Francisco Noguera

Guest Post: Is Base of the Pyramid Work Relevant to Rich Countries?

Bill KramerGuest blogger Bill Kramer is principal of The Global Challenge Network, LLC, an executive education and training company. From 2001 through mid-2007, he worked on pro-poor business strategies with WRI. Previously, Bill founded a non-profit focusing on the relationship of knowledge to economic development and enjoyed a long career in the private sector, founding a dozen companies, most of which were in the book business.

By Bill Kramer

Several questions keep cropping up for me in this line of work.? One is whether the expectation that the private sector as presently constituted can, or ever will, have meaningful impact on poverty reduction.? That question keeps me awake only a few nights every month.? Another, which occupies more of my daylight awake time, is whether what we in the rich countries are learning about the BOP can be applied at home.?

A variant of this question has recently entered the U.S. presidential race – in the form of Republican accusations that Senator Obama’s views are “socialist” because he said he “wants to spread the wealth around.”?? As the McCain team uses the term, it is just a proxy for the debate over economic philosophy and policy.? What are “equality” and “inequality”?A new OECD study, Growing Unequal?: Income Distribution and Poverty in OECD Countries (English summary here), gives food for thought on this issue.? A few findings: income inequality has been growing steadily within OECD countries (World Bank economist Branko Milanovic really helped us understand this as the ?next big thing’ when doing research for The Next 4 Billion).? Overall, inequality is not quite as severe as the public perceives it to be (although the US is right up there in the rankings).? Government redistribution policies clearly reduce inequality but in recent years the policies are less and less targeted to the poor and are therefore less effective in reducing income inequality.? Put another way, inequality is rising in good part because the rich are getting richer, with government help.?

Significant and permanent change can only be achieved by reducing the gap between capital and wage incomes, which means jobs with good wages and, likely, either legal or social constraints on ?obscene’ rewards for capital.? Wide distribution of income is linked to higher relative poverty and lower social mobility, and conversely, relatively lower disparity is linked with lower poverty rates and higher social mobility. As the OECD puts it, “(I)n practice, achieving greater equality of opportunity goes hand-in-hand with more equitable outcomes.”?

Obviously, much of what the OECD countries experience is found, in abundance, in poor countries: acute income inequality, low wages and social mobility, limited opportunities for equitable outcomes.?

So, yes, what we do is relevant.? It’s part of the political dialogues in all rich countries, not just the U.S.? And how we answer the questions at home, how we demand companies and governments to behave in our backyards sets the standards for how we ask them to behave elsewhere.