Muhammad Yunus receives his Nobel Prize

Posted on by

10cnd-nobel.600.jpg
The award ceremony of the 2006 Nobel Peace Prize took place today. Muhammad Yunus was accompanied by nine village women, elected representatives of Grameen Bank’s borrowers. The full text of his speech is an interesting read. He re-tells the story of the founding of the bank and describes the different ways it has branched out, from its program for beggars to its mobile phone, food, and medical care initiatives. He also gives a sense of his personal economic philosophy, which he grounds in an embrace of the free market and globalization. It’s an argument similar to that made for “double bottom line” or “triple bottom line” investment and accounting, which seeks social or environmental value creation along with financial profit. It’s a good read; you can find it here.

30 thoughts on “Muhammad Yunus receives his Nobel Prize”

  1. …This interpretation of capitalism insulates the entrepreneurs from all political, emotional, social, spiritual, environmental dimensions of their lives. This was done perhaps as a reasonable simplification, but it stripped away the very essentials of human life. Human beings are a wonderful creation embodied with limitless human qualities and capabilities. Our theoretical constructs should make room for the blossoming of those qualities, not assume them away.

    Word, mon frere, word.

    Partha Dasgupta has made similar arguments that support the “triple bottom line” approach:

    To put it another way, how should we conceptualise sustainable development? The Brundtland Commission Report of 1987 defined it as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’. In other words, sustainable development requires that each generation bequeath to its successor at least as large a productive base as it inherited. But how is a generation to judge whether it is leaving behind an adequate productive base for its successor? An economy’s productive base consists of its capital assets and its institutions. Ecological economists have recently shown that the correct measure of that base is wealth. They have shown, too, that in estimating wealth, not only is the value of manufactured assets to be included (buildings, machinery, roads), but also ‘human’ capital (knowledge, skills health), natural capital (ecosystems, minerals, fossil fuels), and institutions (government, civil society, the rule of law). So development is sustainable as long as an economy’s wealth relative to its population is maintained over time. Adjusting for changes in population size, economic development should be viewed as growth in wealth, not growth in GNP. There is a big difference between the two. It is possible to enumerate many circumstances in which a nation’s GNP (per capita) increases over a period of time even as its wealth (per capita) declines. In broad terms, those circumstances involve growing markets in certain classes of goods and services (natural-resource intensive products), concomitantly with an absence of markets and collective policies for natural capital (ecosystem services). As global environmental problems frequently percolate down to create additional stresses on the local resource bases of the world’s poorest people, GNP growth in rich countries can inflict a downward pressure on the wealth of the poor.

    Further,

    A state of affairs in which GNP increases while wealth declines canÂ’t last for ever. An economy that eats into its productive base in order to raise current production cannot do so indefinitely. Eventually, GNP, too, would have to decline, unless policies were to change so that wealth began to accumulate. ThatÂ’s why it can be hopelessly misleading to use GNP per head as an index of human well-being… …It seems that during the past three decades the rich world has enjoyed sustainable development, while development in the poor world (barring China) has been unsustainable.

  3. Welcome back M. Nam..

    And here is the opinion of my fellow comrades – The Communist Parties of India:

    all such poverty alleviation programmes will be sponsored, encouraged and utilised by the ruling classes as a means for keeping the downtrodden away from the path of revolt and thereby perpetuating the structures of exploitation and domination.

  5. Thanks for the post! YAAYY for Yunus and the borrowers-cum-owners! Can you imagine the experience they’re having?? Amazing.

    I know it’s kinda foolish to feel pride for another person’s accomplishments but perhaps its understandable as human nature…? Bangladeshi villages are just so darn beautiful.

    I found this interesting:

    I am in favor of strengthening the freedom of the market. At the same time, I am very unhappy about the conceptual restrictions imposed on the players in the market. This originates from the assumption that entrepreneurs are one-dimensional human beings, who are dedicated to one mission in their business lives to maximize profit. This interpretation of capitalism insulates the entrepreneurs from all political, emotional, social, spiritual, environmental dimensions of their lives. This was done perhaps as a reasonable simplification, but it stripped away the very essentials of human life.

