by Derek Brown

The French farmer Jose Bové may be the only demonstrator to have left Seattle this past December happy with both the achievements of his country's official delegation to the World Trade Organization talks and with the disruptions caused by his colleagues marching in the streets. Celebrated by anti-free-trade activists for demolishing a local McDonalds restaurant in France in protest against globalization, Bové's interests were also defended by his European Union representatives and their Japanese counterparts. This coalition successfully, if temporarily, thwarted attempts by the United States and developing countries to pry open European and Japanese agricultural markets by reducing government support to small farmers like Bové.

The paradox of these actions was lost on no one. Despite the protesters' depiction of the W.T.O. as a tool of global corporate interests, at the end of a summit that agreed on little, the winners seemed to be the small agricultural producers of Japan and Europe rather than big corporate agribusinesses.

The plight of Bové and his counterparts in Japan and Europe illustrates the increasing uncertainty small farmers and other producers and traders of goods and services must contend with in our global economy. Faced with mounting competition from transnational corporations and from small producers in poorer countries, Bové and others like him are casting about for new strategies in their struggle to survive.

Unlike Bové and his "first world" counterparts, however, most small producers and traders in the developing world are not well served by their governments, labor unions, or social and environmental interest groups, whose agendas rarely encompass the interests of this significant population.

This issue of Changemakers looks at how three social entrepreneurs – in Asia, Latin America and Central Europe – are helping these small producers compete in the global economy. Their efforts combine the latest business tactics and strategies with tried and true methods of cooperative organizing. Their common goal: to create job opportunities and ensure stable livelihoods, in environments where chronic unemployment and underemployment are undermining the health of local communities.

Job Growth in the New Global Economy

Despite the attention focused on multinational corporations, in the developing economies of the world, no less than in the United States, small business is the predominant job creator. In Asia, Africa and Latin America, not only do global corporations account for a minor percentage of all jobs; in the poorest countries, over 80 percent of all jobs are in agriculture and the informal economy. In middle-income countries, this figure is less, but still over 40 percent.

The statistics vary from country to country, but the conclusions are largely the same. Even with massive urbanization in the past thirty years, most of the world's population does not derive a paycheck from a corporate employer. In Ghana, over 60 percent of the people are still rural producers, working small plots of land to sell surplus produce to the marketplace. In Bangkok, a citizen is more likely to be a hawker on the street than a machinist in a motorbike factory. Still, though their individual contributions are small, such farmers and street hawkers contribute significantly to their nations' economic well-being.

In the new millennium, if the millions of unemployed, underemployed and low-wage earners around the globe are to climb out of poverty, their best hope will be to join the ranks of the small producers and traders. This vast segment of our world's economy will only be able to absorb the influx if it can grow rapidly, competing both locally and globally, reaping the potential benefits of the global marketplace.

Expanding opportunities for these small producers is central to the work of Ashoka Fellows Kazimierz Jaworski, Rosana Tositrakul and Dayse Valença. They know that freer trade brings both opportunities and challenges. In order to help small producers and traders meet these challenges, their work focuses on leveling the playing field for small producers against their larger, better equipped counterparts and on helping these producers create a superior product in order to compete effectively with their lower-priced competition.

David vs. Goliath: Competing in the Global Economy

Despite the dominance of the informal sector and small business in developing economies, their potential has barely been tapped. The sector is constrained by poor access to credit, inefficient production, high costs, ineffective distribution and a reputation for poor quality. As detailed in these articles, too often the rural villager in Poland or the washerwoman in Rio is just scraping by, not capturing a fraction of her potential value in the local economy.

If small producers and traders – the "Davids" of the economic landscape – are to thrive and incorporate the legions of unemployed into their ranks, they must overcome these obstacles to become more efficient producers. Doing so means that small producers need to create new structures to support their activities, structures that in many cases will allow them to mimic the "Goliaths" of the business world, whether in setting up cooperative markets or in joining forces with other producers to lobby government for favorable regulatory treatment.

Helping small producers compete more effectively is exactly what Rosana Tositrakul, Kazimierz Jaworski and Dayse Valença undertake everyday. Just as the Internet helped a few guys build the "world's biggest bookstore" in Amazon.com, Tositrakul's Friends of Nature, Jaworski's Ourselves to Ourselves and Valença's training programs are helping leverage the capacity of small farmers and rural and urban tradespeople to produce and sell their goods and services in a crowded marketplace.

Inspiring a New Entrepreneurial Class

Launching and running a successful small business can be a daunting challenge, but these Ashoka Fellows are showing that it can be mastered – with patience, determination and the ability to learn new skills.

Beyond these personal qualities, there are a few prerequisites: A budding entrepreneur needs basic infrastructure, e.g. roads, electricity, telephones. Assuming these are adequate, the entrepreneur also needs a good product or service, access to capital, skilled labor to produce and deliver at a competitive price and finally the know-how and means to market the product or service. Unfortunately, most small producers and traders lack many of these assets, if not most of them. Filling these gaps is the mission of a new breed of socially-minded business consultants.

A Condition of Success: Building Social Infrastructure

Unlike large corporations who can pick and choose among people and communities, small producers are bound to their communities. The social infrastructure of each community is therefore critically important to the success of the small producer. Recognizing this, all three social entrepreneurs profiled here integrate business development with efforts to improve the infrastructure in their communities.

