Micro Credits – A Solution For Poverty?

After the Norwegian Nobel prize committee decided to give the United States president Barack Obama the peace price, a president that later came to continue to war in Iraq, and also fund insurgents in Syria, I seriously started to doubt the reasoning skills of the members of this Nobel price committee. And after having watched the documentary ‘The Micro Debt’ by Tom Heinemann, I have concluded that the Nobel prize committee (at least those handing out the peace prize) do not know anything about what it means to create actual peace in this world. Because when they decided to give Muhammad Yunus the peace price, for having founded the Grameen Bank, and invented the concept of micro loans, and for thereby apparently having found a solution to poverty, they were obviously not using basic mathematics to assess the outflows of such loan methods.

Professor Muhammad Yunus, Nobel Peace Prize winner visiting theThough, before we dive into the basic mathematics of Micro Debt and whether this can be a solution for poverty or not, let me share the story of Muhammad Yunus, his bank, and the stories that has begun to surface about his money lending practices. It begins in 1976 when Yunus (supposedly) found out that small loans could make a disproportionate difference in a poor person’s life. According to Wikipedia, the first loans Yunus gave, made it possible for the borrowers to profit. Yunus business expanded, and by July 2007, his bank had issued around US$6.38 billion to 7.4 million borrowers.

As mentioned above, Yunus was awarded the peace price in 2006 for his efforts to create economic and social development. However after the release of the documentary ‘The Micro Debt’ the Bangladeshi government decided to review Yunus bank, and Yunus himself was removed as Managing Director of his bank. This is not particularly strange considering the claims that are made in the documentary, and the compelling evidence that it presents, that the micro debt is not at all a solution for poverty, but rather a trap, making the large amount of borrowers worse off than before.

Though in this blog I am not going to focus on Yunus and whether the claims made against him are true or not. My focus will instead be the concept of micro credits and whether these loans makes any sense; is it really possible to remove poverty through debt? The Micro Credit concept is not unique to Bangladesh; it has also become popular in South Africa, where it has created the opposite of poverty reduction. The following quote gives a stark description of the situation that unfolded.

”The microcredit-induced problems that emerged in South Africa are two-fold. First, microcredit per se is actually an “anti-developmental” intervention. For one thing, it exists on paper to support the smallest income-generating activities, but in practice is increasingly all about supporting consumption spending. In South Africa, the microcredit movement has created an incredibly risky and expensive way to support the immediate consumption needs of the very poorest.

With few poor individuals possessing a secure income stream that might ensure full repayment of a microloan – unemployment is now higher than it was under apartheid – many of the poorest individuals have been forced to repay their microloan by selling off their household assets, borrowing from friends and family, as well as simply taking out new microloans to repay old ones. For far too many now “financially included” individuals in South Africa, using microcredit to support current spending has been a disastrous and irreversible pathway into chronic poverty.”

Milford Bateman, Microcredit has been a disaster for the poorest in South Africa, http://www.theguardian.com/global-development-professionals-network/2013/nov/19/microcredit-south-africa-loans-disaster (2015-09-25)

euro-427528_640Academics and other proponents of the Micro Credit as a way out of poverty makes the assumption that the money lent will be used by the borrower to further his business. This however, is just that, an assumption. Most poor people are just as middle class people, not entrepreneurs, and do not have a very entrepreneurial relationship with money. The loan will be used to buy goods for immediate consumption, and will only serve to put more pressure on the debtor. In worst-case scenario, this will lead the already poor person, to loose the little safety they do have, when they are forced to sell their house to meet interest and installment payments.

Further, those borrowers that are indeed entrepreneurs, and that do invest their money in a business, there is nothing that says that these businesses will be able to profit. Nine out of ten startups fail – and that number will probably be even higher when not only you, but also all of your neighbors, decide to go out on the streets and sell the same thing – which did happen in South Africa.

