Week of June 21, 2019

The Concentration Camp Edition

1. Concentration Camps: The United States is operating concentration camps again, and one soon will be at the site of one of the Japanese-American camps operated in the 1940s. The conditions are inhumane and unconscionable, both for children and for adults,and getting worse. People are dying. Babies are being denied medical care. Last week, I joked about a scream of helpless rage about financial literacy programs. This week, I'm not joking, and I don't know what else to do, except to do my best to not look away.

2. Philanthropy and Social Investment (and Microfinance): What would it look like if US philanthropy en masse decided the reappearance of concentration camps in the United States was a crisis that deserved all hands and funds on deck? I don't know, but I don't think historians would view that decision unkindly.
There is something going on in American philanthropy--for the first time since 1986, charitable giving did not track GDP, falling 1.7% last year. More specifically, giving by individuals fell 3.4% and for the first time (since the data has been tracked) made up less than 70% of total contributions. Here's the researchers' analysis of the new data. And here's Ben Soskis' Twitter thread on the important questions the decline in giving raises about giving culture and inequality. Several years ago I speculated about whether Giving Tuesday's hidden theory of change was to shore up American giving culture, and that question has new relevance.
On the social investment front, there's a new book out that I can recommend, A Research Agenda for Financial Inclusion and Microfinance. If you're wondering about the connection to social investment, Jonathan and I have the opening chapter, "The Challenge of Social Investment Through the Lens of Microfinance." Keeping on that theme, Beisland, Ndaki and Mersland have a new paper on agency costs for non-profit and for-profit microfinance firms, finding that CEO power determines whether residual losses are higher or lower in non-profit firms. Governance matters in social investment!
If you're one of those CEOs (or just any aspiring social entrepreneur), you may be interested in Alex Counts', founder of the Grameen Foundation, new book, Changing the World Without Losing Your Mind. Here's an interview with Alex about the book and the evolution of microfinance (which I'm including even though he says a couple of nice things about me).

3. Digital Finance, Part I: Libra: The news of digital finance this week was dominated by the announcement of Libra, Facebook's proposed...well, depending on what you read, either Facebook's "me too" derivative payments service masquerading as crypto, or Facebook's attempt to take over the world and replace all governments. Here's Vox's explainer.
My favorite immediate response was from Erik Hinton, which I have to quote in full: "God, grant me the confidence of Facebook, a company that has managed to lose most of the data that it's either stolen or extorted and has repeatedly been caught lying or miscounting its own analytics, deciding to create a global financial system."
As that response hints, there are a lot of questions. Here's a start at some of them and some answers about who is participating and why. Here are Tyler Cowen's questions about how exactly Libra will work as a currency without an underpinning banking and regulatory system. Here's a view that Facebook's main target in the near-term is remittances, but that it really does have ambitions to replace national currencies. One of the things I find most interesting about the whole thing is that this is a like Facebook building a giant sign to the world's governments saying: "Come seize all our data and regulate us heavily!" (and governments are indeed reading the sign!) I would guess that there will be approximately .1 seconds between the first cross-border transfer and an accusation of money laundering or terrorist financing. I was having a conversation this week about the main reason Amazon hasn't started consumer lending: it would never do something to invite regulator access to its data.
Here's a piece on the good and bad of Libra which I highlight because it's an odd mix of complete ignorance about how money works and evolved (did you know that before bitcoin there had never been money that wasn't controlled by a government?), with some actual engagement on the dangers of private digital monetary systems.

4. Evidence-Based Policy (and Information Interventions and FinLit Redux): I never intended for the faiV to become a regular discussion of financial literacy and information interventions, but here we are. In one of the most amazing tests I've seen of whether evidence can affect policy, Jonas Hjort, Diana Moreira, Gautam Rao and Juan Francisco Santini work with 2000+ Brazilian mayors and find that they are a) willing to pay to learn the results of impact evaluations, and b) change their beliefs, and c) are willing to implement new policies. The only thing missing is a test of whether they would be willing to shut down an existing program (say, financial literacy in schools). Score another one for David Evans' point from last week that information interventions do sometimes change behavior.
And here's a test of a financial literacy program in Colombia that delivered content through tablets to women recipients of a CCT program, with some social interactions built in. Attanasio, et. al. find that the program boosts not only knowledge but actual practices, with poorer, less educated and more rural women benefiting more. But still not impact on access to and use of formal services.

5. Financial Exclusion: This is so great it deserves its own item: a "visual essay" from the American Historical Review on how access to capital in 1800's New Orleans required getting yellow fever--and surviving. And how that channel led to many new migrants attempting to catch yellow fever as quickly as possible, despite the 50% chance it would kill them. Of course, that only applied to whites. While survival was a symbol of fitness for whites, blacks' relatively higher rates of survival was evidence that they were destined to be slave laborers in the fields.

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