Monday, November 14, 2011
Business vs Aid
Over the semester, we have had several conversations about the role of technology in economic development. Access to technology, appropriate or more advanced seems to be key to the economic take-off that developing countries are yearning for. The aid community is promoting the adoption of technologies but questions remain about the sustainability of these initiatives. Would private companies be a viable alternative then? Can big multinational companies contribute to the adoption of technology and thus help the poor? We are not talking about philanthropy here, we are not talking about short term projects. These companies are seeking profits at the bottom of the pyramid, viewing the poor as potential customers. The class was quite skeptical. Here is another reason for skepticism: these companies have shown in the West that profits take priority over human rights and local economic growth. Over the last decades, the frequent lawsuits against Walmart remind us of the essential role of regulatory checks and balances. Developing countries not only lack these legal boundaries, but they are also desperate for economic growth, a disastrous combination!
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Private Corporations and MNCs have largely become a necessity for economic growth to occur in regions of "untapped potential". MNCs and Venture Capital funds can help provide and implement technology, while also profiting off of the situation. It is a win-win situation for the firms and the consumers (the people of Africa). That is why these initiatives should not be looked at in terms of a charitable situation, but rather a profit opportunity. Many companies are skeptical of investing in Africa because they believe that most Africans do not have the disposable income to purchase their products. While that theory is true, there is another way that Africans can buy their products. Companies must think of the consumers in terms of an aggregate model or groups of people. When a village or group of consumers allocate their incomes together to share usage of the new technology, it not only implements the technology but also helps spread it among the community. The Bottom of the Pyramid has an extremely large aggregate purchasing power and when used effectively, many can benefit from the transactions and the companies make a profit. Human rights is not an issue regarding Africa if the profit opportunity also profits the consumer in terms of helping the region of local economy grow to the investment and availability in technology, especially information and communication technologies.
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