Measurement: Alternative Economics
Salvadoran Enterprises For Women: An Alternative Economic Model
Salvadoran Enterprises for Women enables women to work and support their families without being beholden to global capitalism and the prescriptions of the Washington Consensus. Here’s how . . .
The end of El Salvador's Civil War in 1992, marked the same year as the launching of a new experiment in global capitalism designed by what is known in economic and political circles as the Washington Consensus, including Wall Street, Washington, and multilateral financial institutions. The experiment encouraged governments of emerging markets (formerly known as developing nations) to join the global market system by opening their economies to foreign capital, selling public assets, and pegging currencies to the U.S. dollar with the promise that global capitalism would lift them out of poverty.
Today we see the impact of the experiment. Within a few years of nearly every nation joining the Washington Consensus, a financial meltdown occurred, requiring governments to borrow ever greater sums of money to make debt payments at ever higher interest rates with stricter conditions. Monetary authorities, including the Federal Reserve and the U.S. Treasury, often stepped in to bail out investors for fear that one nation's financial collapse would spread to other nations. Thus, an asymmetry emerged whereby leading private and institutional investors reaped tremendous profits while governments in emerging markets were left heavily indebted.
A critical turning point was in December of 2001, when Argentina—fearing a financial meltdown—walked away from $132 billion in debt, marking the largest default in history. Rather than assuming additional loans from the IMF to make the quarterly loan payment, Argentina stopped making payments all together and asked for time to reconsider its options. Without the influx of foreign capital, Argentines suffered from fiscal austerity, unemployment, and growing poverty for several years. In 2005, the government offered to pay 32 cents on every dollar of debt, noting that this was more than Enron shareholders received after the energy trader filed bankruptcy in 2001. Argentina slowly regained its footing and posted annual growth rates exceeding eight percent in 2004, 2005 and 2006.
Other nations are taking note. Several Latin American, Asian, and Eastern European nations are stockpiling dollars to avert future crises. Some countries are bypassing traditional lending institutions in favor of bilateral or regional partnerships. Indeed, the IMF's outstanding credit dropped from $104 billion in 2003 to $28 billion in 2006, reflecting an increasing reluctance to do business with the Washington Consensus under the old rules of the game.
This phenomena makes the bankers nervous. Having lost high yielding loan portfolios with governments in emerging markets, new financial technologies are being marketed directly to poor people. The generic term for the newest financial technologies is microfinance, which includes banking services (e.g., savings accounts, ATM cards, cellphone banking), loans (e.g., home mortgages, small business, consumer), and insurance policies (e.g., life, health, home). Once again, the promise is that by joining the global marketplace, the poor will be lifted out of poverty.
The new microfinance initiative holds the potential to be yet another way to exploit poor and vulnerable people in order to make a profit. Microfinance is lucrative. Bankers charge between 15 and 35 percent interest plus fees on small loans and credit cards. In some cases microfinancial institutions require those who are poor to also purchase an insurance policy to cover the note in the event that the borrower dies. Wall Street is now a microfinance creditor because microfinance is profitable.
While commercial banking may prove to be a sound financial technology for savvy individuals, easy credit may also lead to financial ruin for others. As noted in a recent article by economist and board member, Dr. Patrice Flynn, "we may be seeing a new form of green washing or "charity washing" in the making, whereby commercial bankers can use microfinance as a selling point to command pricing premiums for their products and investments."
Salvadoran Enterprises for Women provides an alternative to this kind of 21st century global capitalism for women with low-incomes who have little or no education, collateral, capital, or access to training required to start a small business. We are not interested in turning poor women into international consumers and debtors. We do not promote involuntary migration to the U.S. in search of a minimum wage job. We do not encourage young Salvadorans to leave their home towns to find factory jobs in El Salvador that pay $173.78 a month for full-time employment.
Rather, Salvadoran Enterprises for Women provides seed money that enables women to set- up small businesses in their communities. SEW grants do not create future financial obligations and hence, give participants an immediate head start toward economic independence. We strive to alleviate poverty and despair by empowering women through solidarity with other women. We have found a way to give women a chance to earn an honest living while maintaining their dignity and family ties.
Salvadoran Enterprises for Women is part of a worldwide effort to provide alternatives to global capitalism, especially for people whose right of birth makes day-to-day living a struggle.