by MILFORD BATEMAN
[Muhammad Yunus’s] most famous claim was that the next generation would have to go to a ‘poverty museum’ to find out what all the fuss was about.
Yunus was dramatically wrong. A key dynamic that he missed was the generally fixed (or at best upward crawling) level of local demand for the very simple outputs associated with microenterprises. When microfinance-funded enterprises are set up, they tend simply to displace other tiny businesses without funding, meaning there is generally no net impact on poverty. Local demand is effectively shared out among the total number of microenterprises. Pre-existing microenterprises typically experience falling demand, leading to falling margins, wages and profits, and so also pressure to dismiss any employees.
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