ZNet Special

ZNet | Economy

Microcredit, Macro Issues

by Walden Bello;
The Nation; October 21, 2006

The awarding of the Nobel Peace Prize to Muhammad Yunus, regarded as the father of microcredit, comes at a time when microcredit has become something like a religion to many of the powerful, rich and famous. Hillary Clinton regularly speaks about going to Bangladesh, Yunus's homeland, and being "inspired by the power of these loans to enable even the poorest of women to start businesses, lifting their families-and their communities-out of poverty."

Like the liberal Clinton, the neocon Paul Wolfowitz, now president of the World Bank, has also gotten religion, after a recent trip to the Indian state of Andhra Pradesh. With the fervor of the convert, he talks about the "transforming power" of microfinance: "I thought maybe this was just one successful project in one village, but then I went to the next village and it was the same story. That evening, I met with more than a hundred women leaders from self-help groups, and I realized this program was opening opportunities for poor women and their families in an entire state of 75 million people."

There is no doubt that Yunus, a Bangladeshi economist, came up with a winning idea that has transformed the lives of many millions of poor women, and perhaps for that alone, he deserves the Nobel Prize. But Yunus-at least the young Yunus, who did not have the support of global institutions when he started out-did not see his Grameen Bank as a panacea. Others, like the World Bank and the United Nations, elevated it to that status (and, some say, convinced Yunus it was a panacea), and microcredit is now presented as a relatively painless approach to development. Through its dynamics of collective responsibility for repayment by a group of women borrowers, microcredit has indeed allowed many poor women to roll back pervasive poverty. However, it is mainly the moderately poor rather than the very poor who benefit, and not very many can claim they have permanently left the instability of poverty. Likewise, not many would claim that the degree of self-sufficiency and the ability to send children to school afforded by microcredit are indicators of their graduating to middle-class prosperity. As economic journalist Gina Neff notes, "after 8 years of borrowing, 55% of Grameen households still aren't able to meet their basic nutritional needs-so many women are using their loans to buy food rather than invest in business."

Indeed, one of those who have thoroughly studied the phenomenon, Thomas Dichter, says that the idea that microfinance allows its recipients to graduate from poverty to entrepreneurship is inflated. He sketches out the dynamics of microcredit: "It emerges that the clients with the most experience got started using their own resources, and though they have not progressed very far-they cannot because the market is just too limited-they have enough turnover to keep buying and selling, and probably would have with or without the microcredit. For them the loans are often diverted to consumption since they can use the relatively large lump sum of the loan, a luxury they do not come by in their daily turnover." He concludes: "Definitely, microcredit has not done what the majority of microcredit enthusiasts claim it can do-function as capital aimed at increasing the returns to a business activity."

And so the great microcredit paradox that, as Dichter puts it, "the poorest people can do little productive with the credit, and the ones who can do the most with it are those who don't really need microcredit, but larger amounts with different (often longer) credit terms."

In other words, microcredit is a great tool as a survival strategy, but it is not the key to development, which involves not only massive capital-intensive, state-directed investments to build industries but also an assault on the structures of inequality such as concentrated land ownership that systematically deprive the poor of resources to escape poverty. Microcredit schemes end up coexisting with these entrenched structures, serving as a safety net for people excluded and marginalized by them, but not transforming them. No, Paul Wolfowitz, microcredit is not the key to ending poverty among the 75 million people in Andhra Pradesh. Dream on.

Perhaps one of the reasons there is such enthusiasm for microcredit in establishment circles these days is that it is a market-based mechanism that has enjoyed some success where other market-based programs have crashed. Structural-adjustment programs promoting trade liberalization, deregulation and privatization have brought greater poverty and inequality to most parts of the developing world over the last quarter century, and have made economic stagnation a permanent condition. Many of the same institutions that pushed and are continuing to push these failed macro programs (sometimes under new labels like "Poverty Reduction Strategy Papers"), like the World Bank, are often the same institutions pushing microcredit programs. Viewed broadly, microcredit can be seen as the safety net for millions of people destabilized by the large-scale macro-failures engendered by structural adjustment. There have been gains in poverty reduction in a few places-like China, where, contrary to the myth, state-directed macro policies, not microcredit, have been central to lifting an estimated 120 million Chinese from poverty.

