ACCESS Advisory

Privatizing Poverty Part 11: Climate Change Gives the Lie to Market-Based Development

The tenth post in this blog series singled out microfinance, and financial inclusion in general, as the “money pump” that powers market-based poverty reduction programs. Whether the specifics of the program involves generating additional income, improving skills, adopting new technologies for mitigating and adapting to climate change, strengthening homes against natural disasters, or building resilience, the beneficiaries of these programs are often encouraged to borrow, save, and insure themselves in order to achieve these goals. And due to the weak statistical link between financial inclusion and increased income and resilience, many critics blame financial services for being inappropriately designed, poorly delivered, or expensive.

Yes, some people borrow too much and the interest rates are high. But the vast majority of clients use financial services appropriately and regularly. If they remain poor or vulnerable, it is not because of the financial services. Instead, the problem is the oversold belief that an investment can enable a small farm or micro-enterprise to grow to the point that it enables its owners to accumulate capital or assets and thereby escape poverty. It is the idea that reducing poverty, or addressing climate change, slowing migration, or a host of other problems can be solved if only the poor and vulnerable were more entrepreneurial or innovative.

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Privatizing Poverty Part 11: Climate Change Gives the Lie to Market-Based Development | ACCESS Advisory The tenth post in this blog series singled out microfinance, and financial inclusion in general, as the “money pump” that powers market-based poverty reduction programs. Whether the specifics of the program involves generating additional income, improving skills, adopting new technologies for mi...

Privatizing Poverty Series Part 10: Financial inclusion––the money pump of market-based development

This blog series has traced the history of the idea that promoting entrepreneurship and innovation is the key to unlocking economic growth and reducing poverty. No new idea embodied this approach to development better than microcredit. Microcredit’s rise to prominence culminated with the 1997 Microcredit Summit in Washington, DC, which included a speech by First Lady Hillary Clinton who succinctly expressed the logic behind it: “It is the individual human being willing to work hard who will be given the opportunity if that person takes responsibility to seek and find a better life for themselves.”

In other words, getting out of poverty is one’s own responsibility. This logic is based on two assumptions. First, people can succeed in their own efforts if given the right tools (e.g., teach a man to fish…). Second, there are no structural barriers to economic success.

When taken together, these two assumptions imply that when someone remains poor, it is their own fault. This is the deeper meaning behind the privatization of poverty: not only that tools and methods of poverty reduction are turned over to for-profit activities (micro-enterprises and the microfinance institutions who lend to them, as well as social enterprises and investors) but also that the responsibility for poverty is one’s own, not a social problem or one requiring a direct policy response.

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Privatizing Poverty Series Part 10: Financial inclusion––the money pump of market-based development | ACCESS Advisory This blog series has traced the history of the idea that promoting entrepreneurship and innovation is the key to unlocking economic growth and reducing poverty. As we have seen, it is distinctly American in its conceptualisation: forged in an economic context of the first advanced economy to experie...

Privatizing Poverty Series Part 9: The cult of the entrepreneur

The prioritization of innovation, productivity, and growth over income and wealth distribution; technology as savior; government as a partner rather than a regulator of the private sector; market-based solutions to social and economic problems; and the overall emphasis on the individual initiative over collective action––this economic vision did not come from the political right as is often assumed. Instead, it was the brainchild of the political left––one that accepted the right’s criticisms of social democratic institutions without abandoning social democracy itself. This is the source of the concept of market-based development.

As economic policy, it might have made sense. But like all narratives, this political platform needed a protagonist. The right-leaning neo-liberals had their hero: the property owner. The Washington Consensus and Structural Adjustment Program (SAP) promoters elevated “the market” to the status of omniscience incarnate. However, left-leaning neo-liberals had already attacked “establishment” institutions such as government and universities and certainly did not want to be seen as pro-corporate or pro-wealthy.

Instead, they found their protagonist in the business version of the American pioneer, the cowboy, the rebel, the Great Man: the entrepreneur.

