Monday, January 20, 2014

François Brugère, Microfinance, the Capabilities Approach to the human doing: will the middle class benefit? Lecture notes on the first few chapters of "La Politique de l'individu".



Microfinance started with providing credit to enable poor people to start their own enterprises. The experience with microcredit shows that it may lead to empowerment, but that it's difficult to prove impact. Different studies do claim positive impact, but consistent results across studies are difficult to find. Researchers are usually cautious in their interpretations and do not find significant impact.

If microcredit does not create positive impact, it does create temporary palliatives and provide an opportunity. However, the poor may not be in a position to make use of these opportunities since they lack complementary resources such as human and social capital. Moreover, short-term palliatives may lead to long-term stress as the poor get over-indebted easily: their debt servicing capacity being limited by their poverty.

One approach to make up for the deficiency of microcredit has been to offer other financial products such as savings, insurance and transfers. Elsewhere, I have often argued that the poor entrepreneurs need equity capital more than anything else.

Another approach has been the capabilities approach. This approach says that the poor need capacity-building services. These take the form of mentoring and guiding entrepreneurs. The French word "accompaniement" is far richer as it includes providing company to end the entrepreneur's isolation. All in all, these approaches require the mentor to share his human capital and social capital to help the poor entrepreneur succeed, without taking over the agency. The responsibility for action should remain with the individual, so that he can appreciate his own success.

If this kind of coaching can help the poor entrepreneur, can it not help everyone? Why should coaching be the privilege of the poor? We know that in the private sector, many managers have mentors and coaches. These mentors and coaches help keep the individual on the path to his goals. Fabienne Brugère, a French philosopher is now asking for the right to coaching (she calls it "soutien" or support) as a third basic right. The first basic right, for her, is property rights. The second basic right is social security rights. She now wants to include individualized mentoring as the third right.

The problem with a purely economic approach, neoliberalism, is that mounting inequalities lead to the collapse of the system: once someone has all the property it is evident that no one else will have buying power. Therefore, property sharing is required. Similarly, social security certainly helps to break the fall, but it may keep people in poverty traps. I have argued (probably orally, but check my "microfinance and suicides" paper) that financial mechanisms of social security coming through the State are not sufficient because they lack a human element. In the older systems still prevalent in poorer countries, social security is provided by the family. As the State takes over this function, people certainly become more independent and confident, but they also become more isolated. This is explicitly recognized by Fabienne Brugère, as she argues for a personalized human aid. This would have the benefit of placing humanity back in the system and provided recognition as people perform better.

This individualized attention is not to be reserved for the poor, but should be available to anyone who needs it; including those who may fear losing their jobs.  She even hints it would go further: it should be made available to anyone who feels he is underperforming and feels that he needs guidance to go further. I agree that asking for help requires a lot of humility, but it may be easier to ask for this if it is given as a right.
Undoubtedly, this will mean a bigger role for the State which serves the socialist cause and her desire to bring the individual back into the political system. The question is who pays? Certainly, the middle classes will benefit if it is a universal right. However, if they are the ones who are going to pay, and if only the "winners" are going to win more as a result, the back of the camel may break from this fresh set of rights.

The question then is whether the rights have to be provided within the market? Or should it be the responsibility of each person to provide such a service to his neighbor? Again, some people undoubtedly do this better than others, enjoy providing guidance more than others, and perhaps some do not have the time to do this. Therefore, we would come back to providing social mentoring as a paid public service.
If free treatment through psychiatrists and psychology can be provided to those who are suffering from mental ills, the provision of coaching can be considered one step away: it will be provided so that we function better mentally, physically, and professionally. For the moment, it may be useful if it is labor intensive. But it is possible that people will soon write software which may become more expert than many human coaches. The humanity would then again have to be found elsewhere.

Perhaps the main criticism of this capabilities approach is that it is centered on welfare being a function of doing rather than being. This is strange for the French translation of welfare is "bien-être". Thus welfare requires being well.

Of course, the spiritually advanced "being" may not need social recognition and may be able to differentiate from action rightly performed and action rightly renounced.

Undoubtedly, this blog would have been better if I had the time to read the rest of her short book, but the weekend is over….

Arvind Ashta

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