Epistemic status: I am aggregating talking points and research I have read on my own time over last few years. Likely many errors with memory and thinking. I AM NOT AN EXPERT. Take this as you will. 

For anyone who has donated to charity, I imagine the naysayer must be an unwelcome sight, unseemly as they are discouraging. I imagine most of us would choose to ignore them, and for good reason. The talk of “this won’t change anything, it’s just a drop in the bucket, you’ve failed to account for this issue” ultimately doesn’t help people. Something, the rationalist might reason, is better than nothing, and nothing is what we will get if we decide to listen to the naysayer instead of doing productive work. 

So, why am I deciding to be a naysayer? The answer, which I hope this community would understand, is because I am a rationalist. I have seen a claim (or at least an implied claim) that I believe is false, and I further believe that sticking with this belief will have a myriad of negative effects. The claim in question is, of course, that foreign/charity aid to 3rd world countries ‘works’ in the sense that it would function as a ‘solution’ for global extreme poverty. 

Before we begin, some 

Definitions and caveats: 

Foreign/charity aid (in this post, I will be using aid in short, as a general term to refer to both) describes any initiative or transfer of cash, undertaken by individuals, organizations, or governments to help impoverished people. 

Extreme poverty will be defined by the world bank’s standard of living on less than roughly 2 dollars a day, with the caveat that this is correlated with purchasing power and living conditions. A war refugee with money they can’t spend is no less impoverished than the farmer who makes no money but lives off subsistence. 

Finally, (and probably most contentiously), I will describe a ‘solution’ to this problem as a world where those in poverty can reasonably live in prosperous conditions self sufficiently. If we simply hook up every individual in need to an aid system, the problem is not ‘solved’. The reason for this, I hope, is obvious. For any solution to be considered a true solution it must be sustainable. A patient who takes ever increasing amounts of painkillers has not ‘solved’ their heart condition as much as delayed his inevitable doctor visit. In much the same way, a solution to poverty must entail a solution to the root causes of poverty. 

If anyone takes issue with these definitions, please feel free to say so. But in the meantime let’s move forward. 

Chase for the Holy Grail

Few discoveries have been greeted with so much enthusiasm as plans to end poverty, and yet, most such breakthroughs often disappoint our hopes. To date, over half a billion people still remain in poverty, despite the multiple NGOs, countless governmental projects, and billions of dollars invested in a solution. Thus far, the holy grail has eluded us. And yet, the pressing need to eliminate poverty has not diminished in the slightest. 

The negative effects of poverty are well known. Hunger, malnutrition, high infant mortality rate, crime, child labor, disease and death. More than 3 centuries after Hobbes published Leviathan, millions still live lives that are “nasty, poore, brutish and short”, trapped by a never ending cycle of destitution and neglect. In the modern age, the presence of such misery is as confounding as it is appalling. How is it that most of us enjoy such great material wealth when so many people are in lack of basic needs? How is it that while affluent nations produce more food than we could ever eat, thousands still die from hunger each day? In an age of unparalleled growth and affluence, poverty remains, a ghost from the past we should have banished long ago. 

All this begs the question: why? Thousands of committed, intelligent people have worked in aid. World leaders have pledged support to humanitarian causes. Certainly they are not idiots! Yet, independently, the data would suggest that they are. If we are going by the world bank’s definition, giving every impoverished person a measly 2 dollars would be enough to double their daily income. Giving them 500 would give them a massive infusion equivalent to a year’s wages. If only we could repeat this for the many million in poverty. While they would have to wait their turn, eventually we would get to them. Surely that would be enough to break the poverty trap, get on their feet, and allow them to become self-sufficient… right? 

Not quite

In the rest of this post, I’d like to synthesize summaries and excerpts from some sources I’ve read on poverty, and why it refutes the notion that aid alone is enough to ‘solve’ the problem. 

To understand how to help the poor, we must first understand why they are poor, and maybe more importantly, why they stay poor. I found Poor Economics by MIT professors Banerjee and Duflo an invaluable source of insights in this regard. Much of this post will be fragments of their work, and paraphrasing from my recollection. (a very good read, I recommend it to everyone interested about poverty and I will be rereading it myself)

To begin, Banerjee explores the concept of a ‘poverty trap’, a principle I’m sure many of us are already familiar with. Poverty, as it turns out, begets poverty. Lack of funds to obtain an education would lead to inability to find work. Constant preoccupation with basic subsistence drains away energy that might otherwise be invested in devising solutions. Inability to pay for preventive healthcare leads to worsening healthcare outcomes demanding increasingly outrageous payments… and so on. 

