Saturday, September 8, 2012

GRAMEEN BANK TAKEOVER : Property rights, liberty in danger

While  delivering  a  speech  in  Oslo, Norway, on  10 Dec 2006  Muhammad  Yunus, who invented microcredit  and  founded  Grameen  Bank said, “Nine  elected  representatives  of  the  seven  million  borrowers – cum owners  of  Grameen  Bank  have  accompanied  me  all  the  way  to  Oslo to  receive  the  prize. I  express  thanks  on  their  behalf  to  the  Norwegian  Nobel  Committee for  choosing  Grameen  Bank  for  this  year’s  Nobel  Peace  Prize. By   giving  their  institution  the  most  prestigious  prize  in  the  world, you    gave  them  unparalleled  honour. Thanks  to  your  prize, nine  proud  women  from  the  villages  of   Bangladesh  are at  the ceremony  today  as Nobel laureates giving  an  altogether  new  meaning  to  the  Nobel  Peace  Prize.”

Six years after that on 23  August the government of Bangladesh, which  neither  travelled  to  Oslo nor  was mentioned anywhere, issued  a  notification  to  constitute  a  search  committee  to  prepare  a  panel  for  the  government  for  appointing  a  managing  director of  its  choice  for  the bank. Sheikh  Hasina’s  cabinet  had  approved  on  2 August, an amendment to the Grameen  Bank Ordinance ,1983 assuming all powers to appoint the managing  director  to  monitor  a  privately owned enterprise.

Now  8.4 million  underprivileged own the bank, mostly women, holding  97%  shares, with  the  government  retaining barely  3% of  the total  shares. On  August  2, the  government  arbitrarily  decided  to nationalize the private property of the poor women  entrepreneurs  much in the same way as the Sheikh Mujib government   nationalized the private properties  during  the  years  between  1972  and  1975.

On 23 August Dr. Muhammad Yunus issued a statement: “This  day  will  go  down  as  a  black  day  in  the  history  of  our  nation. Our government has obliterated the unique characteristics – one of which is the bank being owned and run by women – which made the institution universally lauded and a Nobel Prize winner. Thanks to the amendment the institution has been rendered into another cookie-cutter public organization. I cannot bear the sorrow.”

Although the Grameen Bank take-over evokes sorrow it is not simply a matter of sentiment or emotion, but a hard practical question involving individual liberty and property rights which has  to be answered by ripe political sense and wisdom.

“The political liberty of the subject,” says Montesquieu, “is a tranquillity of  mind arising  from  the  opinion each  person  has  of  his  safety. In order to have  this  liberty, it is requisite that the  government  be  so  constituted  as  one  man  need  not  be  afraid  of  another.” According  to  him: “When  the  legislative  and  executive  powers  are  united  in  the  same  person, or in  the  same  body  of  magistrates, there can be no liberty; because apprehensions may  arise, lest the same monarch or senate  should  enact tyrannical  laws to  execute  them  in  a  tyrannical  manner.”

“Again, there is no liberty,” he  says, “if  the judiciary  power be  not  separated  from  the legislative and  executive ….There  would  be  an  end of everything, were the same man or the same body, whether of  the nobles or of  the people, to exercise those three powers, that of  enacting  laws, that of executing the public resolutions, and of trying  the causes of individuals.”

Indeed, there has been an end of everything in Bangladesh after  the arbitrary adoption of the August  2  amendment of the Grameen  Bank Ordinance.

In Bangladesh, the government is not democratic. It is autocratic or at its best is aristocratic. Here the legislative and executive powers are united in one person who is the prime minister and the leader of the House in the parliament. The same person appoints the judges. There is  no  liberty  here  in  Bangladesh  because  the  same  person  can  adopt  an  ordinance  or  amend  it  when  the  parliament  is not  in  session and execute it in tyrannical manner. Here the life and liberty of the people is exposed to arbitrary control. The government is despotic. It can arrogate to itself whatever power or authority it pleases.

The August 2 amendment carried out arbitrarily by a cabinet decision has violated the property rights of citizens. Ordinarily property rights are cherished as personal benefits by those fortunate enough to own a substantial amount. But  property  rights  are  best  assessed  in  terms  of  their  economic  effects  on  the  well- being of  the  population  at  large. And  the  property  rights  of  the  women  of Grameen Bank  have  been  rightly   assessed  by  the  international  community in terms of their economic effects on the well-being of  the people at large. And how  do  the  people    with    property  rights  differ from the  people  without  it ? One  example  was  the  erstwhile  Soviet Union  where  individuals did  not   own  agricultural  produce  as their private  property. Here  the  monitoring  of  the  produce  handling  was  done   by  the  Communist  Party  members  who  were  honeycombed  throughout  the  society  to  report  on  dereliction  of  duty and  violation  of  law.  But  the  widespread  corruption and inefficiency found even under Stalinist  totalitarianism suggest  the  total   failure  of  governmental  monitoring as compared  to  automatic  self-monitoring  by  the property  owners  themselves.

