Bottom of the Pyramid

The bottom of the pyramid (BoP) as a term and concept has seen a recent renaissance through the work of two business professors, C. K. Prahalad of the University of Michigan, and Stuart L. Hall of Cornell University. Of the roughly 6.5 billion people in the world [Page 43]today, according to Prahalad and Hall, more than 4 billion live at the bottom, or, by some of their varying definitions, at below $2 a day or below a purchasing power parity of $1,500 a year. Due to their inherent lack of money, businesses around the world have largely ignored this vast collection of poor people. Such neglect, according to Prahalad and Hall, constitutes a missed opportunity of vast proportions, for the multitudes at the bottom represent an almost-limitless and promising pool of future consumers. In their words, “as multinational firms search for avenues for profitable growth and radical innovation in the new millennium, they may find a unique, counter intuitive opportunity—the 4 billion poor that are at the bottom of the economic pyramid. Converting the very poor into active consumers will foster innovations in technologies and business models.” In recent statements, Prahalad further elaborated that since two or three or four billion additional consumers and producers will inevitably put a tremendous strain on the environment, and particularly water and energy resources, the issue of what he calls “inclusive growth of poor people” and the issue of corporate sustainability are inextricably linked.

Sociologically, the pyramid has been used as a metaphor to describe the hierarchical nature and inequality of modern societies since the 18th century. The Industrial Workers of the World (IWW) disseminated a poster of a social pyramid in 1911 that later became famous, depicting the masses of people at the bottom, working for and feeding all, and at the top rulers and capitalists and clergy, ruling and fooling all. Then, in the midst of the Great Depression, shortly after he announced his candidacy for president, Franklin D. Roosevelt popularized the term bottom of the pyramid in his famous April 1932 speech “The Forgotten Man.” For far too long, Roosevelt argued, those at the top had enjoyed all the benefits of economic progress. Now it was time for the government to support society's disadvantaged—“the bottom of the pyramid”—those who form “the infantry of our economic army.” Roosevelt of course later became president, and his New Deal programs not only helped the poor and unemployed, but it also realized what was, at the time, a new economic theory: the basic Keynesian insight that, particularly during severe economic downturns, the federal government had a large role to play, namely to boost demand by providing people with money to spend.

During the post–World War II era, the idea that only economic growth as defined by the totality of goods and services could lift people out of poverty became an article of faith—among capitalists and communists alike. The first cracks in this axiom only appeared when development theorists and environmentalists began to raise serious questions about the consequences of unfettered and indiscriminate growth. Resource depletion, environmental destruction, and growing levels of pollution were only the tip of the iceberg. Industrial growth also destroyed centuries of independent farming traditions, turned hundreds of millions of people into wage laborers or no-wage unemployed, and created widespread dependence. Perhaps most ironically, historically unprecedented economic growth did not seem to make its primary beneficiaries any happier, and it barely (if at all) reduced the magnitude of extreme poverty.

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