Muhammad Yunus' 'Creating a World Without Poverty'

from The Statesman

By Roger Gathman
SPECIAL TO THE AMERICAN-STATESMAN

In 1992, Rolling Stone sent William Greider, Hunter S. Thompson and P.J. O'Rourke to Little Rock, Ark., to interview presidential candidate Bill Clinton. This interview was crucial in burnishing Clinton's image as a policy wonk and New Democrat (that is, one who didn't automatically look to the state for social welfare programs).

The symbol of Clinton's "coolness" was his enthusiasm for an obscure bank in Bangladesh that made microloans to poor people. Clinton had long been interested in Muhammad Yunus, the "Banker to the Poor" who started Grameen Bank in the '70s. Yunus believed that poverty could be broken by loaning very small sums to poor people who would invest productively — in, for instance, a sewing machine that could be used to set up a clothing business. Clinton had the prophetic hunch that something like this was needed; during his presidency, as the Cold War system of foreign aid dried up, others came to share his vision.

And so, since 1992, a lot has happened to Yunus and Grameen. The bank has set up a number of companies, ranging from a cell phone vendor that is now the largest business in Bangladesh to a yogurt manufacturer. And microlending enterprises have sprouted all over the globe; according to one survey, such institutions now reach 100 million families. And that was before Yunus and the bank gained even more fame by winning the 2006 Nobel Peace Prize.

Yunus described the bank's workings in his 1999 book, "Banker to the Poor." In "Creating a World Without Poverty," he explains the extension of the microcredit industry into other businesses. The idea is simple, but ingenious. Since the Industrial Revolution, we have divided the economy into profit maximizing enterprises and social welfare charities. Yunus believes that there's a middle way — the "social business." Such businesses engage in commercial activities with the purpose of creating a social good. Unlike charities, however, they don't depend on contributions — they aim at self-sufficiency, and expand depending on how much they take in.

"Creating a World Without Poverty" is written in the format that is all too familiar to readers of contemporary business books — a lot of bullet points and anecdotes and inspirational stories about obstacles overcome and projects overseen. It's a manifesto striving to become a PowerPoint presentation.

Unlike most inspirational business books, however, this one is worth engaging with. The viewpoint is distinctly CEO-centric, but this CEO has a heart. Especially interesting is Yunus' account of partnering with the French company Danone (known in the U.S. as Dannon) to build a yogurt factory in Bangladesh. Danone had to rethink its method of operation, thanks to the region's lack of refrigeration (which prompted the company to produce smaller lots for speedier distribution) and dearth of trucks (which led to the hiring of village women as "Yogurt Ladies"). Yunus describes these things with good humor, but one cavils at the amount of space devoted to the feelings of Danone's CEO compared with the absence of attention paid to the "yogurt ladies." Ironically, Yunus' prescriptions for ending poverty don't leave much room for the point of view of individual poor people, too often rendered here as part of an undifferentiated collective.

Elsewhere, Yunus is on firmer ground, such as when he builds a strong case against companies that offer a hybrid of profit maximizing and social welfare. Yunus' stand has drawn controversy, but his training as an economist strengthens his argument: Such unwieldy hybrids quickly become for-profit entities, disguising themselves behind a set of good intentions. He also grants a point that has been made by the critics of microlending, which is that many so-called microlenders are really practicing usury, an old and persistent curse of impoverished cultures. Yunus would like to see international standards put in place, and see those standards enforced by an auditing organization.

One wishes that Yunus addressed corruption issues more directly, however. According to the corruption index published by Transparency International, Bangladesh was the second-most corrupt country in the world in 2005. While the idea of a business that assesses its "profit" in terms of social good is the kind of thing one wants Hollywood liberals to make movies about, it's easy to see how such businesses could become fronts for money laundering, or be used by unscrupulous businessmen to bankrupt rivals.

Mostly, however, Yunus' case is convincing, as far as it goes. But how far does it go? Microlending has certainly helped a fair number of people. But is it really a substitute for the large-scale foreign aid the First World used to offer to the Third?

On this, Yunus is somewhat coy. Although he makes incisive criticisms of First World economies — for instance, of the environmental cost borne by poor countries due to our lavish habits of consumption — he doesn't directly criticize the drastic reduction in foreign aid programs that has occurred over the past 20 years. Unlike Harvard economist Jeffrey Sachs, whose 2005 book, "The End of Poverty," advocated large-scale foreign aide, Yunus doesn't mention such a possibility. Most likely, he thinks it highly improbable that we will ever see such levels of assistance again.

That's a problem. Countries such as Greece, Spain, Israel, Taiwan and South Korea received massive amounts of aid in the '60s, '70s and '80s. As a result, all have healthy economies today. By contrast, though Yunus cites World Bank statistics that show a decrease in Bangladesh's poverty level from 57 percent in 1991 to 40 percent in 2005, we're talking about a country in which a garment worker making 39 cents per hour has escaped the official poverty level.

Yunus' vision of a network of small scale, nonprofit businesses spurring the entrepreneurial energies of impoverished villagers has a positively Jeffersonian feel about it. Still, it's doubtful that such enterprises will ever fill the role played by state social welfare systems. It's worrying that some of the enthusiasm for Yunus' program comes from the same people who want to destroy the fragile social welfare systems that were put in place in the world's poorest countries in the '60s and '70s. Social business shouldn't be the enemy of the pitiful trickle of social spending that still makes its way to the Third World.

Such skepticism aside, "Creating a World Without Poverty" succeeds in imparting the optimism that allows Yunus to keep struggling against the overwhelming forces arrayed against the Bangladeshi poor. By unlocking the potential of the overlooked — poor mothers, uneducated beggars, migrant laborers — he has shown himself to be one of Mohandas Gandhi's unlikely heirs, even if he clothes his beneficent message in bullet points. After all, Gandhi took as his symbol the spinning wheel, the instrument of the small scale, self-employed artisan, and said, "He who spins before the poor, inviting them to do likewise, serves God as no one else does."