Al Hammond: “…Most of what Mr. Karnani says seems just silly—armchair theorizing. His numbers are wrong—as we have already explained in detail elsewhere, although he does not acknowledge the criticism. And he misquotes me and attributes words to me that I’ve never spoken, thus underscoring his questionable scholarship...But it is his larger critique that is more troubling.”The above email debate between Ashoka’s Al Hammond and University of Michigan’s Aneel Karnani was posted (with permission) on Next Billion’s blog last Thursday. Their exchange was sparked by an article that Karnani wrote back in December. The article, “Romanticizing the Poor,” was published in the Stanford Social Innovation Review, and it was provocative.
Aneel Karnani: “Al, I am sorry that you are not happy with my article…that certainly was not my intention…I take scholarship seriously, and would appreciate it if you would substantiate the charge of ‘questionable scholarship.’”
In the article, Karnani argues that market-driven solutions to global poverty are in need of a serious reality check because they assume that poor people are rational consumers and innovative entrepreneurs when in fact they aren’t. To Karnani, this romantic picture of the poor gives multinational companies (MNCs) in the tobacco, alcohol, and consumer products industries license to exploit poor people with harmful, unnecessary products; and it encourages the misguided notion that microfinance is a realistic means of alleviating poverty. For Karnani, the real harm comes when governments begin deferring their responsibility in the fight against poverty to the rosy market. Karnani pleads, “More Government, Please.” A few quotes from his article:
“But poor people seem to lose control more often, for reasons that reflect the realities of their daily lives.”There is nothing romantic about the poor or being poor – anyone who has experienced poverty can tell you that – but please don’t patronize the poor either because:
“Mounting evidence suggests that just being poor hinders people’s ability to make good decisions.”
“I have found little evidence suggesting that poor people are particularly discerning consumers or creative entrepreneurs.”
Change needs to come from the bottom level. The quest for growth in poor countries has been long and elusive. In his book The Elusive Quest for Growth, William Easterly shows that in the past 50 years, foreign aid, capital investments (both in machines and humans), population control, policy reforms, and debt forgiveness aren’t the answers when it comes to explaining growth. When Easterly spoke at Stanford last spring, he concluded his talk by admitting that experts can only do so much to understand and promote growth. Instead he focused on the individual, specifically on the idea of the creative individual and individual responsibility.
Entrepreneurship isn’t classy. I agree with Karnani in that governments need to stay involved in the welfare of the poor by investing in infrastructure and reforming policies, but we’ve seen that neither government investments, nor policy reforms are the elixir to sustained growth and improved lives. Before we dismiss the poor as incapable of an entrepreneurial life, we need to consider for a moment that entrepreneurship isn’t just for the elite. Sure, poor people with cool ideas may not have access to the training, resources, and funding that their wealthier counterparts have, but all that can come with time and experience, while the vision of those ideas can never be taught.
Not all MNCs exploit. It’s suspicious that the only examples Karnani refers to in his article are MNCs in the tobacco, alcohol, and consumer products industries. What about, technology? Cell phones have penetrated developing-country markets at rapid rates, leading to interesting and beneficial services that run off the mobile platform, including mobile education (mEducation), mBanking, and mHealth. In the nascent field of mHealth, for example, the cell phone is quickly proving to be an efficient means of healthcare delivery in areas where health infrastructure is severely lacking. The introduction of mobile phones in the developing world means greater connectivity, which means more access to information and heightened transparency. The case study of fishermen in Kerala is a compelling one. (The illustration at the very top is by Belle Mellor and was used for The Economist's article "The meek shall inherit the web.") When healthy incentives align all players in the value chain, and value is delivered to each player – MNCs, governments, nongovernmental organizations, and the poor people themselves – you can’t call that exploitation anymore.
Everyone has the right to invent and innovate, and to make decisions to buy things without judgment, and if you can free yourself from a life of poverty in doing so, that’s a beautiful thing. “Freedom is just another word for entrepreneurship.” I believe in that.