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

Monday, March 19, 2012

We spend a lot of our time trying to convince skeptics that they should care about development. Bill Gates made the case very convincingly in his report to the G20 delivered last November. He argues from the supply side: successfully developing countries can keep the price of key commodities low by boosting production – important in ensuring food security. And he argues from the demand side: successfully developing countries can keep markets humming by boosting consumption. In the U.S., exports to developing countries are growing six times faster than exports to developed countries.

At the foundation, we also spend a lot of our time trying to convince a very different kind of skeptic that the private sector must play a central role in development. Members of Business Fights Poverty will agree on both points—that meeting the MDGs is good for business, and that business is essential for meeting the MDGs.

What we need, and why this community is so important, is a conversation about the specifics of how. There are some exciting examples of innovative financing mechanisms that are making a real difference and doing a great job of engaging the private sector. GAVI matching funds is one such example. It’s not just about developing new vaccines, it’s also about delivering the vaccines we do have. The funding available to GAVI quite literally makes the difference between children dying of preventable diseases, or not. DFID and our foundation have partnered to offer matching funds to any private sector group that contributes to GAVI. Anglo American recently took us up on the offer, because they understand how important healthy populations are to future prosperity. If any corporate members of Business Fights Poverty would like to speak with me about matching funds, please get in touch.

But the larger question is one of strategy: How do we tackle the obstacles that systematically keep the private sector from engaging in development as much as we’d all like?

When I think about these issues, I think about what it really means to be poor. What, really, is the problem we’re trying to solve? The world’s shorthand is $1/day, or $2/day. But this definition doesn’t analyze the causes of poverty or provide ways to think about solutions.

I think in terms of “access to productivity”. You can neither create nor seize opportunities if you don’t have basic necessities like nourishment, health, and education. In Africa, most of the people who live on $1 or $2/day are farmers. Their seeds have not been bred for maximum productivity. They don’t have key inputs like fertilizer or irrigation. They don’t have any reliable way to sell surplus at market. Meanwhile, it’s likely that they and their children are sick for long stretches. As a result, they get about one-fifth or one-quarter of the yield that farmers in Europe or the United States get. That’s how they wind up at $1 or $2/day. Once you understand the key barriers to productivity, the root causes of poverty, you can start targeting poverty with strategic interventions.