I have not read C.K. Prahalad’s The Fortune at the Bottom of the Pyramid, but I’ve caught a few newspaper columns like this one summarizing his position. The message, that entrepreneurial MNCs are discovering that they can profit by significantly improving the consumptive well-being of the impoverished, is good news for fans of both markets and helping the poor. Unfortunately, it may be too good to be true.

Aneel Karnani, a colleague of Prahalad at Michigan’s Ross Business School, has posted a working paper attacking the thesis:

Poor people – at the bottom of the pyramid (BOP) – represent a very attractive market opportunity. The ‘BOP proposition’ argues that selling to the poor can simultaneously be profitable and help eradicate poverty. This is at best a harmless illusion and potentially a dangerous delusion. This paper shows that the BOP argument is riddled with fallacies, and proposes an alternative perspective on how the private sector can help alleviate poverty.

I have not read Prahalad’s work, but it seems that Karnani has a good case. The first sentence of the book is:

Turn on your television and you will see calls for money to help the world’s 4 billion poor-people who live on far less than $2 a day.

You don’t have to believe we’ve already achieved the MDG poverty reduction goal to find that number a bit high. It implies that more than half the world lives in moderate or extreme poverty. The real number is certainly below three billion.

That’s just the first sentence. Dive into the rest of the debate by reading the paper.

[Update: Prahalad’s response is here.]