An Invisible Hand for Stopping Hunger

Reading about Danone’s strategic innovations in the food industry[1] made me wonder about the role these multinational corporations are going to play in the resolution of hunger issues in the developing countries. Could it be possible that MNC’s rather than governments and international organizations are going to put an end to food crisis and bring alimentary security to the world population? Even if the future is uncertain, there are many tendencies pointing out this scenario as a likely result derived from evolving market practices and innovations.

Just a century and a half ago, nations saw as a common practice to conquer new territories every time there was a need to expand the markets. Nowadays, democracy has institutionalized self-determination in every nation, making older practices unviable most of the time. Also, widely accepted democratic ideals and market principles have shifted the balance of power between the private and the public sectors. During the mercantilist era, States would open markets for private companies. Today, companies have had to use their own means and adapt to a new –and freer– context by promoting innovations in products, services, supply-chains and many more areas.

So, if a Senegalese worker on a 2 dollars daily food budget can’t afford the Danone yogurt you would typically buy at Whole Foods, Danone comes up with the idea of selling this man a smaller portion of yogurt at a lower price. As a result, 42% of Danone sales came from emerging markets in 2009, while they ascended just to 6% ten years ago.[2] As Danone does, many other MNC’s such as Unilever or Tata Motors[3] are looking straight into the base of the pyramid to find new costumers.

If these trends keep increasing MNC’s profits, many more people will have access to food and health products they couldn’t even imagine to consume a decade ago. However, even in the long run the invisible hand is able to deal with scarcity and achieve an equilibrium between the demand and the supply of the most basic goods for every individual in the planet, the effect will take some time to materialize.

In the meantime, governments and international organizations are taking prompt actions to respond to the food crisis that has hit many nations. For instance, the World Bank and the UN High-Level Task Force have implemented a Global Food Crisis Response Program “to provide immediate relief to countries hard hit by food high prices.”^[4]

If the power of the invisible hand endorses MNC’s, eventually there won’t be need for IO’s and governments to intervene in this matter. So a new set of questions about the relative power of government arises. Could it be possible that by achieving adaptation MNC’s market innovations will lead to a shift in the balance of power vis-à-vis the State?

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^[1] Dannon Expands Its Pantry to Woo the World’s Poor (Wall Street Journal, July 29, 2010)

^[2] Dannon Expands Its Pantry to Woo the World’s Poor (Wall Street Journal, July 29, 2010) P. 107

^[3] Inside the Tata Nano Factory (Business Week, May 9, 2008)

[4] http://www.worldbank.org/foodcrisis/