    Adam Smith’s capitalism in The Wealth of Nations was premised on a previous book called The Theory of Moral Sentiments where he laid out his understanding of human nature. Though not quite as elaborate as the figure Yunus paints, his idea was that free-market capitalism will work well because people are like this. Today’s conception, as Yunus points out, seems to rely on an artificial abstraction of a self-interested man. So long as we revere him, the lesson seems to be, the rich will get richer and the poor, poorer.

    We get what we want, or what we don’t refuse.

  6. Siddhartha, thank you for this, especially for the link to his speech and for the photo. No matter the purported average size of subcontinental units, it took serious balls (and a heart like the sun) for Mohammed Yunus to get to this day.

    I was shocked to discover a woman in the village, borrowing less than a dollar from the money-lender, on the condition that he would have the exclusive right to buy all she produces at the price he decides. This, to me, was a way of recruiting slave labor.

    Straight out of Mother India! Now there’s a film that needs to be re-made, but with a decidedly different ending. It goes something like this:

    In lieu of going insane and killing her son to save the village, a struggling widow played by Priyanka Chopra gets a Grameen Bank style loan, starts her own business, sets up a savings, pension and insurance fund for herself, sends her sons to get PhDs, rages against the dowry system, marries her sons to village girls who earned Grameen scholarships to IIT, kicks the village money lender to the curb and saves the planet from being zapped by aliens.

    With a cameo appearance by Commander Sunita Williams, but of course.

    Eat it, Laura Croft!

  10. @#9 stt kurma,

    really! that article is actually called “Man calls Nobel winner ‘amazingÂ’”. it is probably just me, but the article seems to place the retired community college professor in colorado as the more important person, and tone seems to narrate the story of the colorado community college professor “discovering” the nobel prize winner!!

  11. @ #10

    The article is from a local newspaper, and seeks to make a local connection with an international celebrity. It doesnt take away from Prof. Yunus in any way? I’d prefer to point to this line at the conclusion.

    I think they should have given him the Nobel Prize for economics, too.

  12. Siddarth,

    … an embrace of the free market and globalization.

    I have not read the whole speech, but the NYT leads with his warning against globalization…

  13. From speech:

    “I believe that we can create a poverty-free world because poverty is not created by poor people. It has been created and sustained by the economic and social system that we have designed for ourselves; the institutions and concepts that make up that system; the policies that we pursue.”

    Finally, an economist who does not blame the poor for the circumstances they find themselves living under! Thank you for this post Siddhartha.

    Speech continued:

    “Poverty is created because we built our theoretical framework on assumptions which under-estimates human capacity, by designing concepts, which are too narrow (such as concept of business, credit- worthiness, entrepreneurship, employment) or developing institutions, which remain half-done (such as financial institutions, where poor are left out). Poverty is caused by the failure at the conceptual level, rather than any lack of capability on the part of people.”

  14. I support globalization and believe it can bring more benefits to the poor than its alternative. But it must be the right kind of globalization. To me, globalization is like a hundred-lane highway criss-crossing the world. If it is a free-for-all highway, its lanes will be taken over by the giant trucks from powerful economies. Bangladeshi rickshaw will be thrown off the highway. In order to have a win-win globalization we must have traffic rules, traffic police, and traffic authority for this global highway. Rule of “strongest takes it all” must be replaced by rules that ensure that the poorest have a place and piece of the action, without being elbowed out by the strong. Globalization must not become financial imperialism.

    I was also interested by his perspective on globalization and its intrusion/affect on the Bangladeshi poor. Although I’m not quite sure what Yunus means when he mentions the ‘alternative’ I can see why he’s concerned. The majority of Bangladesh’s population is far too poor to enjoy any of the benefits of what a global market has to offer, but they are affected by it nonetheless. The outsourcing of textiles to Bangladesh has created thousands of jobs yet those jobs offer negligible wages and poor working conditions, with child exploitation on the rise. Modeling itself after other supermalls that were created elsewhere in Asia, Bangladesh has built its own behemoth superstructure; Bashundhara, in which the poor are hardly allowed to enter unless they are serving the mighty upper-middle and upperclass. And while rickshaws may not be out of fashion yet, with the plethora of foreign car companies that are opening doors within the more urbanized areas, it would not be a surprise to me if those rickshaw drivers found themselves without jobs or actually driving one of those cars in the not so distant future.

