The Poverty Industry

“Our ideas are sticky. And we tend to stick to our theories. Good idea then to delay one's theories, for once they’re made they’re very difficult to let go of.” Nasim Taleb

A few years ago a dear friend, who happens to be a passionate "progressive", told me of an interview with an African economist who had made a compelling case for the halting of aid to the continent. The argument that the donation of "mountains of clothes" has virtually destroyed Nigeria's textile industry, that the countries that have received the most aid are in the worst shape, and that huge bureaucracies teach Africans "to be beggars, and not to be independent"---resonated with my friend.

I thought to myself at last an opening! She just stepped herself right into the real-world logic that when one is handed life's "necessities", one's odds of elevating oneself much above "subsistence" are surely compromised. So I say (words to the effect [it was a few years ago]) "my friend, for once you and I are on the same page. Now, please---keeping what you just shared in mind---think about the impact of aid right here at home. Think about our huge welfare industry. Wouldn't that same logic apply here? Won't you now agree that our ever-growing "safety net" has become a snare, trapping the unwitting prey of the vote-seeking American politician? That our intense aversion to pain---ours to human suffering (and I am in no way advocating for an abrupt ending of aid to individuals [I would, however, advocate for an abrupt ending of aid to institutions] in need), our politician's to losing an election---is what keeps us mired in a slow-growing economy (add corporate welfare), keeps us subservient to a fast-growing government, and, worst of all, perpetuates poverty?"

Well, alas, my eloquent plea did not resonate---not in the least---with my dear friend. Her reply; "Hmm... I'm finally beginning to understand why you people think the way you do." Oh well, I tried.

While reflecting upon the above conversation, I thought I'd try to locate the interview in question. I believe I did, and it is indeed telling. Please read it in its entirety, and, just for the moment, see if you can't suspend your preconceptions with regard to international aid, and consider how the Kenyan economist's logic might---in some dimension---apply to the "aid" industry here at home. Here are a couple of snippets:

Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa's problems.

Why do we get these mountains of clothes? No one is freezing here. Instead, our tailors lose their livlihoods. They're in the same position as our farmers. No one in the low-wage world of Africa can be cost-efficient enough to keep pace with donated products. In 1997, 137,000 workers were employed in Nigeria's textile industry. By 2003, the figure had dropped to 57,000. The results are the same in all other areas where overwhelming helpfulness and fragile African markets collide.

And, lastly, here's a post from May 2012 where I ask you to consider Who Has Skin in the Poverty Game?