Friday, March 24, 2017

Time to re-think capitalism

Reformists seek to soften the effects of capitalism by calling for such oxymorons as “ethical” capitalism or “responsible” capitalism.

Today's co-operative movement is so unlike the dreams of its founders as to be almost unrecognisable. Socialists have not the slightest interest in the efforts of the co-operative movement to extend its business organisation. Some workers may find a co-operative permits a bit more say in the work-place but, as a movement, it never will or could bring emancipation any nearer. It can thrive only by accepting and imitating capitalism. It can never bring the workers more than a few crumbs from the capitalist table. The Socialist Party points out to those people trying to maintain a precarious and often illusory independence against large-scale industry and commerce, that there is no salvation for them under capitalism. As individuals, their place is within our ranks, when they recognise that the prime need of our age is the abolition of the private ownership of the means of production and distribution, and the establishment of socialism, and when they are prepared to work with us to that end. As socialists, we do not gloat over the personal tragedies of the failure of the small cooperative enterprise any more than we do over other tragic effects of ruthless capitalism.

Likewise our criticism of credit unions as a more convenient method of saving or borrowing than a conventional bank. Or the proclaimed panacea for poverty – micro-finance.

 Much has been said about the supposed empowerment easy access to credit for the poor, and in particular, poor women. This “grass-roots” capitalism has been advocated by charities and NGOs as a means of transforming lives for decades now and enough time and study has now been given to determine the results on the much trumpeted “success” stories. Undeniably, in a few personal situations, these loans have helped the slightly better off among the poor to build up their livelihoods but those entrepreneurial individuals are few who use a small amount of money to catapult themselves out of destitution. Those successful enterprises are the exceptions. However, the idea that micro-credit has potential to spark sustained economic benefit has been misplaced. Micro-finance is a Band-Aid solution to poverty and fails to address the root causes of poverty. No one should be lulled into believing that micro-finance is a cure-all for global poverty. 

Originally developed as a non-profit effort to lift society’s most downtrodden, microfinance has increasingly become a for-profit enterprise that serves investors as well as the poor. It can also lead to indebtedness. We must not forget the flip-side: Microcredit is microdebt. When a person and especially a woman fails to make installments on time, she experiences humiliation from fellow members and loan recovery officials. The default by a lone woman can result in friction among group members who are collectively held responsible for individual loans. Women who cannot pay due to unforeseen circumstances, (poor investment decisions, unexpected illness or even theft) are subjected to dishonour.

Six randomised evaluations from four continents conducted by researchers affiliated with Innovations for Poverty Action (IPA) and The Abdul Latif Jameel Poverty Action Lab (J-PAL), show that microcredit does not have a transformative impact on poverty. The results of studies, which were carried out in India, Mongolia and Philippines in Asia, Bosnia-Herzegovina in Europe, Morocco and Ethiopia in Africa, and Mexico in North America, were presented in the January 2015 issue of the American Economic Journal: Applied Economics. They conclude that micro-loans generally do not lead to increased income, investments in children’s schooling, or substantial gains in women’s empowerment for poor borrowers.


Unknown said...

This seems like an argument for NOT rethinking capitalism. I want my 10 minutes reading time back. Time is money and you offered money back. For 10 minutes I want you to consider the following idea. . .

it does not matter that it is a band aid solution as long as we can produce band aids and apply them faster and easier than the need for the arrises. Consider an automotive engine. No single explosion of gas and oxygen in the piston chamber ever lasts. They are all band aid explosions that make up for the wheels not turning on their own. Imagine if we had communism in the form of 10,000 small social communes that fail after a generation or a decade and are replaced by two more for every one that fails.

Also, the proposed alternative of a global political majority, doesn't seem achievable. Nobody expects the "just get a lot of people to agree and it will work" argument anymore. That's been argued too long and too ineffectively without ever satisfactorily acknowledging questions of how does this world wide majority happen to come into existence?

ajohnstone said...

The band aid solution has failed in our reading of history, regardless of how many are applied. And one thing to note, is that the political battle being engaged now is a right-wing/conservative attempt to remove already existing band-aids, not to add to them, as the need arises.

Your imagination is not new and has been advocated since the times of the Rochdale Pioneers of the cooperative movement. The 10,000 "alternatives" to "conventional" capitalism have all been co-opted. This is not theory but empirical fact. Have one or true remained true? Maybe but they have had no impact or importance other than perhaps aiding a select few individuals to escape the ravages of outright wage-slavery.

As you say, in these dire times, the socialist project of world revolution does seem a bleak prospect.That i will freely admit. However, ideas are social and not restricted by frontiers, no matter how many barriers are sometimes raised. But some will share your pessimism but isn't it even more unrealistic to think capitalism will solve its problems.

Lisa and Sam said...

"This seems like an argument for NOT rethinking capitalism."?? How dull witted can one be? This article is a illumination of capitalism, as small as microloans, as a failure. It doesn't improve lives except to enrich the already obscenely wealthy.