The Bottom of the Pyramid Strategy for Reducing Poverty

Another vital role of the state is to provide basic services such as infrastructure, public health and education. Both these responsibilities of the state are even more critical in the context of poverty reduction. 2 DESA Working Paper No. 80 The Poor as Value-Conscious Consumers The BOP proposition views the poor primarily as potential consumers i. e. as untapped purchasing power. Providing increased consumption choices to the poor will increase their welfare, assuming rational consumers. It is almost an “item of faith” among development economists that the poor act rationally (The Economist, 2007).

Some civil society organizations have argued that targeting the poor as a market might cause them to wastefully spend part of their already meagre income on low priority products and services (for example, Clay, 2005: chapter 5). Hammond and Prahalad (2004) dismiss such arguments as patronizing and arrogant; how can anybody else decide what is best for the poor? The BOP proposition argues that the poor have the right to determine how they spend their limited income and are, in fact, value-conscious consumers; the poor themselves are the best judge of how to maximize their utility.

Only the expenditure patterns of the poor, and not their utility preferences, can be directly observed. The BOP proposition assumes—on ideological grounds, and without empirical evidence—that the poor must be maximizing their utility preferences, and that these preferences are congruent with the true selfinterest of the poor. This is free market ideology taken to a dangerous extreme, and harms the poor. Even a stalwart proponent of neo-liberal policies like The Economist concludes that the poor do make choices, and the empirical evidence suggests that “they are not always the best ones

I will argue below that the assumption that the poor are value-conscious consumers is empirically false; additionally, it is morally problematic. The poor, in fact, are vulnerable due to lack of education (often they are illiterate), lack of information, and other economic, cultural and social deprivations. A person’s utility preferences are malleable and shaped by his or her background and experience, especially if he or she is disadvantaged (Sen, 2000). It is not appropriate to assume that the poor’s expressed preferences are truly in their self-interest.

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