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Privatizing Poverty Series Part 9: The cult of the entrepreneur | ACCESS Advisory The prioritization of innovation, productivity, and growth over income and wealth distribution; technology as savior; government as a partner rather than a regulator of the private sector; market-based solutions to social and economic problems; and the overall emphasis on the individual initiative o...

Privatizing Poverty Series Part 8: New Democrats

Left-leaning neo-liberals rose to power just as new ideas about economic development and poverty reduction emerged. Their main goal was to increase employment and worker incomes, and their policy recommendations shifted the locus of government programs away from directly providing for the needs of workers and households through income redistribution and support for unions toward accelerating productivity growth.

Underlying their approach was a fundamental belief in the genius of American free enterprise––that it is the greatest poverty-killing weapon that man had ever devised. Their core policy vision was to promote investment of public and private resources away from sunset industries––mainly old-line industries with unionized workforces––toward sunrise industries. The ensuing boom would take care of the rest of society, and they stressed education and retraining as a way to adjust to the new future.

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Privatizing Poverty Series Part 8: New Democrats | ACCESS Advisory Left-leaning neo-liberals rose to power just as new ideas about economic development and poverty reduction emerged. Old-style New Deal democrats lost to Richard Nixon in 1968 and 1972. New-left politicians were first elected in the 1974 Democratic wave after the Watergate scandal. Their main base wa...

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Privatizing Poverty Series Part 7: The rise of left-leaning neo-liberalism

This blog began last year by marking the 50th anniversary of a new approach to economic development and poverty reduction. The previous model had sought to copy the pathways of advanced economies, placing emphasis on infrastructure and industrial development. However, this approach failed to kick-start self-generating economic growth. Most people remained outside the formal sector, either as subsistence farmers or part of the quickly rising population of urban informal workers. Whereas the previous model had considered such activities to be a dead end and not worth supporting, the new model specifically encouraged them. The goal was to harness these people’s supposed inherent entrepreneurial energies to enable them to lift themselves out of poverty.

This model is often considered the brainchild of the political right and labelled “neo-liberal”. Hence, we have taken a detour from the main focus of this blog series to explore what neo-liberalism really means. As subsequent posts have demonstrated, true right-leaning neo-liberalism’s fe**sh is for the protection of property rights above all others. Although it opposes taxes and regulation of business, market fundamentalism is not its raison d’etre but a means to insulate property owners from democratic politics. Structural adjustment programs and the Good Governance agenda, and the Washington Consensus policy framework upon which they are based, make a fe**sh out of markets and in doing so contribute to the neo-liberal agenda. All of them share underlying entrepreneurial values, such as competitiveness and self-interest.

However, none of them make a fe**sh out of entrepreneurialism itself. In fact, they barely even mention it.

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Privatizing Poverty Series Part 7: The rise of left-leaning neo-liberalism | ACCESS Advisory This blog began last year by marking the 50th anniversary of a new approach to economic development and poverty reduction. The previous model had sought to copy the pathways of advanced economies, placing emphasis on infrastructure and industrial development. However, this approach failed to kick-st...

The third post in this blog series discussed how right-leaning neo-liberalism, as opposed to classical liberalism, places property rights above all other rights. This means that property holders are a protected class, overriding the political and civil rights of everyone else. It is highly anti-democratic.

Right-leaning neo-liberalism’s obsession with property rights over all others appears even more bizarre when one considers how strange our ideas about property rights are in general.

The notion of absolute property rights -- the right of an owner to have, use, enjoy their produce, and abuse or alienate their possessions -- was derived from slavery.

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Privatizing Poverty Part 4: Right-leaning neo-liberalism’s obsession with property rights runs through slavery | ACCESS Advisory The third post in this blog series discussed how right-leaning neo-liberalism, as opposed to classical liberalism, places property rights above all other rights. This means that property holders are a protected class, overriding the political and civil rights of everyone else. It is highly anti-demo...