For the purpose of keeping this post at reasonable lengths, I will not explore all of the scenarios the authors present. But I will cite a few details I believe are important and illustrate the point. 

Poverty traps 
 

Poverty traps *keep people poor*: 

 In a village in Indonesia we met Ibu Emptat, the wife of a basket weaver. A few years before our first meeting (in summer 2008), her husband was having trouble with his vision and could no longer work. She had no choice but to borrow money from the local moneylender—100, 000 rupiah ($18.75 USD PPP) to pay for medicine so that her husband could work again, and 300,000 rupiah ($56 USD PPP) for food for the period when her husband was recovering and could not work (three of her seven children were still living with them). They had to pay 10 percent per month in interest on the loan. However, they fell behind on their interest payments and by the time we met, her debt had ballooned to 1 million rupiah ($187 USD PPP); the moneylender was threatening to take everything they had. To make matters worse, one of her younger sons had recently been diagnosed with severe asthma. Because the family was already mired in debt, she couldn’t afford the medicine needed to treat his condition. He sat with us throughout our visit, coughing every few minutes; he was no longer able to attend school regularly. The family seemed to be caught in a classic poverty trap—the father’s illness made them poor, which is why the child stayed sick, and because he was too sick to get a proper education, poverty loomed in his future.

Poverty impairs rational, planned thinking  

 Orwell captured this phenomenon as well in The Road to Wigan Pier when he described how poor families managed to survive the depression. Instead of raging against their destiny, they have made things tolerable by reducing their standards. But they don’t necessarily reduce their standards by cutting out luxuries and concentrating on necessities; more often it is the other way around—the more natural way, if you come to think of it—hence the fact that in a decade of unparalleled depression, the consumption of all cheap luxuries has increased

Poverty severely hampers the ability to invest in even the most ‘logical’ solutions

 A friend of ours from the world of high finance always says that the poor are like hedge-fund managers—they live with huge amounts of risk. The only difference is in their levels of income. In fact, he grossly understates the case: No hedge-fund manager is liable for 100 percent of his losses, unlike almost every small business owner and small farmer. Moreover, the poor often have to raise all of the capital for their businesses, either out of the accumulated “wealth” of their families or by borrowing from somewhere, a circumstance most hedge-fund managers never have to face. A high fraction of the poor run small businesses or farms. In our eighteen-country data set, an average of 50 percent of the urban poor have a non-agricultural business, whereas the fraction of the rural poor who report running a farm business ranges between 25 percent and 98 percent (the one exception is South Africa, where the black population was historically excluded from farming). In addition, a substantial fraction of these households also operate a non-agricultural business. Moreover, most of the land farmed by the poor is not irrigated. This makes farm earnings highly dependent on the weather: A drought, or even a delay in the rains, can cause a crop failure on non-irrigated land, and half the year’s income might vanish.

 We are often inclined to see the world of the poor as a land of missed opportunities and to wonder why they don’t put these purchases on hold and invest in what would really make their lives better. The poor, on the other hand, may well be more skeptical about supposed opportunities and the possibility of any radical change in their lives. They often behave as if they think that any change that is significant enough to be worth sacrificing for will simply take too long. This could explain why they focus on the here and now, on living their lives as pleasantly as possible, celebrating when occasion demands it.

The insights from their work are far too numerous for me to cover fully, needless to say I am not doing them justice. But I believe the above is enough to illustrate my main point, that the impact of aid is often deceptive, and in many cases fail to break the poverty trap, which takes different unique forms across a wide population of different unique people.

To truly ‘break out’ of a poverty trap, the effort and resources demanded are far greater than they might originally appear. In addition to offering the aid necessary to meet reasonable standards of living (and I must emphasize, almost none of these people in poverty live in circumstances even the most impoverished of 1st world citizens would consider ‘reasonable’), aid must ‘pay the debt’ of previous neglect, as a manner of speaking. Countless diseases that could’ve been prevented. Forgone education that must now be returned. Festering crime pits that have never been policed. The costs of yesteryear’s problems have not faded. Rather, like the debt collectors which hound the most vulnerable, they come back, always demanding more from those least able to pay.