Then we have the big problem when it comes to Micro Credits, the interest rates. On some of the Micro Loans that interest rate will be at 100 % or more. There is no startup that yields a sufficient profit to cover such a high interest rate. Conveniently for the creditors, most of the debtors are not proficiently literate, and will thus not really understand what they are signing.

Yunus was applauded when he was able to offer loans to poor people that cannot offer any securities in case they would forfeit on their installments. However, to ensure repayment of the loans, Yunus bank have developed a system of “solidarity groups”. It is these small informal groups that together apply for loans and its members act as co-guarantors of repayment and support one another’s efforts at economic self-advancement. Hence Yunus use the psychology of group pressure to ensure that the poor people are sufficiently motivated to pay back their loans. And even though this might seem innocent, in reality it has lead to the most horrific of consequences. One woman that was unable to pay her loan was pressed by her co-guarantors to take up prostitution as a way to meet her installment payment. That woman later poured kerosene on herself, and lit herself on fire. That is the effectiveness of group pressure when survival is in the picture.

What are we then able to conclude from all of this? One thing is clear: We cannot trust academics to know what is right! Even though they have a degree in economics, and even though they have received the Nobel peace price, that does not mean they actually understand how reality operates. Academics have their nose buried in deep books and because of that they will many times miss what is right before their eyes. Hence, we have to educate ourselves, and take responsibility. We cannot rely on a small intellectual elite to know how to solve such things as poverty – this is a problem that involves, and touches all of us, and accordingly it is everyone’s responsibility.

Then, the second thing we can learn: Change cannot come through DEBT. The very reason why we are living in a world where money is increasingly more difficult to obtain is because of DEBT. We live in a debt based system, and this forces us to work more – and even still there will/must be a loser. With debt, someone always loses; someone must be that poor guy that has to pay back the interest.

Real change will come through changing the structural design of the economic system – because only through changing the rules of the game are we removing this incessant fear of survival that is currently holding the entire human race in its grip. That structural change must involve giving all human beings a dignified life, real security, real safety, and easy access to money. This cannot come from debt, as debt is the very instigator of fear, anxiety and stress.

Hence, if you are interested in solving poverty, I suggest that you investigate the Living Income Guaranteed. This is an economical system that will revolutionize the way we think about money – and that is precisely what we need. We need something new, a brand new way of looking at things – a fresh start – free from debt and the old pessimistic ideas that apparently, poverty is unable to be removed from the face of this earth.

For more reading:

http://www.marlenvargasdelrazo.com/the-micro-debt-the-nefarious-business-on-poverty/#

http://www.theguardian.com/global-development-professionals-network/2013/nov/19/microcredit-south-africa-loans-disaster

Watch the documentary ‘The Micro Debt’

https://www.youtube.com/watch?t=791&v=yoAGKFaqwjM

https://www.youtube.com/watch?v=M6KHa4omGG8

https://www.youtube.com/watch?v=FdmXLpjykNk

Who Benefits From a War In Syria?

A street in Syria before and during the warThe Syrian war is a perfect example of how the western countries utilize media to sway and manipulate the public into a false understanding of reality. The story being repeated is how the Arabic spring during 2011 spread to Syria – and where the Syrian demonstrators desired to have democracy. However, Bashar al-Assad and his regime instead responded with violence, which lead to the current civil war. This is simplification and a biased view on what have occurred in Syria. Even though Bashar al-Assad have potentially taken actions that should be condemned, there are other indirect parties in this war that bare a great responsibility for what has happened.

“Both the Syrian government and the opposition have received support, militarily and diplomatically, from foreign countries leading the conflict to often be described as a proxy war. The major parties supporting the Syrian Government are Iran and Hezbollah. Both of these are involved in the war politically and logistically by providing military equipment, training and battle troops. The Syrian government has also received arms from Russia and SIGINT support directly from GRU, in addition to significant political support from Russia.

