This Week In Blunders – June 7-13
“For every complex problem there is an answer that is clear, simple, and wrong.” – H.L. Mencken
The same week that the world made Elon Musk its first trillionaire, The Wall Street Journal published a devastating review of one of the most celebrated anti-poverty ideas of the past half-century.
The Davos class has been touting “microfinance” for decades as a sure-fire solution to alleviating global poverty. “Doing well by doing good,” they called it.
The economist who launched the concept won a Nobel Prize. Politicians and philanthropists swarmed. And then even Wall Street got involved, turning it into a more of a “do-well” than a “do-good” enterprise.
As it turns out, giving tiny loans to the world’s most despairing people too often leads to new loans to repay the old loans, and a cascading cycle of debt, according to a slew of academic studies.
It also leads to homelessness, child labor, suicides and shakedowns from aggressive loan officers, the Journal reports. Amid intense desperation, many borrowers end up spending the money on medical expenses and other necessities instead of small businesses. Go figure.
