Milford Bateman

The Microfinance Illusion

In both developing and transition economies, microfinance has increasingly been positioned as one of the most important poverty reduction and local economic and social development policies. Its appeal is based on the widespread assumption that simply ‘reaching the poor’ with microcredit will automatically establish a sustainable economic and social development trajectory animated by the poor themselves. We reject this view. We argue that while the microfinance model may well generate some positive short run outcomes for a lucky few of the ‘entrepreneurial poor’, the longer run aggregate development outcome very much remains moot. Microfinance may ultimately constitute a new and very powerful institutional barrier to sustainable local economic and social development, and thus also to sustainable poverty reduction. We suggest that the current drive to establish the central role of microfinance in development policy cannot be divorced from its supreme serviceability to the neoliberal/globalisation agenda.

A Post-Washington Consensus Approach to Local Economic Development in Latin America? An Example from Medellín, Colombia

This paper looks at the radical policies introduced in Medellin, in Colombia, to promote local development and social inclusion. While not always successful, the paper finds that they hold out a useful foundation for further reforms and measures to build local economic development success and social inclusion.

The Rise and Fall of Muhammad Yunus and the Microcredit Model

This paper looks at the microcredit model made famous by Dr. Muhammad Yunus and explains the key reasons why it has failed as a poverty reduction and local development instrument. It also briefly analyses some of the reactions to this failure by the microcredit industry and why many microcredit supporters nevertheless still stand behind the model in spite of its failure.

Financing Local Economic Development: In Search of the Optimal Local Financial System

This paper looks at the financing of local economic development and what history says are the best models. It compares the success of more interventionist local financial models to more recent but unsuccessful neoliberal-inspired local financial models, such as microfinance.

The Informalisation of the BiH Economy and the Role of the Microfinance Model

This paper looks at the progress with the microfinance model in post-conflict Bosnia. It analyses why the evidence clearly indicates that has begun to fail as a development model and the international development community has made a major policy mistake in promoting it. It analyses some of the reasons why microfinance was considered so important to Bosnia.

South Africa's Post-Apartheid Microcredit Experiment: Moving from State-Enforced to Market- Enforced Exploitation

The international donor community arrived in post-apartheid South Africa in the early 1990s to restructure the economy along neoliberal lines. One of the most important of the interventions it promoted was microcredit, which was widely seen as one of the principal self-help solutions to the exceptionally high levels of unemployment and poverty that prevailed in the Black South African community. In spite of an early ‘boom-to-bust’ episode in the early 2000s and worrying evidence it was actually further impoverishing far more Black South Africans than it was actually helping escape from poverty and unemployment, the microcredit model did not lose its international support: if anything, this support was expanded as the international development community desperately sought to ensure the survival of the microcredit model and therefore also the centrality of self-help and individual entrepreneurship as the only way out of poverty for the poor. This article shows how and why the microcredit model was supported so strongly by the international development community and South African financial community in spite of its manifestly calamitous impact on Black South African community. Overall, I conclude, microcredit can be viewed as South Africas own sub-prime-style disaster which, like the original US version, has mainly served to benefit a tiny financial elite working within and around the microcredit sector, whilst simultaneously destroying many of the most important pillars of the economy and society.

Cooperative Enterprise Development as a Key Aspect in Rebuilding Solidarity-Driven Local Economies in the Aftermath of Thirty Years of Destructive Local Neoliberalism

With global neoliberal capitalism coming within a hair’s breadth of entirely collapsing in late 2008, and with many resigned to the fact that there is a lot more deprivation, pain and humiliation to come, the search for a far more stable, equitable,dignified, environmentally sustainable and democratic/participative economic model is now more urgent than ever for humanity. This paper is about the construction of the economic model that embodies all of these important aspirations – the solidarity economy model – and the central role that cooperative enterprises will play in this important endeavor. I argue here that the key practical task involved in promoting cooperative enterprises involves ‘getting the local institutions right’. I maintain that the optimal way to promote the solidarity economy is through the adoption of a ‘local developmental state’ (LDS) approach, an approach that has achieved much more success around the globe than many analysts are aware, and which in future can and should be directed towards building the solidarity economy model from the bottom-up through a strategic and determined focus upon cooperative enterprise development.

