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Few documentaries in the past years can claim to have had as much impact on transnational development as The Micro Debt. Tom Heinemann‘s documentary film, produced for Norwegian public broadcasting, has contributed to a wave of critical reasoning about microfinance, but also to the axing of Grameen Bank’s founder, Muhammad Yunus. While Heinemann wasn’t out to harm Yunus, the documentary’s fallout (as well as the Indian microfinance crisis) was an opportunity for politicians in Bangladesh to remove a weakened Yunus from office.
All in all, The Micro Debt doesn’t shed a good light onto microfinance, and in return has come under fire from the microfinance community, an epistemic community which doesn’t take criticism well. Grameen Foundation in particular has mounted an organised attack on Heinemann and his film, engaging PR firm Burson-Marsteller to disseminate counter-claims and draw into question the film’s integrity. But The Micro Debt is becoming increasingly difficult to ignore or deny. It won in the “Television” category at the Avanca Film Festival in Portugal earlier this year, and may win more awards at the various other festivals internationally where it has been nominated. And it’s going on tour in the USA and Canada this month (see below).
Tom Heinemann: “The Micro Debt- a critical investigation into the dark side of Microcredit” (2010)
The real message of the film is that, after three decades, there is still no concrete evidence that microcredit actually does anything for the poor. Heinemann’s main point is that Western donors have been naive in their enthusiasm about microfinance, and his poverty-stricken interviewees testify that this might even worsen their precarious situation.
A misrepresented film
The film’s director Heinemann visited Bangladesh, the Mecca of microfinance, to check up on the successes claimed by Grameen Bank and other microfinance organisations regarding poverty alleviation. He investigated Grameen’s funding from the Norwegian government (where he uncovered financial irregularities amounting to $100 million) and spoke to numerous academic and practitioner experts. The film also shows him being denied interviews with Muhammad Yunus on several occasions.
Recently, I’ve been writing a section about the history of microfinance for my dissertation. Having read around a bit, I feel the need to correct a myth that seems all too common among microfinance enthusiasts: that microfinance follows in the footsteps of German cooperative banking. I will admit this is becoming something of a pet peeve. But in fact, microfinance and the cooperative movement have very little in common. Here’s an explanation.
At least not all microfinance histories follow the simplistic story which casts microfinance as an invention of Muhammad Yunus in 1976, essentially saying microfinance has no history. But there is also an account of microfinance which I would call the over-historicised account, which sees microfinance as part of a very long history of credit. Mainly, the idea is that pilanthropists have been using credit to “do good” for aeons because the poor have always needed credit, so microfinance is just the modern iteration of this idea. Muhammad Yunus has even been compared to Friedrich Wilhelm Raiffeisen (by Bernd Balkenhol at the ILO).
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Can you tell the difference? Muhammad Yunus; F. W. Raiffeisen
But I don’t think the poor have always needed credit (definitely not before the monetised economy), and I don’t believe microfinance really follows in the footsteps of, say, the Irish loan societies or the German cooperative movement. The particular for-profit financialised “social business” commercial enterprise which is modern microfinance bears very little resemblance to anything before it; it is distinctly a product of the financialised capitalism of our time.
Interregionalism – multi-lateral meetings between different regions – has become an important aspect of governing global economic, financial and political issues. One such interregional exchange is the Asia-Europe Meeting, (ASEM). The 8th meeting just has been taking place in Brussels 5th-6th of October. ASEM is an informal dialogue bringing together Heads of Governments of the 27 EU Member States and 16 Asian countries, the European Commission and the ASEAN Secretariat.
The first ASEM meeting took place in Bangkok in 1996 in order to foster economic development and counterbalance the US influence in the Asian region. While these meetings are informal and non-binding, they are nevertheless aiming at strengthening economic and political relationships between countries. This year’s summit was dominated by the financial and economic crisis. Under the heading ”More Effective Global Economic Governance” European and Asian officials agreed upon closer economic cooperation as well as financial coordination, and stressed the importance of sustainable growth and climate protection goals.
Such meetings – as international trade politics in general – suffers from the lack of democratic participation and support of citizens. Negotiations take place behind closed doors, the negotiation processes are intransparent and the parliaments are largely shut out of such processes. Consultative bodies and advisory committees are dominated by business interests or business affiliated lobbying groups.
As a response to the lack of transparency and democratic checks and balances, unions and NGOs found counter summit, the Asia-Europe People’s Forum (ASEF) where labor unions and social movements across Asia and Europe expressed their concerns about marketization and demanded a “social and market regulatory dimension” of trade negotiations.
