The Myth of Microloans

The committee that gave Henry Kissinger the Nobel Peace Prize has given it this year to Muhammad Yunus, the economist who put the word "microloan" on the map with the Grameen Bank in his native land of Bangladesh. That's progress of a sort. But in terms of hot air, any sentences linking "peace" with "Henry Kissinger" aren't immeasurably more vacuous than the notion that microloans can help--to use the language of the Nobel Committee's citation--"large population groups find ways in which to break out of poverty."

Throughout the late 1980s and '90s, in the verbal currency of First World do-gooders, "microloans" became one of those magically fungible words, embedded in a thousand foundation and NGO annual reports, like "sustainable." What could be more virtuous in terms of prudent philanthropy than giving very small loans to very poor women? Microloans breathe healthful uplift, as divorced from the sordid world of megaloans as are microbrews from Budweiser.

The trouble is that microloans don't make any sort of a macro-difference. They have helped some poor women, no doubt about it. But in their own way they're a register of defeat. Back in the early 1970s there were huge plans afoot to change the entire relationship of the Third to the First World, to speed Third World economies toward decent living standards for the many, not just the few. At the United Nations radical economists were hard at work drafting plans for a New World Economic Order. All that went out the window, and here are the caring classes thirty years later, hailing microloans.

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