William Jaffe's Essays on Walras Book

While building my schedule for next year, my goal was to take as few economics courses as possible. After a year of studying economics, I can't help but feel that economic theories are far from real life problems (and yeah okay, I know that real life economics is different from what we study in uni but still). Economics seems miles away from real life. 

Mohammad Yunus, a Bengali Economics professor has the exact same feeling when he realizes his lectures are a world away from the poverty of Bangladesh. He walks around a village near his university and sees that the poor people of the village work incredibly hard and yet remain poor due to their dependence on others. Many of them are stuck in a poverty trap. He realizes that their lack of capital stops them from being able to earn more money and leave poverty. 

And so, Yunus decides to create a bank that focuses on lending money to the poor. The idea is that through a relatively small amount of money, poor people can use their existing skills and break out of the poverty trap. With some capital, they can begin a business and start earning money independently. 

This was an eye opening book for me. We read Elizabeth Anderson's work this year and discussed the way huge capitalist firms aren't liberal. When Adam Smith was writing about that pin factory, he wasn't talking about Amazon or Google. However, he very much was talking about a Bengali woman making fabric. By giving these people a loan, Yunus effectively liberates them. It's totally the division of labor, the professional specialization that Adam Smith speaks of.

And it's fascinating because who would have thought the answer to poverty could be "everyone should be a freelancer!". I'm used to thinking about self-employment as a risky move that can leave you in a very shaky financial situation but Yunus shows that for the poor of Bangladesh (and other places), self-employment allows them to use their skills and potential in the best way. 

It also brings a question to the table. Elizabeth Anderson writes about the process that the West went through in order to switch from small scale liberalism to large scale capitalism. If Yunus' bank continues, will the same happen in Bangladesh? Is large scale capitalism a natural continuation of a business? A Bengali woman opens a fabric store, if she's successful, she will have to hire more people and well, with enough luck, she'll become a massive business. Is this what we want?

The alternative of working for someone like that also isn't great (as Elizabeth Anderson shows), are these our only options? When alleviating poverty, are we trying to replicate the success of the West or is there room to consider alternative economic systems? 

There's a moment where Yunus says economics sees the world as employees and employers but simply ignores the self-employed. This is a problem because places like Bangladesh actually have a lot of poor people who are self-employed but lack capital to truly make a decent profit. This was another one of those aha moments because our economics focus is so Western. We can't take a theory that works mathematically and attempt to force it onto countries if they don't have the same premises at play. Our solutions have to fit the problems. As a Bengali economist, Yunus is able to make them fit. 

Yunus heavily criticizes programs that attempt to teach the poor new skills. He claims the poor already have all they need in order to succeed. They don't need handouts or long training sessions. By giving them a loan, they are held accountable. It's not charity, they have a stake in returning it. This keeps their dignity and allows them to succeed on their own terms. 

I loved how Yunus describes the importance of organizations that are both for profit and for social improvement. The finance world needs to make room for social enterprises that manage to make a profit but also change the world for the better. It's both. This is something I'd like to remember next year when I start studying Business.  

Man, there's so much that I found inspirational in this book. Yunus' bank was a grassroots initiative. Yunus and his team of students built this alone. Unlike banks chasing for money, Yunus focused on creating a community. My bank hasn't communicated with me in months but here's Yunus and his committed team helping their loaners with everything from education to life skills. 

I loved hearing how this idea worked in Western countries as well. Hearing about the application of it in the USA and in Norway was especially interesting. 

To conclude, I'm still going to avoid Econ courses but I've definitely been more bitter about Econ than it deserves. I want to take these ideas with me because it's just so cool that this bank built a bridge between economic theory and economic practice, that Yunus managed to make banking sound interesting. 

What I'm Taking With Me
- My mental image of banking is pretty much Mary Poppins so I might be wrong about it.
- Yunus seems like such a nice guy, I'm so glad this is working and I hope he continues to make the world a better place.
- I loved learning how they dealt with religious leaders during the establishment of the banks and how the focus is on women. Like heck yeah, it's really changing the entire society.
- Next year when I'll be staring at graphs and crying, I want to remember that economics really can make people's lives better. 
- Can we all be entrepreneurs? What if some people are just bad at managing a business? Is a loan (even a small one) helpful for everyone? 

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"Economics must show that a market economy does not necessarily have to be a playground for "bloodthirsty" capitalists; it can be a challenging field for all good people who want to pilot the world in the right direction."

This book just singlehandedly renewed my faith in economics. Review to come!