Thoughts on Money & Poverty: The Root

In my series of posts focused on confronting the existence of poverty and thinking through the issues behind it [Thoughts on Poverty parts I, II, and III], I came to a series of realizations which I will sum up as follows: 1) development, profit-generation, and gentrification is not necessarily a bad thing; 2) poverty is not spawned by the idleness and laziness of the poor but rather through structures of commerce and policy; 3) charity is only a symptomatic response, and does not in any way address the root causes of poverty; and 4) poverty is sustained by the lack of will and indifference on the part of those with influence and money. These are all poignant observations, but my thought process was stopped short continually when I hit the wall of what do we do to change this? This can be seen especially in my second post, in which I end it by stating that micro-credit doesn’t work in the US, and that I have a lot more to learn on the subject of poverty.

I do indeed have a lot more to learn, but the wall that I was hitting turns out to be a quite common perception within the US in regards to the problem of entrepreneurship/employment and the poor. That wall is welfare. I was getting at this idea in a general way when I discovered that charity is a manifestation of shallow perceptions of the problem and not the solution.

The fact is that welfare has created a powerful disincentive to those stuck in poverty from ever obtaining the motivation to succeed. It’s throwing money at the problem, and increasing the division between the poor and the rich. It’s a type of exclusion, a method of control. Any of us who has ever been bribed by our parents knows this.

I arrived at this understanding while reading Banker to the Poor, by Muhammad Yunus. I have talked about Yunus before, and posted plenty of quotes of his, but I had not yet actually read a book written by him. I would highly advise reading some of his speeches and his books, in addition to books written about Grameen Bank such as David Bornstein’s The Price of a Dream. In Banker to the Poor, he discusses the reactions of Americans to the concept of micro-credit, and the problems he encountered with welfare states in the US and in Europe.

“I was not prepared for the amount of skepticism I encountered. What struck me was not so much people’s doubt as to whether micro-credit would succeed in the United States but their pessimism about whether anything would actually raise people out of poverty rather than merely alleviating its symptoms. Many Americans argue that their welfare state has created a lazy underclass of dysfunctional individuals who would never be interested in or capable of starting their own businesses or supporting themselves.

. . . Almost everyone I spoke with dismissed what I said, arguing that the Bengali experience could not be relevant to poverty eradication in the United States. They claimed that [poor people] needed jobs, training, health care, and protection from drugs and violence, not micro-loans, and that self-employment was a primitive concept lingering only in the Third World. Low-income people . . . needed money for rent and food, not for investment. They had no skills anyway.  . . .”

That is essentially the argument that I had been making in my second post on poverty. I was talking about how the cottage industries in Bangladesh of weaving, making furniture, rickshaw pulling, etc, were all something ingrained in their traditions and way of life. In the United States, I thought, what could we do to start our own businesses? Isn’t it a lot of hassle and paperwork, and don’t you have to get some kind of training and a degree? However, the more that you think about it, the more that you realize that the problem isn’t that people don’t have skills or ability, it is that they lack will and motivation.

I wrote a post while in Colombia on the teeming activity of its micro-economies, and of how this was inspiring to see, something that we need in the United States. And that is exactly what we do need! We need more street vendors, more individuals starting their own taxi businesses, more food carts, more clothing makers, more strange and exotic retail shops, more corner stores, etc. This local, community based commerce is what makes for a stronger overall economy. We need small-time entrepreneurs.

As I was reading Yunus’ chapter on the United States while on the subway, I excitedly gripped the book and finally realized the biggest major obstacle both in my mind and in my nation in regards to poverty: the concept and institution of welfare.

“. . . I witnessed directly how welfare laws in the United States create disincentives for welfare recipients to work. Those who receive welfare become virtual prisoners not only of poverty but of those who would help them; if they earn a dollar, it must be immediately reported to the welfare authority and deducted from their next welfare check. Welfare recipients are also not allowed to borrow money from any institutional source.

. . . In the developed world, my greatest nemesis is the tenacity of the social welfare system. . . Recipients of a monthly handout feel as afraid to start a business as the purdah-covered women in Bengali villages.

. . . I believe . . . that providing unemployment benefits is not the best way to address poverty. The able-bodied poor don’t want or need charity. The dole only increases their misery, robs them of incentive and, more important, of self-respect.

