Giulio Terzi on Microfinance: The Mind Boggles

Just read this utter nonsense emerging from the European Union:

Microfinance is one of the instruments for “addressing inertia and social fragility, which is essential in safeguarding the quality of democracies” in order to prevent “material distress from encouraging populist deviation and citizen regression”. Minister Giulio Terzi thus explained the anti-crisis role of microcredit and microfinance, as he spoke at the second edition of the “Microfinance and European Union policies Forum” organized by the National Microcredit Agency.

“People with ideas and projects they cannot realise as a result of not having access to credit need concrete answers; those who have lost their jobs and are having a hard time finding another; immigrants who risk social exclusion”, Terzi explained, underscoring how microfinance “expands business opportunities as it encouraged citizens’ participation in economic life”. Moreover, it “can also help contain public spending by contributing to the reduction of social buffers, the cost of which rises in times of recession”.

Italy is one of three EU countries, along with France and Romania, that have adopted microcredit and microfinance laws”, while the foreign ministry and the national microcredit agency have developed synergies at international level to promote microfinance through “public and private partnerships” and are also watching the youth of the Arab Spring countries, where microcredit “can play a role that generates preventive diplomacy and support for fragile democratic transitions”, Terzi concluded.

I have no idea what planet this guy is on. If I was producing a comical piece of deliberate gibberish I would have been hard-pressed to generate quite as much nonsense in so short a space. Microfinance generating business opportunities? Sure, this is what the electorate wants to hear. Particularly in the case of immigration, the electorate may be a little more forgiving if these folk are going to arrive and set up the next Apple on the back of a $100 loan, work hard, generate jobs, pay taxes and help restore Italy to the dizzying heights of the Roman Empire. What’s the evidence from 30 years of microfinance in the developing world? The vast majority of microfinance is spent on consumption and there is no impact on poverty. A point that Terzi has managed to entirely overlook. The fact that those few microfinance clients that do actually invest in some income-generating business tend to be trinket vendors, as Bateman so concisely puts it, is another detail that Terzi has ignored. Do we want millions of unemployed people across Europe squatting on street corners selling tomatoes?

Presumably Terzi has become enamoured with the romanticized images of colourfully dressed African women perched behind sewing machines or indigenous Bolivian women leading goats along mountain paths. Now we are to have herders clogging the streets of Paris as a solution to unemployment? Micro sweat-shops will spring up in the slums of Naples to compete head on with the Asian textile industry.

As for “safeguarding the quality of democracies”, Terzi is presumably entirely unaware of the microfinance crises that have had catastrophic impact upon countries such as Pakistan, Nicaragua, Morocco, India, Bolivia and Bosnia. The latter, at least, Mr. Terzi may have heard of given it’s proximity to Italy.

Here we are in 2013 with the Minister of Foreign Affairs, of Italy of all countries, telling us that what we need to get out of the current mess is more debt to more people. I initially thought this was a joke, but in fact this jester is completely serious, despite the inane grin on his own Facebook Page. Of course he’s laughing – how can you say this nonsense with a straight face? No doubt he wants the tax-payer to stump up funds for his ridiculous plans. But then, in what must be a rare moment of clarity for Mr. Terzi, he reveals the real answer: this would mean the Italian government could cut back on public spending and welfare (he politely phrases this as “contain public spending by contributing to the reduction of social buffers”). Of course, Italy is totally bankrupt thanks to chronic over-indebtedness and an incompetent government. Terzi is clearly within the latter category, and clearly stuck for answers on how to address the former.

I know, he must have thought, given that no conscious human being on the planet would lend to the Italian government, why not try and dupe these microfinance morons into lending directly to the poor people? That way we don’t have to bother satisfying even the most rudimentary functions of a government, and leave the entire thing to the microfinance sector, and when these poor people default, who cares, it’s not us that have to pick up the tab or face another ratings downgrade. Call it a public-private partnership and the electorate will lap it up.

