“Credit alone is not a panacea” (Jonathan Morduch, as cited in Bruck, p.5)
Ways to alleviate poverty
There are many different ways to alleviate poverty pretty much sums up the whole reading for this week. According to Rajiv Shah, “you need a range of different business models. Some are going to be very commercial” when talking about microcredit (nonprofit) VS. microfinance (commercialized). There will also be distinct ways of alleviating poverty in different countries.
Successful ways of combating poverty
I. Redistribution: (Sider, p.230-231) approach of combating poverty parallels with Gates’ foundation’s attitude towards microcredit and microfinance; that there is no one way of combating poverty (as cited on Bruck, p.5).
- “In a largely agricultural society, land reform is essential” (Sider, p.230).
- “In an information society, equality of educational opportunity is the most basic way to empower the poor” (Sider, p.231).
- “Wise schemes to enable the poor to acquire the money needed to buy a house, start a small business, or prepare for retirement are also important.”
Eg: MED (micro-enterprise development), Grameen Bank (Sider, p.231)
II. Policy & government: “…[A]ppropriate policies will always enable us to profit from growth and to moderate, even prevent, unpleasant outcomes for the poor.” (Bhagwati, p.4)
- According to Sider, land reform is essential in a largely agricultural society. Hernando de Soto would agree with this because in Africa (largely agricultural society), property owners who do not have access to legalize their land ownership are not able to do microloans and invest. Thus, they need rights and rule of law to protect themselves and their property (Bahgwati, p.58).
- Policies that forced banks to open in rural India, and provide lower collateral requirements resulted in bad debts. However, microcredit programs providing small loans to very poor clients, utilizing collective accountability for repayments helped ensure success in providing opportunity for the very poor (Bhagwati, p.59)
- Sider uses the example of South Korea, Taiwan and Singapore where governments intervened in the global economy to promote trade relations while putting on protective measures
- Diversify exported production in order to insulate the domestic market from failure (Eg: Market saturation of Jute production in Bangladesh showed a drop of world price thus causing immiseration, which could have been avoided had they diversify production) (Bhagwati, p.55). Note: Tariff policy at this point needs to support diversification. (Sider, p.241)
- Collier’s idea ties into Sider’s example of the actions of the government of Singapore, South Korea and Taiwan calling for the strengthening of the governance to grow and sustain the economy of the bottom billion.
- Trade liberalization in all contexts does not always promote growth that is beneficial to the poor. According to Bhagwati, there are certain policies and trade that works while others don’t. Greg Ip, US economics editor of The Economists shows the narratives that have been going on about trade liberalization. Could this be a possible narrative to deviate from the term “capitalism” yet still hold the goals of capitalism? In Wallterstein’s lecture, he mentioned that there will come ways of holding the goals of capitalism using different terms that is not shunned by people yet.
- There is a great need in wealthy nations for a shift in priorities and patterns of consumption centered on Biblical principles. Sider called it “Redefining the Good Life” (p. 238). In fact, Bhagwati claimed that even as the poor realize greater incomes, they are also know to purchase things based on status, variety, and other qualities that do not promote healthy living (p. 59).
- In Bruck’s article, Yunus and Omidyar has opposing views. Yunus backs the non-profit paradigm in his advocacy for the “social business model” while Omidyar strongly believes in a profitable business model that is sustainable. Yunus believes that one shouldn’t be making profit out of the poor, and for-profit microcredit businesses question the purity of motives. On the other hand, Omidyar believes that with a for-profit model, it will be provide sustainability.
- Given the debate regarding redistribution as a means to combat poverty how can we define what progress looks like using these methods?
- What are some important factors that will ensure women are integrated in the effort for progress when using methods to give opportunities to those in poverty? How can we as community developers that we are factoring in those who have been historically marginalized? What do you mean by progress?
- According to Bhagwati, some policies work to combat poverty, what type of policy would work for underdeveloped nations?
- Having read Bruck’s article about microcredit being for-profit and non-profit, do you think Yunus’ debate about purity of motives (p.5) a valid point? If yes, how does a for-profit microcredit keep their purity of motives?
- Sider showed the downfall of using GDP and suggested a more effective way of measuring growth through GPI. This article shows the pros and cons of GPI
- Sider refers to good governance as a key element to ensure that the success of a countries economic well being, this link gives some examples of what good governance might look like What is good governance?
- Bruck showed several examples of the effectiveness of micro-lending. Jamii Bora shows that not only is it possible to reach the very poor (contrary to CGAP’s beliefs-in NYT article) with microlending, but that coupled with trust and involvement, it can be used to enable the very poor to benefit from the market economy in growing their income and building infrastructure within their community.
- Microconsignment (featured in NYT article) is an alternative to microcredit without the high risk of not being able to pay back.