But in how far does challenging this global economic governance institution contribute to any kind of change?
At first sight it looks like a success story: Labor, environmental and human rights issues play a promomient role in the final ASEM declaration and the ASEM leaders promised a people-to-people approach. But the disappointment about the discrepancies between words and action is huge.
Book review:
Milford Bateman, 2010: Why Doesn’t Microfinance Work? The destructive rise of local neoliberalism. London: Zed Books.
Since the inception of this blog, one issue which has been critically explored again and again is the dominant position of microfinance in the field of international development. For instance, a series of blog posts in early 2009 was aimed at unmasking the popular myths spun by microcredit’s advocates, from presumed gender empowerment to the purported win-win situation in which profits would go hand-in-hand with social impacts. More recently, we followed how, in the wake of two high-profile randomised studies which failed to show increases in poor people’s income, even some mainstream media have begun taking a more critical view of microfinance.
Indeed, 2009 and 2010 may have brought some disillusionment to many who believed that small loans would create “a world without poverty”. But still the microfinance industry and its epistemic community remain fiercely defensive of the reputation as a solution to poverty; still the international donor community unquestioningly pours money into a concept with much promise but little proof; and still Muhammad Yunus’ award shelf continues to fill up with precious metal as the hype around microfinance continues to enthrall the socially-concerned masses.
A few full-fledged books critiquing present microfinance practices may have been published to date, but these have addressed themselves mainly to microfinance insiders and development experts. Milford Bateman’s brand-new book (released this summer) however is the first critical book capable of crossing the border between academia and the lay world; it reaches out to convince a wider audience of questioning those accepted wisdoms which underlie the first big development hype of the 21st century. Read the rest of this entry »
This post is provided by our “guest blogger” Bernhard Brand. Bernhard Brand works as research assistant at the Institute of Energy Economics at the University of Cologne. This contribution is the first of a series of critical reviews of transnational economic governance arrangements, based on an analysis of policy reports undertaken by graduate students of Sigrid Quack’s seminar on Transnational Economic Governance during the summer term 2010.
The Siemens corruption scandal of the year 2007 was one of the largest bribery cases in the economic history of Germany. It ended with a number of (suspended) jail sentences for high-ranking executives and a painful €2.5 billion penalty to be paid by Siemens for running an extensive worldwide bribery system which helped the Munich-based company to win business contracts in many foreign countries, as for example in Russia, Nigeria or Greece. Interestingly, if the bribery case just had happened a few years before, there wouldn’t have been any sentence at all for Siemens: Until 1999, the practice of bribing officials and decision makers in foreign countries was not considered a crime in Germany. And even worse: The German law allowed companies to deduct bribes from their tax declarations – under a tax law provision ironically termed “useful payments” (in German: “nützliche Aufwendungen”). This incentive for the German industry to perform corruption in the international business became abolished under the pressure of the OECD Anti-Bribery Convention. The convention criminalizes the so-called ‘foreign bribery’, the act where a company from one country bribes officials of a ‘foreign’ country. Germany, as well as the other OECD members had to align their legislation to the new OECD standards, enabling their courts to punish the person or entity who offers the bribe – even if the bribing action originally took place somewhere else in the world. Read the rest of this entry »
“Water, like oil, is finite. There is only so much ocean saltwater, glacier freshwater and water in the air, while global consumption is growing twice as fast as the world’s population.”
It would be hard to believe that anyone could view these facts as a positive thing. But add the story of Warren Buffet, former world’s richest man, buying the water treatment company Nalco for US$ 3.7 billion through his investment firm Berkshire Hathaway, and suddenly you get that “investing in water is an untapped opportunity”. So argues journalist Tatiana Serafin on mint.com in an article entitled “Invest Like a Billionaire: Water Is The New Gold“.
Serafin considers publicly traded water utilities firms a bargain, quoting another author as saying “utilities are cheaper than they have ever been”. Her conclusion is, “invest like Buffet”, even if you’re on a budget.
One could also think that viewing the so-called global water crisis – which I recently wrote about here on World Water Day – as a hot investment opportunity would require the shrewd and narrow-minded perspective of the investment banking profession. Yet even the Netherlands-based IRC International Water and Sanitation Centre, an important resource centre in the water and development sphere, and at least not officially posing as a private sector think-tank, apparently agrees that water is “the new gold”. On its water and sanitation financing blog WASH news finance, the article quoted above was merely copied and uncritically reproduced.
