Better than Bono

by Don Boudreaux on January 8, 2008

in Foreign Aid

Karol, with Marginal Revolution‘s own Tyler Cowen, just published this outstanding article in the current issue of the Wilson Quarterly.  It’s entitled "The Micromagic of Microcredit."  Here are the concluding paragraphs:

With microcredit, life becomes more bearable and easier to manage. The improvements may not show up as an explicit return on investment, but the benefits are very real. If a poor family is able to keep a child in school, send someone to a clinic, or build up more secure savings, its ­well-­being improves, if only marginally. This is a big part of the reason why poor people are demanding greater access to microcredit loans. And microcredit, unlike many charitable services, is capable of paying for ­itself—­which explains why the private sector is increasingly involved. The future of microcredit lies in the commercial sector, not in unsustainable aid programs. Count this as another benefit.

If this portrait sounds a little underwhelming, don’t blame microcredit. The real issue is that we so often underestimate the severity and inertia of global poverty. Natalie Portman may not be right when she says that an end to poverty is “just a mouse click away,” but she’s right to be supportive of a tool that helps soften some of poverty’s worst blows for many millions of desperate ­people.

Be Sociable, Share!

Comments

comments

6 comments    Share Share    Print    Email

{ 2 comments }

Martin Brock January 8, 2008 at 2:08 pm

Credit is a good thing, for sure, but without more detail, this article could be an argument for subprime mortgages too, and conflating credit with aid is a mistake. Credit does not and cannot substitute for insurance and charity and many other useful expenditures. If a hurricane destroys someone's house, we can't expect to solve the problem with credit, because the person's credit presumably was in the old house, and he might not be worthy of enough credit for two houses while possessing only one. [I'm not using "worthy" in any moralistic sense here.] We must sell him insurance first, or we must be charitable, or we must let him be homeless. Credit is no use to an invalid either. Credit is not a panacea.

Martin Brock January 8, 2008 at 2:09 pm

Credit is a good thing, for sure, but without more detail, this article could be an argument for subprime mortgages too, and conflating credit with aid is a mistake. Credit does not and cannot substitute for insurance and charity and many other useful expenditures. If a hurricane destroys someone's house, we can't expect to solve the problem with credit, because the person's credit presumably was in the old house, and he might not be worthy of enough credit for two houses while possessing only one. [I'm not using "worthy" in any moralistic sense here.] We must sell him insurance first, or we must be charitable, or we must let him be homeless. Credit is not a panacea.

{ 2 trackbacks }

Previous post:

Next post: