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Thought Leadership

Innovation Has Always Crushed Poverty

Written By Ritika Trikha | August 5, 2015

For the first 10,000 years of human history, the world was very still, confined by hand-crafted tools, acres of farmland and not much else. When the 18th century rolled around, suddenly there was exponential progress. Everything changed.

The Industrial Revolution introduced the definition of “innovation” as we know it today. It marked an era when inventions upon inventions proliferated society, boosting productivity through the automation of labor. The quaint English town of Birmingham was history’s original Silicon Valley, a fertile destination of the forward-thinking minds who created technologies that shook the rest of the developed world.

With each new tech-driven idea unleashed in the market, the progress bar for societal and economical prosperity shot up higher and higher. Income skyrocketed. Families had more food on the table. People lived longer. A middle class blossomed as folks below the poverty line capitalized on new, attainable job opportunities. But it wasn’t just a period of ground-breaking inventions that made this era significant--it was the longevity of impact still felt today.

In just the last 20 years, the rise of the software technology revolution produced a spurt of innovations with an economic impact similar to that of the 1760s. With each year that passes by, the speed and capacity has been exponentially increasing, while the cost of software and hardware has been plummeting. Thanks to the parallel expansion of world trade, today we’re witnessing another pivotal moment of human history. Developing worlds that were once frozen in the agricultural bubble are starting to burst into the 21st century. Rural dwellers in China, India and other eastern developing nations are moving to urban factories.

Just as innovation empowered the lowest social class with the opportunities to rise up, technological innovation will continue to pull poverty-stricken people out of the slums worldwide. This visualization by economist Max Roser reveals a fascinating, optimistic outlook on the future end of poverty. Even though our population has been exponentially increasing, for the first time ever, the absolute number of people in poverty is lower than ever before. In order to truly understand why absolute poverty started to deteriorate, we must go back to the eve of the Industrial Revolution.Screen Shot 2015-08-01 at 7.35.37 AM

When Innovation Gathered Steam: The Rise of Social Mobility

Many historians have dedicated their lives to figuring out why there was a sudden burst of significant inventions and desire for entrepreneurship particularly in the 1700s. Why then? Why there? Over 200 theories are circulating. But one fascinating explanation involves a shift in human character and thinking. Historian William Rosen posits:

In England, a unique combination of law and circumstance gave artisans the incentive to invent, and in return obliged them to share the knowledge of their inventions.

In other words, it was the first time that ideas were considered property--a source of profit. Until this point in time, Europeans had been drenched in religious domination, suffering from Metathesiophobia, or fear of change. But following the era of Enlightenment, commercialization of new ideas was a possibility.

So a diverse body of visionary industrialists, from educated scientists to uneducated merchants, set out to improve their way of life--profiting along the way. At this point, Britain was the only place in the world that developed a patent system.

It was not until the 17th century that patents were associated entirely with awards to inventors.... The Statute of Monopolies allowed patent rights of fourteen years for “the sole making or working of any manner of new manufacture within this realm to the first and true inventor…”

The 1700s England Industrial Revolution was the earliest form of the technological innovation that’s booming today. Not only were people empowered to become inventors but--for the first time--humans weren’t pegged into only two classes: “poor” or “elite.” Anyone had the opportunity to not only profit from their idea but also learn an in-demand operational skill that spawned from new product technologies. One such revolutionary job-generating technology was the steam engine, which scholars point to as the symbol of the Industrial Revolution.

“Thousands of innovations were necessary to create steam power, and thousands more were utterly dependent upon it, from textile factories—soon enough, even the water frame was steam-driven—to oceangoing ships to railroads,” - Rosen

The steam engine was the nucleus of innovation in Birmingham that spawned the Industrial Revolution. It was much like the way transistors spawned the Information Age in Silicon Valley. The mobility of steam as an energy source freed people from the chains of agrarian society. Factories could be built anywhere, spawning urbanization and opportunities for wealth. It helped develop a substantial middle class--a first for humankind.
Screen Shot 2015-07-31 at 1.37.41 PM

How Global Poverty Halved Since the ‘90s

Fast-forward to present day--even though the population has increased 7X---poverty is at an all time low, and rapidly falling. Between 1990 and 2010, absolute poverty fell from 43% to 21%--just about half. Poverty’s at an all time low even though population has increased.

So what extinguishes the flames of poverty? History tells us that a boom in economic growth and employment opportunities will produce a long-term negative impact on poverty. The Organization for Economic Co-operation and Development confirms that the rate of poverty decline is directly correlated with increase in economic prosperity in any given region.

For example, a flagship study of 14 countries in the 1990s found that over the course of the decade, poverty fell in the 11 countries that experienced significant growth and rose in the three countries with low or stagnant growth.

Since the 1990s to 2010, the developing countries’ GDP has been increasing by 6%, as depicted here:
Although there are quite a number of factors at play for the rise in economic size, optimizing productivity through smarter software tech plays a crucial role in bolstering developing economies. Africa is a prime example of how technology is helping its economy grow. In the last decade, African countries boasts a fast-growing startup market. Mobile phones have been one prolific economic growth engine, reducing the cost of communication, fueling productivity and opening up access to capital
One analysis of 96 different countries found that a 10% increase in mobile phone penetration can increase GDP growth by 1.2%!

So, on one end you have widespread use of mobile technologies in one of the most underdeveloped continents on the planet. The other side of the innovation loop: Mobile adoption was directly associated with a boost in the country’s economy. Above all, these studies show that economic prosperity, spawned by innovation, helps flatten poverty. This is just one example of an underdeveloped region benefiting from technological economic engine.

Emerging Worlds are Now Leapfrogging the Industrial Revolution

As a result of the large-scale tech adoption in developing countries, these folks are emerging out of their agrarian bubble to--not only catch up with the Industrial Revolution--but in some cases jump right into the digital age. Not only are some Africans skipping traditional institutions (like adopting virtual money instead of building banks) but Africa’s also turning into a hub of mind-blowing innovations. For example:

  • The BetaBook - A simple whiteboard that connects with a smartphone to help ease communication by instant translation with non-native speakers.
  • The iCOW App - As high-growth as Africa is, it’s still largely dependent on agriculture. But this app helps African farmers manage their cows. The app keeps track of the estrus stages of their cows, while giving them valuable tips on cow breeding and more.
  • The CardioPad - A young African engineer created a medical health tablet that performs heart examinations remotely in rural areas, helping save thousands of lives.
  • LifeStraw - It’s a portable water filter that claims to remove a minimum of 99.9% of waterborne diseases through instant filtration.

From its very first appearance as the propagator of the Industrial Revolution, innovation has always been an indirect suppressor of poverty. The motivation of turning profit from something that actually benefits the masses proves to be highly impactful. Innovation benefits both the inventor and the consuming market over time by creating more opportunities for economic growth.

When you zoom out and take a look at human history as a whole, you can see that greed isn’t always evil. When incentivized to profit from ideas, humankind began changing the world for the better. True innovation is a result of harmonious collaboration between those who engineer an idea and those who can actually implement it.

The biggest inhibitors of progress thus far have been governmental policies, which is largely why the developing world has been slow to adopt new technologies. But in the last few decades, we’ve seen immense progress that makes us feel optimistic about a future without poverty. Underdeveloped nations who were ridden with government regulations and policies, are now benefiting from open channels of commerce.

With the rise of globalization, tech companies can continue to help make the world flatter by innovating on both sides of the globe while profiting along the way.

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