One of the most enduring and flawed myths in economic development circles is that lifting the poor out of poverty requires the transfer of wealth from rich countries to poor, from the “haves” to the “have-nots” in underdeveloped nations.
While some who embrace such views acknowledge the role that entrepreneurship and free markets can play, they nevertheless cling to the belief that the road to riches for the masses involves government putting capital into their hands through grants, cheap credit and subsidies.
One problem is that intellectual elites, in rich and poor countries alike, often associate capitalism with pathological greed, corruption and abuse of power. They confuse free markets with large, sometimes corrupt corporations using political connections to concentrate wealth. This association is so powerful in some countries that the English word “business” is used at times as a synonym for criminal activity (usually accompanied by a knowing wink).
Experience shows, however, that government transfers have little to do with economic success. The real keys are individual creativity and initiative, and the sense and ability to address market needs as they arise. In one word, entrepreneurship.
Opportunity in a Bottle
Consider two success stories in Peru.
The first involves the Añaños family. A few decades ago, the Añañoses were making their living on a small farm in Ayacucho, a poor region terrorized by Shining Path, a Maoist organization that, among other abuses, disrupted transportation in the region. This created local shortages of various goods, including carbonated drinks.
This beverage void provided an opportunity to the Añaños family, which created a new low-cost soda and started producing it at home. They called it Kola Real.
The Añañoses did not seek or receive help from any government, nongovernmental organization or international aid agency. Instead, they invested their modest earnings in the new business—and then reinvested the profits into expansion.
In true entrepreneurial fashion, the family found ways to hold down costs, to navigate the labyrinthine Peruvian regulatory system and to outsmart their large competitors, both local and international, many of whom had an “in” with the authorities.
The Añañoses invited unemployed Peruvians with old vehicles to buy Kola Real at the bottling plants and resell it in their neighborhoods. They created a second tier of entrepreneurs who would prosper from Kola Real's success.
The family also spurned mass media advertising, creating special marketing programs that would appeal to their low-income customers, such as exchanging Kola Real bottle caps for other consumer products.
Now the Añaños's Ajegroup is the largest manufacturer of nonalcoholic beverages in Latin America, with 8,000 employees, sales estimated at $1 billion, and operations in nine Latin American countries and Thailand.
Opportunity in T-Shirts
Entrepreneurship was also what enabled Aquilino Flores to create a successful business. A migrant from Peru's dirt-poor Huancavelica region, Flores moved to Lima and started washing cars for a living. At the behest of one of his clients, a clothing merchant, Flores started hawking cotton T-shirts in Lima's Central Market area. Blank shirts sold slowly, so he found a subcontractor to print pictures on the shirts.