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« "Bark" Mitzvah & "Cat"echism | Main | The "Unacceptable" Presidency of George W. Bush »

October 13, 2006

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To me, anytime the West "prizes" the East - the "other" - is sufficient cause to dig deeper. I'm not familiar enough with BD to figure out what's going right there but microfinance has been a failure in India.

Typically, the microloan turns out to be debt trap for the woman because the economics just don't work out. Imagine a case where a woman micro-borrows to finance the purchase of a cellphone. She then uses the cellphone to provide payphone service to the rest of her village & earn an independent income. Sounds good in theory & this is about the extent normally heard in all the NPR sound bytes. And all it took was a Vanderbilt-trained economist. Sounds great so far, doesn't it?

There is just one little hitch. As they teach you in B-schools, getting a loan is no guarantee of business success. If the payphone service appears to be successful in the village, it quickly breeds copycat competitors as other women from the same village also access micro-loans & enter the payphone market. Sure enough, with this added competition, no woman is earning enough money to be able to pay back even the interest on the loan. In addition, the potential for conflict increases dramatically.

Quite frankly, the Nobel does not impress me.

You mean Amartya Sen didn't deserve it either?

Sen deserved it, as did all the other recipients of the assorted "prizes". This is not about discrediting the recipients but analyzing whether their work contains exotic - culturally "othered" - goods, artifacts etc. where value can be derived by processing through the legitimizing machinery of the award or prize.

In this case, the culturally "othered" artifacts are immediately obvious:

1. the oppressed eastern woman
2. liberated by western trained economist
3. obscurantist locals preventing progress

Huggan says that the merchandising and trafficking of these artifacts are seen as legitimizing the very institutions (in this case, The Nobel) that support them.

Thanks Sanjay for your wisdom, as always. The other criticism I saw of Dr. Yunus and the Grameen Bank came from left leaning folks, who claim that the success of micro-lending will be seen as a triumph of the market and thus make an inept government sit back even further. A bit like the Indian government leaving it to the citizens to dig their own wells and generate electricity during black outs.

I don't think Yunus was out to subvert Bangladesh's governmental economic efforts or to coerce anyone. He acted on a common sensical idea that he thought he could promote to help the desperately poor. From all reports, it seems to have gone pretty well.

I would like your insight on my latest post, Life, Liberty and the Pursuit of Utility.

Thanks Ruchira, your blog is one of those very rare places where people can actually converse. I say that with the experience of someone that has subscribed to over 250 online fora of various types - and seen mostly "post & run" types.

I have nothing against Dr. Yunus & perhaps I can help mute some of the Left criticism against him. Amartya Sen won the Noble in part because he demonstrated real life cases where the free market fails miserably i.e. during a drought. During the pre-independence Bengal famine, there was an urgent demand for food but people did not have the money to pay i.e. they could not make a bid in the open market. As far as the market is concerned, these people were invisible, they did not exist because their blip did not even register on the screen. On the supply side, Sen showed that there was no shortage of food as warehouses and godowns were overflowing. However, the "efficient" market rationally decided to (1) send the food where it was getting the best price or (2) wait until it got a better price. Those who urgently and immediately needed food the most never did get it, millions perished.

Getting beyond droughts & other natural calamities to a more general case, the market really only includes those that show up as blips on the screen. It seems to me that before we can say "let the markets decide", we at least have to also ask "is everybody in the market?". It is not solely up to the government (even if it is able) to provide the needed social service of uplifting people past this market-entry threshold. Perhaps Grameen's effort should be judged favourably in this light - how effective have they been in getting more people into the market.

I applaud Mr. Yunus' efforts in the area of microlending. As I mentioned in an article I wrote on my website, I applaud anyone who goes about the business of helping the impoverished improve the quality of their life. It may not be a perfect solution, but it is what I like to call 'Hope in the form of action.'

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