Saturday, October 21, 2006

Micro loans, Macro racket

Alexander Cockburn, thundering left winger, must take a dig at micro loans, since IMF and World Bank are praising micro loans.

Yunus has been given a Nobel Prize for his work in Bangladesh. Cockburn dismisses the three decade long work put in by Yunus and his bank with one big sweep:
In the statistical tables of human development Bangladesh ranks 139th, worse than India, with 49.8 percent of its population of 150 million below the official poverty line. In the homeland of the Grameen Bank, about 80 percent of the people live on less than $2 a day.
Yes, Yunus should be punished for this. Next, let us demolish the entire micro credit concept itself, having done the same to Yunus.
As the economist Robert Pollin put it pithily when I asked him what he thought of the award to Yunus, "Bangladesh and Bolivia are two countries widely recognized for having the most successful micro credit programs in the world. They also remain two of the poorest countries in the world."
Cockburn's primary source describing in detail the ills of micro loans is P.Sainath of The Hindu. It is unfortunate to compare the micro credit implementation in India with that of Bangladesh. In India, there is no single entity that comes anywhere close to Grameen in size and implementation. Sainath has well covered the rural problems in India, and frankly none of the problems is the doing of micro credit organizations. The blame is entirely on the governments, local moneylenders, drought and famine, and perhaps lack of good micro credit organizations. Thus, quotes from Sainath about Indian experience is taken, transformed into the failure of micro credit in the world, Bangladesh's chronic poverty and pathetic political situation and in the end we get the ultimate left wing mumbo jumbo:
The trouble with publicly subsidized credit programs is that they're public, they're large and run contrary to the neoliberal creed. That's why Yunus got his Nobel macro-prize of $1.4 million, whereas radical land reformers get a bullet in the bank of the head.
Since Yunus has powerful friends, he must also get powerful enemies. His work is irrelevent to these enemies.

Neither Yunus, nor any major proponent of micro credit has presented micro credit as the only development tool, and in oppostition to land reforms, larger government spending on poverty alleviation, publicly subsidized credit program etc. Rather than merely theorising, the micro credit people have gone about transforming the lives of people in a positive manner. The left wing theorists must now demonstrate that micro loans are actually bad, and will result in increased poverty. They have a lot of work in their hands.

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