead of social change. There’s never enough money available for foreign aid or philanthropy to expand successful pilot programs. Lastly, anti-poverty efforts have been scattershot and uncoordinated.

The Mission-Driven Business Solution to Poverty

Paul Polak and I believe that only the private sector has the resources—and the incentives—to address the problem of poverty at its roots. In The Business Solution to Poverty, we lay out, point by point, a systematic approach that entrepreneurs can take to design, produce and market income-generating products and services for the two out of five people on Earth who live on $2 a day or less.

By taking this approach, which we call zero-based design, businesses can gain entry to vast new markets, acquire hundreds of millions of new customers and earn big profits commensurate with the high risk of first entry.

We’re not talking here about business as usual. The ventures that Paul and I write about are mission-driven businesses, single-mindedly focused on serving $2-a-day customers in such a way as to enable them to lift themselves out of poverty. These businesses must maintain an equally strong commitment to earning big profits; otherwise, they’ll fail to gain the large investments from mainstream investment funds and high-net-worth individuals that will enable them to go to scale.

But if they don’t also manage their companies in a socially and environmentally responsible manner, they’re likely to find they will be unable to do business at all in many places in the Global South. (If you think the marketplace in the U.S. has become hostile to companies that exploit their workers and the environment, just take a look at India!)

Stakeholder-Centered Management

The leadership of this new breed of multinational companies must be committed to what we call stakeholder-centered management. You may be more comfortable thinking of it as pursuing the Triple Bottom Line.

Can you see, then, why I think of these ventures as social enterprises? And can you also see—even if you don’t yet understand—why I believe that only social entrepreneurship can end global poverty?

I hope you’ll join me at Social Enterprise Alliance Summit '14 to learn why Paul Polak and I are convinced that this is the case, and how Paul is already engaged in building companies that will demonstrate exactly how zero-based design can do the job.