Hurting the World’s Poor in the Name of Helping Them—Poverty, Inc.

The vast sums of money transferred by the governments of wealthy nations to the governments of poor nations do not help the world’s poor, for the most part. Rather, such foreign aid serves to prop up corrupt dictators, finance a giant network of Western nonprofits, disrupt local markets, and keep many of the intended beneficiaries dependent and poor. Even private aid often has deleterious effects. Or at least Poverty, Inc., a 2014 film by Michael Matheson Miller of the Christian, free-market Acton Institute, plausibly argues those points.

A major theme of the film is that today’s system of foreign aid is deeply paternalistic—indeed, in some respects colonialist—based on the idea that the world’s poor are helpless and dependent and always will be so. One person interviewed for the film responds to such premises, “The people here are not stupid, just disconnected from global trade, that’s all.”

What enables people to lift themselves out of poverty, argues the film, is not the perpetual transfer of wealth, but good legal institutions. What people really need for long-term success is “legal protection from violence,” access to just courts, legally recognized ownership of property, the “freedom to start a business,” and links to wider markets, the film summarizes. In short, people need the rule of just law.

Tragically, the film shows, the existing system of foreign aid often inhibits the creation of such institutions and instead entrenches bad governments. Magatte Wade of Senegal summarizes for the film, “When people support more foreign aid for Africa, . . . they are condemning us in Africa to live under dictators, who will not respect our right to access of rule of law.”

The film focuses much of its attention on Haiti. According to the film, cheap, subsidized rice from the United States flooded the Haitian market, devastating local rice production and driving many people into shoddily built slums. Then the earthquake came, and in the wake of its destruction, the nonprofit aid groups came too. As someone comments in the film, the “short-term natural disaster” of the earthquake “turned into a long-term unnatural disaster” of counterproductive aid efforts.

One Haitian refers to his country as the “Republic of NGOs,” or non-government organizations. “They keep giving away free stuff as if they didn’t want the Haitians to stand up for themselves,” he says.

The film offers the example of Enersa, a small Haitian business that builds solar-powered street lights. When NGOs shipped a huge amount of “free” solar equipment to Haiti, Enersa’s business took a big hit.

Sometimes private charity efforts also create more problems than they solve, the film shows. For example, when a church shipped a bunch of eggs to a region in Africa, if effectively destroyed the local egg production market—then pulled out.

Poverty, Inc. makes its main points convincingly. However, the film is fuzzy at times about the nature of the problems at hand and about the appropriate solutions.

One open question is whether, leaving aside cases of catastrophic emergencies, institutional reform is enough. For me, a student of free-market economics, the film’s case for rights-oriented legal institutions is easy to accept. But is the creation of such institutions sufficient to solve the problem of global poverty? And what are the barriers to the creation of such institutions, besides foreign aid? The film leaves such questions largely unanswered.

I suspect that many viewers of the film will conclude that governments conduct foreign aid badly, and that they (along with private aid groups) should conduct it more intelligently, to support local markets rather than upend them.

My view is that governments have no legitimate business forcing people to aid others, but that private charity efforts have played and can continue to play a big role in alleviating global poverty. I get the idea that Miller may agree with me, but his film left me wondering.

Another shortcoming of the film is that it complains about aid disrupting local markets, then argues for access to open markets—without commenting on how free trade, too, can disrupt local markets. For example, the film discusses hand-made shoes, low-tech farming, and local textiles—types of production likely to be altered or displaced as a region’s economy develops. I’m all for free trade, but I recognize that factory-made Chinese shoes may put a local shoemaker out of that job. I see the “creative destruction” of markets as necessary for a growing and innovative economy.

Miller seems to cast the economic disruption of aid as uniquely sinister, but is that right? I think where he’s headed is that long-term aid disrupts production and creates dependency, whereas market development disrupts some forms of production by creating new forms. I wish the film had been more clear about such matters, and I fear some viewers may come away from the film thinking third-world governments should restrict imports. In fact such economic “protectionism” is harmful or even disastrous for development.

I don’t want to make too much of these problems with the film. My advice is to watch this fascinating, bold, and thoughtful film, absorb and share its major lessons, and leave its unresolved issues on the back burner.

On the whole, Poverty, Inc. is a powerful and important film about the limits of good intentions, the evils of propping up corrupt regimes, and the self-empowerment of individuals entering the market as producers.

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