    Yunus has reason to be concerned: while his Grameen strives to decrease the gap between the rich and the poor, globalization in its current form is doing the exact opposite.

    A big congrats to the man tho – this is a big deal gain for Bdesh in terms of positive media. Hard to say which overshadows the other, the current political instability or this feel good story.

  17. I’d be the last one to claim any significant knowledge about banking, economic systems, etc…but reading the link Moornam posted in post #2 above, has made me curious…what do others here think about that link? Are those criticisms against Yunus and the Grameen Bank valid? Does this man deserve this prize? (He may very well deserve it, I just wanted to know if people more knowledgable about these things than myself have any opinions on some of the criticisms.)

  18. On the topic of micro financing, i remember seeing a TV piece on a dot com type co. that allows you to contribute towards development in an African village. I cannot remember what the co. name was but there a desi guy featured as the founder.

  20. I’d be the last one to claim any significant knowledge about banking, economic systems, etc…but reading the link Moornam posted in post #2 above, has made me curious…what do others here think about that link? Are those criticisms against Yunus and the Grameen Bank valid? Does this man deserve this prize? (He may very well deserve it, I just wanted to know if people more knowledgeable about these things than myself have any opinions on some of the criticisms.)

    It is true that micro lending isn’t a revolutionary idea and has been around for a long time. Even in Bangladesh, Dr. Akhtar Hameed Khan (look it up on google) was actually the pioneer of the whole scheme. On a much smaller scale, its been around for ages. My dad was telling me about how the people who sell groceries on push carts actually borrow the cart at 100 Rs. a day, load it up, net about 2-300 Rs. by the end of the day and return the cart at night. I can’t really comment on whether the Grameen bank is fudging its numbers, but to claim that Grameen bank’s success is a complete myth is unfounded. When you consider the amount of corruption in most poverty alleviation programs, not breaking even is probably least of Grameen Bank’s concerns. I for one don’t think that profitability should even be an ultimate goal of the institution. Its not surprising that the program has received so little criticism especially since most other programs have been complete failures.

    A 2003 report from a leading Bangladesh university estimated that 75 percent of all foreign aid received in that country is lost to corruption. http://www.lewrockwell.com/bovard/bovard13.html

    One angle that the article failed to cover was that having a large scale, centralized, lending institution for the poor will act as a stabilizer in the small scale loans market. I am quite sure the bank has helped reduce the interest rates charged by the local money lenders who probably take advantage of local borrowers. Its also probably that most of these villages only have one or two money lenders creating a quasi monopoly situation. At least this bank provides more options for the local people. It’s kind of like those e-choupals that allow farmers to check the market prices for their crops and cut out the middle men.

  22. Quite inspirational!! (what a humble guy!!..Youtube link was helpful..thx Gulaab)

    Does anyone know,where to ask for guidance or support, if an individual wants to start this kind of micro-lending in ones’s own rural district? Seriously thinking of replicating this back home – albeit at smaller scale. I would think, someone in India would have started this. Any ideas or links or info??

  23. Microfinance is just one giant ponzi scheme of do-gooderism run amuck. The loan amounts are too paltry to make any tangible difference and as the link to the Mises institute noted, the repayment rates are likely exagerated. The worse part of microfinance, is that is a grossly inefficient way of providing capital for those who either need or want it. It would in all likelyhood be more constructive to send a recipient a donation of $1,000 rather than a $100 loan.

    The problem is that the total amounts of the loans are so small, and the returns fairly low, and there are massive operational costs. I once saw a program on TV extolling microfinance, what no one bothered asking was how a “bank” loaning just several hundred thousand dollars per year could afford half a dozen yuppie employees working in California. Rent (they had very snazzy brand new offices), office supplies, etc alone would eat up more than the possible returns from the loans not even including employee salaries (if they were not volunteers that is). As is usual of so much charity schemes, most of the money is spent by and for the charity workers than on those who actually need assistance.

