The Nobel Peace Prize vs. Peace and Prosperity

Last Friday, the Grameen Bank and its founder, Bangladeshi banker and economist Muhammad Yunus, were jointly awarded the Nobel Peace Prize “for their efforts to create economic and social development from below.” The Nobel Peace Prize committee is certainly right in asserting that lasting peace requires the breaking out of poverty of large population groups. The devastating effects of foreign development aid in the past decades have also demonstrated the need for economic development from below. Is the Grameen Bank thus an important contribution to this kind of development and to the end of poverty and war?

The causes for war and poverty can in most cases be traced back to state activities. The case of Bangladesh is no exception. The Bangladesh Liberation War, which led to the birth of Bangladesh in 1971, claimed up to three million civilian casualties according to some estimates. It is the direct result of the British rule in India. After India gained independence, Muslim-majority areas in the east and west of the Indian subcontinent were joined in a separate country, Pakistan. The Eastern zone was subsequently treated much worse by the central government than the Western zone. This finally resulted in the Bangladesh Liberation War. During the decade following the creation of Bangladesh, the country experienced a series of bloody coups and counter-coups.

Today, some of the main obstacles to economic growth in Bangladesh include inefficient state-owned enterprises, slow implementation of economic reforms, political infighting and corruption. Furthermore, Bangladeshi agriculture is also threatened by intellectual property laws on seeds, granting benefits to transnational corporations at the expense of local farmers.

This clearly shows that the State cannot be trusted to defend peace and prosperity. However, the Grameen Bank is, contrary to popular belief, an institution which relies heavily on state subsidies and its methods are not as much of an example of development from below as one would hope.

The Grameen Bank received its first major loan of $3.4 million from the UN International Fund for Agricultural Development. Since then, it has received grants and subsidized loans from the governments of Canada, Germany, Norway, and Sweden and from the IMF and the World Bank.

The high repayment rates by the debtors are achieved through methods which could be called coercive. The borrowers are grouped into cells of five. Future loans, which are much higher than the first one, are only granted if each member of the cell has repaid his or her first loan. This creates an incentive for each member of the cell to make sure everyone pays back their loans — how they do this is up to them. The repayment rates for second-time borrowers are much lower even though employees of the Grameen Bank monitor all borrowers door-to-door on a weekly basis.

In addition to these unusual methods, the borrowers have to chant the “Sixteen Decisions” during parades, which express the worldview of the Grameen Bank. Decision 16 reads as follows: “We shall take part in all social activities collectively.” Other Decisions emphasize the attempt of the Grameen Bank to emancipate Bangladeshi women from the traditionally patriarchal structures. This seeming emancipation and financial independence come at the price, though, of dependency on the Grameen Bank, which turns out to be less of a bank and more of a cult.

Thus, Muhammad Yunus’ Grameen Bank is not so much an example of economic and social development from below as of control from above, subsidized by various states and institutions.

Real economic and social development from below can only take place when people are allowed full liberty, when fully voluntary market transactions can replace control from above. This, of course, requires the abolition of the State as one of the main causes of poverty brought about by its open aggression against its citizens and more subtle forms of aggression such as its relations with transnational corporations. Only when the State’s central monopoly of force is abolished can humanity live in peace and prosperity.