small-scale capitalism
There's been a lot of buzz about online microfinance lately, especially Kiva--maybe the trendiest form of philanthropy I've seen on the web since The Hunger Site and FreeRice. I have some thoughts on the matter.
What is microfinance? Well, the basic idea is that you, a participant in one of the world's richest economies, agree to lend a small amount of money to a specific person (or group of people) in one of the world's poorest economies, for the specific purpose of allowing that person to start a sustainable small business. This business will increase their earning potential, thus enabling them to make more money, thus increasing their standard of living, even giving them the ability to pay you back eventually. $30 or $50 or $100 is pocket change to most people in First World countries, but in places where the local economy has totally gone to shit, like Afghanistan, this is enough for someone to start an auto repair shop or open a fruit stand in a country that needs auto repair shops and fruit stands. The idea is that if enough investment is done through this program, lots of small local businesses will pop up in countries that large international companies refuse to invest in (or should not invest in, neo-colonialism being a nasty thing that leads to bloodshed and more failed economies and all), reducing poverty, allowing indigenous businesses to join the global market on their own terms (rather than the yoke of a foreign corporation), and helping to lift those countries out of the economic shitter. The advantage to this approach over straight-up philanthropy is that it is theoretically less susceptible to corruption: rather than having all of America dump their loose change into collection boxes which are mailed to Zimbabwe to be pocketed by local warlords, each lender is matched up with a specific borrower, so the lenders can personally oversee the borrower's payments. It's the kind of charity even heartless fucktards can get behind--the kind who never donate to charity because they don't trust poor people to spend their money on basic necessities rather than drugs--because it's not a handout, it's a loan to be used for a specific purpose.
You know how they say socialism only works on a small scale? Well...this is an experiment in seeing whether capitalism does too. Because, essentially, this is exactly how Western economies work, scaled down to hundreds of dollars instead of millions. You may not be able to afford a significant stake in Google or Coca-Cola, but you can temporarily receive a tiny amount of money from some dude in Ghana with a dream of expanding his tiny fruit stand into a supermarket. This is shareholder activism for the masses (well, from the masses of one country to the masses of a considerably poorer country). Suddenly you're not dumping money into a box, or selling cookies to mail a check. You're investing in someone else's dreams, and you're monitoring it yourself. And your motive is not profit, but progress.
I have mixed feelings about this concept. On one hand, it seems like a neat way of bringing the advantages of capitalism in theory (economic growth, reduced dependence on government, upward mobility, arbitrary distribution of wealth) to countries that would get stomped all over by international free market capitalism as practiced (class struggle, corruption, foreign political influence, racial inequities, puppet governments, ghettos). As an added bonus, since investment choices are made out of altruism rather than profit, this provides capital to local businesses that would have nothing to offer a giant multinational corporation, such as junk dealers and small-scale fishermen. On the other hand...isn't lending money to poor people, who may or may not be able to pay you back, exactly what a loan shark does? Visceral semantic connotations aside, the approach does have some the same problems--interest rates are typically exorbitant, and Kiva's already had to put out a press release about a lending partner they had to cut off because said partner was exaggerating the size of their loans and shaving the difference off the top. I've found various articles on the Internet expressing concerns about another, more established microfinance program, Grameen Bank, inadvertently causing debt slavery in Bangladesh. What's to keep Kiva and partners from becoming the same? Furthermore, as a network of smaller microfinance institutions, Kiva doesn't really have any say in how or whether borrowers are persuaded to pay up. Imagine how much it would suck if you lent twenty bucks to a Nicauraguan tailor only to find out much later that the group Kiva hired to manage the debt came over to his shop and broke his kneecaps. Over your twenty bucks. Yeah.
On the other other hand...these countries are often so poor that they have no traditional banks. So there really isn't any other option for folks that want to make a better life for themselves. (Have you seen the Zimbabwean dollar recently? A pair of raw eggs costs something like 38 billion of them. I'm not even exaggerating.) Traditional charities are excellent for providing this kind of capital, as well, but the bureaucracy involved in getting money from donors on one side of the world to beneficiaries on the other tends to either have the money dissolve into the infrastructure itself or be pinched off by corrupt bastards on the other side. That said, the overhead in running a microfinance bank is considerable as well; Kiva uses that as their explanation as to why their interest rates are so high.
So...it's an interesting idea, but I'll stick with traditional charities for now, corrupt as they may be, and direct action when I see poverty up close. There's a good reason why usury is a sin in the Bible, and why the love of money is the root of all evil--as someone who has had to deal with misinformed, overzealous debt collectors recently, and less recently struggled under the weight of enormous student loans, it would be hypocrisy for me to put someone else through that same experience. Neither a borrower or a lender be.
