It's The Markets, Stupid

“What counts as a market?” Pro-Founder CEO Jessica Jackley asked me over coffee on the second day of the Clinton Global Initiative gathering where she led the session “Supporting the Next Generation of Market-Based Innovators.”

Jackley, the social entrepreneur who previously co-founded the microlending enterprise Kiva.org, was referring to the developing world where more often than not the platform traditionally has been charity. “Does it count as a market when the buyer is detached from the recipient?”

“You mean donor,” I replied.

“The donor is the buyer,” Jackley explained. “A donation is a transaction, in the end purchasing the resources someone else needs. However, I think the closer you can get to having the person in need act as a direct purchaser herself, so she can choose directly what she needs, the better.”

MIT professor Iqbal Quadir made a similar point at the “Strengthening Market-Based Solutions” panel. “We have to think of the poor as producers, not consumers.”

The good news for Quadir is that at this year’s CGI conclave, people aren’t just thinking about it, they’re heatedly debating it. The even better news is that the debate is moot.

Markets and the poor have historically had a difficult relationship. But that was then. The line between private and public has blurred. You are as likely to bump into someone representing Starbucks, Google or Wal-Mart in Mumbai or Kigali as you are into someone from the World Bank, IMF or USAID.

Development is no longer a monopoly of the public sector – a worry for many. That much, as I noted in my previous post, was clear in the animated debate between Grameen Bank founder and Nobel Laureate Muhammad Yunus and SKS Microcredit founder Vikram Akula over whether it is right to “profit from the poor.”

“Profit,” Yunus said, “confuses microcredit.” It should find a label of its own, he suggested, offering “bottom of the pyramid credit” as an alternative. At the same time, the microlending pioneer was sensitive about being seen as anti-private sector. “I’m not against profit,” he emphasized. What he’s against is “crossing the boundaries.”

Trouble is, markets don’t have boundaries.

China has proved that to be true. The Asian giant has descended upon the developing world full-force, pouring millions into building roads and improving infrastructure throughout Africa and Latin America in exchange for natural resources and a place for Chinese goods. And the poor that they’re marketing to are welcoming them.

“Be suspicious when people say there’s no market,” Partners in Health co-founder Paul Farmer said in reference to drug companies unwilling to bring--not their high-end patented products--but generic brands to the developing world. “They’re trying to stop a conversation.” Stop it, development activists argue, because the private sector wants only to make a profit, not end poverty.

While private sector motives vis-à-vis the poor will never cease to be scrutinized, there is no question that the poor have markets. The issue, as Jackley noted, is how those markets are defined and, more important, allowed to thrive. Herein lies the opportunity for investors and entrepreneurs all over the world.

There is an opening for “market-based initiatives” to fill a gap. It is a gap created by government-led aid initiatives that have failed and the non-profits that have simply lacked the scale and platform to put a dent in the poverty trap.

The success of market-based initiatives will depend, as Jordan-based Aramex CEO Fadi Ghandour noted, on the willingness, and patience, to see returns as a long-term strategy. “We have fallen into the trap of thinking everything short-term, immediate, instantaneous gratification,” Ghandour said on the market-based solutions panel he shared with Quadir.

Development, he continued, is about “seasons” and purpose. “If I’m investing in education and I’m empowering my people with knowledge and capabilities that will take 20 years to be generationally changing is that profitable or not? Or do I have look for an immediate return on a financial investment?”

Some, particularly in the Fortune 500 world, would say yes, you need an immediate return. Yet pursing profit, rather than investing in the countless individuals who comprise the market, is precisely what exacerbated the recent financial crisis.

The take-away from day two of CGI is that development has moved on from the question of whether it’s okay to profit from the poor. That, as the several sessions on market-based solutions demonstrated, is already happening.

The healthy turnout at CGI by philanthropists, CEOs, government and non-profit officials, and colorful discussions they engaged in, indicate that it is not a phenomenon that will go unchecked. They are on the “profit from the poor” watch – and prepared to ensure that profit helps, not hurts, the poor.

Today’s CGI nugget: embrace the market. That’s where the opportunity, as Bono has declared, to “Make Poverty History” lies. Or, to put it in Clintonian terms: It’s the markets, stupid.

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Elmira Bayrasli writes and works on global economic issues. She is working on a book that looks at aid and entrepreneurship in the fight against poverty.