NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

William Easterly, respected for his contributions to the development debate and widely know for his opposition to the Jeff Sachs camp, recently published an interesting piece entitled How the Millennium Development Goals are Unfair to Africa. The article reveals specific statistical misrepresentations and non-standard methods of calculating progress toward the MDGs, ultimately concluding that such methods “paint an unfairly bleak portrait of Africa.”

Easterly identifies a number of decisions regarding data selection and representation, all of which seem to downplay Africa’s progress and throw its development shortcomings into even sharper relief against improvements made by other regions. These statistics involve the selected benchmark year, absolute vs. percentage changes, change targets vs. level targets, and the use of positive vs. negative indicators to compare improvements.Even for someone – such as myself – with limited exposure to advanced statistics, (most) of Easterly’s arguments immediately register as common sense, and raise some important questions. These are questions not just for development agencies pursuing the MDG grail, but also for investors, markets, and governments who make use of development data (and overall conclusions).

They are also some of the same questions that crossed my mind when I read an editorial last month arguing that, due to the “large statistical glitch” of using outdated calculations of purchasing power parity in China, the number of Chinese living below the World Bank’s poverty line ($1 a day) may in fact be 3 times more than previously thought – 300 million, not 100 million.

Now, if you were a sizeable MNC and suddenly found that your market had shrunk or expanded by two thirds, what would you do? Well, my guess would be that someone would be fired, and the business plan and strategy would undergo some major re-thinking, fast. However, I doubt that MNCs already marketing to a broad swath of Chinese consumers were unaware of this reality when estimating the size of their customer base. After all, consumer surveys or sales data would quickly reveal the ability and willingness to purchase at different price points.

But I don’t think it would be a stretch to assume that Millennium Development reports and their broad conclusions about regional progress do influence the interest and actions of international investors and MNCs. Far removed from the customer on the ground, MNCs can most easily form an initial interest in serving BoP markets based on broad analyses of the size, characteristics, and potential of these lower economic tiers. If, as Easterly says, Africa is portrayed as still lagging inexcusably behind other regions (instead of being recognized for comparably rapid progress in some areas), this effect is likely to dampen MNCs’ interest in pursuing African BoP markets.

On the other hand, SMEs, and particularly ones that serve BoP customers, don’t depend as much on macro information collected and pre-digested by third parties. Given their proximity to consumers, SMEs have an advantage of ascertaining the size, potential, and needs of their market first-hand, an advantage I’ve been talking a lot about recently in “How To Succeed at the BoP: Know Your Customer” and “Boston Consulting Group on Decoding the Next Billion.”

If the buzz among international elites is that Africa is going nowhere fast, this does not bode well for attracting MNCs to serve Africa’s BoP. Yet it doesn’t seem like it would make much difference to SMEs already on the ground who tend to be the ones best-positioned to serve these customers in the first place.