Local Finance for Sustainable Local Enterprise Development: The Role of International Development Assistance in Identifying and Promoting Best Practice in a Post-Neoliberal World

One of the central claims of the new generation of neoliberal economists that emerged in the 1960s, especially in the USA, was that market-driven private sector financial institutions were by far the most effective at intermediating capital into the most productive uses (Friedman, 1962; McKinnon, 1973: Shaw, 1973). Thanks to newly elected neoliberal-oriented governments in the USA and UK in the early 1980s, this academic viewpoint was soon embedded in global financial policy. The result was that a new form of ‘financialized’ capitalism came into existence (Epstein, 2005). However, ‘financialization’ turned out to be one of the major disasters of neoliberalism because very many financial institutions changed to become very destructive indeed: they no longer operated to help generate new wealth for all through rising productivity, but increasingly operated simply to redistribute existing wealth into the hands of a narrow investment and financial elite. A hugely risky, economically destructive and inequality-driving dynamic was catalyzed into existence (Harvey, 2004; Galbraith, 2014; Piketty, 2014). This paper extends the analysis of the impact of ‘financialization’ to focus on the local financial system that emerged in the neoliberal era, with the geographical focus on the global south. The paper goes on to identify the core requirements of a post-neoliberal ‘best/better practice’ model of ‘developmental’ local finance for local enterprise development. It centrally argues that there is an urgent need (once more) to ensure that scarce financial resources are locally intermediated into the ‘right’ enterprises that have defined productivity-enhancing and development-driving characteristics related to scale, technology, innovation, high skills, vertical and horizontal connections, employee participation, and the ability to develop new organizational routines and recombine assets in order to locate more productive and cooperative ways of working (Reinert, 2007; see also Bateman, 2013b).Using the many examples of successful local financial systems that have emerged since 1945, especially the case of China, the paper concludes that only by urgently reinventing and restructuring local finance as a ‘developmental’ project will it be possible to begin to address the significant damage created by forty years of local neoliberalism.

Sustainable, Equitable and Decent Job Creation in South Africa: The Crucial Role of the ‘Local Developmental State’

There is a growing consensus that the historical evidence shows that development and growth require the impetus provided by a functioning developmental state. Originally conceived through East Asian examples (Japan, South Korea and Taiwan) as a ‘top-down’ intervention undertaken by a pilot Ministry, state development bank or development agency, this paper points out that much of the argument in favor of the developmental state has actually overlooked the very important role and functioning of local state institutions. This paper points out that there exists a ‘local developmental state’ model that has worked very successfully alongside the institutions of the ‘top-down’ development state, has sometimes overshadowed the central state institutions in promoting sustainable development, and has sometimes even been forced to work in opposition to the central state but has nevertheless been very successful. Especially in view of major changes in markets, technologies and cultures associated with the emergence of Post-Fordist development in the 1980s, the argument is made that the local developmental state increasingly provides one of the best possible institutional interventions for development and growth involving sub-national governments. The paper examines what role the local developmental state might play in promoting development and ‘decent work’ creation in todays South Africa, where the post-apartheid model of development and employment creation foisted upon the South African government of Nelson Mandela in 1994 by the World Bank, US government and others, centrally involving microfinance and the expansion of the informal sector, has manifestly failed. With poverty, unemployment and inequality now significantly higher than even under apartheid, there is a mountain to climb for policy-makers, but a focus on ‘the local’ and building the institutions of the local developmental state might be one of the proximate solutions.

The Zombie-Like Persistence of Failed Local Neoliberalism: The Case of UNDP's Local Economic Development Agency (LEDA) Network in Latin America

This paper examines the effectiveness of the Local Economic Development Agency (LEDA) model of institutional support for local economic development (LED), a model of LED that became very popular in the 1990’s as the neoliberal political project began its global ascendancy. The paper draws upon rich primary data from Latin America, and much secondary data from many other countries, to demonstrate that the LEDA model has been an almost wholly ineffective instrument through which to promote LED, if it has in fact not seriously compromised the LED operations of those communities in which has been established. The LEDA concept has almost no evidence to support the widespread claims that it has improved the LED function in developing countries. The next question then obviously begged is, Why then were so many international donor agencies, notably UNDP, willing to support the LEDA model, and for so long, if it was in fact a manifestly ineffective LED institution? The answer to this question, it is argued, is primarily to be found in the politics and ideology of the LEDAs, which reflect core neoliberal imperatives – that all development institutions must be private sector-led and financially self-sustainable. The manifestly ineffective LEDAs were therefore tolerated, and evidence of their ineffectiveness suppressed, because the LEDAs were the reflection of key neoliberal imperatives.