not really about me but here

1.8.08 19:08

As I hear more and more about what former volunteers have done in the past here in Moldova I realize a majority of it is not sustainable. We have been given this speech by Peace Corps themselves and they urge us to seek ways of making projects sustainable. I have also listened to some backlash against foreign aid by volunteers who just flat out refuse to write grants for their partners. Doing a little reading into the subject I was able to read their argument more or less and have been given it a lot of thought. At the same time I am reading “Longitudes and Attitudes” by Thomas Friedman in which it discusses the view of America from a middle east view point, why things are the way they are over there and what in Friedman’s eyes is the solution. I am looking inside myself to try to figure out what is my purpose of being here in Moldova and what I should be thinking about as I think about projects to start here.

Any who here is a little snip of the book I typed out… though I do not know if it is illegal to post this material, im not making money on it and I have the book here it is.

Now this is taken directly out of Banker to the Poor by Muhammad Yunus. Now this book was a little hard to get into given how it mainly is just a promotional piece about him self that he wrote explaining how great of a person he is. I have struggled through most of it taken vary little from it until I came across these few pages that were so enlightening that I wrote the page numbers down so that I would later write type them on word then possibly post them to my blog for others to see if they have the patience to read into it.
Taken directly from his books as stated above.

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Why give credit first?

I firmly believe that all human beings have an innate skill. I call it the survival skill. The fact that the poor are alive is clear proof of their ability. They do not need us to teach them how to survive; they already know how to do this. So rather than waste our time teaching them new skills, we try to make maximum use of their existing skills. Giving the poor access to credit allows them to immediately put into practice the skills they already know- to weave, husk rice paddy, raise cows, and peddle a rickshaw. And the cash they earn is then a tool, a key that unlocks a host of other abilities and allows them to explore their own potential. Often borrowers teach each other new techniques that allow them to better use their survival skills. They teach far better than we ever could.

Government decision-makers, many NGOs, and international consultants usually start the work of poverty alleviation by launching very elaborate training programs. They do this because they begin with the assumption that people are poor because they lack the skills. Training also perpetuates their own interests- by creating more jobs for themselves without the responsibility of having to produce concrete results. Thanks to the flow of aid and welfare budgets, a huge industry has evolved worldwide for the sole purpose of providing such training. Experts on poverty alleviation insist that training is absolutely vital for the poor to move up in the economic ladder. But if you go out into the real world, you cannot miss seeing that the poor are poor not because they are untrained or illiterate but because they cannot retain the returns of their labor. They have no control over capital, and it is the ability to control capital that gives people the power to rise out of poverty. Profit is unashamedly biased toward capital. In their powerless state, the poor work for the benefit of someone who controls the productive assets. Why can they not control any capital? Because they do not inherit any capital or credit and nobody gives them access to it because they are not considered creditworthy.

I believe that many training programs are counterproductive. If Grameen had required borrowers to attend a training program in business management before taking out a loan to start a business, most of them would have been scared away. Formal learning is a threatening experience for our borrowers. It can even destroy their natural capacity or make them feel small, stupid, and useless. Also, poor people are often offered incentives to participate in training programs- sometimes they receive immediate finical benefits in the form of training allowance or training is made a prerequisite to obtaining other important benefits in cash or in kind. This attracts the poor, even though they may not be interested in the training itself.

This is not to say that all training is bad. Bur training should not be forced on people. It should be offered only when they actively seek it out and are willing to pay in kind or cash to obtain it. Grameen borrowers, for example, do look for training. They might want to read the numbers in their passbooks, for example, or figure out what amounts have been paid and how much remains to be paid back. Often Grameen borrowers want to be able to read the Sixteen Decisions, keep accounts, or follow business news. Or they may want to learn how poultry raising: cattle raising; or new ways of plating, sorting, and processing crops, Grameen is also bringing new technology to them: cellular telephones, solar energy, the Internet. Soon borrowers will need to calculate the cost of telephone calls or read the words on computer screen.

Even before I started the Grameen Bank, I had been a critic of international aid agencies in
Bangladesh. By far the most influential agency, and the one I have most criticized, is the World Bank. The World Bank and Grameen have been through so many fights and disagreements over the years that some commentators have labeled us “sparring partners.” There have always been a few individuals in the World Bank who understand what micro-credit is all about, but our styles are so radically different that for many years we have spent more time and energy fighting each other than helping each other.

…My less-than-pleasant experience with the World Bank spurred me to learn as much as I could about development agencies. One observation that became increasingly apparent is that multilateral aid institutions have a lot of money to disburse. Officials determine target amounts for each country. The more money officials manage to give out, the better grade they receive as lending officers. Therefore young, ambitious officers of a donor agency will choose the project with the biggest price tag. By moving a lot of money, their name moves up the promotion ladder.

