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Dr. Sardonicus

Nobel Prize winner Muhammad Yunus

Who among us objects to helping the poor?  Even our meanest luxuries are tainted by the realization that the same money donated to humanitarian causes might feed starving families.  We accept this as an irreconcilable fact of modern life.

At least until 2006, when Muhammad Yunus was awarded a Nobel Prize for his groundbreaking work using microloans to assist the poorest people in the economically depressed country of Bangladesh.

The concept is a simple one.  Money from the Grameen Bank is injected directly to the cash-strapped poor using small loans of just a few hundred dollars each -- empowering entrepreneurs to start new businesses and create wealth.  Repaid at low interest rates, the money can be reinvested through many cycles to help large numbers of people, while promoting western-style capitalism.

This idea gained new strength with the popular website Kiva -- where westerners can pick and choose among the slickly packaged photos and personal hard-luck stories to place $20 "investments."   Reach across the world to help a Peruvian cab driver buy a new car, or give a Pakistani farmer a chance to finance another goat.  Patrons can read blogs and repayment cycles, enjoy dedicating their loans to various causes, and reap the praise of the peers and gratitude of the poor.

Kiva combines web-obsession, gambling, feel-good philanthropy and self-referential facebook-style entertainment in a way that guarantees juggernaut expansion over the next decade.  In fact, Kiva is currently among the 3000 most popular websites in America, and has distributed hundreds of millions of dollars.

So -- why complain?  Kiva is no ponzi scheme -- most "investors" never expect to get their money back.  The organization is transparent and effective, and the poorest people of the world have unencumbered access to western cash, while giving patrons a little harmless fun.  Kiva appears to be a kind of perpetual motion machine, harnessing the Web to do endless good in the third world.

However -- as is made abundantly clear in Linda Polman's book The Crisis Caravan -- the law of unintended consequences has a way of corrupting the very people you are trying to help.

Subsistence economies are often delicately balanced.   Poorly educated people rely upon traditional behaviors worked out painfully through trial and error -- knowledge that can be easily disrupted by sudden infusions of humanitarian aid. 
Who could argue with the benefits of inexpensive medical technology to reduce infant deaths in Africa?   Yet -- without a corresponding reduction in fertility, these actions contributed to sudden overpopulation, famine and the death and suffering of millions more,  as well as the destruction of an ancestral way of life.  Societies craving more western money are horrifyingly transformed into that thing we are trying to prevent -- cauldrons of human suffering.

In fact, there are early signs that it may be happening now with Microloans.  The prime minister of Bangladesh has denounced microloans as "sucking the blood" out of the poorSuicides have been reported from debtors unable to repay their loans.   Instead of transforming the poor into capitalists, we may be instead exporting western-style financial irresponsibility.  An impoverished peasant with self-respect is still better off than a peasant drowning in debt.  If it is irresponsible to hand out credit cards to high-school students and hook them on a lifetime of deficit spending and interest payments, is it any better to ensnare the poorest people in the world?

Surely microloans have a role in helping poor people throughout the world.  However, I am reminded of an anecdote I read in Tim Flannery's book Throwim Way Leg about his experiences living among the people of New Guinea.
Noticing the natives relied on dull machetes for their every-day chores, he hit upon the idea of sharpening the blades to make their lives easier.  The next week was spent treating injuries -- many serious -- as the natives tried to adjust to this treacherous uptick in technology. 

The sharp edge of western debt may be even more dangerous.

My advice -- skip internet philanthropy and travel the third world yourself.  Americans are the best ambassadors of Western Capitalism.  Spend your money meeting the people you care about, eating their food and visiting their cities.  And the next time you meet a cab-driver in Peru, if you like the ride, give him a $20 tip.  He will know there are no strings attached, and you will get the best dividend of all -- a big grin.


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