Mehdi Hasan speaks to Muhammad Yunus, economist, on behavioral economics and his Nobel Prize win

“I said: I can create a kind of business based on selflessness”.

You are famous for pioneering microfinance. Can you explain what that is simply?
It is credit given to the poorest people, without collateral, to create some income-generating activity . . . a small loan going to a poor woman.

What inspired you to set up the microfinance-led Grameen Bank?
I saw a loan shark in the village and I got so upset, because he took control of people's lives. I wanted to know how much money was involved; when my list was complete, there were 42 people on that list [and the] total money borrowed was $27. So I said: "My God, for this money people have to suffer so much." I went to see if the bank will lend the money. The bank said: "No way, poor people are not creditworthy. They will eat up your money." I said, "No, you will see." I offered myself as a guarantor.

Were you surprised to win the Nobel Peace Prize in 2006?
For 15 years there was speculation that I would get the prize and it never happened. Nobody in Bangladesh was thinking this is the year! It was an explosion of happiness for the whole country . . . people were distributing sweets in the streets, dancing in the streets.

You're an economist by training. Did the financial crash of 2008 tell you we need a new form of capitalism - and if so, what is it?
Not only the crash itself; 2008 was also the year of food crashes. Two governments fell. There were demonstrations on the streets of several countries. So this was also the year of oil crashes. Oil prices shot through the ceiling of $150 per barrel. Many crises are coming now - you have the debt crisis, you have employment crises.

I have been screaming from then until now: don't try to find [instant] solutions, go to the fundamentals. The economy that we created, the theoreticians that created it, misinterpreted human beings. They assumed the purpose of all human beings was to make money. The invisible hand reigns, and all this stuff.

Do you think it's the economists who failed?
Yes, of course. It's a conceptual failure, the misinterpretation of human beings.

So you sympathise with those who work in behavioural economics?
Human beings are much bigger than money-making. There is the expression of selfishness and there is the expression of selflessness - but economists or theoreticians never touched that part. They said: "Go and become a philanthropist." I said, "No, I can do that in the business world, create a different kind of business - a business based on selflessness."

Can microfinance be a for-profit enterprise, or should it always be not for profit?
Grameen Bank is a for-profit organisation, so I cannot say it's not for profit. It should be a business, so that you cover your cost and have some surplus so that you don't sink. It has to be self-sustainable. You cannot do it as a charity.

Are you a supporter of the Occupy movement?
Absolutely. It is an anger [that is] everywhere. I feel frustrated. What kind of a system is this? This is the failure of the human civilisation that we have built. Civilisation has given us enormous successes: going to the moon, technology. But then this is the civilisation that took us to debt, environmental crisis, every single crisis. We need a civilisation where we say goodbye to these things. We have to create a society where the word "unemployed" will not be known.

Are you worried that, because the banks haven't been fundamentally reformed, we could see another crash?
Of course - and not the same crash, a worse crash. Every day it is getting worse. You are always looking for Band-Aids because the decision-makers are chief executives and government ministers, looking at the next election. This is the greatest opportunity, when [the system] is not working; that's the time to redesign the whole thing. But you are not looking to redesign, you are looking to give a little push and say: "Oh, it will start again." I said: "No, now is the time that we have to discuss the machine."

Do you think the developing world is being forced to pay the price for the sins of the west?
You became greedy and you created this financial crisis. You turned this into a casino.

You said you wanted to expand the G20 to be a G25. What were the five?
You brought the biggest economies by GDP into the G20. That's fine. But if you do not have the poorest economies, with the smallest GDP per capita, at the table, you'll forget. Out of sight, out of mind. Out of mind, out of policy.

Is or was there a plan?
To make social business known to people and to solve problems.

Do you vote?
Of course.

Are we doomed?
No. Human beings have enormous resilience.

Defining moments

1940 Born in Bathua village, Bangladesh
1961 Gains Master's degree in economics from University of Dhaka, Bangladesh
1965 Moves to US on Fulbright scholarship to study for PhD at Vanderbilt University
1983 Launches pilot of Grameen Bank in Bangladesh, lending small sums to the poorest without collateral
2006 Wins Nobel Peace Prize
2008 Grameen Bank has issued over $7bn to 7.5 million borrowers, it is announced

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

This article first appeared in the 02 January 2012 issue of the New Statesman, And you thought 2011 was bad ...