Global Journal of Human Social Science, E: Economics, Volume 22 Issue 2

relation to which the (s) other(s) analyzed imputes damages to the poor. As each of these two approaches serves different objectives, the poverty penalty concept receives contributions from both. By bringing together different concepts under the same name – of penalization of poverty – and systematizing them according to the way they treat what brings them together – that is, the market – this article tries to contribute to the expansion of the meaning of the concept of poverty penalty. As a result, in the respective problematic contexts and different objectives with which the concept is constructed, the operational potential of the concept is delimited and, in line with each aspect, the alternative ways of measuring it. The discussion about the penalization of poverty has only recently been established and disseminated. It was driven by the initiatives of the Inter- American Bank (IDB) and the United States Agency for International Development (USAID). On June 12, 2006, the IDB launches the Building Opportunity for the Majority initiative, based on the poverty penalty concept. This initiative would increasingly guide IDB lending. Less than a year later, on May 25, 2007, USAID's Voluntary Foreign Aid Advisory Committee advises that projects adopt approaches based on the poverty penalty concept. It is understood that the contribution given in this article is still small, given how much the theoretical treatment of the concept will advance and, consequently, the application of the concept. II. P enalization of P overty: W hat does it M ean and W hat I nstruments can be used to I dentify it? a) Presentation The poverty penalty concept is described, for the first time, in Prahalad (2005) and is the difference in costs between the poor and rich payments for the same or similar goods. From the analysis of the way the concept is presented in Prahalad (2005), it is possible not only to identify the essential components of its most widespread version, but also characteristics from which we can gather other aspects and related concepts, which support and deepen the meaning of the concept and were presented by authors who preceded or are after Prahalad (2005). To do both, we will first deal with the concept as it is presented in Prahalad (2005) and then with related aspects and concepts dispersed in the literature. b) Delimitation of the original concept After considering that the different ways of fighting poverty, such as those experienced in India for 45 years since its independence from Great Britain, have not given significant results, Prahalad (2005) proposes a new approach. In it, the development of inclusive and oriented markets for the poor would both provide them with better and cheaper products, as well as guarantee them respect and dignity. Predominant around the world and, mainly, in developing countries, the first approach, called by the cited author as traditional, is characterized by the use of fiscal instruments, by taxing higher incomes to redistribute it as subsidies to the poor, or through large infrastructure projects or even in the form of public spending on education and health. In this approach, small and large companies, as well as the rest of society and even the poor, are not involved in the fight against poverty, because the dominant logic between them, based on the assumption that "the poor have no purshasing power and therefore do not represent a viable market" (Prahalad, 2005, 4th paragraph, p. 10), would lead them to reject the market that is the focus of the fight against poverty, or, in the words of the cited author “[m]arket-based solutions cannot lead to poverty reduction” (Prahalad, 2005, last paragraph, p. 9). Described only once, but illustrated with several comparisons between the prices paid in the Dharavi slum outside Mumbai, India and in the high-income B. Desai Road neighborhood of Mumbai, the poverty penalty concept is presented as evidence of the existence of markets for the poor, which makes it possible to identify the author's work as belonging to the alternative approach to the traditional one, which he calls “market-based” [6] . Despite being briefly presented and illustrated, the poverty penalty concept plays a central role in the author's contribution to the “market-based” approach, as it manifests the problems that the author focuses on and for which he offers solutions. The following passage illustrates what has been said in this paragraph and in the previous one (respectively the description of the concept and the problems that cause it): “These cost disparities between BOP consumers and the rich in the same economy can be explained only by the fact that the poverty penalty at the BOP is a result of inefficiencies in access to distribution and the role of the local intermediaries. These problems can easily be cured if the organized private sector decides to serve the BOP. The organized sector brings with it the scale, scope of operations, and management know-how that can lead to efficiencies for itself and its potential consumers”. (Prahalad, 2005, p. 12) From the quote above it is possible to identify a first characteristic of the penalization of poverty. Their configuration is given according to the characterization of the problems that cause them in each place, that is, it is spatially determined. This space has, in Prahalad, a double character. It is geographic, as high costs occur in different physical areas than where low costs are observed, but it is also a market space. To the market Volume XXII Issue II Version I 20 ( ) Global Journal of Human Social Science - Year 2022 © 2022 Global Journals E Poverty Penalty: A Market-Based Review