The first post in this blog series noted that the ILO, USAID, and Word Bank began implementing programs that targeted the poor directly a half-century ago as part of a broader effort to redistribute wealth downward in order to overcome the monopoly on economic gains from market transactions by the politically powerful. The second blog post in this series pointed out that the economist who first described the “Washington Consensus” policies on structural adjustment, John Williams of the Institute for International Economics, also wrote that “it is important for governments to target an improved distribution of income in the same way that they target a higher rate of growth”.

Yet just like the earlier recommendations for redistribution, Williams’s recommendations would go unheeded. By the time Williams wrote his coda to the Washington Consensus, the Cold War had ended in a way that seemed to validate a form of capitalism that envisioned a limited role for government in regulating the economy and in promoting equity and social democracy.

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Privatizing Poverty Series Part 3: The anti-democratic aims of right-leaning neo-liberalism | ACCESS Advisory The first post in this blog series noted that the ILO, USAID, and Word Bank began implementing programs that targeted the poor directly a half-century ago as part of a broader effort to redistribute wealth downward in order to overcome the monopoly on economic gains from market transactions by the p...

Some comments on the first post in this blog series linked market-based development to the structural adjustment programs (SAPs) pursued by the International Monetary Fund (IMF) and World Bank. It’s a tempting analogy, especially since both economic approaches have been labeled “neo-liberal”.

In fact, these two concepts have very different intellectual histories as well as economic (and political) goals. They do, however, share one very important trait: exaltation of individual action and, by extension, hostility toward any forms or institutions of collective action. They both also share a jaundiced view of politics, although for entirely different reasons: right-leaning neo-liberalism seeks to prevent politics from interfering with property rights, while left-leaning neo-liberalism seeks to prevent politics from interfering with technocratic solutions to social and economic problems.

Because of these common starting points, these two economic visions ultimately lead to the same final outcome: grossly unequal results for those with more assets (financial, real, or educational) compared to those who have less.

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https://www.accessadvisory.org/2022/09/03/privatising-poverty-part-2-market-based-development-vs-structural-adjustment%e2%80%95same-same-but-different/

The year 2022 marks an important anniversary in the field of economic development and poverty reduction. It was exactly 50 years ago that the shift from top-down industrial development to direct targeting of the poor began.

Starting with microcredit, multilateral and bilateral development agencies have spent a half-century moving further in this direction. Such programs are based on an implicit assumption that the poor are able to extract a surplus from market transactions.

There is no question that absolute poverty has been significantly reduced since 1972. The question this blog series intends to explore is whether and how much this approach to economic development contributed to that outcome, or if instead the pursuit of “market-driven, private sector-led, pro-poor growth” simply privatizes the problem of poverty.

Read more at:
https://www.accessadvisory.org/2022/04/06/privatizing-poverty-series-part-1-marking-a-half-century-of-market-led-development/

Privatizing Poverty Series Part 1: Marking a half-century of market-led development | ACCESS Advisory The year 2022 marks an important anniversary in the field of economic development and poverty reduction. It was exactly 50 years ago that the shift from top-down industrial development to direct targeting of the poor began. The first salvo was launched by the International Labor Organization (ILO),....

ACCESS has supported Vietnam’s microfinance sector since 2010. The following year, the government issued its microfinance development strategy, which raised hopes that the sector would enter a new growth phase that would enable it to make a significant contribution to financial inclusion.

However, a decade later, the reality is that Viet Nam’s microfinance sector continues to underperform its peers in Asia and elsewhere. Most microfinance service providers are growing slowly, if at all.

Supported by the Asian Development Bank, ACCESS recently completed a deep-dive analysis of the sector, and traced the causes of this underperformance to two factors. The first is limited access to funds and the second is a general lack of a commercial mindset among the providers.

We find that this outcome is the result of deliberate policy choices and that, therefore, change is possible. With a new National Financial Inclusion Strategy issued in 2020 and the potential revision of the Credit Institutions Law and regulations for microfinance, there is an opportunity to promote a new vision for the sector.

Read our report athttps://www.accessadvisory.org/wp-content/uploads/2021/12/Reimagining-Vietnam-microfinance.pdf

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