R.P. Barr

The Monster We Made

[reference: http://apnews.myway.com/article/20120224/D9T3O0MO0.html]

How did American private equity firms cause dozens of people in India to commit suicide?  To be fair, it wasn’t entirely their fault.  Like the roadhouse on the highway is not responsible for the accidents caused by drunks leaving their parking lot.

Here is what happened.  In the 1970’s, Bangladesh was, and probably still is, the most impoverished country on the planet.  A Bangladeshi economist named  Muhammed Yunus had an idea.  Working from the principle that poor people cannot get credit, he would—from his own pocket—make small loans to poor women (because men are more likely to waste the money).  When they paid back the money, he would roll it over into loans to others.  He had a 100% repayment rate and Yunus formed the Grameen Bank.  Each village would have a board of five women who would decide which applications to approve.  The business grew and Yunus received a Nobel Prize for his creation.  So far, so good.  Bangladeshis helping Bangladeshis.

An Indian alumnus of Tufts University, Yale and the University of Chicago, Vikram Akula took the concept to his own country in 1997, and founded his own microcredit organization, Swayam Krishi Sangam (SKS Microfinance), Sanskrit for "self-help society."  Like Grameen, it prospered, doing well by doing good.  So good that in 2005, SKS evolved into a for-profit organization.  His American education paid off.  And, like a good American businessman, in 2010 Akula took SKS public.

If you’ve followed the trends in American business you can already see how this story would end in dozens of suicides.  If not, well, Akula didn’t see it either.

According to the AP article, “Exuberant investors oversubscribed the $350 million offering nearly 14 times. The stock surged more than 10 percent its first day. The company handed out 21,000 watches to employees in celebration.”

Boston-based Sandstone Capital had made a major investment in 2008 and probably saw a public offering as the best way to see a profit.  It was soon joined by Sequoia Capital from Menlo Park, California.  This partnership became the largest shareholder in India’s SKS Microfinance.  Vikram Akula resigned as chief executive, but stayed on as chairman of the board.

Across South Asia, thousands of people kill themselves every year because of insurmountable debt and poverty.  Grameen and SKS were created to provide a way out.  But, the management philosophies of investment firms in the air-conditioned comfort of Menlo Park and Boston, believe that growing the numbers in corporate ledgers is the goal of all business.

SKS began to market loans to impoverished Indians without concern for their ability to repay.  Agents were given incentive prizes that could exceed 10 times their annual wage.  SKS had 6.8 million borrowers in a 100,000 villages, and loaned $3.2 billion. SKS began bundling loans and moving them off their books by selling them to investors.  Does this pattern sound familiar?

 Then, when the borrowers defaulted, agents began a system of horrific harrassment: seizing household utensils, ordering mothers to sell their daughters into prostitution, telling other loan applicants that they could not get loans until this named person repaid his/her loan, setting up demonstrations in front of borrower’s homes.  Women began drinking pesticides and drowning themselves: one in a pond, another in a well.  44 recorded cases so far.

In November 2011, Vikram Akula resigned from SKS Microfinance.

You might argue that business never was about morality, but it used to be more local, and more focused on the idea that getting ahead means providing products that fill a need and responsible service.  If a merchant was perceived as abusing his neighbors, he faced the opprobrium of the community.  In today’s world of long-distance capitalism, there are no neighbors, and those who are victimized often have no recourse.  The only answer is for government regulators to keep businesses honest and responsible.  Unions also have a roll in counter-balancing greed-soaked schemes.  But, the bean-counters are winning, profitting from failure, and women are drinking pesticide.

 

A Word about Honor

We often hear the word “honor” in connection with the military. To be sure honor can be used to describe the behavior of a great many service men and women. But, honor is not looking sharp in a uniform, and it doesn’t come from being shot at, or killing the enemy. Honor involves performing the mission with respect toward others, doing what needs to be done without betraying the ideals one is protecting--especially when it is hard to do. The honor of the U.S. Military as an institution was tarnished with the verdicts against the Marines who massacred 24 civilians in Haditha. A roadside bomb blew up a Humvee. Tragic. Did the bombers live in the nearby houses? There is no reason to believe that they did—or didn’t. It is unlikely that the bombers would try to drive past the Marines in a taxi in the aftermath. Perhaps passersby needed to be searched for weapons. That is prudent. Murder is not. Five students and the driver were summarily shot to death. This was not in the heat of battle, and it served no military purpose other than to inspire recruits for the other side. The Marines claim there was small arms fire from the neighborhood. No Marines were hit, so one wonders who the target was. The squad “cleared” the houses by throwing in grenades and spraying the rooms with machine gun fire. Many of the dead: old men, women and children, were shot in the chest and head. Wounds—from what I read--not likely to have been incurred by indiscriminate fire. There was no honor in those murders, even though we can all understand the feelings that motivated them. On the other hand, the cowardice of the reviewing officers who released the killers without charges is inexcusable.

The desecration of fallen enemies has a long, dishonorable history. Severed heads were once posted on pikes. Crucified bodies left where they died as warnings. Vlad the Impaler skewered an entire army on upright stakes and left them as symbols of his wrath. On a more personal level, fingers, ears, noses, tongues etc. have been cut from the dead. Recently, corpses have been dragged through the streets. Urinating on the dead is rather tame by comparison, but still dishonorable.

Men in combat have more in common with the people shooting at them than they do with their own families and neighbors back home. Respect for the enemy does not mean granting them leniency, it means acknowledging the hardship and grit and fear that are involved in battle. And, if you think of Afghanistan, consider that the Taliban and their friends do not have air cover, or med-evac capability or body armor. If you think that roadside bombs are sneaky and cowardly, weigh them against bombs that fall out of the sky. The Taliban regime was as evil and destructive of basic human rights as any in history, but their fighters walk miles over desolate terrane, hide in caves, and attack troops who have them out-numbered and out-gunned. —Well, they may have to be shot, but their bodies deserve a minimal level of respect. That’s honorable.