Readers' Forum

316 Readers' Forum To the Editors: I read with interest Barbara SaIl'sarticle"Trickle Up: A Solutionto ThirdWorldPoverty"in the April 1990 Freeman.WhileI believethat programssuchas TUP do much to improveconditionsfor the poor, I think that TUP and other programs like it fail to addressfundamentalproblemsin the poor'saccessto credit.As a result,they can scarcelybe calleda solu tion to poverty but are at best a palliative.And at worst,by pretendingto solve the problem,they dis tract attention from the real impediments to poor entrepreneurs in the Third World, and delay the implementationof policiesthat would truly rectify the situation. By and large, these programs rely on charitable assistanceto provide credit for the poor. But why don't the poor have accessto domesticcredit? The .answeris to be foundin Hernandode Soto'sresearch in Peru.He has pointedout that the unavailabilityof creditto the poor is related to their lack of accessto the legalsystem.

OneoftherequirementsforacquiringaTUPgrant is that the granteesmustbe able to securethe neces sary governmentapprovalsand licenses.But, what happenswhen it takes 289 days of full-timeeffortto acquiresuch a license?What good is amicro-enter priseloanor grantwhenthe costsofobtainingall the necessary government authorizations in a lawful mannerriseto severaltimesannualpercapitaincome in the poor countries?(Hernandode Sotohas shown this to be the situationfor informalentrepreneursin Peru.) A long lastingand effectiveway of ensuringthat the poor have access to credit is found in removing the legal and institutionalobstaclesplaced in their way by mercantilisteconomicsystems,and by foster ing intermediaryinstitutionsso that they may have accessto the legaland financialsystemson a perma nent basis. GracielaD. Testa,Editor InternationalHealth& Development Washington,D.C. BarbaraSailreplies: GracielaTestahas madesomeveryimportantand positive points concerning the need to reform t~e legal and economicimpedimentsto development~n ThirdWorldcountries.In fact,theseneedswerereIt erated by MelanieS. Tammen,a policyanalystwith the CompetitiveEnterpriseInstitutein Washington, D.C.,in the June editionof Reasonmagazine.

Tammenrefersto Hernando de Soto'spioneering book,The OtherPath,which"explainswhyonlylegal and regulatoryreformswill permanentlyenfrachise Peru's microenterprisers.... " So persuasiveare de Soto'sand others' argumentson the needfor massive reforms in the way Third World countries do busi ness, that even the World Bank is callingfor legal reformsthat would"makeit easierto smallenterpris es with relativelylargefinancialneeds to use formal services." Butcallingfor asignificantchangeinlegalandeco nomicpoliciesthat wouldallowvery poor peopleto compete with the large family monopoliesthat are the beneficiariesof bureaucratic,legal,and regulato ry controlsis one thing-obtaining results that will bringin the littlebitsofmoneynecessaryto getpoor familiesthrough one more day is another. Denying tiny enterprisestheir first chance at self-sufficiency forthe long-rangegoalofchanginghundredsofyears of repressivepoliciesmay be impossiblefor people likethe Leets,directorsoftheTrickleUp Program,to handle.

Instead,I wouldpreferto believethat the pressure of newly successful small entrepreneurs will be greater than any milquetoast reform guidelines imposedby the WorldBank,AID, andotherinterna tional developmentagencies.I seriouslydoubt that large Third World aid corporationswill cease their number one task-that of fundingthe very regimes that deny credit and financialempowermentto the verypoor. The powerof thousandsof self-sufficientfamilies, however, now able to educate their children and employdozens of their relatives,to push for these extremelyimportantreformsshouldnot be underes timated.Likewise,the dismaltrack recordofinterna tional aid organizationsand reform-mindedpoliti cians in Third World countries should not be forgotten. As we have found only too often in this country,the removalof barriersto economicgrowth imposedby governmentis one of the most difficult tasks of a free people. It only becomes possible if those people have the abilityto feed, educate, and shelter themselves. Any assistance toward those ends,such as the TrickleUp Program,will hopefully worktowardthefinalgoalsexpressedso wellby Gra cielaTesta.

Barbara L. SaIl Boise,Idaho 317 A REVIEWER'S NOTEBOOK The Questfor Conununity by John Chamberlain The Questfor Community,subtitled "A Study in the Ethics of Order and Freedom," was written in the 1950sby Robert Nisbet, a professor of sociol ogy at Columbia University. Originally published by the Oxford University Press, it has now become part of the "ICS series in self-governance" pub lished by the Institute for Contemporary Studies (243 Kearny Street, San Francisco, CA 94108,272 pages, $10.95paper). The book is confusing because pluralism, which Nisbet welcomes, is in itself confusing. As George Roche of Hillsdale College has said, we live in a "bewildered society." We come out of a 19th cen tury in which men believed in individualism. They were satisfied to take status from membership in the "intermediate" organizations of the family,the church, the private school, the labor union, the sports club, the dramatic society,and so on. For the rest, they were happy in a world that believed in something called "progress." Community took care of itself.