In my line of work, I have often witnessed the desperation of donor agency officials to give away ever-larger sums of money to Bangladesh. They will do almost anything to achieve this, including bribing government officials and politicians either directly or indirectly. For instance, they will rent newly build, expensive houses owned by government officials or invited them on attractive foreign trips under the guise of official workshops and conferences. Consultants, suppliers, and potential contractors often facilitate this bribing mechanism. After all they are the ones who most benefit from project funded by donors.

One research institution in Bangladesh estimates that of the more then $30 Billion in foreign donor assistance received in past twenty-six years, 75% was not spent in Bangladesh. It was spent on equipment, commodities, and consultants from the donor country itself. Most rich nations use their foreign aid budget mainly to employ their own people and sell their own goods, with the poverty reduction as an afterthought. The 25 % that is spent in Bangladesh usually goes straight to a tiny elite of local suppliers, contractors, consultants, and experts. Much of this money is used by these elites to buy foreign-made consumer goods, which is of no help to our country’s economy or workforce. And there is a general belief that a good chunk of donor money ends up as kickbacks to officials and politicians who have helped make purchase decisions and sign contracts.

The situation is the same in all countries receiving aid, which amounts to $50-$55 Billion a year. Aid-funded projects create massive bureaucracies, which quickly become corrupt and inefficient, incurring huge losses. In a world that trumpets the superiority of the market economy and free enterprise, aid money still goes to expand government spending, often acting against the interests of the market economy.

Most foreign aid goes to building roads, bridges, and so forth, which are supposed to help the poor “in the long run.” The only people really benefitting from most of this aid, however, are those who are already wealthy. Foreign aid becomes a kind of charity for the powerful while the poor get poorer. If aid is to have some impact on the lives of the destitute, it must be rerouted so that it reaches poor households more directly.

I believe that a new aid methodology has to be designed with new objectives. In fact, the direct elimination of poverty should be the objective of all development aid. Development should be viewed as a human rights issue, not as a question of simply increasing the gross national product. When the national economy picks up, the situation of the poor is not necessarily improved. Therefore development should be redefined. It should refer only to a positive measurable change in per capita income of the bottom 50% of the population.

…When as I talked about micro-credit in the 1980s, whether to World Bank economists or journalists, most people assumed that I was trying to alleviate poverty by lending to small business that would then expand and hire the poor. It took people a while to see that I actually advocated lending to the poor directly. Policy makers tend to equate job creation with poverty reduction and economists tend to recognize that only one kind of employment—salaried employment. And economists tend to focus their research and theories on the origins of wealth in the former colonial powers, not on the micro level reality of poor people in Third World countries. Whatever attention is given to poverty comes under the rubric of so-called development economics, a field that emerged only after the Second World war and that has basically remained an afterthought or reinterpretation of the main body of economic theory.

Worst of all, economist have failed to understand the social power of credit. IN economic theory, credit is seen merely as a means with which to lubricate the wheels of trade, commerce, and industry. In reality, credit creates economic power, which quickly translates into social power. When credit institutions and banks make rules that favor a distinct section of the population, that secretion increases both its economic and its social status. In both rich and poor countries alike, credit institutions have favored the rich and in doing so have pounced a death sentence to the poor.

Why have economist remained silent while banks rejected the poor as unworthy of credit? Nobody can provide a convincing answer. Because of this silence and indifference, banks have imposed a finical apartheid and gotten away with it. If economists would only recognize the powerful socioeconomic implications of credit, they might recognize the need to promote credit as a human right.

The shortcomings of the core economic theories remain unchallenged. Microeconomic theory for example which plays a central role in the analytical frame work of economics, is incomplete. It views individual human beings as whether consumers or labor ores and essentially ignores their potential as self-employed individuals. This theoretical dichotomy between entrepreneurs and laborers disregards the creativity and ingenuity of each human being and considers widespread self-employment in Third World countries as a symptom of underdevelopment.

In many Third World countries, the overwhelming majority of people make a living through self-employment. Not knowing where to fit these individuals into their analytical framework, economists lump them in a catch all category called the “informal sector.” But the informal sector really represents the people’s own effort to create their own jobs. I prefer to call it the “people’s economy,” a term often used by a German friend of mine, Karl Osner, who has played a critical role in educating Europeans about micro-credit. Any economist with a real understanding of society would have come forward to increase the efficiency of this people’s economy rather then undermine it. In the absence of economists’ support, organizations like Grameen must step into the breach.
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