And then after this even more challenges await. The unique circumstances surrounding each impoverished community would have to be addressed. Inadequate infrastructure needs to be fixed, corrupt governments reformed, and investments allocated for the necessary ventures that would bring the poor out of poverty. Necessarily risky investments which may never see a return. 

This is not to say that aid is futile. Quite the contrary, a timely transfer of cash during a famine may very well save a starving child’s life. However, the point remains that the root problem has not been solved. Corruption, war, limited resources or any myriad of evils will deliver more famished children to our door.

If you’ve read this far, you’ve probably realized something. Hey Lyron, you can’t be the only person to have realized this! Why haven’t people acted based off this information? The answer, of course, is that they have. Sadly, we rarely see any successes. To illustrate the point, allow me to link a video by Polymatter. 

Why Aid Fails: The Real World Example
 

(1) Why Foreign Aid Doesn't Work - YouTube

At first glance, the Millenium Villages project seems like a dream come true. It was everything we could imagine ‘good’ foreign aid to be. Led by experts who based their approach off scientific research, devoid of middlemen who might make off with the funds, and driven with a determination to end all the root causes of poverty at once. Malaria, inadequate infrastructure, efficient crop production, lack of access to drinking water… everything would be addressed at the same time. 

The best part? It wasn’t even expensive. The project, despite it’s grand scale and vision, costed only 120 USD per villager. If it succeeded, it would provide a tried and tested template for eradicating poverty, an effective method that could be emulated across the developing world. 

Except… it failed. 

The project’s finely planned strategy met of many harsh realities when they ran into an ironic problem. The southern Ugandan villagers were producing too much corn. When selecting for the crop of choice to introduce efficient farming methods with, the project managers had dutifully accounted for crop hardiness, weather, and yield projections. But they neglected to account for the fact that the villagers didn’t actually like the corn! In Southern Uganda, corn was thought of as ‘prison food’, and there was no buyers. 

Facing disaster, the project scrambled to find a viable alternative. Commercial farming was suggested, except they soon ran into another problem. Namely, that the nearest water source was 3 miles away, and required the villagers to go retrieve more water… on foot. Pipes were too expensive to ship, so the villagers relied on donkeys, which unfortunately, also failed. Most of the donkeys died after a few months. 

The problems with the project didn’t end there. I highly encourage watching the full video, it’s quite informative. However, for the purpose of this post I think the point has been sufficiently made. The project, despite the very best of intentions, expertise, and planning, could not possibly account for all the contingencies and unique demands of the community. The ‘tried and tested’ handbook the project aimed to create did not materialize. Observing the evidence, we are encouraged to believe it ever existed. 

When all was said in done, it was estimated that 12,000 USD was spent per household lifted out of poverty. A monumental achievement for sure, but at a cost which far exceeds the amounts we are typically accustomed to giving. Certainly far more than the 350 USD annual income of these households, and far greater than what many could stomach. Many of us are used to the ads that boast of every 2-3 dollars saving a life. These comparatively mammoth costs dwarf the paltry sums sought by other charity organizations. 

Having now reviewed a myriad of reasons why poverty persists, I’d like to focus on what I personally believe is the most important factor: institutions. 

The Institutional Problem
 

Ultimately, we can observe that the most effective forms of aid tend to not work in isolation. Rather, they’re amplified by the capacity of the state to absorb the funds and transform it into better outcomes. Turkey was able to recover from devastating earthquakes. Botswana’s economic miracle allowed it to reduce poverty by 10%. For a more familiar example, I might bring up the Marshall plan aid, which for a comparatively modest 13 billion rebuilt western europe after the most devastating war in history. 

Meanwhile, in states where institutions fail, all the basic necessities of life tend to fail with it. Consider, for instance, South Africa. 

(1) South Africa's Slow, Inevitable March Towards Collapse - YouTube

Once a shining beacon of hope, South Africa is now in crisis, gradually regressing to ever escalating issues with energy and most functions of state. Decades after the end of apartheid, we still see the legacy of defunct institutions at work. 

South Africa has an issue with power generation. Not because of some unforeseen disaster, or lack of resources to fix the issue, but rather, political dysfunction. The ruling party's corrupt and ineffectual government has led to years of neglect on South Africa's energy grid, turning what used to be a power exporter running a healthy surplus to a nation constantly in deficit. To day, South Africa faces rolling blackouts on a daily basis, with ruinous costs skyrocketing into the billions. 

