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Small hopes for a shift leftwards in economy
by Patrick Bond
9 July 2009

A COUPLE of Nobel prize-winning economists are giving major talks in
Joburg this week. Many in civil society hope the visits by two of global
capitalism’s best-known critics can pull local economic policy debates
further leftwards: towards meeting social needs, not market dogmas and
corporate profitability.

Without wanting to prejudge, I just don’t think such expectations will
be fulfilled. The ideas for which Muhammad Yunus and Joseph Stiglitz won
the Nobel Peace Prize in 2006 and Economics Prize in 2001, respectively,
are simply not sufficient for these tumultuous times.

The Nelson Mandela Foundation is honouring Grameen Bank founder and
microcredit guru Yunus on Saturday with the annual Mandela Lecture,
while Columbia University professor Stiglitz gives two speeches at Wits
University, tonight and on Friday.

The way both have addressed the global economic meltdown leaves a great
deal to be desired. Yunus is most complicated, because his micro-finance
strategy dovetails with the most rabid model of neo-liberal capitalism.

As Yunus put it: "I believe that ’government’, as we know it today,
should pull out of most things except for law enforcement and justice,
national defence and foreign policy, and let the private sector, a
’Grameenised private sector’, a social-consciousness-driven private
sector, take over their other functions."

Over the past three decades, across the world, many governments pulled
back from regulating financial markets, especially in the US under the
Reagan, Bush 1, Clinton, and Bush 2 administrations.

One might expect that the resulting financial crisis would change
Yunus’s tune. After all, the catalysing event a couple of years ago was
the rising default rate on a rash of “subprime mortgage” loans given to
low-income US borrowers.


Earlier, the Yunus philosophy was that "credit is a fundamental human
right", not just a privilege for those with access to bank savings
accounts and formal employment that permits stop-order repayments.

Reflect on this, and you quickly realise how ridiculous, inappropriate
and dangerous it is to compare bank credit with crucial political and
civil liberties, health care, water, nutrition, education, environment,
housing, and the other rights guaranteed in South Africa’s constitution.

Yet the biography of Yunus supplied by his local speaking agent (www. still makes reference to "credit as a fundamental
human right" in its opening sentence.

Apparently backing away from this posture four months ago, Yunus told
India’s MicroFinance Focus magazine the opposite: "If somebody wants to
do microcredit - fine. I wouldn’t say this is something everybody should

Indeed, the predatory way that credit was introduced to vulnerable US
communities in recent years means Yunus now must distinguish his Grameen
Bank strategy of “real” microcredit from microcredit "which has a
different motivation“.”Whenever something gets popular,“he told the Indian magazine,”there
are people who take advantage of that and misuse it."

To be sure, Yunus also unveiled a more radical edge in his interview,
interpreting the crisis in the following terms: "The root causes are the
wrong structure, the capitalism structure we have. We have to redesign
the structure we are operating in."

Fair enough. But in the next breath Yunus is back in the neo-liberal
box, arguing that state microfinance "regulation should be promotional,
a cheerleader".

For a man whose strategy of lending to women in group borrowing schemes
garnered such praise, but who, when times were tough, allowed interest
rates to soar and his loan collectors to rip the tin roofs off the
women’s houses as a means of taking collateral when they defaulted, a
robust consumer watchdog is needed, definitely not a cheerleader.

Similar contradictions characterise Stiglitz’s views. His first Wits
lecture promises to address "the role that orthodox economists played in
the creation of the crisis and the implications for the teaching of the
discipline of economics in universities".

This sounds very welcome. Stiglitz won the Nobel prize for his new
“information-theoretic economics”, especially the critique of the flawed
market assumption of perfect information by buyers and sellers.

He coined the phrase “Post-Washington Consensus” in 1998, to suggest the
need to drop the International Monetary Fund and World Bank orthodoxy of
the day, and in 2002 he even called for the IMF to be shut down.

Yet Stiglitz’s own ideology is based upon fixing capitalist markets, not
transcending them. As he explained six months ago: "No one can be sure
what will work. But long-standing economic principles can help guide us.
Incentives matter."

The same reversion to orthodoxy was witnessed in his leadership of the
UN Commission of Experts on Reforms of the International Monetary and
Financial System, which met last week in New York.


Ultimately, Stiglitz’s work disappointed those with more ambitious
reforms in mind. There were no mentions of capital/exchange controls to
allow countries insulation from disastrous global financial flows.

There were no suggestions for converting bank nationalisation from
“lemon socialism” into a genuine public utility. The Jubilee movement’s
projects of debt cancellation, Odious Debt and reparations were not

There were no detailed strategies to address ecological debt and the
financing implications of climate crisis. There was no attempt at
commodity price regulation, in spite of disastrous swinging.

Instead, Stiglitz’s commission endorsed the tired, dubious Doha Agenda
of the World Trade Organisation, as well as a greater role for the
much-aligned IMF.

The commission proposed a UN Global Economic Council with two dozen
members with similar status to the UN Security Council, which might
potentially lock in the power of the Group of 20 elites (including South
Africa) rather than democratise the world economy.

On the other hand, the commission also proposed a new currency and
reserve system that would suffer relatively less veto power from the
wealthy countries, plus a 1 percent of gross domestic product levy to
redistribute from North to South.

But overall, Stiglitz failed to grasp the opportunity of delegitimising
the world elites who are desperately trying to return to business as
usual. A much greater challenge to prevailing international economic
relations will be needed to recover from the depression.

During a week the G8 leadership is meeting in Italy with the intent of
sabotaging prospects for a workable climate change treaty in Copenhagen,
the world needs genuine voices of clarity on behalf of social and
environmental justice.

Maybe Yunus and Stiglitz can rise to the occasion. My guess, though, is
that they remain trapped inside the box of their training as damn

Patrick Bond is the director of the Centre for Civil Society at UKZN.

Patrick Bond

is professor at the University of Johannesburg Department of Sociology, and co-editor of BRICS and Resistance in Africa (published by Zed Books, 2019).