This post is part of the series Toxic Charity: How Churches and Charities Hurt Those They Help (And How to Reverse It).
For reference, here’s the version of the book I’m using.
In this post, I also cite Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty. Citations from each book are marked with the short version of the book’s title. Unmarked citations are from the same book as the previous citation.
As we’ve seen over the last few posts, Robert Lupton believes in the power of microlending, and there is some reason to share his optimism in what microlending can accomplish for borrowers who participate in it. Though we should be careful about two things. First, we should prayerfully consider whether the values on which microlending is based are truly compatible with our values as Christians. Second, we shouldn’t place expectations that are too high on the microlending model; while microloans can be beneficial to those who take them, they have not been shown to have success in lifting individuals, families or communities out of poverty. Neither of these limitations mean that microlending is a bad thing, only that we shouldn’t treat it as a panacea for poverty.
While Lupton is, if anything, overconfident in the power of microlending to relieve poverty and transform communities in the developing world, he is not so confident in its potential power in the United States. He gives three reasons for this lack of confidence that should come as no surprise to anyone who has been paying attention thus far. All of these reasons are weak at best and callous, uncharitable and unchristian at worst.
First, Lupton identifies a work ethic as “almost a given” in “developing countries where people must constantly hustle to survive.” At the same time, he laments the fact that, in the Unites States, “the welfare system has fostered generations of dependency and has severely eroded the work ethic.” After all, “Where a people assume that their subsistence is guaranteed, hard work becomes neither a necessity for survival nor a means to escape poverty.” (Toxic Charity, p. 121)
Second, Lupton can see a common entrepreneurial spirit in “developing cultures” where “a host of... small unregulated enterprises proliferate along rural roads and urban thoroughfares” and where “additional capital... is a highly valued treasure that directly translates into an improved standard of living.” Meanwhile, in poor communities in the United States, “complex regulations” and daunting survival odds for a “sustainable inner-city business” force potential business owners into “informal, if not illegal, enterprises that operate under the radar and do not leave a paper trail” and which “microlending organizations understandably shy away from.” (Toxic Charity, p. 121)
Third, Lupton points to the need for a stable support system in developing countries, taking special note of the roles of members in extended families and, of course, the trust groups formed in order to receive microloans. In the United States, of course, “the number of two-parent nuclear families is in decline,” especially among the urban poor where they “have become a rarity.” Moreover, the degree to which individualism is valued in the United States means that “neither interdependent family support nor community support is reliable.” (Toxic Charity, p. 122)
All of these statements about the poor in the developing world are, to a greater or lesser extent, true. They are also interrelated. As Abhijit Banerjee and Esther Duflo point out, huge percentages of urban and rural poor run businesses. In their eighteen country data set, they found that more than 40 percent of the urban poor ran a non-agricultural business and up to 98 percent of the rural poor – depending on the country – ran a farm. Among the farmers, a substantial number also ran a non-agricultural businesses. The main form of employment outside of these businesses and farms is casual labor, where a person takes a job for a few days – a lucky person might land a job that lasts a few weeks or even months – and then must secure another job. (Poor Economics, p. 135)
Importantly, these businesses are often small and unprofitable. For example, Banerjee and Duflo found that the average monthly profit of a small business in Hyderabad, after paying rent but not counting unpaid labor by household members, was the equivalent of $115 American or enough to pay one family member about $2 per day American. (p. 214)1
All of these people face unimaginable levels of risk. Agricultural wages vary tremendously from year to year even during normal times, and a drought or other natural disaster can be catastrophic in terms of earnings and purchasing power. And these shifts among agricultural workers have effects throughout the poor economy. (p. 136) Beyond the vagaries of weather and the market, the poor also face personal risks: a theft or illness that would be an inconvenience for a middle-class American can be impossible to recover from. In response to this risk, the poor may try to work more during times when wages are low (a move which may actually make things worse), diversify their number of occupations (p. 141-142) and manage risk through village or neighborhood level social networks (p. 144).
When Banerjee and Duflo asked the poor what they wanted, they found two important things. First, many of the poor in developing countries do not want to be entrepreneurs. Rather, starting one’s own business is an unstable means of survival that one takes on because there are no other options. (p. 233-234) Second, many of the poor want good, stable jobs, which often means jobs in factories or in the government. (p. 227) While Banerjee and Duflo are not confident in the transformative power of microlending (p. 234), they do recognize that such stable jobs really can change lives and lift people out of poverty (p. 227).
A few points must be made here:
First, at least one of the causes of the virtues Lupton sees in the developing world is poverty itself. He must recognize this at some level, as he laments the existence of the welfare system that – according to him – erodes the work ethic of the poor and creates dependence.
Second, and following directly from the first point, Lupton is effectively suggesting that the problem with the American poor is that they aren’t poor enough. If only we would lower the degree to which the poor receive assistance from the state so that they would have no choice but to develop the sort of work ethic, entrepreneurial spirit and community networks which he finds amenable to microloans!
Third, if poor Americans are anything like the poor in developing countries, they have no particular desire to be entrepreneurs. Rather, they would like reliable and stable employment in jobs that have the power to lift them out of poverty. This is, as Banerjee and Duflo point out, unlikely to come from microloans. Rather, we could create those jobs by encouraging existing businesses to move into, and creating government jobs in, poor areas.
Fourth, and something I don’t want to spend a lot of time on here, all of Lupton’s critiques rely on tired stereotypes of poor people in America: that they have no desire to work, that they have no stable social networks, etc. Let it suffice to say that there is a lot of variation in how poor people in America live and that while there are undoubtably lazy poor people in the United States – just as there are in developing countries – it is more often the case that it is incredibly hard work to be poor and survive.
In the end, Lupton’s characterization of why microlending wouldn’t work in America sounds like little more than a rehearsal of basic politically conservative talking points of poor Americans: access to welfare erodes the work ethic and crushes the entrepreneurial spirit; if we reduce that, people will find ways to work their way out of poverty. Lupton, of course, adds a piece from the playbook of cultural conservatives: we must also work to strengthen the family. Of course, some of these new entrepreneurs might have difficulty securing start up capital, but that problem can be overcome with loans.
Lupton even manages to embrace the idea of the model minority when he finds the one group in America who might be able to make something of microloans: recent immigrants,
Vietnamese from a fishing culture, for example, know innately how to catch and market seafood. Their families have survived on this activity for generations. With a microloan to purchase a small boat and fishing gear, an extended family will pull together, invest long hours of toil, and carve out a niche in the seafood industry. (Toxic Charity, p. 122)
Ignore the casual racism here. What Lupton is suggesting is that the way out of poverty is for an extended family to take out a loan on a fishing boat and enter the particularly volatile seafood market in competition with industrialized fishing operations. While a particularly industrious and lucky family might manage to make a life following Lupton’s advice, it seems like most would end up in the same position as many business owners in the developing world: working very hard at a job that keeps them in poverty rather than providing a way out. This plan seems more of a method of bringing poor families into the lived ideology of market-based global capitalism than a way of escaping poverty.
And this brings me to Banerjee and Duflo’s final comment on the matter, a comment that I think nicely captures both the power and the problem with microlending:
Microcredit and other ways to help tiny businesses still have an important role to play in the lives of the poor, because these tiny businesses will remain, perhaps for the foreseeable future, the only way many of the poor can manage to survive. But we are kidding ourselves if we think that they can pave the way for a mass exit from poverty. (Poor Economics, p. 234)