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Saturday, October 14, 2006

The Miracle of Money

posted by on October 14 at 7:43 AM

Microcredit miracle.

Five years ago, Gulbadan Nesa was destitute, unable to feed her family. Then a simple, yet revolutionary idea — in the form of a $90 loan — changed her life, pulling the Bangladeshi villager out of a devastating cycle of poverty.

In reality, capitalism is as logical, as precise, and as cold as any of the hard sciences. But once we enter its ideological sphere, such as the recent praise and worship of microcredit (capitalism’s cure-all for Third World poverty), its language and tone is as superstitious, as mystical as the most primitive religions.

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1

Mysticism surrounding science is certainly not limited to economics. In public discourse, many scientific topics are often couched in similar language, with a separation between the formal knowledge and vocabulary of specialized fields and the tacit, experiential understanding of the laity.

But does this mean that you're dead set against the concept of microcredit? Or are we just waxing philosophical about how capitalism is suddenly the weapon of choice to fight poverty in the "developing" world?

Posted by bma | October 14, 2006 8:24 AM
2

Mudede, you're the three year old with a hammer -- everything likes a nail. Where was the mysticism in that quote? "Revolutionary idea" could be called overwrought. I think "cycle of poverty" is merely accurate. And what's not to love about microcredit? It beats the alternative.

Posted by chris | October 14, 2006 8:51 AM
3

Overthinking is not a virtue, particularly when over-thinking a concept that actually helps people.

I know you might prefer they be given cabbage soup and a tract about some glorious five year plan Charles, but in the real world, cash is better.

Posted by Catalina Vel-DuRay | October 14, 2006 9:24 AM
4

Charles clearly believes that the poor should simply be given the things they need. To insist that they work to pay back what they have been given may result in the unfortunate instillation of new life skills.

Posted by BC | October 14, 2006 9:45 AM
5

It CAN work but most likely, it's used as a tool to financially enslave, and thus claim a stake in, third world pops by American banks.

Posted by Gomez | October 14, 2006 10:24 AM
6

Wrong, Gomez. These aren't American banks. These are very small banks set up for this express purpose, specifically because larger banks avoid loans to groups that they gauge as being high-risk for default. There is nothing insidious about this system.

Posted by Gabriel | October 14, 2006 10:59 AM
7

And Charles, it's silly to say that capitalism is mystical and superstitious as primitive religion simply because it can address issues such as breaking poverty cycles and improving miserable lives. So should we call medical surgeons primitive and superstitious mystics because they speak of "saving people"?

Posted by Gabriel | October 14, 2006 11:03 AM
8

Microcredit ain't the World Bank. It's a completely different program. In fact, many of these microloans are underwritten by private citizens in the developed world who may or may not have realistic expectations about getting their investment back; while the conditions of the loan stipulate that it be paid back, usually the interest rates and penalties are much lower than similar programs financed by the WMF. If you've got an extra $90 sitting around, you too can be a microlender.

Posted by david | October 14, 2006 11:07 AM
9

Also, capitalism isn't really all that logical and certainly isn't "precise." The materialism characteristic of Marx's era insisted that big, sloppy systems (like, say, the economic and social interactions of seven billion people scattered across a whole planet) could be made to behave in predictable and controllable ways, much as intellectuals of that era believed that the whole physical world could be understood and its behavior predicted accurately if one could just track all the subatomic reactions that gave rise to it. It was a mechanistic view of reality that existed before things like relativity and quantum mechanics pretty much exploded that mechanistic view of the world. Physics left that conceit behind a hundred years ago, but a lot of economic theorists never got the memo.

Marx also had the benefit of never seeing what happened when his wonderful elegant theories of economic planning collided with the messy real world.

That is to say, there's voodoo in economics from micro all the way to macro. Capitalism has always been a religion as much as a science, and the current brand of "free-market" capitalism (where everything can be traded as a commodity of wildly fluctuating value over porous national borders) is about as rational as Scientology. That is to say, makes perfect sense to the initiates who've bought their way into the inner circle, looks pretty crazy to everyone else.

Posted by flamingbanjo | October 14, 2006 11:38 AM
10

To paraphrase Charles: I come here not to praise capitalism but to bury it.

Posted by brian | October 14, 2006 12:12 PM
11

As Mike Davis pointed in his book Planet of Slums, the most important book published this year, the microcredit success story is essentially a "myth" that has its meat in the "bootstrap capitalism" ideology that never stops feeding the most voracious species in the capitalist zoology, the parvenu.

Posted by charles mudede | October 14, 2006 2:24 PM
12

Fair enough, Gabriel, but it CAN be used fopr insidious means, once the foot is in the door and it becomes a popular means of enablement among the disadvantaged, similar in means to how the ignorance or relatively primitive populations is preyed upon by Catholic 'missions'. They earn the trust of these populations, get them indebted, and start changing policies, rates, et al, seize assets for nonpayment of now impossible terms, and what can these people do?

