Here's something to wrap your mind around: Most development efforts
around the world focus on the extremely poor: those people who somehow
survive on $1 or less a day. Most businesses focus on middle- or
upper-income groups: you know, those with enough disposable income to
buy designer handbags, plasma screen TVs, yachts, what have you. But
the majority of the world's population — some 4 billion people — fit in
neither of these categories. Dubbed the "Next 4 Billion" in a report released by the World Resources Institute
earlier this year, this group lives at what's called the "base of the
[income] pyramid" and earns between $500 and $3,000 a year. That,
aspiring entrepreneurs, makes for a combined purchasing power of some
$5 trillion.

The report, culled from income data from 110
countries and spending data from 36 countries, reveals that these 4
billion people — let me just say this again, the majority of people on
the planet — do not participate in the global economy. That is, they
don't have jobs earning salaries from corporations and they don't buy
anything from formal stores. They earn and spend their money amongst
themselves, in what's called the informal economy.

WRI
proposes that there's a lot of money to be made by savvy corporations
who go after this market, and that the profit motive can deliver
services to the bottom of the pyramid that more traditional development
approaches can't. The report focuses in particular on the dazzling
growth of the cell phone market (aka "mobile telephony" in
bureaucratese) in sub-Saharan Africa, where an astonishing 95 percent
of the population ekes out an existence at the bottom of the pyramid.

Between
2000 and 2005, the market for cell phones in the developing world grew
five times to include 1.5 billion subscribers. In Nigeria alone, the
report states, subscribers grew from 370,000 to 16.8 million in four
years. Celtel, a little start-up that provided service to customers in
developing and unstable countries, sold for $3.4 billion in 2005 and
now operates in 15 countries in Africa.

The message WRI wants
to deliver is that there's money to be made in serving the poor. The
assumption is that businesses who invest in this market will, guided by
the famous invisible hand,
bestow on the next 4 billion the services they need and that they
currently provide for each other. My only worry is that it's easy to
see what private companies have to gain from selling goods and services
at the bottom of the pyramid, but not so easy to see what they have to
gain from employing local folks — at decent wages — to do so.

The
report mentions that companies would do well to work through franchises
and local agents, which sounds good enough. But by definition, only a
fraction of the community would hold positions in such enterprises.
What will become of the rest of the people who have carved out a niche
in the informal economy, should formal businesses see a profit in
competing with them?