Printer-friendly versionSend by emailPDF version

cc Alarmed at the fondness for neoliberal solutions to the global financial crisis among the Nobel Prize Winners Muhammad Yunus and Joseph Stiglitz, Patrick Bond suspects that the two economists are simply aiding rather than challenging the global capitalist system. With Yunus and Stiglitz both set to give talks in Johannesburg this week, Bond fears that civil society's calls for social and environmental justice will continue to remain overlooked.

A couple of Nobel prize-winning economists are giving major talks in Johannesburg this week. Many in civil society hope the visits by two of global capitalism's best-known critics can pull local economic policy debates further leftwards, towards meeting social needs, not market dogmas and corporate profitability.

Without wanting to prejudge, I just don't think such expectations will be fulfilled. The ideas for which Muhammad Yunus and Joseph Stiglitz won the Nobel Peace Prize and the Economics Prize in 2006 and 2001 respectively are simply not sufficient for these tumultuous times.

The Nelson Mandela Foundation is honouring Grameen Bank founder and microcredit guru Yunus on Saturday with the annual Mandela Lecture, while Columbia University Professor Stiglitz will be giving two speeches at Wits University on Wednesday and Friday.

The way both have addressed the global economic meltdown leaves a great deal to be desired. Yunus is most complicated because his micro-finance strategy dovetails with the most rabid model of neoliberal capitalism, especially after his 1998 autobiography made clear the Bangladeshi's maniacal policy agenda.

As Yunus put it, 'I believe that "government", as we know it today, should pull out of most things except for law enforcement and justice, national defense and foreign policy, and let the private sector, a "Grameenized private sector", a social-consciousness-driven private sector, take over their other functions.'

Over the past three decades, across the world, many governments pulled back from regulating financial markets, especially in the United States under the Reagan, Bush I, Clinton and Bush II administrations.

One might expect that the resulting financial crisis would change Yunus's tune. After all, the catalysing event a couple of years ago was the rising default rate on a rash of 'sub-prime mortgage' loans given to low-income US borrowers.

Earlier the Yunus philosophy was that 'credit is a fundamental human right', not just a privilege for those with access to bank savings accounts and formal employment that permits stop-order repayments.

Reflect on this, and you quickly realise how ridiculous, inappropriate and dangerous it is to compare bank credit with crucial political and civil liberties, healthcare, water, nutrition, education, environment, housing and the other rights guaranteed in constitutions such as South Africa's.

Yet the biography of Yunus supplied by his local speaking agent – – still makes reference to 'credit as a fundamental human right' in its opening sentence.

Apparently backing away from this posture four months ago, Yunus told India's MicroFinance Focus magazine the opposite: 'If somebody wants to do microcredit – fine. I wouldn't say this is something everybody should have.'

Indeed, the predatory way that credit was introduced to vulnerable US communities in recent years means Yunus now must distinguish his Grameen Bank strategy of 'real' microcredit from microcredit 'which has a different motivation'.

'Whenever something gets popular,' he told the Indian magazine, 'there are people who take advantage of that and misuse it.'

To be sure, Yunus also unveiled a more radical edge in his interview, interpreting the crisis in the following terms: 'The root causes are the wrong structure, the capitalism structure we have. We have to redesign the structure we are operating in. Wrong, unsustainable lifestyle.'

Fair enough. But in the next breath Yunus is back in the neoliberal box, arguing that state microfinance 'regulation should be promotional, a cheerleader'.

For a man whose strategy of lending to women in group-borrowing schemes garnered such praise, but who when times were tough allowed interest rates to soar and his loan collectors to rip the tin roofs off the women's houses as a means of taking collateral when they defaulted, a robust consumer watchdog is needed, certainly not a cheerleader.

Similar contradictions characterise Stiglitz's views. His first Wits lecture promises to address 'the role that orthodox economists played in the creation of the crisis and the implications for the teaching of the discipline of economics in universities.'

This sounds very welcome. Stiglitz won the Nobel prize for his new 'information-theoretic economics', especially the critique of the flawed market assumption of perfect information by buyers and sellers.

He coined the phrase 'post-Washington Consensus' in 1998 to suggest the need to drop the International Monetary Fund (IMF) and World Bank orthodoxy of the day, and in 2002 he even called for the IMF to be shut down.

Yet Stiglitz's own ideology is based upon fixing capitalist markets, not transcending them. As he explained six months ago, 'No one can be sure what will work. But long-standing economic principles can help guide us. Incentives matter.'

The same reversion to orthodoxy was witnessed in his leadership of the United Nations Commission of Experts on Reforms of the International Monetary and Financial System, which met last week in New York.

Ultimately, Stiglitz's work disappointed those with more ambitious reforms in mind. There was no mention of capital- and exchange-controls to grant countries insulation from disastrous global financial flows.

There were no suggestions for converting banks' nationalisation from 'lemon socialism' into genuine public utilities. The Jubilee movement's projects of debt cancellation, 'odious debts' and 'reparations' were not mentioned.

There were no detailed strategies to address ecological debt and the financing implications of climate crisis. There was no attempt at commodity price regulation, in spite of disastrous swinging.

Instead Stiglitz's commission endorsed the tired, dubious Doha Agenda of the World Trade Organisation (WTO), as well as a greater role for the much maligned IMF.

The commission proposed a UN Global Economic Council with two dozen members with a similar status to the UN Security Council, which might potentially lock in the power of the G20 elites – including South Africa – rather than democratising the world economy.

On the other hand, the commission also proposed a new currency and reserve system that would suffer relatively less veto power from the wealthy countries, plus a 1 per cent of GDP (gross domestic product) levy to redistribute from North to South.

But overall Stiglitz failed to grasp the opportunity of de-legitimising the world elites who are desperately trying to return to business-as-usual. A much greater challenge to prevailing international economic relations will be needed to recover from the depression.

During a week in which the G8 leadership is meeting in Italy with the intent of sabotaging prospects for a workable climate change treaty in Copenhagen, the world needs genuine voices of clarity on behalf of social and environmental justice.

Maybe Yunus and Stiglitz can rise to the occasion. My guess though is that they will remain trapped inside the box of their training as damn economists.

* Patrick Bond is the director of the Centre for Civil Society at the University of KwaZulu-Natal.
* Please send comments to [email protected] or comment online at