Donation: World Poverty vs. Charity That Actually Works

Between 1950 and 2000 western governments and NGOs spent 2.3 trillion dollars on foreign aid. But many development economist wonder whether that money was spent in ways that actually led to real lasting improvements in human well-being.

Is there a better way? Most foreign aid programs are based on a top-down model with governments NGOs and experts deciding what the poor need. But there are four reasons why top-down systems are often ineffective. First, top-down systems lack local knowledge.. Experts might think they now what poor Africans need to improve their condition, but the fact is that there’s a lot about their lives, their customers, and their local environments that we simply don’t know or understand. Whatever plans we made for them without the benefit of that knowledge will likely be ineffective and could be disastrous.

To give just one small example, when Jeffrey Sachs Millennium Villages project gave high-yield seeds and fertilizer to a village in Uganda to help them grow their maize more effectively. It worked. Crop yields increased by almost 300%, but because the village had not developed any storage for excess crops and because there was no road network that transported elsewhere, most of that excess sat around to be consumed by rats and other pests. The rats brought disease.

The second problem with top down systems is that they often come with a lot of bureaucratic inefficiency. The more money you spend on administration and more hoops you have to jump through to try out new ideas the harder it is to get help where it’s most desperately-needed.

Third, top down systems often work by channeling money to the poor through their governments, but since those governments are often inefficient and corrupt, much of that money never actually makes it into the hands of the people who need it. In fact by making corrupt governments richer it sometimes makes the problem even worse. The brutal dictatorship of Robert Mugabe in Zimbabwe is a tragic case in point.

Finally, when top-down programs fail, they fail big. Spending a lot of money on a single program means that if you missed the mark or there are unintended consequences, those failures can have a massive destructive impact. And the bigger the program is the harder it is to change course and learn from your failures.

Recently one group of people came up with a radically simple alternative. Give the poor cash and let them spend it on whatever they think they need. Some of those people choose to spend money on food, some people spend it on a new roof, some people buy chickens and sell the eggs for a profit. The point is they get to decide. Give Directly is an example of a charity that works from the bottom up. Rather than trying to figure out what the poor need from the outside, then coming up with that grand plan to give it to them.

Give Directly empowers the poor to make those decisions themselves. Its one of the highest rated charities on give well door and it’s making a real difference in people’s lives. And unlike foreign aid, Give Directly is a voluntary charity. Which means it only has money to work with if you decide to give it to them. That means it has a strong incentive to keep its costs low its impact high and to learn from its mistakes. The lesson is that big problems don’t necessarily need big solutions. Sometimes the best way of dealing with a big problem is to have lots of different people try lots of different small ideas and find out which ones actually work.