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Global Corporations Are the Best Weapon Against Poverty, Said Reliance Chairman

May 2004

STANFORD GRADUATE SCHOOL OF BUSINESS—Why should global corporations become involved in eradicating global poverty? Because it is in their enlightened self-interest, said Mukesh Ambani, chairman and managing director of India's Reliance Industries, speaking at Stanford's conference on Global Business and Global Poverty.

Ignoring the global poor's growing desire for a better quality of life—a desire increasingly fueled by images transmitted over the Internet and television—will lead to "an unmanageable social crisis," Ambani warned. "Poverty feeds into conflict and breeds terrorism," he said. "A desperate, poor man has little to lose by becoming a human bomb. The world is seeing that the war against global terrorism cannot be won only by military might and homeland security. It also requires a sustained commitment to the fight against poverty."

On the positive side, Ambani said that by addressing worldwide poverty, global corporations will help create broad new markets. "A huge latent customer base lies untapped," he told the audience at the May 19 conference organized by the Center for Global Business and the Economy at the Stanford Graduate School of Business. "Imagine 3 billion new consumers in the global markets. This will pave the way for least $30 trillion in new consumption, as much as the entire current global output."

Maintaining the optimistic view that corporations today have greater power and resources than ever before to help in the fight against poverty, Ambani pointed out that of the 100 largest economies in the world, 37 are corporations and 63 are countries. "These institutions are able to champion projects, get roads built, power lines wired, and pipelines flowing; they're able to bring skills, knowledge, and access on a huge scale," he observed. "Such attributes are important because development is much more than just economic process."

Ambani, who has been honored by the London Financial Times as one of the top 50 most respected leaders of the world, championed the role of private enterprise over foreign aid or governments in addressing economic development. "Foreign aid is said to worsen the plight of the poor in about 70 countries by sustaining corrupt or inefficient governments," he argued. "Loans for fighting poverty from multilateral lending agencies come with binding covenants. Only a fraction of this money actually reaches the needy."

He then suggested various steps global corporations could take to eliminate poverty. Ambani called upon companies whose businesses are based in the agricultural arena, for example, to help local farmers raise their yields and realize market prices by providing new agricultural techniques, biotechnologies, and information resources. In the area of health, he encouraged corporations to invest in finding cures to diseases predominant in poor countries. He also urged transnationals to make products and services affordable to common people throughout the entire world. "Global corporations must learn to play on the cost-volume tradeoff to address huge market opportunities," Ambani said. "They must create a different model of business that creates a virtual cycle of higher market demand and greater opportunities to leverage economies of scale."

He supported U.S. corporations outsourcing services as an integral part of their strategic plans. "Outsourcing places income directly in the hands of those who work and those who are needy. It rightfully bypasses the maze of government and nongovernmental institutions that can prevent monies from reaching the poor," he explained. He also urged corporations to exert pressure to remove subsidies, quotas, and nontariff barriers that affect poor nations unfavorably.

Ambani spoke briefly about the role of Reliance Industries, a company his father founded, in providing millions of Indians with jobs and the opportunity to participate as shareholders. Now a $20 billion enterprise, Reliance has created a healthy business cycle with its holdings textiles, petrochemicals, oil and gas, information and communications, and the life sciences.

As he concluded his discussion, Ambani urged the audience "not to depend exclusively on macroeconomic strategies in the war against poverty." He argued, "Such an approach assumes that the prosperity of the general population trickles down to the poor. It is based on the metaphor that a rising tide lifts all boats. Unfortunately, a rising tide may drown those without boats. Global corporations have the ability to enable the poor to have their boats."

Ambani was among the speakers from four continents invited to address the May 19 conference, sponsored by the new Center for Global Business and the Economy at the Stanford Graduate School of Business. The Center hopes to open new areas of research into issues faced by business, governments, and nonprofit organizations operating around the world. The Center is codirected by Business School professors John McMillan and John Roberts.

—Marguerite Rigoglioso

Stanford GSB News

Global Corporations Are the Best Weapon Against Poverty, Said Reliance Chairman

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