The great leap downward: the poor can save capitalism if companies see them as serious customers. (Trade Talk).

Throughout Latin America, which is sinking into its worst financial crisis in two decades, people are losing faith in economic reforms that have failed to produce enough jobs, reduce poverty or improve their lives.

In part, the disillusionment is a reaction to the widespread corruption that accompanied Latin America's experiment with free-market policies. With little oversight monies from privatizations went into politicians' pockets and unfettered "crony capitalism" flourished.

Stuart Hart, a business professor at the University of North Carolina, has a solution. It's an idea that might bewilder corporate heads initially, but it's a surefire way out of the current economic morass. Hart sees a new frontier for business growth and a multi-trillion dollar market from an unlikely source. It's what he calls "the bottom of the pyramid," the world's 4 billion poor.

"Contrary to popular belief, the poor can be a very profitable market," says Hart. "The real source of market promise is not the wealthy few at the top of the pyramid or even the middle class, which is tapped out."

Though the poor in developing nations may earn US$300 to $1,000 a year, "it's not zero and many already spend money on products that don't serve them well," Hart argues.

He urges global executives to take the "great leap downward" by focusing on products geared toward the poor and by forgoing high margins in exchange for profits from volume. Companies will be more sustainable in the long run and, most importantly, they could stem social instability caused by the rapidly widening gap between rich and poor.

Forty-four percent of Latin America is poor. That acids up to 211 million people. Income distribution is distorted and unemployment has more than doubled in the past decade.

Although obviously not a panacea, I have seen Hart's idea work.

While living in Brazil in the mid-1990s, I watched Avon ladies in the Amazon work a small village in Para state and reap profits once the door-to-door cosmetic giant decided to target remote areas. "[The poor] like to smell good, too," an Avon executive told me at the time.

In 1999, the working poor purchased their first telephones--cell phones--en masse after telecommunications companies introduced cheap handsets with prepaid phone cards, some as cheap as $8. No down payment, no monthly bill and no charge for incoming calls made the deal affordable even for a maid earning $150 a month.

Global companies that take the downward plunge will not only provide products that make life easier but they'll provide decent jobs--vastly better than exploitative maquila sweatshops.

In Brazil, Anglo-Dutch home and food products giant Unilever sent agents to the impoverished northeast to quiz poor people on the kind of detergent that best fit their needs. The result a cheap product called Ala, which is available not only in stores but also through an elaborate distribution network.

In Honduras and the Dominican Republic, Soluz, a Massachusetts company, provides low-income earners with cheap electricity. Consumers in rural towns and villages pay Soluz to install solar panels that cost $600 to $1,500, paid in easy installments. Micro-credit financing gives villagers the means to operate these electrical systems themselves, creating jobs.

And in Costa Rica, a pilot program by Hewlett-Packard brought the 21st century to remote towns and villages. HP converted old shipping containers into "digital town centers:" Each container holds a satellite link, several computers with access to Internet and e-mail, educational videos and phone service. The project, known as Lincos, is sold to towns and villages through credit and also creates work.

A democracy must have a large middle class arid shared prosperity if it hopes to become stable. By redirecting business models to fit the needs of the poor, corporations can create new markets, lift the poor out of poverty and attain sustainable growth. It's a win-win proposition and one that should be taken without delay.

COMMENTS? WRITE: [e-mail]