December 10, 2006: Two Banks

In one of those rare ironies of coincidence, the Nobel Peace Prize was just presented to Muhammad Yunus and his Grameen Bank in the wake of a report highly critical of the World Bank released by its own independent assessment arm. Here are some specific numbers from the account of this report in Friday's SAN FRANCISCO CHRONICLE:

Among 25 poor countries probed in detail by the bank's Independent Evaluation Group, only 11 saw reductions in poverty between the mid-1990s and the early 2000s, while the other 14 suffered the same or worse rates over that term. The group said the sample is representative of the global picture.

It is easy enough to be glib about the fact that Grameen is doing everything right and the World Bank is doing everything wrong, and that would obviously be a specious generalization. Nevertheless, it might be worth considering what differentiates these two lending organizations besides the magnitude of money involved. I would like to propose the hypothesis that, because of its magnitude, the World Bank operates on an institution-to-institution basis (a generalization of the B2B concept that has become part of our technical jargon). Grameen, on the other hand, was conceived by Yunus to operate on an individual-to-individual basis. It is only by thinking of a loan applicant as an individual person (subject) that one can consider the value of advancing a $2 loan (an example given on the radio the other day). This is not to say that the world would be a better place without institutions, since there are clearly situations in which we benefit from them. However, poverty and related disasters, such as flood and famine, are, as I have previously tried to articulate, problems of individual subjects; and institutions that can only deal with those people as objects inevitably make matters worse, just by virtue of that institution-to-institution thinking. Since I am still basically a Hegelian, I would certainly like to see a dialectical synthesis of these two perspectives; but I doubt that we can arrive at such a synthesis before beefing up the individual-to-individual side of the argument. Also, while there is no doubt that Yunus' efforts have advanced the cause of peace, the Nobel Committee could have made an even more powerful statement by also awarding him the Economics prize!