Globalization and poverty by Michael Blowfield London Business School

2. A
major promise of economic globalization is
that it will create a tide of prosperity that
will lift all boats, and overall, even if some
people gain more than others, the kind of crushing
poverty that has long been part of the human
condition will be removed. Business as the main
creator of wealth and as the beneficiary of the free
trade and flow of capital that are pillars of economic
globalization is clearly an important element of
globalization’s poverty alleviation agenda. Indeed,
some authors claim that it is only by encouraging
free enterprise that poverty can be ended.
Yet, is it reasonable to argue that business has a
responsibility to tackle poverty? Should companies
simply conduct business according to the laws of the
land and the marketplace, or should they consciously
seek to affect poverty? Is there a role business can
play that is different from, and more efficient than,
that played by international development agencies?
The bottom of the pyramid
Much has been said about “the fortune at the bottom
of the pyramid” and social entrepreneurship. Both
of these concepts have become powerful ideas in
thinking about corporate responsibility in terms of
opportunity rather than danger. Along with specific
poverty-oriented business models such as fair-trade
and micro-finance, they promise to harness the
strengths of business (for example, innovation,
raising capital, marketing, managerial efficiency)
and set them to work as assets to benefit the poor
and marginalized. Thus, in addition to brands such
as Max Havelaar, Equal Exchange, Honest Tea, and
Grameen that have been built on serving the needs
of the poor, today companies such as Standard
Charterered, Vodafone, and Deutsche Bank have
developed product lines that address specific niches
in what have hitherto been considered underserved
markets. Moreover, the idea that the poor and
otherwise marginalized sections of society present
opportunities for business is nothing new: one only
has to think of Avon, which began with the idea of
selling cosmetics to (typically rural) women in the
United States through a network of entrepreneurs
picked from people who lived in those same
communities – a model that has been exported to
companies around the world.
However, poverty as opportunity is only one aspect
of its relationship with business. Furthermore, to
think of the poor as only producers or consumers is
to ignore the complex nature of poverty: there have
been numerous studies that show there are
Business Strategy Review Winter 2007© 2007 The Author | Journal compilation © 2007 London Business School 35
→
Can business eliminate poverty? And, if yes, should it? As business
becomes more global in scope, companies need to think about how they
will address the poorest sectors of the planet. Michael Blowfield talks
about the four dimensions of the business-poverty relationship.
Globalization and poverty
Trends
Should companies simply conduct business according to
the laws of the land and the marketplace, or should they
consciously seek to affect poverty?

3. gender, racial, national, political and other non-
economic dimensions to poverty. Thinking of poverty
as a lack of money, or a lack of skills and
infrastructure necessary to obtain it, can lead to
some very narrow and potentially misleading ideas
of what poverty means and how it can be addressed.
For instance, there is heated debate as to whether
free markets can prosper without a functioning
democracy; there is evidence that poor rural women
are especially prone to exploitive labour conditions
in developing economies; and there are many
studies of how ethnicity affects access to economic
opportunity and political power in regions such as
west Africa and south Asia. Although progress out of
poverty is still often measured in terms of income,
access to education, infant mortality and disease,
several international development agencies use a
multi-faceted model to understand poverty; such
models consider not only financial capital, but also
access to natural resources (natural capital), skills
and education (human capital), infrastructure and
technology (physical capital) and participation in
social networks (social capital). It is the blend and
balance of these different types of capital that,
according to what is known as sustainable
livelihoods theory, ultimately determine whether
an individual or family can prosper.
Sustainable livelihoods theory is just one of the
many lenses that have developed over the years to
help understand poverty. Authors since at least
Vladimir Lenin have critiqued the system of
capitalism as causing poverty, either globally or in
terms of a developing/developed country world
divide. Others writers (such as William Greider as
well as Will Hutton and Anthony Giddens), in their
books on global capitalism, have focused on how
the behaviour of business or of particular industries
and countries relates to poverty. Even those who
endorse the ultimate efficacy of globalization argue
that the process needs to be better managed and
that the role of business cannot simply be left to
unfettered free markets.
A business-poverty relationship?
What emerges from these and other theories of
poverty and development is an awareness of the
complexity of the factors surrounding poverty itself
and of the business-poverty relationship. Yes, there
are geographical dimensions to poverty – some
countries are much poorer than others (the
developing/developed country divide), but one only
has to look at disparities in wealth within countries
such as the US, Russia and Brazil to see that not
only inequality, but also real poverty, exist in rich
nations. Likewise, there is evidence that women
experience poverty differently from men and in
some cultures are marginalized in ways that men
are not. But this is not to say that all women are
poor or denied the opportunity to progress. Overall,
there are national, gender, racial, ethnic, and other
dimensions to poverty; but they do not fully explain
either the causes of poverty or its possible solutions.
Given this degree of complexity – and the fact
that, historically, business has not been considered
a partner in international development – it might be
argued that business should not be overly bothered
with poverty and its alleviation. As noted, there
are many who believe that free markets will of
themselves eradicate poverty in due course, even if
some have to endure pain in the process. As Henry
Wilcox, a character in E.M. Forster’s Howards End,
observed during an earlier era of economic
globalization, “The poor are poor, and one’s sorry for
them, but there it is. As civilization moves forward,
the shoe is bound to pinch in places, and it’s absurd
to pretend that anyone is responsible personally.”
But that era came to a screeching halt in the
early 20th century, in part because of perceptions
that it was unfair and a cause of immiseration
(economic impoverishment). The continuing protests
against globalization by supporters of workers’ rights,
indigenous peoples, the environment, and human
rights; the emergence of popular anti-big business
movements in countries such as Venezuela and
Bolivia; as well as increased unrest in globalization’s
success stories in countries such as China and
India suggest that the fairness and justice of
economic globalization is still widely disputed.
On top of this, poverty has been associated with
a rise in militant religious groups from Israel to
Indonesia; and, in wealthy Western markets,
influential segments of consumers are factoring
poverty alongside human rights and environmental
issues into their buying behaviours.
While there may not be a watertight case as to
why business should pay attention to poverty, there
are numerous reasons why the issue may gain many
companies’ attention. However, these reasons vary
© 2007 The Author | Journal compilation © 2007 London Business SchoolBusiness Strategy Review Winter 200736
→
Trends
One only has to look at disparities in wealth within
countries such as the US, Russia and Brazil to see that not
only inequality, but also real poverty, exist in rich nations.

