microcredit hoax

This is a bit painful for me, because the Foundation for Economic Education was my introduction to free-market economics, through both The Freeman and Henry Hazlitt’s Economics In One Lesson. You never forget your first love.

But it seems they’ve fallen for a neoliberal hoax:

Nobel Peace Prize Goes to Lender of Capital
10/13/2006
“Bangladeshi economist Muhammad Yunus and the bank he founded won the Nobel Peace Prize on Friday for pioneering the use of microcredit, the extension of small loans to benefit poor entrepreneurs.” (New York Times, Friday)

Peace and commerce — natural allies.

FEE Timely Classic
“A Private-Sector Solution to Poverty” by Mark Skousen

Read Skousen’s article. It’s short.

Then contrast it with these two pieces by Jeffrey Tucker at the Mises Institute:

  1. The Micro-Credit Cult
  2. Microcredit Meltdown

Skousen calls microcredit “a burgeoning private-sector success story.”

It may be burgeoning, but it is neither private-sector nor a success story.

The Grameen “Bank” would not function at all without massive government involvement, and even then, it fails to be profitable. The 98% repayment rate is a phony figure, only 3% of its assets are private, and its claim to be 88% privately owned is based on “shares” that are non-transferable, pay no dividends, and are distributed among 1.5 million borrowers who had to acquire them as part of the terms of their loans — loans, remember, of money whose primary source was the government. Some private-sector success story.

How could a free-market scholar be so willing to buy the press on something like this and not dig deeper?

Skousen’s article is from 1999. Tucker had already debunked this scam in 1995.

I guess free-market think tanks don’t necessarily read each other’s stuff.

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