For Jaworski, being rooted in his community meant tackling the multiple physical and social problems that have wreacked havoc in rural Poland. No less important than laying phone lines and sewage systems has been the Foundation's work providing alcohol counseling, continuing education and youth programs.

In Valença's work, inspiring cooperative members to help non-organized workers gain access to home loans and training, has been crucial to help stabilize the community and broaden the impact of her efforts.

Tositrakul and the Thai Holistic Health Foundation and Friends of Nature pursue their respective agendas – social development and business development – very much in tandem. Without the former's work helping to educate the public about traditional remedies and medicines, the market for the latter's products would be much smaller.

Improving Access to Capital

But an improved social and physical infrastructure, while crucial, is merely a beginning. Access to start-up capital remains a significant hurdle for small businesses. Unlike large corporations, most small producers and almost all the unemployed, lack access to credit to help them get started in business.

While the micro-credit revolution launched by the Grameen Bank has been hugely successful, helping millions of individuals build up savings to start micro-enterprises, its reach has been restricted largely to rural women and has been stymied in helping borrowers move from micro to small business. Larger-scale enterprises simply require more capital than small savings schemes can generate.

The response by Tositrakul and Jaworski has been to build on the savings available in local communities with contributions from creative funding partnerships with business and government. For the Thai villagers of Kudchum and the Polish families of the Strug Valley, obtaining funding begins with the pooling of financial resources, then leveraging these funds with loans and advance payments from business and local government.

In the Polish example, Chmielnik Springs used the homes of local leaders as collateral. A common technique in industrial countries, such asset-based lending is rare for poor communities in the developing world. Markets simply have not existed in the developing world and the transitional economies of Eastern Europe and the former Soviet Union for the collateral – homes, land, etc. – which is the foundation of credit systems.

To overcome the lack of asset-based lending in Thailand, Tositrakul employed a different mechanism: an advance payment scheme, providing farmers with money up front for products to be delivered later, thereby allowing them to accumulate enough cash to purchase a rice mill prior to their harvest.

Cooperatives: The Multiplier Effect

Funding partnerships are just one way in which collective strategies can be critical to the launch of small business enterprises. Some projects are simply too large to be undertaken by individuals, requiring economies of scale to allow for efficient production or requiring group participation to ensure success. This is where the cooperative movement continues to play a key role in the evolution of economically disadvantaged populations.

Cooperative action can also yield political clout. The Thai Holistic Health Foundation's lobbying against restrictions on natural products would not have been as effective if it hadn't represented a substantial community of producers, distributors and retailers. Jaworski's efforts and those of his colleagues on behalf of the Strug Valley Association convinced local government to match the community's contributions for rural telephone service.

Creating Superior Value

Cooperatives, like any other corporation, must provide superior value if they are to succeed. Since competition on price alone is increasingly difficult in our globalizing economy, the focus of social entrepreneurs is to find the right markets where they can offer an improved product and distribution for a higher price.

For Valença, creating superior value translates into standardizing production to assure consistent quality, improving packaging and building efficient distribution systems. For the rice growers of Kudchum, this means connecting directly with markets in Europe where buyers will pay more for organic rice; for the Thai Holistic Health Foundation, it means launching a direct-sales force that takes educational materials and natural products directly to office buildings in Bangkok, where consumers can learn and buy products on their lunch breaks.

In Poland, Chmielnik Springs offers direct distribution of farm fresh products to Polish townspeople, who are also willing to pay more for fresh, largely organic produce delivered to the door. The price premium Strug Valley's small farmers receive is critical to helping them meet their higher production costs.

These small producers no longer compete merely on a commodity basis; they have recognized the need to differentiate their products in a crowded marketplace. They are learning how to compete in the global economy.

Upgrading Skills

Challenging the traditional business practices and mindsets of small producers demands ongoing training and education. While corporations invest heavily to increase the skills of their workers, small producers with fewer resources must be shrewder to procure the resources for developing themselves and their staff.

The people of the Strug Valley recruited volunteers from within their community to provide business plan development skills for new enterprises. In Rio de Janeiro, Valença acts as a nonprofit continuing-education service, helping hundreds of Brazilians learn the basics of accounting, marketing and management. Small producers, no less than large corporations, must learn to respond to the changing market, whether it be seizing the opportunities presented by the Internet to sell crafts internationally or diversifying production to accommodate changing consumer tastes.

Conclusion

The challenges of launching small business enterprises are not unique to poor urban dwellers in Brazil, or rural villagers in southern Poland and Thailand. Global corporations have the same needs and face the same obstacles, yet by and large they have access to the resources that have allowed them to overcome these obstacles.

In the cases presented in this issue, three social entrepreneurs have launched programs that help to diminish the effect of this resource disparity, helping small producers and traders to adopt strategies that allow them to compete more effectively with larger enterprises that dominate the global economy. However, they are still a small vanguard of a new breed of socially-minded business consultants that must grow exponentially if the world's unemployed are to find new livelihoods in this sector. Just as global corporations have rallied together to promote free trade through the World Trade Organization, small producers must continue to unite to take advantage of the market opportunities their larger counterparts have taken for granted.