    Honestly, the most efficient way to transfer capital to Africa would be to actually set up a new bank account, add some money to it, and give the info to the Nigerian diplomats.

  25. Suraj, Vinod Khosla (the SUN Micro founder) who is now a venture capitalist, has a micro lending project in India. Google that up. Contact Khosla’s people if you are really serious about doing this.

  26. Suraj: Also check out Trickle Up, the United States’ oldest microfinance development nfp. They make conditional grants (like KIVA go to http://www.kiva.org or http://www.skoll.org to learn more). Conditional grants are small sums of money, given over a two year funding cycle, that do not have to be paid back. These sums are usually never more than $50.00-$500.00 dollars; or just enough to launch a very small business or act as emergency funds to help an existing very small business in crisis. Trickle up trains existing community business organizations to act as mentors, technical assistance providers and support systems.

    Trickle Up does this through fundraising and corporate strategic alliances that result in income, in kind services and resources. (How do I know this? They were a client of mine for a good long while.)

    You might also check out yesterday’s NYT magazine, page 84, Web-based Microfinancing

    Also, take a look at The New Yorker, October 30th, where you will find a pretty interesting 10 page article on microfinance by Connie Bruck –in it you can find out more about Accion, Banco Sol, and PRO MUJER, a grameen-based model and the incredible strides it’s made for and with its consumer constituents.

    An excerpt: “In India, Citi has begun to install A.T.M.s in microfinance institutions, and clients will be able to open Citi savings accounts, with no minimum balance; the machines, which can identify clients by their fingerprints, will speak to them in any of six dialects.”

    And Jing, you might find that microfinance is indeed a huge business opportunity with potential giant ROI. It’s actually changing the face of lending in the developing world. To be sure, some of these micro finance institutions charge extremely high interest rates, this is something to keep a watchful eye on and it might change as more private banking stakeholders enter the microfinance marketplace.

    “In the past several years, Citigroup and its subsidiary Banamex raised seventy million dollars in the capital markets for the Acción affiliate Compartamos, the largest microfinance institution in Latin America, with more than five hundred thousand clients. This June, Compartamos became a fully regulated bank. “The only way to have massive impact is to do it profitably,” CompartamosÂ’s co-C.E.O. Carlos Labarthe declared. “As an N.G.O., getting donations, we were not able to grow. But when you are able to go to the market, then the skyÂ’s the limit.” Labarthe said that Compartamos now has access to two hundred million dollars in the market. In five years, he predicted, eighty to ninety per cent of all microfinance institutions will be for-profit institutions.”

    Moving out of saturated, repetitive poverty requires collateral and equity. Appropriate and sustainable usage of conditional grants ready very small business owners for microfinancing which, when managed well, leads to the accumulation of collateral that can be held as equity. So it’s actually not a

    giant ponzi scheme of do-gooderism run amuck.

    Unless, of course, you have some data that the Nobel Committee needs to know about.

  28. Also, take a look at The New Yorker, October 30th, where you will find a pretty interesting 10 page article on microfinance by Connie Bruck –in it you can find out more about Accion, Banco Sol, and PRO MUJER, a grameen-based model and the incredible strides it’s made for and with its consumer constituents. An excerpt: “In India, Citi has begun to install A.T.M.s in microfinance institutions, and clients will be able to open Citi savings accounts, with no minimum balance; the machines, which can identify clients by their fingerprints, will speak to them in any of six dialects.”

    Ooooops, I just realized that I deleted a paragraph here … can’t rewrite it now–must make the donuts–but I hope the post is still readable.

    Sorry!

  29. Honestly, the most efficient way to transfer capital to Africa would be to actually set up a new bank account, add some money to it, and give the info to the Nigerian diplomats.

    Keynesian approach: It doesn’t matter if the money gets spent on hookers right? It still circulates in the economy. Only problem is that most of these countries have so few viable investment opportunities that the money eventually ends up leaving the country. Plus you now have the problem of a society of prostitutes serving an elite upper class of Nigerian diplomats.