The Rich Get Richer, the Poor Get Richer, the New York Times Gets Outraged

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Submitted by Ayn Rand Center on Mon, 2010-04-26 21:29

WASHINGTON--“Look out world: the rich are getting richer by helping the poor get richer,” writes Don Watkins, analyst with the Ayn Rand Center, examining a New York Times article titled “Big Banks Draw Profits From Microloans to Poor.”

microloan recipientAccording to the Times, “Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100 percent or more.” Now critics of these companies are complaining that the reputation of microloans will be “tarnished by new investors seeking profits on the backs of the poor . . . .”

“But profits aren’t made on anyone’s backs,” writes Watkins. “They are made by creating value and are a sign of mutual gain. Companies profit by making us better off (otherwise we would patronize their competitors). Well, microloan companies profit by providing the poor with a service they desperately need at prices they willingly pay.

“No, suggests the Times, those prices aren’t paid willingly: the poor are taking those loans because they are ‘too inexperienced and too harried to understand what they are being charged.’ But the only example the Times can dredge up to illustrate this point is a Mexican entrepreneur who used microloans to successfully expand her t-shirt factory five times over, and who can now pick up the phone and get a fresh infusion of cash for her business within the span of a day. That’s not a scandal--that’s inspiring.

“While the Times treats news of industry profits as a shocking revelation, the only thing shocking is its shock. Why else would companies be willing to brave the vicissitudes of shyster governments and deliver capital to tiny businesses at a moment’s notice but for the profit motive?

“Opponents of microloan companies have an answer to that. The Times quotes economist Muhammad Yunus: ‘Microcredit should be seen as an opportunity to help people get out of poverty in a business way, but not as an opportunity to make money out of poor people.’ Read that sentence again, because what it denounces is viewing the poor as traders rather than charity cases.

“Profit is a benevolent force that creates a harmony of interests among all producers, rich or poor--and any attempt to reduce industry profits can accomplish only one thing: to reduce the poor’s access to capital and prevent microloan companies from reaping the rewards they’ve earned.”

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Don Watkins is an analyst with the Ayn Rand Center for Individual Rights, specializing in free speech issues. His op-eds have appeared in such venues as Investor's Business Daily, Christian Science Monitor, and CNBC.com. Mr. Watkins is also a contributing writer for “The Objective Standard,” a quarterly journal of culture and politics.

To interview Don Watkins and other Ayn Rand Center experts, please contact: media@aynrandcenter.org or call 202-609-7470.

For more information on Objectivism’s unique point of view, go to ARC’s Web site. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of “Atlas Shrugged” and “The Fountainhead.”