In a democratic country where free-market system prevails, property  rights  create  self-monitoring  which  is  more  effective  and  less costly  than  third-party  monitoring. Normally animals not owned privately are threatened with extinction. Inanimate things  like air and water  are  easily  polluted  because  they  are  not  owned   by  anybody. Similar  neglect  of  property  not  owned  privately  occurred  in  the  Soviet  Union. Bangladesh, unfortunately  , now  is  following  the  footsteps  of  the  Soviet  Union, abruptly  taking  over  management of privately owned enterprises just for the hake of it.

Through  the  Grameen  Bank  the  poor  entrepreneurs  changed  their  economic conditions using  their own  savings  or  borrowings. The powerful people in the government do not like it. Leaders of the  party - in - power  have already declared that the Grameen Bank is  a  public property like  the  state  owned  enterprises  which  means  the  8.4 million  women who  own  97%  of  shares  in  the  bank  will  be  dispossessed of their property. The apprehension of Dr. Muhammad Yunus that the bank “has been rendered into another cookie-cutter public organization” is not unfounded. The take – over bid is  intended to  keep out  people  of  average  or  low  income   from  the  production-distribution  chain.

It is incentives which matter in the Grameen Bank and in this  institution  property   rights  are  assessed economically  in  terms  of  the  incentives . The powerful  incentives  created  by  a  profit –and  - loss economy depend on the profits  being  private  property. When  government  owned  enterprises  in the  erstwhile  Soviet  Union  made  profits, those  profits  were  not  their  private  property  and  could  be  taken  by  government  for  whatever  purposes  it  chose  to  spend  it. Soviet  economists  pointed  out  the  adverse  effects  of   this  on  incentives: “We  are  taking  away  from  those  who  work  well  in    order  to  keep  afloat  those  who  do  nothing.”

Job crisis is not only the cause of  poverty  in  the Third World   but  also  the  cause  of the  double –dip  recession  in  the  developed  countries. Entrepreneurship could be the answer to the global need for employment opportunities. At  the  moment  there  is  an  uneven  playing field that makes the choice to become an entrepreneur. Dr.  Muhammad  Yunus  has  matched  this  uneven  playing  field  by  his  microcredit tool. In an article published  in the  September  13 , 2010 issue Tim  Kane drew  the  attention  of  the  U.S  policy  makers in  the  following  words:

“All  human  beings  are  entrepreneurs”, says  Nobel  Peace  Prize  winner Muhammad Yunus, an economist who kicked off  microcredit  in  his  native  Bangladesh. Well, Washington: Are you listening?

To Yunus every individual is an entrepreneur. In the process of    implementation of the concept he has turned 8.4 million low-income women into self-employed, self-starter entrepreneurs giving a boost to the country’s economic development.

Knowledge has now been recognized as a factor of production. In fact there is much that the ruling party hierarchy do not know that   knowledge  is  vital  to  the  functioning  of  an  enterprise. One may ask, “How much knowledge does it need to fry a hamburger?” And the answer, certainly, is best known to McDonald’s.

 One may ask again, “How much knowledge does it need to run the Grameen Bank? The  answer to  this  question  is  best  known  to  the  man  who  took  the  nine  village  women  of  Bangladesh  to  Oslo in  2006 to  receive  the  Nobel  Prize.  Anybody  who  studies  the  history  of  the Grameen  Bank  will  be  astonished  at  the  amount  of  detailed  knowledge, insights, organizational and technological innovation, financial  improvisation, all-out  efforts, and desperate sacrifices  that went into creating an enormous economic and social  transformation. In  both  the  cases, it  was  the  knowledge  that  was  built  up  over  the  years – the human capital – which ultimately  attracted  the  financial  capital  to  make  ideas  become  a  reality. This  fact  alone  is  sufficient  to  answer  the  question  why  Dr. Muhammad  Yunus  is  indispensable  for  the  Grameen  Bank. He is irreplaceable. No  sensible  man  in  his  right  mind  will  ever  think  of  taking  the  place  of  Yunus, the  icon whose  microcredit  is  a  modern  marvel. The whole nation is proud of him.

BY :  Abu Hena.  (The author is a  former  Member  of  Parliament )