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

Wednesday, May 25, 2005

This year the United Nations announced a major push to deliver unprecedented amounts of aid to the world’s poorest countries. U2’s Bono has appealed to fans at rock concerts to support the One Campaign, which aims to persuade the U.S. government to spend an additional one percent of its budget to assist Africa and other struggling regions, while Tony Blair has called for a massive charitable package for Africa.
After last year’s devastating tsunami, relief pledges quickly turned into a bidding contest where nations did their best to out compete one another in their “generosity.” Despite this apparent renewed interest in charitable spirit, over the past generation aid to the developing world has met mixed reviews. Some of the largest recipients of aid are still some of the world’s poorest countries. What’s going on here? Have aid agencies just been throwing money into a hole?
Well to start, in many cases corrupt regimes have consumed massive amounts of aid. In the past aid — especially from America — was often tied to political agendas and went to supporting regimes that really had no business receiving aid. More money went to feeding strategic alliances with countries that were “poorly run, or not that poor,” as phrased by The Economist. Often, direct aid has not only bred corruption and the misallocation of resources away from those who need it most, but it has also fostered dependency and skewed the perceived value of goods and services.
So is there a better way to help the planet’s poorest people? C.K. Prahalad believes there is. In his book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, Prahalad argues that by regarding the world’s masses, who he terms “the bottom of the pyramid,” as potential customers, businesses and the poor will be better off. Prahalad suggests that the private sector may do a better job eradicating poverty, building dignity and respect, encouraging entrepreneurship, and reducing dependency than handouts under traditional aid programs.
Article found here.