The relentless revolution: a history of capitalism (67 page)

Capitalism’s critics fall into three groups. There are those who are offended by the vulgarity and ugliness that the pursuit of profit promotes. They don’t like the surfeit of goods and the materialistic preoccupations of their fellow global citizens. This complaint usually comes from members of a social or academic elite. Others fight capitalism for the sins of a globalization that has enlarged the scope of the rich countries’ rapacity at the expense of the vulnerable poor. The multinational corporation is the bogey of the antiglobalization movement because it is seen as acting without social responsibility or sensitivity to human needs. Critics depict multinationals as octopuses whose tentacles cling to any profit-promising scheme, however dubious. A third group wants to work within the framework of capitalism to make the system more open, more fair, and as responsive to people as dollars. These latter seem the most interesting, if only because they are the most constructive in the fight against tenacious poverty and the misery and injustice that come with it.

Since the mid-1970s, developments in Korea, Taiwan, China, and India have lifted three hundred million people out of poverty. Millions of other men and women have moved themselves out of poverty by emigrating to more prosperous places.
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For example, half a million Romanian immigrants are now supplying the labor of the missing youths in an aging Italy. And Italy is not the only European country losing population. France, Germany, Spain, and Greece all are dipping below the replacement rate.

Elsewhere, Middle Eastern oil fields, construction work, and domestic service in cities like Dubai are pulling workers, mostly young and male, from India and the Philippines. A wave of immigrants from Africa pushes its way through the European doorway of Spain every week. The remittances these expatriated workers send back home run to the hundreds of billions, but the cost of separation from home is cruelly high. Perhaps if global communication had not shown these men and women how the West lives, they wouldn’t care, but they do know and want it. Still, without televised incitement, fifty-one million Europeans and two million Asians came to North and South America between the 1870s and 1930s, forty-nine million Southern Chinese and Indians migrated to Southeast Asia, and forty-eight million Russians and Chinese left home for Central Asia, Siberia, and Manchuria.
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The Problem of Poverty and Its Analyzers

Although “bottom billion” has not migrated out of Paul Collier’s study of that name, it’s an evocative label for those mired in poverty. Of the six billion people living today, one-sixth of them are in advanced capitalist economies, another four billion are in developing countries, and the remaining billion live in countries with stalled economies.
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World Bank figures for 2005 indicate that 1.4 billion people live below the poverty line, earning less than $1.25 a day. Unlike the backward, underdeveloped Third World nations of yore, the bottom billion today live in particular countries—fifty-seven in fact—that are treading water while the world around them is swimming toward development, even during a world recession. They are not the BRICs (Brazil, Russia, India, and China), which have won attention as “emerging markets.” Instead they are “failed states” that have begun to wear out the patience of philanthropists and test the imagination of aid organizations. Today more money is pouring into combating disease than into promoting economic change, evidence of a certain despair about development.

The fifty-seven states tethered to the bottom of the global economy are not like others in the world. They carry special burdens, which means that the conventional aid programs will not be effective with them. In his carefully analyzed study, Collier notes that the fifty-seven that have made no progress toward economic development have been plagued with bad governments, civil wars, landlocked locations, and, surprisingly, being resource rich. These conditions are often mutually enhancing. Natural riches like oil, ivory, or diamonds actually give the leaders of such countries abundant resources for bribery. The leaders don’t need to court their people because they have the money to steal elections or buy off opponents.
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Civil war is another trap. Estimating that a typical one costs sixty-four billion dollars, Collier recommends military intervention in countries like Afghanistan and Somalia to rescue them from this trauma. Arguing that such interventions should last at least a decade in order to lay the foundation for sound government, he wants the intervening organizations to clarify their intentions through an international charter. Collier views neither trade nor aid alone as being of much help to failed states. Change must come from within, he maintains, but domestic reformers will succeed only with assistance from the industrialized world. Nor does he place faith in globalization per se because the entrance of India and China has made it much harder for latecomers to get into the world marketplace. A former official with the World Bank, Collier recognizes the tyranny of the already tried and urges a revitalized debate on the subject.
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The best ideas for tackling poverty have come from people, like Muhammad Yunus, Hernando de Soto, Amartya Sen, Frances Moore Lappé, Walden Bello, Raj Patel, and Peter Barnes, who want to use the strengths of capitalism in new ways to enhance everyone’s life. This of course is what Marx wanted to do: build on the capitalistic base of wealth to provide for the entire society. He failed to foresee the danger of joining a society’s economic and political power through state ownership of property. This consolidation of power ossified programs and created a ruling apparatus impervious to popular will. Yet the issue that Marx addressed persists: how to make the riches generated by capitalism increase the life chances of everyone, including the bottom billion.