Or was the thought that rushed through his little mind even simpler: Why not simply replace “unemployment benefit” with “unemployment loans”?

Just as one may consider that Terzi could reduce his intellectual integrity no further, he strikes on another genius idea. Maybe microfinance could facilitate “fragile democratic transitions”. This is urgently needed in Italy. Perhaps they could transition from a joke government to an actual functioning government. Bunga Bunga parties is not government, Mr. Terzi, and over-indebting your poor citizens is not development. Do some research next time you open your mouth in public.

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4 Responses to Giulio Terzi on Microfinance: The Mind Boggles

  1. Phil says:

    Hugh, Thanks for catching this. Agree with all your remarks. I just want to point out in defense of Mr. Terzi that what he says isn’t really any dumber than the rest. However, this is just one more sign from major EU politicians about the role they intend for microfinance in managing the crisis (compare Bolivia as early as the 1980s):

    “We, your politicians, have messed up your country, and you are now out of a job while we slash the social security you depend upon, so that we can balance our budget while not raising taxes on the rich or anything. We understand you’re pissed off, so how about a little loan so you can get to work selling something, instead of being on the streets demonstrating against us because you’re angry; hey, we’ll even respectfully call you an entrepreneur! Never mind the bollocks…”

    • Hello Phil, yes, I agree, the spin is ludicrous. What is astonishing is that this court jester actually admits his strategy. I went to his Facebook page and posted the article, with a silly comment mentionig that he should get a job for which he is qualified, or some such remark. It was swiftly removed. Standing back from the microfinance farce for a moment, it is hard to see how Europe is going to get out of its current crisis when it is clear that leading politicians in one of the most troubled countries on the continenet cannot read, think or string together a logically consistent sentence. They can’t even lie convincingly.

  2. In an amusing turn of events, I have tried posting on the esteemed minister’s Facebook page. It was removed in minutes. Milford Bateman just posted the following:

    Dear Mr Terzi

    I saw your February 1st piece on the Ministry website looking at the potential role of microcredit in Europe today – ‘Terzi: micro finance to prevent social fragility’.

    I’m afraid this is really a most spectacularly wrong understanding of the role and potential of microcredit, and your economic advisors really should get their act together. With demand falling in every depression/recession-hit country in the EU, and so with large numbers of microenterprises failing because of the lack of clients, how is it that setting up new microenterprises will find anyone to buy their simple goods and services? The answer is they don’t: in conditions of declining demand, most new microenterprise simply displace existing microenterprises that are also struggling to survive in today’s horrendous economic conditions. Alternatively, a new microenterprise will simply fail after a short period of operation, which then runs the risk that the hapless owner is plunged into even deeper poverty than before trying to repay a microloan on a micro-business that went bad. Your economic advisors might have first checked out my posting in the Social Europe Journal:

    http://www.social-europe.eu/2012/05/creating-jobs-in-recession-hit-communities-in-europe-why-microcredit-will-not-help/

    Milford Bateman

    Milford J. B. Bateman PhD
    Freelance consultant on local economic development

    Bateman’s post lasted a little under 10 minutes before it was swiftly removed. It appears the minister is a little hesitant to engage in any discussion on this, and is probably regretting writing such gibberish. Let’s hope he can string his thoughts together a little more wisely when it comes to rescuing Italy from economic collapse.

    I thought politicians were meant to be held accountable for the actions? Isn’t the the point of democracy? If you enjoy the benefits of public office, and by all accounts there are quite a few in Italy, doesn’t this come with an element of accountability?

    Anyway, Terzi’s Facebook page is:

    http://www.facebook.com/MinistroGiulioTerzi

    His Twitter handle is @GiulioTerzi

    Slightly worryingly he has nearly 37.000 followers, and is following only 15. Could this alone explain why he is an elected Italian politician with very little knowledge of the real world?

  3. Pingback: Terzi to the Rescue » Confessions of a Microfinance Heretic | Blog

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