Reference no: EM131424786

Opportunity International: Giving the Poor a Working Chance

Billions of people in the world make two dollars a day or less. In fact, a billion people make less than one dollar a day. In such places, a loan of $100 or $200 makes a huge difference. That's where microloans from organizations such as Opportunity International come in. Opportunity International is an organization that grants microloans to people, mostly women, in developing countries so they can invest in a business. Those investments often lead to community growth and employment, and help the owners, themselves, to prosper on a moderate scale. The borrowers must pay back the money with interest—when they do, they can borrow more and keep growing. Opportunity International, unlike some other microlending organizations, also provides a banking function where entrepreneurs can safely put their money. They can also buy some insurance to protect themselves against loss.

Opportunity International helps over a million people in over 28 countries, giving them the opportunity to change their lives for the better. This video introduces you to some of those people, but primarily explains how freedom and a little money can combine to create huge differences in people's lives.

Adam Smith was one of the first people to point out that wealth comes from freedom, the ability to own land, and the ability to keep the profits from what you do on that land. When people try to maximize profits, they have to hire other people to help them do the work. This provides jobs for others and wealth for the entrepreneur. And, like an Invisible Hand, the whole community benefits from the entrepreneurs' desire to earn a profit. In the video, you can see a woman in Uganda who has applied those principles to benefit her family, provide employment, and help her community.

Free market capitalism is the system where people can own their own land and businesses and keep the profits they earn. Such a system demands that: (1) people can own their own property (not a reality in many developing nations); (2) keep the profits from any business they start; (3) compete with other businesses (it is difficult to compete with the government); and (4) work wherever and whenever they want. The key word in capitalism is freedom—freedom of religion, freedom to own land, and freedom to prosper and grow. Opportunity International is making an attempt to show people how freedom plus a few dollars can make a huge difference in an economy.

In a free market economy, price is determined by buyers and sellers negotiating over the price of a good or service. The equilibrium point is the place where buyers and sellers agree to an exchange; it is also called the market price. Without free markets, there is no way of knowing what buyers need and what sellers need to produce. Thus, in command economies, where there is no supply-and-demand mechanism in operation, there can be shortages or surpluses in food, clothing, and other necessities.

Socialism and communism are alternatives to a free market economy. Under such systems, people are more likely to have a bit of equality, but there are fewer incentives to work hard, and entrepreneurs are often lured to countries where they can make more money by working harder. The result is called a brain drain, where the best and the brightest often move to free market countries. There are advantages to socialism and communism, such as free schools, free health care, and free day care, etc. But the taxes are higher, and there is usually less innovation and higher unemployment.

The trend in the world is toward mixed economies where most of the economy is based on free market principles, but the government gets involved in things such as education, health care, and welfare. The United States has been basically a free market economy, but it is clear that there is a movement toward more government involvement. On the other hand, some countries are reducing the role of government in society and moving toward freer markets. Thus the world is moving toward mixed economies.

The United States' government tries to control the money supply through the Federal Reserve and fiscal policy. Fiscal policy has to do with taxes and spending. The less the government spends, the more that is available for businesses to invest. And the lower the tax rates on entrepreneurs, the more they will invest in businesses and the faster the economy will grow.

Opportunity International shows the poorest of the poor how important entrepreneurs, freedom, opportunity, and a little bit of money are to economic growth and prosperity. You are encouraged in this video to participate in helping poor people around the world. You can do this by contributing time and money to organizations like Opportunity International. You can join the Peace Corps or other groups designed to assist less-developed countries.

Questions

1. Why is there a need for organizations like Opportunity International? Can't poor people get loans from banks and other sources?

2. Identify the four major requirements necessary for a free market system to operate.

3. What is the main difference between capitalism and a mixed economy? Which model is used in the United States?