Eamonn Butler has written a new book called The Best Book on the Market. It is aimed at the general public, in much the same way as Freakonomics and The Undercover Economist. Yesterday I did a podcast interview with Eamonn about his book: you can listen to it here.
BusinessWeek hails microfinance
Dr Eamonn Butler on the Adam Smith Institute Blog discusses microfinance:
I learn from the Globalisation Institute’s excellent daily news digest that BusinessWeek has spotlighted the rise of microcredit. Quite right: it can be a powerful agent for economic development.
Recently a friend gave me a short paper on an interesting example, the Grameen Bank in Bangladesh, which (it explained) is owned by its borrowers, the overwhelming majority of whom are poor women. It takes no donor funds, but almost always turns a profit.
Small loans are available for housing, for education, and for micro-enterprises. For example, the Bank has provided loans to 90,00 women to buy mobile phones, which the borrowers then charge other people to use: an easily-managed business for a poor woman in Bangladesh. The Bank proudly claims that over half its customers have been helped to rise above the poverty line through its programmes.
All this happens without written loan agreements – most clients are illiterate anyway. But the Bank insists that borrowers should belong in five-member groups, which perhaps places some social pressure on them to use the money wisely. If someone cannot repay a loan, the Bank says its focus is to help them, rather than pursue them as ‘defaulters’. There is an insurance plan so that loans are repaid on the death of a borrower.
The Bank even tries to help beggars out of poverty by providing interest-free loans to them. And it teaches borrowers the basics of self-reliance and sustainability: hygiene, cultivation, having small families and ensuring that children are educated.
Microcredit takes many forms, but it seems to work because it is built entirely around the needs of those who actually use it. And if it can provide poorer people with the small capital they need to educate their families or start micro-enterprises that will lift them out of poverty, that must be a good thing.
Stephen Byers: the man who killed Rover
Eamonn Butler on the Adam Smith Institute Blog writes:
Five years ago, businessman Jon Moulton came up with a plan to save at least some of Britain’s ailing car-maker. About 6,000 Rover workers would lose their jobs – though with generous severance payments of up to £50,000. But the 2,000 jobs on MG sports cars would be saved. Beaten by Germany’s high quality and Japan’s low costs, Britain would at last bow out of volume carmaking and concentrate on the niche production it did so well. A rational strategy. But the unions hated the job cuts. So politics intervened, with Industry Secretary Stephen Byers supporting another plan to give the group to four executives in a new consortium called Phoenix, who promised to save it.
Daft, of course. Rover still couldn’t compete. Sales slid, cash dried up. And by the time Chancellor Gordon Brown had finished pillaging the pensions industry, the MG Rover group had a £67m black hole its company pension scheme too.
The Pheonix four managed to pocket £30m. But once again, Rover workers face losing their jobs – only without the generous severance pay, and with very shaky pension rights. MG might just survive, though greatly weakened. For Rover workers and taxpayers, Byers’s plan has turned out to be a stinker.
And this from the politician who also killed Railtrack, the privatized rail infrastructure company. Let’s hope no more bodies are hidden under the patio of this corporate serial killer.