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COMMENTARY
October 14, 2006
A little hurrah
It is such a rare thing, when I approve of the bestowal of a Nobel Peace Prize, that I must spend a column in wonderment. The prize this year has just gone to Muhammad Yunus, the founder of the Grameen Bank, that pioneered microloans to poor Bangladeshis, especially women, to help them raise their village enterprises above subsistence level.The prize might have gone to another Shirin Ebadi -- the clever apologist for the Iranian regime, who won it in 2003 by posing as a human rights activist. More likely, to a Yasser Arafat -- or some other psychopathically cynical, blood-stained, terrorist “peace negotiator” from one of the world’s hot fronts. Norwegian peace prize committees have a long history of short-sightedness. What a pleasant change. According to his website autobiography, the spark of Mr Yunus’s idea came in 1974, when he was teaching economics at Chittagong University. He took his class to see some real “basket cases” -- that is, to a poor village where basket-weaving was the only variation on hand-to-mouth agriculture. He realized that the weavers were kept in their state of impoverished dependency, by the loan-sharks who advanced them money to buy their bamboo. At a more reasonable interest rate, allowing wider profit margins, they could raise themselves out of poverty. He started by lending out of his own pocket -- against the advice of everyone who claimed to have a brain. The most remarkable statistic about the Grameen Bank (the word means “village” in Bengali), is its claimed 98% repayment rate. If the credit card companies could get that, they wouldn’t have to charge such high interest rates. Verily -- I will put on my Catholic hat now, and thunder against usury -- extortionate rates of interest inspire criminal behaviour of a hundred kinds. And one of them, when combined with glad-handed consumer lending, is by making defaults inevitable. People get behind the eight-ball, and they just can’t get around it. They come to look upon the lender as a personal enemy, and behave maliciously towards him. They dream of “screwing the system”, but of course, they are generally too small and hapless to do that well. Often enough in history, an ethnic class of moneylenders has wound up being persecuted. Whereas, a 98% repayment rate can be built only around conservative, responsible lending, and the building of real trust. (It has to be trust, because the poor have no collateral.) This is the side of capitalism that is morally most appealing: that it builds on trust, and it works because trust IS generally rewarded when it is tried. (Socialism builds, by contrast, on envy.) As the late Jane Jacobs once said (I think it was to me), she walked into a bank branch in Germany, where she had never been, to wire money home to Canada -- and how did she know they weren’t going to steal it? The building of universal, taken-for-granted banking practices is among our greatest civilizational achievements. Mr Yunus has, in this sense, been building morally as well as financially. He has introduced poor people, who would never look at a bank, to the opportunities only a bank can provide. And he built upon a great moral insight, deeper than any financial calculation: that naïve villagers in Bangladesh as elsewhere know the value of money, of reputation, and of hard work, in ways smooth city folk with day jobs have forgotten. Deal with them personally, without condescension and on the scale of their own lives, and they will be reliable as bricks. Full disclosure: I am not a commercial banker, and I do not live in Bangladesh. I therefore write in fear that a reader who can meet either or both of these conditions will tell me everything I think about the Grameen Bank is wrong -- that it is, for instance, a foreign-aid scam like thousands of others; that its collection agents are thugs; that it fronts for druglords. The operation carries endorsements from such low-life as Hillary Clinton and Jimmy Carter. Mr Yunus himself likes to talk self-serving nonsense about bank credit being among the human rights. (He’d be quickly out of business if he believed it.) The very fact the Norwegian prize committee was attracted to him makes me wonder, “What’s the rub?” But the only fly I can descry, is the bank’s own long-term dependency on World Bank and other subsidy-rate financing. This may have been crucial to start with, but over time can only make a bank sloppy, reckless, and politically over-aware. Still: yesterday appears to have been a day when a good guy did not finish last. A little hurrah is in order. David Warren
© Ottawa Citizen
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