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Micro-finance: a critique

  • Walter E. Block
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    Purpose – The purpose of this paper is to shed critical light on micro-finance. Design/methodology/approach – This scheme is managed from an economic perspective. Findings – Micro-finance comes to us as a left wing attack on the free enterprise system; as such, it ought to be opposed by all freedom lovers, at least in its present format. Other baggage weighing it down is, if not absolute fraud, then, what might well be considered at least serious chicanery. A further criticism is the cult-like behavior now surrounding it. However, is micro-finance per se necessarily fraudulent? Can it only be favored by critics of laissez faire capitalism? What of micro-finance shorn of all such encumbrances? Should it then be supported? No. Even the Platonic Ideal of micro-finance has serious difficulties. This claim is a matter of prudential judgment, not praxeology. But, even a pure-as-the-driven-snow variety of this scheme still violates the economic concepts of specialization and division of labor, an appreciation of the infant industry fallacy, and several other basic building blocks of the dismal science. There are other better ways to “cure poverty” than this misbegotten scheme. This one, paradoxically, exacerbates impoverishment by placing investment resources in hands less capable of making it grow than would otherwise be the case. Practical implications – It would be unwise to invest in or support this scheme. Social implications – Society should instead rely upon free enterprise banking, the occupy movement to the contrary notwithstanding. Originality/value – It takes a minority position on this very popular institution. JEL classification: D14, G2, R51.

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    Article provided by Emerald Group Publishing in its journal Humanomics: The International Journal of Systems and Ethics.

    Volume (Year): 28 (2012)
    Issue (Month): 2 (May)
    Pages: 92-117

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    Handle: RePEc:eme:humpps:v:28:y:2012:i:2:p:92-117
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