Quite obviously what the poor lack is the magic of capital or even access to capital. There are now some ingenious ideas for changing this situation. Muhammad Yunus has come up with one of them. Born in British India in 1940, Yunus earned a Ph.D. at Vanderbilt University, where he taught nearby for three years in 1969–1972. The movement to create an independent Bangladesh lured him back home, where he began teaching economics at Chittagong University. Two years later reality came rushing at him in the form of a national disaster. With a terrible famine raging in Bangladesh, “it was difficult to teach elegant theories of economics in the university classroom,” he recalled.
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His contact with the villagers surrounding his campus convinced him that many poor people could pull themselves out of abject poverty if they could just lay their hands on a little money. Yet without collateral they could only borrow from loan sharks who charged as much as 30 percent interest.

Seeing women who made bamboo furniture pay such usurious rates to purchase their bamboo that they could never get their heads above water, Yunus thought of extending loans without collateral. He started with $27 from his own pocket and lent small amounts to forty-two women. It worked; they paid back their loans along with a reasonable interest rate. He next set up the Grameen (it means village) Bank in 1976 with a government loan. In 1983 the bank became independent. It grew from the village to the district to the nation as a whole. Grameen is now owned by its borrowers except for 10 percent the Bangladesh government owns. By 2007 it was lending $6.38 billion to more than seven million borrowers, inspiring hundreds of other microlending start-up institutions worldwide.

The Grameen Bank approached more women than men because they were the more likely to spend their earnings on their families. Yunus also recognized the need for creating support networks among the bank’s clients. The bank wrote into their contracts mandatory weekly meetings so that groups of borrowers living near one another could gather to discuss their enterprises and share ideas. Participants in these groups also acted as coguarantors of repayment. The record of Grameen loans has been sensational with repayment rates above 90 percent. Radical leftists opposed the bank as an enticement into capitalism, and conservative clergy threatened female borrowers with denial of a Muslim burial. But nothing could stop the momentum of this effort. When he won the Nobel Peace Prize in 2006, Yunus donated half of his $1.4 million to start a company to make low-cost, highly nutritious food for the poor. Grameen’s Village Phone Project has brought cell phones to 260,000 villagers in fifty thousand villages, many of whom rent out time on them. These have become a boon to urban day laborers who can now telephone their list of prospects rather than lose precious time traipsing all over town looking for their next job.

Today there are literally hundreds of microlending institutions working with one hundred million families on all continents. The largest private bank in India, ICICI, wants to take microfinance to a new level by cooperating with the Indian government and another one hundred partner organizations. Inspired by Yunus’s example, ICICI has lent six hundred million dollars to three million customers. Its next project is to create a biometric identity card with one’s credit rating encoded so a person could access credit at Internet kiosks or bank branches everywhere with the press of a thumbprint. Meanwhile Yunus has teamed up with Mexican telecom mogul Carlos Slim Hélu to bring microlending to Mexico in a big way. A contender with Warren Buffett and Bill Gates for the title of the world’s wealthiest person, Slim has been a great benefactor. He has poured money into foundations, but as a monopoly owner of many sectors of the economy he is also part of the problem of Mexican poverty. He employs a quarter of a million men and women. Like Yunus, he has declared war on poverty and is turning his attention to helping fund Mexican health and education programs. “My new job,” Slim says, “is to focus on the development and employment of Latin America.” Critics ask if he intends to pay a working wage commensurate with the rest of North America.
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Yunus understands that one of the underpinnings of poverty is the widespread conviction that it is an ineradicable evil, like dying. “I firmly believe,” he says, “that we can create a poverty free world if we collectively believe in it.” In a poverty-free world, he says, “the only place that you would be able to see poverty is in a poverty museum.”
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Advocates for the poor are pushing against the same obstacles that eighteenth-century opponents of slavery confronted: acceptance of an evil because of its age and familiarity. It’s hard to be outraged by a condition like poverty that’s been around for millennia. That prevailing attitude once applied to slavery. Then, with remarkable suddenness, the idea of abolition aroused a cadre of reformers who successfully pushed against public complacency in less than a century. The legislature of Pennsylvania demonstrated in 1780 that an institution as old as the Bible could be abolished by statute. Northern states followed Pennsylvania’s example, most of them providing for emancipation gradually according to the enslaved person’s age.