So probably the best way we can honor Muhammad Yunus is to say, Yes, he deserves the Nobel Prize for helping so many women cope with poverty. His boosters discredit this great honor and engage in hyperbole when they claim he has invented a new compassionate form of capitalism-social capitalism, or "social entrepreneurship"-that will be the magic bullet to end poverty and promote development.

http://www.zmag.org/content/showarticle.cfm?SectionID=10&ItemID=11238

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ZNet | Iraq

Iraq: 'The British army is just another militia'

by Kamil Mahdi and Liv Lewitschnik;
The Socialist Review; October 21, 2006

Daily the media tells us about clashes between "insurgents" and Western troops in Iraq. We hear less about the unarmed resistance which is fighting the occupation with strikes and workplace walkouts. The General Union of Oil Employees in Basra (GUOE), or Basra Oil Union as it is commonly referred to, is in many respects leading in that struggle - continuously opposing international corporations that want to take over the national oil industry.

Kamil Mahdi is an Iraqi lecturer in the economics of the Middle East at Exeter University. He saw at first hand how strong labour resistance in Iraq is when he went to the GUOE's second anti-privatisation conference in August: "There is a great deal of commitment to the idea that political issues are not swept under the carpet. The oil workers do not believe that it is in their or the oil industry's interests to be handed over to foreign companies."

The GUOE was set up in the wake of the invasion three years ago and now represents 23,000 workers employed by nine Iraqi oil companies in Amara, Nassriyah, Anbar and Basra provinces. In 2003 they stopped Dick Cheney's company KBR (a subsidiary of Halliburton) from taking over their workplaces, and defied a new wage system instituted by Paul Bremer's administration, with a three-day strike. In late August 2006 GUOE won a number of demands following a walkout by 700 workers in Basra and Nassriyah.

The International Monetary Fund is backing a new oil resources law which would give free rein to foreign corporations over Iraq's oil. Mahdi says that while fighting for workers' rights is important to the GUOE, it is the preservation of the national oil industry that is foremost in their minds: "There is an existing national oil industry and it has continued to work and develop production under very difficult circumstances of war and sanctions. Industries have been attacked, bombed, and received no investment. The efforts of thousands of workers have kept the oil industry going, and their experience of companies brought in by the occupation to take over the management of the industry is completely negative."

Strength on the ground

The workers' efforts also prove that they are perfectly capable of running the oil industry on their own terms, even if technical and economic assistance is needed. According to Madhi, "The workers are able to manage the industry themselves. They can decide what is needed in terms of technical expertise and investment to develop the current and future oilfields - even when this is through service contracts with other companies, both domestic and foreign. But they will not allow production sharing with foreign companies because this would become a new form of the concession system."

Although the Iraqi government formulates social and economic policies behind closed doors, it takes note of GUOE because, in Mahdi's words, "the union has shown that it has strength on the ground in mobilising people for or against policies." Basra oil workers are also raising awareness about labour and economic issues within the wider community. Through their contacts with political groups, other trade unions and the international anti-war movement, GUOE's president Hassan Jumaa spoke both at the Marxism 2006 event this summer and at the International Peace Conference in London last December where he stressed the union's support for the Iraqi resistance's campaign to drive the occupiers out of Iraq. They did this because they believe the future of Iraq is at stake if the military occupation becomes an economic one.

In Basra the British occupation is now more precarious than ever, says Mahdi. The security situation has got worse since the occupation because the British military effectively ignore crime and cannot effect the dynamics of militia politics. Mistrust for the British army is growing in tandem with new revelations of military brutality towards both the civilian population and suspected resistance fighters.

He says, "The British presence in Basra is really isolated now. Of course it is a major military force, but it is isolated politically. The British army is just another militia in Basra - it cannot ever play a positive role in political development. It is an occupation army that is not even in control of the area."

Despite the situation on the ground, workers are showing remarkable solidarity and resilience. The anti-privatisation conference and the union's continuing campaigning are testimony to that. As part of standing up for workers' rights the union is campaigning to ensure that the government implements the better wages and workers' housing they won during the August strike. The union's main task is fighting to keep the Iraqi oil industry under Iraqi control rather than have it stolen by US multinationals under the protection of military occupation.

http://www.zmag.org/content/showarticle.cfm?SectionID=15&ItemID=11239

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ZNet | Israel/Palestine

Even Palestinian-Americans are being turned back at the border

by Amira Hass;
Haaretz; October 21, 2006

During the summer months, the city was "empty," according to people in Ramallah and the neighboring city of El Bireh. Residents of both cities, as well as of the surrounding villages, employed this hyperbole to express the extent to which they felt the absence of thousands of Palestinian-Americans who regularly visited their families in previous summers. Children clad in reversed baseball caps and cropped pants filled the streets with laughter and rolling American accents.

