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.