Thursday, May 20, 2010

Discussion among development experts

Is Microfinance A Schumpeterian Dead End? via
Chris Blattman What we talk about when we talk about development. One excerpt:
"It’s an interesting idea, microfinance as a Schumpeterian dead end. It strikes me that the claim imposes a pretty high burden of evidence though. Economic developments often takes circuitous routes. I recall Jane Jacobs’s thumbnail history of Detroit, I think in The Economy of Cities (I can’t check my bookshelf because I am travelling). It began as a tiny copper mining town; then moved into flour milling; then, using its accumulated expertise in machinery, boat repair (it being on the shore, connected to America’s internal maritime transport network); then boat manufacturer; then, in time, almost inevitably, the hub of the American auto industry. Only when it became a single-industry town, seemingly extraordinarily successful, did it economically stagnate. So the question is, how can you tell with reasonable confidence whether a new industry represents a dead end? Several big financial institutions today—Bank of America, Metropolitan Life, the Prudential (in the U.K. and its namesake in the U.S.)—started serving the poor, arguably the microfinance institutions of their day, It’s not clear to me that work-around-for-deviation-from-the-ideal is a useful criterion."
Lant Pritchett seems to be the one who had doubts and he clarifies his questions in the comments. Earlier post on Lant Pritchett here.

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