What is microfinance? Well, the basic idea is that you, a participant in one of the world's richest economies, agree to lend a small amount of money to a specific person (or group of people) in one of the world's poorest economies, for the specific purpose of allowing that person to start a sustainable small business. This business will increase their earning potential, thus enabling them to make more money, thus increasing their standard of living, even giving them the ability to pay you back eventually. $30 or $50 or $100 is pocket change to most people in First World countries, but in places where the local economy has totally gone to shit, like Afghanistan, this is enough for someone to start an auto repair shop or open a fruit stand in a country that needs auto repair shops and fruit stands. The idea is that if enough investment is done through this program, lots of small local businesses will pop up in countries that large international companies refuse to invest in (or should not invest in, neo-colonialism being a nasty thing that leads to bloodshed and more failed economies and all), reducing poverty, allowing indigenous businesses to join the global market on their own terms (rather than the yoke of a foreign corporation), and helping to lift those countries out of the economic shitter. The advantage to this approach over straight-up philanthropy is that it is theoretically less susceptible to corruption: rather than having all of America dump their loose change into collection boxes which are mailed to Zimbabwe to be pocketed by local warlords, each lender is matched up with a specific borrower, so the lenders can personally oversee the borrower's payments. It's the kind of charity even heartless fucktards can get behind--the kind who never donate to charity because they don't trust poor people to spend their money on basic necessities rather than drugs--because it's not a handout, it's a loan to be used for a specific purpose.
You know how they say socialism only works on a small scale? Well...this is an experiment in seeing whether capitalism does too. Because, essentially, this is exactly how Western economies work, scaled down to hundreds of dollars instead of millions. You may not be able to afford a significant stake in Google or Coca-Cola, but you can temporarily receive a tiny amount of money from some dude in Ghana with a dream of expanding his tiny fruit stand into a supermarket. This is shareholder activism for the masses (well, from the masses of one country to the masses of a considerably poorer country). Suddenly you're not dumping money into a box, or selling cookies to mail a check. You're investing in someone else's dreams, and you're monitoring it yourself. And your motive is not profit, but progress.
I have mixed feelings about this concept. On one hand, it seems like a neat way of bringing the advantages of capitalism in theory (economic growth, reduced dependence on government, upward mobility, arbitrary distribution of wealth) to countries that would get stomped all over by international free market capitalism as practiced (class struggle, corruption, foreign political influence, racial inequities, puppet governments, ghettos). As an added bonus, since investment choices are made out of altruism rather than profit, this provides capital to local businesses that would have nothing to offer a giant multinational corporation, such as junk dealers and small-scale fishermen. On the other hand...isn't lending money to poor people, who may or may not be able to pay you back, exactly what a loan shark does? Visceral semantic connotations aside, the approach does have some the same problems--interest rates are typically exorbitant, and Kiva's already had to put out a press release about a lending partner they had to cut off because said partner was exaggerating the size of their loans and shaving the difference off the top. I've found various articles on the Internet expressing concerns about another, more established microfinance program, Grameen Bank, inadvertently causing debt slavery in Bangladesh. What's to keep Kiva and partners from becoming the same? Furthermore, as a network of smaller microfinance institutions, Kiva doesn't really have any say in how or whether borrowers are persuaded to pay up. Imagine how much it would suck if you lent twenty bucks to a Nicauraguan tailor only to find out much later that the group Kiva hired to manage the debt came over to his shop and broke his kneecaps. Over your twenty bucks. Yeah.
On the other other hand...these countries are often so poor that they have no traditional banks. So there really isn't any other option for folks that want to make a better life for themselves. (Have you seen the Zimbabwean dollar recently? A pair of raw eggs costs something like 38 billion of them. I'm not even exaggerating.) Traditional charities are excellent for providing this kind of capital, as well, but the bureaucracy involved in getting money from donors on one side of the world to beneficiaries on the other tends to either have the money dissolve into the infrastructure itself or be pinched off by corrupt bastards on the other side. That said, the overhead in running a microfinance bank is considerable as well; Kiva uses that as their explanation as to why their interest rates are so high.
So...it's an interesting idea, but I'll stick with traditional charities for now, corrupt as they may be, and direct action when I see poverty up close. There's a good reason why usury is a sin in the Bible, and why the love of money is the root of all evil--as someone who has had to deal with misinformed, overzealous debt collectors recently, and less recently struggled under the weight of enormous student loans, it would be hypocrisy for me to put someone else through that same experience. Neither a borrower or a lender be.