The main Syrian opposition body – the Syrian coalition – receives political, logistic and military support from the United States, Britain and France. Some Syrian rebels get training from the CIA at bases in Qatar, Jordan and Saudi Arabia. The Syrian coalition also receives logistic and political support from Sunni states, most notably Turkey, Qatar and Saudi Arabia; all the three major supporting states however have not contributed any troops for direct involvement in the war, though Turkey was involved in border incidents with the Syrian Army. The Financial Times and The Independent reported that Qatar had funded the Syrian rebellion by as much as $3 billion. It reported that Qatar was offering refugee packages of about $50,000 a year to defectors and family. Saudi Arabia has emerged as the main group to finance and arm the rebels.”

Wikipedia (https://en.wikipedia.org/wiki/Syrian_Civil_War) (2015-09-23)

Thus we have western super powers engaging indirectly in a military conflict far from their own borders, through supply funding, weapons and training. We, the inhabitants of these western countries, should ask ourselves what is really going on? How is it that we accept and allow our leaders to use our tax money, to support wars far away with abstract, and bogus goals such as creating ‘democracy’ and ‘freedom’ for the people in these countries?

It is ridiculous when you look at the situation, how we accept and allow our political representatives to abuse, and misuse their power, and utilize their public trust to support actions of war – and then some of us have the stomach to blame the Syrian immigrants arriving in Europe. Without the financial support of the western countries, there would not be a Syrian Civil War, and there would not be a refugee crisis in Europe. We have ourselves placed us into this position. We can not blame Bashar al-Assad, because without the weapons, the money, and the training, this conflict would have been long over.

It is evident that we cannot solve conflicts and disagreements through wars and weaponry. Still, this is the option that our governments gravitate towards when given the chance. Here we should ask ourselves, who really benefits from these ongoing wars? Who benefits from weapons being exported to lowly educated, and poverty stricken people in Syria, and Iraq? Who benefits from the world existing in a constant state of war?

”The most recent wars in Iraq and Afghanistan offer an ominous example about what can happen when the rush to war is met with sharp spending increases coupled with little to no oversight or fiscal restraint. The Commission on Wartime Contracting — a bipartisan congressional body — estimates that there was $30 to $60 billion in waste, fraud and abuse associated with the wars in Iraq and Afghanistan — a total of $12 million per day. Even worse, at least $6 billion is completely missing, never accounted for, gone forever. That is a stunning amount of taxpayer dollars — yours and mine — to simply disappear into the wind.”

[…]

” The direct costs of the wars in Iraq and Syria may only be a small part of the new business that will flow to Lockheed Martin and its cohorts in the next few years. The new wars will almost certainly extend the life of the Pentagon’s war budget, known more formally as the Overseas Contingency Operations (OCO) account. For the past few years, OCO has served as a slush fund to pay for Pentagon projects that have nothing to do with fighting any war. In its most recent effort to raid the OCO account, the Pentagon has proposed using it to fund eight costly F-35 combat aircraft that haven’t even been certified for combat yet. There will be a strong temptation on the part of the Pentagon to continue padding this slush fund to levels far beyond anything being spent in Iraq or Syria.

Last, but not least, the arms industry will join with the Pentagon and hawks on Capitol Hill to use the current Middle East crisis as leverage to lift the caps on the Pentagon’s base budget that exist under current law. If they are successful, it could mean tens or even hundreds of billions of new business for Pentagon contractors over the next decade.”

Stephen Miles and William Hartung, Huffington post, Who Will Profit From the Wars in Iraq and Syria? (http://www.huffingtonpost.com/william-hartung/who-will-profit-from-the_b_5915794.html) (2015-09-23)

It is time that we understand something, which is that behind the sanctimonious exterior of the international superpowers there are greedy and power hungry corporate interests. These interests determine the policy, the direction, and the decisions of our leaders. These interests have invested enormous amounts of money to get into the very heart of the democratic decision making process that we have come to trust. Hence, we cannot anymore say that we are living in democracies; most of the western countries are but corporatocracys. They are ruled by the law of profit and have no squirms about using war as a way of increasing cash flow. This is not acceptable, and as citizens of the western world, it is our responsibility to stand up and say no more. We cannot anymore accept and allow our tax money, and our political machinery to be used as tools of destruction.

