Muhammad Yunus – Credit as Slavery

Who better to interview than Muhammad Yunus on the current crisis of the global financial system? That’s what Le Monde did.

How does he explain the credit crisis? For him, this crisis is not a bug, it’s a feature of the normal functioning of the global financial and banking system. The very principles of credit – the guarantees that are demanded, the bonus based on risk funded on the backs of the least solvent people – have revealed that this system does not know how to lend to the poor. And it’s the banks’ fault. They loaned a lot of money, all the while making false promises with great offers, teaser rates, and a guarantee to be able to reimburse over long periods of time. In reality, the poor were put under extreme pressure to reimburse since this is where large profits come from. This is the logic of the financial system. Which is, of course, the opposite of what Grameen Bank does.

The only logic of this system is the maximization of profits. There is no other logic here. That’s what led to subprimes and hedge funds. In this sense, according to Yunus, this system is blind to anything else. He is stricken by the focus on the enormous sums of money lost by banks and the little focus on how low-income people were duped by maladapted offers from the banks and whose homes are repossessed or simply abandoned, if only to blame them for their greed or irresponsibility whereas bank losses are explained in structural terms.

For Yunus, the system that is collapsing today is one based on a faulty economic principle: loans cannot be granted without collateral, especially to poor people. This is a principle that has the strength of dogma. With Grameen Bank, he has proven that this is not true. This principle prevents half of the world’s population from participating into the global economic system, and not just in the Global South, but in the US and Europe as well. Traditional banks, as the saying goes, only loan to the rich. But for Yunus, what’s the point of such banks if they do not contribute to creating value or helping people getting out of poverty through their own labor? This is a major blind spot in the current system: banks and financial institutions do not understand the importance of independent economic activities as well as households as productive units. The informal sector, as it is called, must be recognized as legitimate productive activity, as a source of employment, and should be encouraged through credit.

However, orthodox economic literature ignores it. Only salaried employment in busisnesses is considered. Therefore, economic prescriptions are based on enterprises employing people, or resulting in unemployment if they do not. That is the current logic of capitalism. It seems absurd, to Yunus, to limit economic activity to this narrow definition. Why should the poor of the Global South wait for large corporations to hire them? Why not let them create their own employment through access to credit? This is this narrow conception of employment and denying credit to the alternative that is a form of slavery, for Yunus. For him, the overworked, salaried American, employed by large companies, is slave to the rigidities and instabilities of the system.

This is where Yunus sees the real danger of current economic structures: a unidimensional man (Herbert Marcuse, anyone?). Salaried life should be one option among many other opportunities. The denial of such possibilities, especially in the Global South, clearly is described by Yunus as a form of alienation (in the Marxian sense).

The other major blind spot of the current financial system is its sexism. Grameen’s focus on women is well-known by now. The reason for it is that women are more productive and more solvent than men and this gendered economic productivity generates greater communal benefits. Men spend on themselves. Women spend on their families and communities. There is greater general welfare achieved by women rather than men. And this aspect, for Yunus, holds true everywhere in the world.

But overall, Yunus argues that we are seeing the collapse of a faulty financial system and that it is time for something different: social capitalism.

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