4. Business Strategy Review Winter 2007© 2007 The Author | Journal compilation © 2007 London Business School 37
Trends
The only way is up.

5. according to the way particular companies or
industries interface with poverty. We have already
seen that some see poverty as a business opportunity;
and this thinking is influencing industries such as
banking, food and agriculture, and household
products. But, as mentioned earlier, that is only
one dimension of this relationship. Business can
also be a cause or a victim of poverty, or it can
remain neutral.
Marley, not Scrooge
One of the drivers of corporate social responsibility
has always been concern that business exploits
poverty through such practices as low wages and
poor working conditions that take advantage of lax
labour and health and safety laws. Recall Ebenezer
Scrooge’s comment to the ghost of his former
partner, Jacob Marley, in Charles Dickens’ A
Christmas Carol: “But you were always a good man
of business, Jacob.” Marley responds in a flash.
“Business!” cried the Ghost, wringing its hands
again. “Mankind was my business. The common
welfare was my business; charity, mercy,
forbearance, and benevolence, were, all, my
business. The dealings of my trade were but a
drop of water in the comprehensive ocean of
my business!”
Globally, companies in oil and mining have been
criticized for abusing communities near their
facilities, undermining their sources of income,
ignoring their human rights and taking away their
land and water rights. In these instances, business
can be accused of being a cause of poverty, which is
a very different dynamic for the company to address.
Equally, business can suffer from poverty and its
consequences. For example, since the 1990s
companies in Africa and parts of Asia have
recognized that high rates of HIV/AIDS and other
fatal diseases starve them of the skilled workforce
they need to be competitive. Likewise, if schools do
not function properly or if (as is the case with many
school-age girls in south Asia and sub-Saharan
Africa) significant sections of the population receive
little or no formal education, companies will
struggle to find an adequate supply of workers.
However, it also needs to be acknowledged that
companies can treat poverty with indifference.
Private capital has grown to surpass other forms of
foreign direct investment (FDI); and, after a dip in
the early years of the new millennium, FDI in
developing countries has increased. But these
countries still only account for 36 per cent of all
FDI, and the proportion going to poor countries
shrivels as soon as China and India are removed
from the statistics.
It can be argued that multinationals depend on
such countries for growth, (and this is true in places
such as China, India and Brazil) but developed
economies are still the most profitable markets.
Furthermore, as the threat of climate change and
other aspects of sustainable development become
better understood, the role and nature of growth
itself is coming under the spotlight, raising all
manner of questions about what sort of prosperity
the Earth can accommodate in the future and how
the poor will figure in what might be a very different
model of economic progress. ■
Resources
Michael Blowfield, “Business and poverty:
A framework”, Presentation to the University of
Cambridge, Post-graduate Certificate in Sustainable
Business, April 2007.
Paul Collier, The Bottom Billion: Why the Poorest
Countries Are Failing and What Can Be Done About
It, Oxford University Press, 2007.
William Greider, One World, Ready or Not: The Manic
Logic of Global Capitalism, Penguin Business, 1998.
Will Hutton and Anthony Giddens, Global
Capitalism, New Press, 2001.
Kevin O'Rourke and Jeffrey Williamson, Globalization
and History: The Evolution of a Nineteenth-century
Atlantic Economy, MIT Press, 2001.
Joseph Stiglitz and Andrew Charlton, Fair Trade for
All: How Trade Can Promote Development, Oxford
University Press, 2007.
© 2007 The Author | Journal compilation © 2007 London Business SchoolBusiness Strategy Review Winter 200738
→
Michael Blowfield (mblowfield@london.edu) is a Teaching Fellow at London Business School,
specializing in corporate responsibility.
Trends
London Business School
Regent’s Park
London NW1 4SA
United Kingdom
Tel +44 (0)20 7000 7000
Fax +44 (0)20 7000 7001
www.london.edu
A Graduate School of the University of London