Can aid solve the problem? The answer, most would agree, is not really. The problem of bad planning, ineffectual governance and corruption are not issues related to a lack of resources. Rather, they stem from a lack of ability to use resources properly. 

Political ineptitude is in no way a situation unique to South Africa. Defunct institutions are everywhere. Look at American healthcare, Mexican crime, Hungarian corruption or Chinese properties, and you will see the same issues. Resources allocated poorly are the root of the problem. More resources, when used wastefully, will not produce the desired results. Just think of Mao and Stalin, who seized grain for their ambitions of production while their people starved. Was it lack of food that was the issue, or policymaking? 

The strength of institutions, which aid to the poor mostly or completely circumvents, is often the strongest determinant of their welfare. A well functioning state can provide security, public services, peaceful transfer of power, unified responses, all the manner of basic prerequisites for the development of prosperity. In the absence of such conditions poverty traps are often inevitable. Why build wealth, when nobody can stop the rampant banditry who would plunder your earnings? Why produce more, when there are no markets to sell to? Why make money when the region has no goods to purchase at any price? Why listen to the good hearted but foolish ‘aid’ organizations, who don’t seem to understand even the most rudimentary aspects of their lives? 
 

This is only the beginning. In the absence of strong institutions the government becomes mired in corruption, neglect, incompetence, or worse of all– war. Picture the child soldier, picking up a gun after his father has been murdered, and a perfect illustration emerges of why money alone cannot solve the problem. 

Societies, much like the people living in them, are not children. We cannot expect them to be constantly dependent on outside support. While it's of course our duty to alleviate suffering as best as we can, a people must ultimately be responsible for their own destiny. 

Conclusion

So… what can we do, you might ask? You may have read this far hoping I would present a solution. 

I’m sorry to disappoint. The answer is, unfortunately, that I don’t know. Having read what I did about poverty I have came across scant solutions and ever greater and compounding problems. I cannot claim to know what works. Only what does not. 

All of this said, you may be surprised to learn I’m still very much in support of donations, and aid in general. 

Despite the danger of underestimating the problem, I find the dangers of overestimating it to be just as insidious. Despair is no solution to great challenges. If anyone is thinking about donating, I would strongly encourage them to do it. At the end of the day, every contribution is a contribution, no matter how small, and aid doesn’t need to be life changing to make a difference. 

Think of all the things you have done for other people. A hug here, a smile there. A word of encouragement, a laugh of joy— so many things can be meaningful, even if we don’t realize it. The impact of aid would be far bigger, not just physically but psychologically as well. Small as our individual actions may be, together they work towards something greater. We must not forget that civil rights was won by the collective actions of many individual people, and the Nazis won power from lack thereof. In choosing to do, or not to do, individuals can change the actions of the group. Though not always, this can often change the world. 

There is a peculiar power to giving. It is, in many ways, an affirmation of the self. Despite the naysayers, despite the doubts, despite the constant nagging feeling that nothing you do will matter. Despite the lack of action by society, which seems to have gotten too tired to care. You can make a difference… here, now, by showing them that they are wrong. That you refuse, regardless of how hopeless it seems, to merely accept the situation. That you are willing to help.

I know there will be some people reading this who have donated already, or contributed to similar causes. I’d like to stop for a moment and offer them some thanks. They are the reason I can keep on hoping. 

I will be giving 50 dollars to givedirectly, the charity organization that inspired me to write this post. I found their fundraising here. I understand this isn’t much, but then, I am a student with no allowance. This is essentially all I am able to give. I hope this little gift could inspire some others to give more. 

If not, I will know that this money went to someone who needed it more than me. Maybe for food, which they hungered to buy. Maybe for entertainment, for which they’ve been equally starved. Maybe a gift for a dear family member, or treatment for a disease. Or maybe just for another day of rest, well earned after long days of strenuous work.  

Whatever happens, I hope that they will be happy. 

Endnote: Woah! This ended up being way longer than I expected. Whoever you are, thanks for reading this all the way to the end! This is my first real post, and I wrote this over a few hours while sick, so I imagine I’ll have made a whole bunch of mistakes. Any feedback is welcome, I appreciate it. If you have any critiques/thoughts in general, feel free to drop by in the comments. 

(Forewarning: I will probably be busy, so excuse slow/nonexistent responses)

Links:

Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty: Banerjee, Abhijit V., Duflo, Esther: 9781610390934: Amazon.com: Books

(1) Why Foreign Aid Doesn't Work - YouTube