This, among other cases from the NGO sector, shows how strategies of privatisation and commodification still heavily dominate development politics where they pertain to water. Though less aggressively and more subtly pursued now than the IFI-driven Structural Adjustment Programs and their successors, PRSPs, the new-millennium logic of privatisation is promoted instead by smaller, ostensibly unconnected agencies and through new, seemingly innovative means such as decentralisation, downscaling or microfinance – essentially a return to the days before the developmentalist state. Through blogs and social networks, the politics of liberalisation have adopted a postmodern aesthetic – as always arguing in the name of the poor – complete with Internet videos in HD.
Today is World Water Day; this year operating under the heading “Clean Water for a Healthy World”. Every year since 1995, March 22 has been dedicated to “focusing attention on the importance of freshwater and advocating for the sustainable management of freshwater resources“.
The 2010 events campaign focuses specifically on raising awareness of the importance of water quality for health and human well-being, and the importance of sound water management for preventing pollution.
While that means that this year the World Water Day has no specific focus on the developing world, a global view onto water problems always naturally draws attention to the specific the problems of the developing world, where not only most of the people lacking access to safe drinking water live, where desertification and pollution are worst, and where water-borne diseases are most prevalent – just to give a few examples – but also the technical and financial means for dealing with the causes and consequences of the “water crisis” /1/ are slimmest.
In 2003, the United Nations Economic and Social Council codified a Human Right to Water in its General Comment No. 15, based on the interpretation of the pre-existing International Covenant on Economic, Social and Cultural Rights, which stated:
The human right to water entitles everyone to sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic uses. An adequate amount of safe water is necessary to prevent death from dehydration, to reduce the risk of water-related disease and to provide for consumption, cooking, personal and domestic hygienic requirements.
Yet, this right remains unclaimable in many poor countries, both as a result of the failure of the international community to support the necessary steps financially, and because of a competing paradigm of “full cost recovery”. This is reason enough to have a cursory look today at the transnational governance and provision systems of water and sanitation for the poor.
Thursday, October 15th 2009 was a day of good news. The FT print version headlined “JP Morgan profits lift the Dow”, as JPM posted a net income of 3.6 billion US $ in the three months leading up to September (online article of similar contents). Goldman Sachs posted earnings of nearly as much, as the DOW soared above 10,000.
A good time to be unemployed (for the wealthy)
Meanwhile, the preparatory discussions for Germany’s new coalition government brought an improvement for Germany’s unemployed. If the new government goes forth with its plans, unemployed people will be allowed up to 750 Euros savings per year of age (up from currently only 250) – that means, for instance, if you’re 30 years old and lose your job, you’ll be allowed 22,500 Euros on your bank account and still receive minimum social security cheques (Hartz IV). Sadly, however, according to local radio station WDR5 last night, only 0.2 per cent of currently unemployed people will benefit. It seems appropriate, therefore, to call the move mere “social cosmetics”, as the Frankfurter Rundschau did.
Probably the best financial news of the day was that the top 23 financial institutions in the USA (alone) will pay out 140 billion US $ in bonuses this year, as the Wall Street Jounal reported – the biggest round of bonuses ever. And that’s among a significantly reduced population of bankers compared to 2007. Goldman Sachs is paying out 743,112 Dollars per employee, on average.
Thursday, October 15th 2009 was also a day of bad news, however, though reported by fewer. At least, the left-leaning German newspaper “die tageszeitung” (taz) framed the good news above in a shocking fashion by underscoring it with pictures of starving Ethiopians. Read the rest of this entry »
The diamond trade hasn’t exactly enjoyed a great reputation over the past years. Not least thanks to Hollywood movies like Blood Diamond, these gems are inextricably percieved as covered with the blood spilt in civil wars all over Africa.
But diamonds are also a key export of many poor African nations.
Despite some initial progress being achieved by the Kimberly Process certification scheme, diamonds’ persisting bloody reputation isn’t exactly undeserved. Many still find their way into the world market, dominated by De Beers, from appalling sources.
Groups like Amnesty International and One Sky have criticised the certification scheme as lacking impartial, obligatory monitoring. Global Witness, an NGO specialising on the link between natural resource exploitation and violence reported the scheme to be failing to address issues of non-compliance, smuggling, money laundering and human rights: “The clock is running out on Kimberley Process credibility.”
Other problems include that diamonds from conflict-ridden Zimbabwe are still considered legitimate under the Kimberly Process; and the mind boggles as to what real effects membership of countries like the Democratic Republic of Congo may have on the ground. Several civil wars currently rage within the Congo’s boundaries.
governancexborders.com 