Posted by Gomez | October 14, 2006 2:55 PM
13

As Daniel Davies recently observed, microcredit, in local context, is simply credit. So yes, it is a little odd to see the Nobel Peace Prize awarded to someone who came up with a neologism for high-volume, low-margin banking.


But if we're going to scoff at mysticism as evidenced in language, let's take a little look at contemporary "never speak the forbidden word Communism" Marxists, shall we? No, sir, no vast apparatus of mystical language in that camp, not at all.

Posted by robotslave | October 14, 2006 4:02 PM
14

AS USUAL - GOMEY JUMPS IN OVER HIS HEAD.

MICRO CREDIT IS SO UTTERLY SIMPLE THAT SEATTLE MIDDLE CLASS KIDS CAN'T GRASP IT.

IN THE THIRD WORLD, EVEN A VERY SMALL AMOUNT OF MONEY GETS YOU A TOOL, SODME INVENTORY OR OTHER NEEDED PEICE OF A SMALL, SMALL, SMALL, START UP BUSINESS.

YOU CRAFT, SELL - AND SUDDENTLY CAN BUY FOOD AND SHOES AND BOOKS.

NO AMERICAN BANKS ARE MAKING 100.00 LOANS TO ANY ONE ANYWHERE IN THE WORLD.

TOO SIMPLE FOR MOST AMERICANS. WE DON'T LIKE TO REALLY UNDERSTAND DIRE POVERTY - AND THE LOCK IT HAS ON MILLIONS PLANET WIDE.

WITH A WHEEL BARROW, YOU CAN HIRE TO MOVE GOODS. WITH A SEWING MACHINE YOU CAN REPAIR AND MAKE CLOTHES. SEVERAL SHOVELS AND YOU CAN HIRE TO DIG.

WITH SOME POTS YOU CAN VEND SOUP.

NOT A BANKING CONSPIRACY. CHARLES, SOMETIME YOU ARE UTTERLY OFF KEY.

Posted by Jack | October 14, 2006 4:36 PM
15

There's One thing that isn't too simple for most Americans....

ONLY RETARADS TYPE IN ALL CAPS

Posted by turn off your cap lock | October 14, 2006 5:27 PM
16

Credit is not wealth, especially if you max your line out and miss a couple payments.

Posted by Gomez | October 14, 2006 7:42 PM
17

Really, Gomez? Gee, thanks for the enlightenment there.

You know, there's a difference between loan sharks and what microcredit is doing. You really should pull your head out of your ass long enough to find out what it is before you go exercising your tongue.

Posted by Seattle Hipsters are Clueless | October 14, 2006 8:32 PM
18

ANCIENT GREEK AND LATIN WAS WRITTEN ENTIRELY IN CAPITAL LETTERS AND THEY WERE HARDLY RETARDS.

Micro-credit is this year's De Soto. It's better than hand-outs, but it doesn't really create entrepreneurs. That only happens when the overal economic environment is conducive to long-term savings.

That's not to say it's not worthwhile. Bandaids are better than nothing. It's a pretty minute benefit though. It's like dressing the wounds of those grazed by landmines. This would be an unqualified good were it not that it's also a diversionary tactic for burying the real victims alive in rubbish mountains.

Viva Hugo Chavez!


Posted by SPQR | October 14, 2006 10:33 PM
19

Well, I think that you also could make the argument that this is not exactly a prize for work in "peace". Even the earlier award to Wangari Maathai, largely granted because of her work in environmentalism and conservation, made some mention of her political positions in Kenya. Here, economics supplants social movements as a means to deliver liberation to the poor and oppressed, which is a frightening message. Can Yunus and Bank be considered to be on the same level as Aung San Suu Kyi, Lech Walesa or Médecins Sans Frontières?

Posted by bma | October 15, 2006 12:04 AM
20

TO THE BABY SNOT NOSE ABOVE - I LIKE CAPS AS I AM AMOST BLIND.

SHOVE IT UP YOUR WIDO OPEN ASS HOLE.

BELLEVUE CREEP.

Posted by Jack | October 15, 2006 5:09 AM
21

Increase the type size in your browser. Don't inflict the ugly, loud, and hard to read ALL CAPS on the rest of us, mmm-kay?

Posted by BEACON HILL CREEP. | October 15, 2006 2:13 PM
22

I think it is a little sweeping to dismiss microcredit as a 'myth', but free market types do tend to ignore the other important components of development: regulation and infrastructure.

Most underdeveloped countries suffer the problem of having a modest formal economy supporting the government through relatively heavy taxation, which supports a small middle class and pensioners. This constituency naturally pushes the government to protect it from competition. This creates barriers to market entry, and keeps budding entrepreneurs operating in the informal economy, which produces no tax revenue and no export earnings.