Signs of Israel's new policy, which prevents the entry of Palestinians with Western, mainly American, passports, were palpable last summer. No one knows the exact numbers of those who were turned back at Ben-Gurion Airport or Allenby Bridge. But for the past two or three months, the streets have been abuzz with reports of relatives blocked at the border: A family of seven, who came to spend two years in Ramallah with their ailing grandfather, left for Amman to renew their visa and were denied re-entry (their grandfather suffered a heart attack); a businessman was permitted entry, but his wife, who accompanied him to Allenby Bridge, was denied entry; an anonymous visitor spent two humiliating days at Ben-Gurion Airport before being put on a return flight to the United States; others received visas that limited their stay to two weeks rather than the customary three months. Still other visitors were denied entry because their parents, American citizens of Palestinian origin in their seventies and eighties, grew tired of traveling to Amman for a day or two every three months in order to renew their entry permits, and thus became "lawbreakers" in the eyes of Israeli border officials.

Those who did manage to visit were reluctant to leave for even a few days to attend family celebrations in Amman. They heard stories about others from Ramallah who decided to "drop by" for a "brief" visit and never returned. Earlier this year, two or three Palestinians on each bus that arrived at Allenby Bridge from Amman were being denied entry. But during the summer, residents felt as if only two or three were allowed to enter. Remaining passengers were forced to turn around. Jordanian passport clerks regularly caution Palestinians with foreign passports to prepare emotionally for the possibility that they will be denied entry. In light of these reports, many Palestinian-Americans simply canceled plans to visit.

"This is a gross breach of tradition," said historian Nazmi Ju'beh, in reference to the traditional ties these emigrants maintain with their cities and villages of origin: regular visits, financial assistance to those who remain behind and investment in local projects, particularly in construction.

Ju'beh said that in 1901, the first Palestinian from Ramallah, a Christian man named Ouda Dabini, emigrated to the U.S. About fifty years earlier, the first waves of Christian emigration to South America from Bethlehem and Beit Jala had begun. Dabini met stonemasons from Bethlehem, the Talhami family, who came to Ramallah to build the Friends School (a Quaker institution). After hearing wondrous stories of the great success of emigrants from that town, he decided to emigrate. Two or three years later, a wave of emigration from Ramallah began. It later spread to include El Bireh and neighboring villages, and many Muslims as well as Christians. For decades, these emigrants maintained the tradition of returning to their original homes: In their old age, emigrants would return to live in their city or village of origin. According to Ju'beh, this is reflected in inscriptions on tombstones. A tradition also developed of sending children to visit during the summer in order to ensure that they would speak Arabic and get to know other members of their families. After 1994, a new tradition developed in response to the signing of the Oslo Accords: Emigrants wished to participate in the political process of building a state. All three traditions are now threatened.

M., age 72, from El Bireh, and his wife decided to return to their ancestral home in their golden years. Their meager American pension permits them to live well in Palestine; the relatively quiet pace of life in their native city suits people their age, and their family home awaits them. Last summer, M.'s wife went to Amman to renew her visa and was denied re-entry. H., age 61, was also not permitted to return. She was told at the border that she could only return after a year. There are rumors that some are told they may only return after 10 years. Now, H.'s husband has been forced to break the law and remain in the family home despite the fact that his visa has run out.

S.'s father emigrated to the U.S. in the 1930s and fought in the American armed forces in World War II. S., a native of El Bireh and an educator, refused to serve in Vietnam. In the 1990s, he decided to return to the country with his daughter. He preferred to grow old in his native land and feared the influence of America's permissive society and crime-ridden streets on his daughter. Israel agreed to reinstate his residential status in the city of his birth, El Bireh. But his request that his daughter be granted Palestinian residence was denied. Now his daughter risks deportation (via a refusal to extend her visa).

"I have no complaints against Israel," said S. "It's an occupying nation. My complaints are directed at the U.S. We are citizens and they [the U.S.] fail to defend us from a discriminatory policy. We wouldn't have these problems - split families and being barred from returning to our homes - if we were Jews."

http://www.zmag.org/content/showarticle.cfm?SectionID=107&ItemID=11237