Poverty is not created by the poor. It is created by the structures of society and the policies pursued by society.”

One of the problems with welfare is that it is staunchly defended by anyone who thinks that they are liberal and/or compassionate. It is thus defended because it is seen as a necessary means of address to the problems of poverty. But welfare is only a symptomatic address; it does not change the structures that create the conditions for poverty.

We obviously cannot just lop off welfare and expect the problem to be solved. Welfare must be reduced in tandem with the extension of financial services to the poor in the form of micro-loans. Welfare must also be altered to allow for the poor to have incentive to take out loans and start their own businesses.

Welfare as a concept and institution should not be done away with. Welfare is necessary for those people who are not able-bodied enough to help themselves. However, it needs some drastic changes in its structuring. Otherwise, all other actions we take to eradicate poverty in the United States will end up falling far short in the face of the lack of will, self-esteem, and motivation on the part of the poor themselves. Only they can raise themselves out of poverty.

Public Policy and the Poor

“. . . the poor, once economically empowered, are the most determined fighters in the battle to solve the population problem, end illiteracy, and live healthier, better lives. When policy makers finally realize that the poor are their partners, rather than bystanders or enemies, we will progress much faster than we do today.”

–Muhammad Yunus, Banker to the Poor

Counterculture of Positivity

“After all these struggles [to extend credit to the poor in Bangladesh], repeated in thousands of villages, it is frustrating to hear people dismiss our accomplishments, arguing that Grameen’s success is due to cultural factors that cannot be replicated elsewhere. To succeed in Bangladesh, in many ways we have had to struggle against our culture. In fact, we have had to create a counterculture that value’s women’s economic contribution, rewards hard work, and punishes corrupt practices. . . Indeed, if one were to look for the country where it would be most difficult to have a program like Grameen Bank succeed, I think Bangladesh would come to the top of the list.”

–Muhammad Yunus, Banker to the Poor

The Worm’s Eye View

Instead of traditional book learning, I wanted to teach my university students how to understand the life of one single poor person. When you hold the world in your palm and inspect it only from a bird’s eye view, you tend to become arrogant—you do not realize that things get blurred when seen from an enormous distance. I opted instead for “the worm’s eye view.”

–Muhammad Yunus, Banker to the Poor

Thoughts on Money and Poverty: Part II

On my last post on the issue of gentrification, I’d left off with the question of “How can a community expand and develop its wealth locally, while at the same time accepting, encouraging, and embracing external inputs of wealth?” The more I’ve pondered on this, the more I’ve realized that the question is quite a bit more complicated than it sounds. Essentially, what we are really looking at are the root causes of poverty, and considering methods of assisting communities in raising themselves out of it.

The problem with poverty is that there are a lot of differing [mis]perceptions of the issue: the most common one being that of the better off, which assumes that those who are poor are lazy, stupid, or otherwise—that is, if the well-to-do are aware of the issue and consider it at all (it sounds amazing, but having grown up in a well-to-do area, and having worked in the hospitality industry with the extremely well-to-do and their offspring, I know first-hand there are indeed people out there who live in an oblivious bubble, both self-imposed and otherwise). Stemming from this initial prejudice, there are two common perceptions on poverty and the poor: 1) they are an unfortunate and inevitable scourge of humanity, to be ignored, endured, and shut away into their own enclaves; and/or 2) they are to be pitied and supported through the works of charity.

I think what becomes apparent as one examines this issue is that while welfare and charity are quite obviously direly needed by those stranded in extreme poverty, what must be recognized is that charity is ultimately only a temporal bandaid that avoids the root causes that create and sustain the conditions for poverty. What becomes further apparent from this realization is that the poor must be given the structural means to help themselves. In other words, the only ones who can directly and actively work to address the root causes of poverty are the poor themselves. Thus, they require not charity, but a pragmatic and systematic support that hands the money and the tools over to them.

