When People are in Need, Charity is Tempting

Charity is tempting, but ultimately unproductive. Today’s Washington Post has a story titled, “World Bank Cuts Growth Forecast for Developing Nations” (some regions, like Sub-Saharan Africa, are still growing though, unlike the West). A headline like this sends people immediately into a scramble for foreign aid and charitable giving to offset the pain these countries are feeling. Not so fast, writes the Post:

“The assumption is that just mechanically pouring money and credits into poor countries makes them have higher growth,” [William Easterly] said. “We have 60 years of evidence against this proposition — lots of money pouring in without discernible growth effects.”

"Perhaps the best way for wealthy countries to help the rest of the world is to get their own economies back in gear," said Harry Broadman, a former World Bank official and now managing director of the Albright Group.

“First and foremost, the engine of growth is not going to be aid,” he said. “It’s going to be the boost in external demand from growth occurring in the industrialized countries.”

All the better if that growth in rich countries is directly fueled by the success of businesses in developing countries. Concerned individuals in the US and other Western countries need to approach the need in developing countries as a business problem, not a charity problem.