“A house divided against itself cannot stand,” Abraham Lincoln said on the eve of the Civil War. But the same Lincoln quoted scripture to say that the poor will always be with us. Thomas Robert Malthus’s popular theory about population growth taught that poverty was the inescapable lot of the mass of men and women. Breaking through this penumbra of resignation has not proved easy. Almost two centuries ago the English radical William Cobbett denounced the cruelty of jobs that kept sober and industrious workers fully employed but did not pay them enough to feed their families. Cobbett’s working poor have now attracted the attention of today’s activists who have succeeded in getting more than a hundred cities in the United States to pass living wage ordinances for their employees and those working for firms with municipal contracts.

Amartya Sen, like Yunus, was born in what has become Bangladesh, but he emigrated to India after the partition of 1947. Sen has spent his adult life teaching at Cambridge, Oxford, and now Harvard. Awarded a Nobel Prize in economics in 1998, he has been both a moral force and an intellectual heavyweight in the fight against poverty or, more precisely, against the misconceptions of what causes poverty and what might relieve it. Sen has used his highly mathematical scholarly work to open the best minds in economics to new ways of thinking about the poor. Again like Yunus, an earlier Bengal famine, that of 1943, profoundly influenced his thinking. Studying this catastrophe, he discovered that people starved not because there was no food but because they couldn’t buy it, owing to declining wages, rising unemployment, and faulty distribution.

Over time these reflections led Sen to develop the concept of social capabilities that are ends in themselves, not merely agents of economic development. More than social capital, they open up larger vistas. Education, for instance, may promote productivity, but more important, people have a broader perspective for making choices. Such capabilities could include women’s being free to discuss contraception, which he found increases the possibility of their society’s making it available to them.
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The basic thrust of Sen’s teachings is to see freedom as a positive force rather than discuss it as the absence of restraint. Governments must assume the responsibility, in his view, to make sure that their citizens have developed their potential. His emphasis has changed the way that aid and deprivation are evaluated. Many poor suffer because their governments fail to address their most basic needs, a neglect less likely to occur where freedom is respected, he says.

Hernando De Soto is another warrior in the fight against poverty. A Peruvian economist with strong connections to international banking and engineering firms, he now heads Peru’s Institute for Liberty and Democracy. The institute concentrates on a different way to empower the poor: get them legal title to the land they occupy and the outfits they operate. De Soto has drawn attention to the informal economies worldwide where people cultivate land, improve their dwellings, and run businesses without having title to their property. This means that they can’t use their property as collateral for loans, though the land may have been in their families for several generations. In De Soto’s view, people choose to operate in the shadow economy because getting licenses to do business and title to land is usually an onerous and expensive task. Through his institute, De Soto has been able to eliminate dozens of restrictive registration and licensing laws, helping more than a million Peruvians and close to half a million firms gain legal title to their property. In Egypt, De Soto has counted seventy-seven procedures devised by thirty-one different public and private agencies necessary to complete before one can register even a lease for land. Having gained favor with the World Bank, De Soto is now sponsoring similar campaigns against bureaucratic restraint in El Salvador, Tanzania, and Egypt.