A Nobel Prize well deserved but badly chosen

Carlos Alberto Montaner

  The Economist does not agree with the Swedes' choice of  Muhammad Yunus, founder of the Grameen Bank in Bangladesh, for the Nobel Peace Prize. It is not a question of Mr. Yunus being undeserving of the appreciation of mankind; rather, his work does not have a direct relationship to peace. The bank he created, which was later successfully imitated in dozens of countries, grants microcredits to people who are desperately poor, almost always women who head one-parent households, so they may start small entrepreneurial activities that will enable them to make an honest living and take care of their children. That is commendable, but its relation to violence and war is altogether too tangential.

I agree with The Economist, as I usually do when I read the analyses that appear in its publications. But I would add an important shading: the award Mr. Yunus deserved was the Nobel Prize for Economics. I don't find it wrong that in the past the Nobel panel selected brilliant mathematicians such as Milton Friedman, historians of economics such as Douglass North, or thinkers endowed with a penetrating sociological vision such as Gary Becker -- three of the intellectual giants of the 20th Century -- but sometime the panelists needed to reward a practical and compassionate banker who went beyond academic economics and penetrated the heart of this pseudoscience: how to create wealth for the benefit of the masses. 

I expect Friedrich Hayek, Economics prize winner in 1974, and his teacher, Ludwig von Mises, also would concur. The great mathematics formulations, the statistical curves, the complex equations and the rest of the econometric instruments somehow help take a snapshot of the economy at a given moment, and maybe they're useful to explain trends and predict (very timidly) possible evolutions, but that intense academic activity has little to do with the creation of wealth.What's important there is human action, the intelligent and unique eye of someone who sees an opportunity to satisfy a need or propitiate a demand and, in quest of his own benefit, creates for that purpose a product or a service. That's why Mr. Yunus deserves the Nobel Prize for Economics. What good are one thousand brilliant economists who graduated from Harvard and Chicago, or the best economics model proposed by the World Bank, if there are no agents willing to create wealth with their enterprises, be they microscopic, medium-sized or large..

Furthermore, with his ideas Mr. Yunus has benefited not only millions of microentrepreneurs throughout the world by granting them credit. He has benefited all of us, because when a family is rescued from misery and becomes a producer of wealth, it is simultaneously transformed into a consumer of goods and services generated by other economic agents. The woman who, with a loan from Grameen Bank in Bangladesh or Mi Banco in Panama (a glorious and remote Central American descendant of Yunus), gave her family an upward push, today consumes footwear and blouses, while her children and grandchildren go to school and exponentially increase the available human capital.

It is almost amazing that the governments and political parties fail to realize that the only way to reduce poverty and create societies dominated by vast middle classes is to stimulate the social, legal and economic conditions so the entrepreneurial fabric can grow incessantly and furiously. There is a truism that should be repeated until everyone understands it: There are no poor or rich countries. Some countries have a thick, varied and efficient entrepreneurial fabric; others lack such fabric. What makes the United States great is General Electric, not the Pentagon and its million bombs. The Pentagon and the world's 100 best universities and hospitals exist in the United States because that country has the world's most efficient and refined entrepreneurial pool, thanks to the institutional and cultural environment that serves as a culture medium. There is no other secret.

Mr. Yunus and his followers work from the same premise, but they do so within the poorest segments of Third World countries or in very marginal sectors of any society. It is a tremendous accomplishment that deserves a Nobel Prize. But it should be for Economics, not Peace.

October 24, 2006

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