I suggest that we implement a new economic system, and a new way of life. We have created the current situation, and we can reverse it. War does not have to exist – and together we can make it a thing of the past.

Investigate the Living Income Guaranteed.

Investigate the Living Income Guaranteed.

What is really going on with the Refugees – and what is the SOLUTION?

People protesting against refugees being seen as the problemEuropa is now facing a big influx of refugees, not only from impoverished African nations, but also more prominently, from the war torn nation of Syria. In mainstream media, the conflict in Syria is portrayed as a struggle between the ‘good’ rebel faction ‘Free Syrian Army’ and the ‘bad’ regime troops with their leader Bashar al-Assad.

The mainstream media story is that Bashar al-Assad for a long time abused his people, that became angry, revolted, and that these rebels have a legitimate claim to the government. What is not shared however is how USA, France and Britain is supplying the rebel groups in Syria with both arms, and training. The other side, the governmental forces receive political and military support from Iran and Russia. Thus – this conflict is really a heaven for war profiteers – and at the end of the day – that is what it is all about.

We can fool ourselves into believing that the Syrian is a civil war fueled by political and ideological motives – but the truth is that the Syrian war exists due to geopolitical power struggles and because the military industrial complex continuously requires more war on this earth to profit. When we talk about the Syrian civil war it is not possible to look at it from a normal country vs. country, bad vs. good mindset – because this war is a product of the structural inefficiency of our current monetary system.

What do I mean with structural inefficiency? The fact that companies are allowed to exist and profit on the designing and manufacturing of weapons is a grave structural misalignment bound to create wars – and whether these are civil wars or bilateral, or multilateral conflicts, it does not really make a difference. Fact is that when weapons are created, the open up the opportunity for people to use force to get things their way. If we ban weapons on a global level – would there be wars as we know them today – and – would there be refugees, as we know them today?

War is one of the primary reasons people are forced to leave their homes, their possessions, their friends, and the life that they created for themselves – and to wage a war you NEED to have weapons. Without weapons it would not be possible to dislocate people on a large scale, or use force to drive entire nations into a state of chaos. Weapons is the one tool that makes it possible for people to commit atrocities on a industrial scale – and both the first- and second world war are perfect examples of how mass murder will be the result of weapons combined with a unstable human mind.

Hence, the solution to the world’s refugee crisis is to ban weapons. The act of selling and distributing weapons is in-fact a crime against the human rights – the right to life – because the design and creation of a weapon implies the intention of taking a human life by force – and that is unacceptable. There is not excuse that can validate weapon production – national security is not a reason – because obviously the safest national security measure would be to ban all weapons world wide through conventions and international agreements. Further, economic welfare is not a reason – because war does NOT produce economic growth. War increase debts, which in turn creates the illusion that the economy is growing – but the real economy which exists of the flesh and blood human beings and their daily living – is completely compromised.

War is hell – and war needs weapons to exist – and if we want to really make a significant impact in this world that will change things for the better – banning weapons on a global scale would be the decision to make. And even though there will be tremendous fear in people of seizing there arms production – it must be done and someone must begin the disarmament. One country must take the first steps, and dare to stand in this world and bring through a new way of doing things. All revolutions must begin somewhere, and at sometime – and if we want to have a world free from violence and refugees – we must take that stand of not accepting and allowing weapons to be manufactured and sold.

Investigate the Living Income Guaranteed for a solution on how to restructure our financial system to stop survival and fear from being the primary driving force in the human life experience. And investigate Democracy Against War Now – and join a movement that is set on producing a world free from violence where we as human beings can truly enjoy life – and let go of the constant uncertainty and worry that our current world situation provides for.