Getting the banking sector to loan to small business without the sort of reforms that let them easily enter the formal economy is putting the cart before the horse.

Posted by Some Jerk | October 15, 2006 2:22 PM
23

How could being "almost blind" justify using all caps in an outgoing message?

Posted by Some assholes will use any excuse.... | October 15, 2006 8:28 PM
24

Really, I'm a hipster?

I HAVE FINALLY ARRIVED!

Posted by Gomez | October 15, 2006 10:01 PM
25

NOT LIKE IT DON'T READ MY OWN OUTGOING POSTS AS I TYPE THEM - AND PERHAPS HABIT - OF COURSE WHEN SOME POSTING GOD SAID - CAPS ARE BAD, THE CONFORMISTSTS ALL FALL OVER THEMSELVES TO CONFORM.

FUCK YOU ALL. YOUR COMMENTS ARE ALMOST COMPLETELY LACKING ANY MENTAL PROWESS, LET ALONE WORTH READING, IN CAPS OR LOWER CASE...... DRIVEL.

BUT I BET YOU REALLY THINK YOU ARE COOL AND PROGRESSIVE AND SO DAMN RIGHT ON....

GOING TO ANOTHER SITE, WHAT A WASTE OF TIME.

Posted by jack | October 16, 2006 3:16 AM
26

I agree wholly with Jack. You all want to think that the only thing that will cure poverty is communism. That is a joke. Do you want to know a MAJOR thing that microloans are for? Its not just sewing machines and pots. In Africa, most all farmers grow organic crops. Mainly because they can not afford pesticides. In the European market, they could get 10X the money for their crops if they are labeled as organic. But in order to get the designation from the EU, they have to have soil testing. Guess what, that costs close to $1000. How many farmers in africa have that kind of money? Pretty much none. But with mircoloans, they can get their soil tested, which creates more money for them, so they can hire others.

You see, they can earn money. And most of the time, they are able to pay back these small loans very quickly with that increased revenue. I am not saying there arent problems with it, cause there are for everything. But with local backs you do many things. 1st, local people get *jobs* there, since they are staffed by local people. It gives pride in a city that you can have entrepenuers, and lastly it gives people a means to get themselves up.


but you know what? I think we should all just give them money. People get no pride from earning a living, they just want money. That is what so-called communists would have us believe.

Posted by Monique | October 16, 2006 8:38 AM
27

@ 22,

Um, not really. Third world countries are definitely not suffering from heavy taxation or regulation. Underdeveloped countries usually have little of either. In many of those countries, you can set up shop with little to no interference from the government, selling clothes, food, offering various services. Think of all the hoops business owners have to jump through to open a business in this country, especially anything related to food handling.

People get no pride from earning a living, they just want money. That is what so-called communists would have us believe.

Well, I think a lot of people wouldn't mind not having to work. The thing is that nothing would get done if anyone who wanted it could get a check from the government every month.

Posted by keshmeshi | October 16, 2006 10:32 AM
28

Keshmeshi,

Your point is correct, but it supports my thesis. You can set up a business without any government interference, but there is a whole system of registration and regulations you are supposed to follow to do it.

No one does, because in most cases the capital required to jump thru the hoops far exceeds the yearly income of the average person. That creates the large informal economy, which is unable to get credit from the banking sector, and provides no tax revenue to the government, which then has to lean more heavily on the taxpayers it does have.

This creates further disincentive to go 'on the books', and a vicious cycle is born. India, while still suffering tremendous poverty, has made great economic strides since throwing off the 'permit raj' which was the ultimate expression of this syndrome.

Posted by Some jerk | October 16, 2006 1:35 PM
29

Okay.

If they're so poor, how do they pay these loans back? Cause they're gonna have to.

Does the term and the rate keep repayment viable? Do all of you singing microcredit's praises know this?

Posted by Gomez | October 17, 2006 12:01 PM
30

Hi!
yes, ok.

Posted by Boobler | October 17, 2006 11:45 PM
31

Keshmeshi,

You make the arguement that most third world and underdeveloped countries do not deal with heavy taxation or trouble when trying to create a business, but what about those countries that are dealing with a dictatorship? I would think that countries in Africa and Asia that are ruled under some form of dictatorship or totalitarian government would be giving away a lot of their wages to funding the leading party.

Although people in this country have to go through a lot of hoops in order to start a business, we at least have the opportunity and for the most part financial support to do so. A lot of the people in these underdeveloped countries have neither, so I think the micro loans are a great first step to solving a much bigger problem.

Posted by Eric | October 18, 2006 1:24 AM
32

jonny

Posted by jonny | October 23, 2006 9:48 PM
33

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