This may at first sound perhaps out of touch with reality or idealistic and overly vague. But this is a concept that has been applied effectively by Muhammad Yunus in Bangladesh starting in the 70′s, when he introduced the concept of micro-credit and banking for those in poverty with his Grameen Bank. Since then, micro-credit has been further applied successively, most notably, in Southeast Asia and Latin America. Yunus founded a bank which extends credit directly to the poor, so that they could gain the means of raising themselves out of poverty through their own hard work and entrepreneurship. This is an approach to poverty that is staunchly capitalistic in its approach, yet underlied by a basic concern for human welfare. Most approaches to poverty are rooted in that initial notion of charity which we just have outlined above, and exist as non-profit donation-based organizations. These organizations generally do little or nothing in regards to helping the poor help themselves. Rather, it is always a matter of the rich helping or giving to the poor. This position, of course, is already rooted in a problematic perception of poverty that does nothing to empower the poor themselves, and rather perpetuates the symptoms.

The problem with micro-credit is that there haven’t been found ways to translate it into a workable and comparable vision in the United States. The reason for this is that micro-credit works quite well in village-based economies, where the poor have recourse to starting their own business in say, weaving kerchiefs, or vending food, and other such small, individual, street-cart type sales. There exists in such cultures many small, micro-economies in which small entrepreneurs are able to thrive. But in the United States, the economy, lifestyle, and culture is different, and small-time entrepreneurs face a number of hurdles before they can break into the world of commerce.

And this is where my thought begins to shoot out randomly in a haze like a flashlight in the fog. This is where I realize just how much more I need to learn. I have already gone from the issue of gentrification to that of poverty in general, thus expanding and deepening the questions on money and poverty. So at this point, I’m going to step back from these questions and look again at the bigger picture. I think what has been changing in my own thought and perception is that I am no longer fundamentally opposed to capitalism—the concept of making money. I believe that we can consciously make money, while at the same time benefitting the environment and combating poverty. And as these changing ideas sink in, my worldview begins to shift on an everyday level, such that as during this trip to Colombia, I have been noting the influence of wealth, and welcoming it.

Muhammad Yunus’ Nobel Peace Lecture

Dr. Muhammad Yunus, accepting his Nobel Peace Prize, gave a stirring speech today detailing how to fight poverty effectively. He has demonstrated, through his work with the Grameen Bank in Bangladesh, that the poor, if given half a chance, will work to better themselves and their community. Contrast this to most middle to upper-class American’s viewpoint, which will be something to the tune of “poor people are poor because they are lazy, stupid, etc.” As in, poor people deserve to be poor. Dr. Yunus, on the other hand–obviously an enlightened human being, as opposed to most middle to upper-class Americans–states, “Poverty is created because we built our theoretical framework on assumptions which under-estimates human capacity . . . Poverty is caused by the failure at the conceptual level, rather than any lack of capability on the part of people.” Yes. His words come from the depths of understanding, compassion, and everyday connection with the struggles of poverty.

Dr. Yunus also clarifies some ideas on capitalism which I had been moving towards as my social awareness has been expanding bit by bit. He states that our current conception of capitalism and business “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.

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.

Many of the world’s problems exist because of this restriction on the players of free-market. The world has not resolved the problem of crushing poverty that half of its population suffers. Healthcare remains out of the reach on the majority of the world population. The country with the richest and freest market fails to provide healthcare for one-fifth of its population.

We have remained so impressed by the success of the free-market that we never dared to express any doubt abqut our basic assumption. To make it worse, we worked extra hard to transform ourselves, as closely as possible, into the one-dimensional human beings as conceptualized in the theory, to allow smooth functioning of the free market mechanism.“

How simply and pointedly stated. He very clearly explicates the issues surrounding poverty without getting bogged down in political or theoretical constructs. The fact is that our current definition of capitalism and human capability is extremely one-sided, and it’s destroying the entire world. Yunus also brings out a key element of poverty: that “poverty is a threat to peace.” That when people live in squalor with no immediate or visible means of escape, they will turn to terrorism, theft, and rage. That as long as we have those who have and those who have not, then we will have warfare.

Finally, Yunus offers a vision of humanity that is filled with hope. He obviously believes in the power of the human mind to create whatever it desires. He states that “we create what we want: we get what we want, or what we don’t refuse. We accept the fact that we will always have poor people around us, and that poverty is part of human destiny. This is precisely why we continue to have poor people around us. If we firmly believe that poverty is unacceptable to us, and that it should not belong to a civilized society, we would have built appropriate institutions and policies to create a poverty-free world.” In other words, all it takes is the simple will to make the world a better place to begin making it a better place. Amen.