Inclusive Capitalism

Description

Inclusive capitalism is a model for development which focuses on stimulating both entrepreneurship (for example through microfinancing), and extensive usage of IT, as alternatives to foreign aid.

It is based on two premises:

1. private enterprise creates wealth and job opportunities and is a quicker route to a poor country’s economic development than aid

2. IT spreads throughout society at all levels, and is not concentrated in the hands of a few

The above is summarized from an interview with Nicholas P. Sullivan.

Case study: the Grameenbank in Bangladesh

From a review of the book:

"Nicholas P. Sullivan, author of You Can Hear Me Now: How Microloans and Cell Phones are Connecting the World’s Poor to the Global Economy.

"Sullivan's book, published in February 2007, uses GrameenPhone to illustrate inclusive capitalism – an economic model that in his own words, “is sweeping the developing world”. As Sullivan explains in his book, this form of capitalism “spreads wealth as it creates wealth” and “empowers the poor as it generates returns for investors.” Information technology is particularly hospitable to inclusive capitalism because people at all levels of society can use it to heighten productivity, and it creates income opportunities as it spreads, this book explains. GrameenPhone alone has created, directly and indirectly, approximately 325,000 income opportunities, lifting those at the bottom of the pyramid out of poverty while bridging the digital divide. And it is still growing.

GrameenPhone is the starkest example of inclusive capitalism, and Sullivan devotes just under half of his book to its story. He follows founder Iqbal Quadir who, in 1993, convinced that “connectivity is productivity”, abandons his job as a venture capitalist in New York and moves home to Bangladesh to bring phones to the masses in a country with but one phone for every 500 people. Determined to reach the poor and in need of capital, Quadir approaches Muhammad Yunus, the man behind the Grameen Bank, for support. After four years of hard work, GrameenPhone is born, providing the bank’s first borrowers with phones that the women manage to generate income and becoming the country’s biggest cell phone provider.

The story’s villain is Bangladesh Telephone and Telegraph Bureau (BTTB), the government body with a near monopoly over the fixed line telephone system. Not only does BTTB exclude the poor by serving only major urban markets (and inefficiently so, with more than a million applications for phone service on file and wait times reaching 27 years if applicants refuse to pay bribes). It also persistently thwarts competition, making GrameenPhone’s development an uphill battle, Sullivan’s book recounts.

BTTB’s ineffectiveness and stalwart opposition to market competition support Sullivan’s main argument that entrepreneurship provides a more effective route to developing countries’ economic development than aid, which often strengthens the economic power of corrupt and ineffectual governments. While foreign aid is mainly channelled to cities and does not reach the poor, “private investment is breathing life into economies long stifled by corrupt, aid-drunk governments,” writes Sullivan. This is taking place through what Sullivan refers to as the “external combustion engine” and its forces of information technology, native entrepreneurs trained in the West, and foreign investors." (http://www.apc.org/english/news/index.shtml?x=5059870)

More Information

See our entry on the Bottom of the Pyramid movement.