Thomas Dichter, a returned Peace Corps volunteer and development consultant to USAID and the World Bank, has written what Alex aptly calls a “provocative and controversial essay…in which he claims that microcredit is not nearly as good a tool as it's made out to be, and that what the world's poorest most need are good governance, clearer laws, less corruption and more development.” NextBillion readers will find Dichter’s essay, Hype and Hope: The Worrisome State of the Microcredit Movement, interesting in part because he calls for increased attention to mesofinance, an area we’ve written about before. You may recall that mesofinance is the oft-unserved gap between small microfinance (<$5000) and commercial finance (>$500,000). Dichter accuses MFIs of leaving promising entrepreneurs behind because “they are not poor enough”:

Indeed, in part because of what has been aptly called "microfinance evangelism," the prospect of significant returns from microcredit made available to solid enterprises has become less likely. This is because those who can really leverage a small loan -somewhere between poor and well-off - who have already got a genuine business going against all odds are often left out of microcredit basically because they are not poor enough. (My emphasis)

Dichter concludes:

I was just finishing college in the late 90s when I first heard of the phrase ‘race to the bottom’. A few activist friends of mine had arranged a screening of Global Village or Global Pillage, an award-winning documentary that examined the harsh consequences of unchecked globalization. In spite of its underlying optimistic message about community organizing and empowerment, it painted a bleak picture of the private sector’s unquenchable thirst for profit and market domination.

“Today's global economy lets corporations pit workers and communities against each other to see who will provide the lowest wages, most abusable workers, cheapest environmental costs, and biggest subsidies for corporations. The result: a race to the bottom in which conditions for all tend to fall toward the poorest and most desperate.”

At the time there seemed to be a certain inevitability to it all, and part of me couldn’t help but hope that corporations sped up their efforts, because the sooner they hit the bottom, the sooner they could start moving back towards the top. But then a funny thing happened on the way to the bottom - a number of companies began to realize that the quest for continued profitability and growth in the next century might actually lie at the top!