Wednesday, October 15th, 2008...3:29 pm
Poverty and financial crisis
Today is blogging action day. All around the world some bloggers give their opnion, thoughts, contribution to fight against poverty. That is the case for my blogging friends Ari Herzog reminds us different public actions against poverty, Kikolani details every way to fight against poverty and Peter Evers who texts with his sponsored child. That is also the case for A-blogs like mashable or Daniel Socco’s. Both of them talk about the bill and melinda gates foundation. When rich people mind about poverty…
Anyway, this not a time for irony. Today, I would like to underline that we are living the most important crisis since a very long time. Many people will loose their job during the following months and poverty will increase a lot. So poverty is, unfortunatly, the topic of the following month maybe years.
An interesting way to think about poverty, is to think about finance with an acurate question since we will have to rebuilt a new financial system, why not associate poverty to the problem? Since the financial system creates poverty, why the new financial system would not reduce poverty. That would make a change.
Some facts :
- The financial crisis leads financial insitutions to bankrupts or nationalisation
- The universal bank model shows more resistances to markets than pure players
- Muhammed Yunus point out that poor people are often better entrepreneur than rich ones just because they know what poverty means.
May be the future financial system should be public and universal in a exented acception I mean from capital finance to microcredit. Afterall finance has always been about allocating resources to people over time…
Am I all wrong ?
3 Comments
October 16th, 2008 at 9:09 am
Interesting view! Banks main role in a capitalist system is indeed allocation of capital. The second role is contributing to the liquidity of the capital market – this role was held mostly by investment banks. The third role that came in the recent decade was to create instruments to spread risks which in turn (in theory) should help banks in their first role – allocating capital.
Since allocating capital efficiently helps nurture growth, indirectly it helps reducing poverty. However, to make poverty reduction a direct (and compulsory) objective of all banks, would reduce their ability to fulfill their first and most important role: efficient allocation of capital.
Microcredit is extremely interesting because it is an efficient way of allocating capital and impacts directly poverty. I doubt that we will see major banks entering massively this market but more and more smaller financial institutions are entering this market to the benefit of all. Now, microcredit is not a magic bullet in the sense that poverty won’t be erased just with this but it allows a segment of the population to benefit from capital markets. It’s already a first step…
The crisis we are leaving imho is a crisis of “complexity”. Products that nobody understood where created and sold on the premise that it allows to spread risks. People just forgot that risk needs to be understood to be assessed…
October 16th, 2008 at 3:13 pm
That is exactly my point. Banks just allocate to wealthy people or company and help them to nurture their growth and their wealth… But not investing on poor people they create two worlds the rich one and the poor ones. May be banks should be forced to allocate a part of the growth they produce with rich ones to the poor ones in order to nurture growth with poor people.
May be it would not eradicate crisis but it may eradicate anger… That is not last but that is not least.
April 15th, 2009 at 2:52 pm
If you ever want to hear a reader’s feedback
, I rate this post for 4/5. Detailed info, but I just have to go to that damn msn to find the missed parts. Thank you, anyway!
Leave a Reply