COLORADO SPRINGS, Colorado — Earlier this year, research by Oxfam International revealed that the richest 85 people in the world hold the same amount of wealth as the poorest 3.5 billion people hold collectively. It’s an unequal distribution of wealth and it’s telling of what ingenuity, innovation and determination can achieve: massive economic growth, but only under the right circumstances.
Most, if not all, of the richest 85 people have come to their wealth because of good fortune, hard work and resourcefulness. But a majority of the wealthy have also been fortunate enough to have these basic needs met: education, healthcare, food, water and shelter. Because of this, the richest individuals, even if they didn’t start out wealthy, could achieve great economic success with the vision and drive to succeed.
For the four billion people at the base of the economic pyramid —those with annual incomes below $3,000 who constitute the majority of the world’s population — finding opportunities for employment, let alone economic growth, is nearly impossible as many of them do not even have their basic needs met. People cannot innovate and add value to the global economy without first addressing their nutritional needs, finding housing in areas safe from conflict or natural disasters and receiving quality health care.
Currently, the base of the economic pyramid is a $5 trillion global consumer market, according to a 2007 joint study by the International Finance Corp. and the World Resources Institute. At current levels of development, the poorest four billion are a completely untapped, sizable consumer market. Five trillion dollars is double the United Kingdom’s gross domestic product and larger than the economies of Russia and Brazil combined.
The slightly wealthier mid-market population—the 1.4 billion people who earn between $3,000 and $20,000 a year—constitute a $12.5 trillion market, which is more than twice the net value of the base of the economic pyramid at only a fraction of the size. The mid-market population has better access to education and health services and has the majority of its needs met, which could explain why it is able to earn more than the base of the economic pyramid.
Assuming that the poorest four billion people had their fundamental needs met and had economic conditions similar to the mid-market population, their $5 trillion consumer market would turn into a $35.7 trillion market. The poorest would become producers too.
But the world wouldn’t just be producing and spending more. The global economy would also look and act very differently.
Much of the innovation and ingenuity that’s occurred in history has come from the privileged minority who have the time and security to pursue their vision, unbridled by the fear of not having their basic needs met. Pioneers of industry, trailblazers and social entrepreneurs are able to pursue their visions only after having the assurance that their lives and wellbeing are not in question.
Today, the majority of people still live in relative poverty and do not have their basic needs met. If the base of the economic pyramid didn’t need to worry about food, safety and health, if the poorest were free to act on their ideas about how to change the world, there would be advancements in every field. It’s a simple numbers game, and the objective is to reduce the number of individuals who do not have their basic needs met to zero.
– Joseph McAdams
Sources: IFC, Forbes, The Guardian, World Bank