In the Global Prosperity research vertical of the Institute, we talk a lot about creating prosperity, specifically, shifting the conversation in development from poverty alleviation to prosperity creation. Although this is a very important point that we will continue to push forward, in this piece I’d like to acknowledge that, sometimes, even when we create prosperity there is still poverty.
But, it doesn’t have to be this way if this question is asked: What kind of market do I want to create?
Matthew Desmond’s most recent book Poverty, by America claims that poverty in the US exists because we (the book defines “we” as financially secure Americans) profit from it: exploiting the poor in our housing markets, our financial markets, and our labor markets. We then build walls around our affluence, keeping opportunities away from the poor. In reading this book, self reflection and, consequently, responsibility become calls-to-action, helping the reader identify how we are part of the problem…but also part of the solution.
Integrating responsibility into prosperity
Once upon a time, the US resembled growth economies today, and it developed into a prosperous nation through markets. But even with this prosperity, there remains vast poverty as most of the country’s important markets profit at the expense and exclusion of the poor.
There are many types and scales of poverty and Poverty, by America makes an important distinction that although the American poor have access to cheap, mass-produced goods, that doesn’t mean they can access what matters most. For example, in the housing market, landlords in poor neighborhoods make double what those collecting rent in rich neighborhoods do, but the poor often don’t have a choice in leaving these neighborhoods. In the financial market, many benefit from free checking accounts subsidized by overdraft fees, payday loans, and cashing fees wrung out from the poor who have limited means of accessing their money. In the labor market, we generate growth from exploitative practices like wage and organized labor suppression because current labor laws, unfortunately, don’t give workers better options.
“Poverty isn’t simply the condition of not having enough money. It’s the condition of not having enough choice and being taken advantage of because of that,” summarizes Desmond.
Using our nation’s own history as a lesson to be learned, Desmond’s book poses an important question around responsibility that all those who are interested in eradicating poverty and creating prosperity must ask themselves, “What are we doing to divest from poverty?”
Ensuring equity through questioning
Much of the Global Prosperity team’s work centers around harnessing market creation to identify everyday problems and creating simple and affordable solutions to generate economic development. Market-creating innovations (MCIs) transform complicated and expensive products into simple and affordable ones to provide more people more access. These innovations have the potential to create jobs, serve multiple sectors, change the culture of entire economies and nations, and, yes, this happens by profiting from the nonconsumers—often the poor.
MCIs have a lot of power, and with great power comes great responsibility. Responsibility to create inclusive markets that don’t exploit the poor, but that integrate them instead.
But how can the innovators and entrepreneurs behind MCIs ensure, to the best of their ability, that the markets created are those that are also equitable? These questions may serve as helpful guides:
1. MCIs are about benefiting from nonconsumption, yes, but in the service of expanding access to those nonconsumers. MCIs are meant to eradicate poverty through the creation of prosperity. In designing systematic solutions to solve systematic problems, are you pulling in (rather than pushing) resources across multiple sectors to create inclusive, sustainable economic growth?
2. MCIs are about creating solutions for those who have created workarounds because they didn’t have other means. Is your MCI helping to expand market opportunity and market competition, ultimately helping nonconsumers access multiple options/choices?
3. MCIs are about creating prosperity for all, not just some. Is your MCI—from the inception of the idea to its implementation, and from its collaborative strategy to its infrastructure, truly designed to help democratize access for all?
When we talk about creating prosperity in growth economies through market-creation, we often look to wealthier nations, like the US, as an example. But just like we learn from American wealth, there’s also much to learn from American poverty—and the power that strategic responsibility can play in helping innovators, policymakers, and everyday citizens create and support the prosperous world of the future.