When You Earn $1.00 a day, $1.80 is Progress

Reading the Sunday NY Times on Cindy's patio. The languid July heat makes for a mellow surroundings, as I read Daniel Gross's engaging column about microlending in the third world. Instead of lobbying for more government foreign aid, we should invest in and support businesses that are self-sustaining and replicable.

The column entitled "Fighting Poverty with $2 a day Jobs," posits that "the creation of low-wage factories, as well as the establishment of lending institutions that charge rates that many Americans would deem usurious, "is the key to making a real difference in poverty stricken nations. "As you increase the number of factories, demanding labor, wages will be driven up, and eventually such factories will not be sweatshops." That's a tough sell for philanthropy-minded westerners. But before the women who labor now for $1.80 a day in a Tanzanian bed net factory, most earned $1.00 a day as street vendors and domestic workers.

Gross makes a case as well for creating new banks to pressure interest rates down, as occurred in Bolivia. In 1992, Banco Sol began lending small amounts--today six regulated banks compete for this business, and the rates paid by poor Bolivians has fallen to 22%, from 80% in the 1980s.