Thomas Frank, with his usual incisiveness, explains in the current issue of Harpers why so many rich liberals such as Hillary Clinton and Melinda Gates endorse micro-lending.
It is a way of identifying the interests of American women who aspire to be corporate executives or partners in law firms with Third World women basket-makers and market-place vendors.
Merely by providing impoverished individuals with a tiny loan of fifty or a hundred dollars, it was thought, you could put them on the road to entrepreneurial self-sufficiency, you could make entire countries prosper, you could bring about economic development itself.
What was most attractive about micro-lending was what it was not, what it made unnecessary: any sort of collective action by poor people coming together in governments or unions.
The international development community now knew that such institutions had no real role in human prosperity.
Instead, we were to understand poverty in the familiar terms of entrepreneurship and individual merit, as though the hard work of millions of single, unconnected people—plus cell phones, bank accounts, and a little capital—was what was required to remedy the Third World’s vast problems.
Millions of people would sell one another baskets they had made, or coal they had dug out of the trash heap, and suddenly they were entrepreneurs, racing to the top.
The key to development was not doing something to limit the grasp of Western banks, in other words; it was extending Western banking methods to encompass every last individual on earth.
Micro-lending is a perfect expression of Clintonism, since it brings together wealthy financial interests with rhetoric that sounds outrageously idealistic.
Micro-lending permits all manner of networking, posturing, and profit taking among the lenders while doing nothing to change actual power relations—the ultimate win-win.
Source: Harper’s Magazine
Last year the Clinton Foundation and the Bill and Melinda Gates Foundation celebrated micro-lending in a conference called No Ceilings, which brought together aspiring American professional women and struggling Third World women entrepreneurs.
Micro-lending involves lending tiny amounts of money to poor people to allow them to start businesses. Often they are members of circles who guarantee each others’ loans. Supposedly they all become entrepreneurs and each each other up.
The reality, as Frank pointed out, that it is very hard for desperately poor people to lift themselves up by borrowing tiny amounts of money at high interest rates to provide goods and services to other desperately poor people.
In a carefully researched 2010 book called Why Doesn’t Microfinance Work? the development consultant Milford Bateman debunks virtually every aspect of the microloan gospel. Microlending doesn’t empower women, Bateman writes—instead, it makes them into debtors. It encourages people to take up small, futile enterprises that have no chance of growing or employing others. Sometimes micro-borrowers don’t even start businesses at all; they just spend the loan on whatever. Even worse: the expert studies that originally sparked the micro-lending boom turn out, upon reexamination, to have been badly flawed.
Nearly every country where micro-lending has been an important development strategy for the past few decades, Bateman writes, is now a disaster zone of indebtedness and economic backwardness. When he tells us that “the increasing dominance of the micro-finance model in developing countries is causally associated with their progressive deindustrialization and infantilization,” he is being polite.
The terrible implication of the facts he has uncovered is that microlending achieves the opposite of development. Even Soviet-style Communism, with its frequently mocked Five Year Plans, worked better than this strategy does, as Bateman shows in a tragic look at microloan-saturated Bosnia.
No matter. The liberal class is unlikely to abandon its romance with microfinance, for yet another reason: it is profitable. Lending to the poor, as every subprime-mortgage originator knows, can be a lucrative business. Mixed with international feminist self-righteousness, it is also a bulletproof business, immune to criticism. Naturally the international goodness community discovered that empowering poor women by lending to them at usurious interest rates was a fine thing all around.
Source: Harper’s Magazine
Breaking ceilings is all very well, but what poor women and working women need is a better floor—a floor that provides assurance of jobs, decent wages, decent working conditions, union representation, child care and protection of sexual harassment.
This was the spirit of the original International Women’s Day, a labor holiday which, unlike the No Ceilings conference, threatened the political and economic status quo.
Thomas Frank’s article was taken from a forthcoming book, Listen, Liberal: or Whatever Happened to the Party of the People? which I look forward to reading.
Illustration from the Wall Street Journal.
Tags: Bill and Melinda Gates Foundation, Clinton Foundation, economic development, Feminism, HIllary Clinton, Melinda Gates, Micro-credit, Micro-finance, Micro-lending, No Ceilings, Thomas Frank, Women's rights