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Why do poor countries remain poor?
Why, after receiving billions of dollars, do poor countries remain poor? Why are failing foreign aid models utilized over and over again? After the devastating 2010 Haiti earthquake, authors Daniel Jean-Louis and Jacqueline Klamer observed first-hand the negative consequences of donations provided with the sincerest of good intentions donations that ultimately undermined local industries and wiped out jobs. Based on primary research and in-depth case studies, and personal experience, From Aid to Trade offers practical, achievable solutions to help Haiti and other developing countries grow more viable economies by:
– building on innovative businesses and existing market-based systems
– equipping NGOs and governments to work with local businesses
– recognizing that growing out of poverty requires entrepreneurial solutions that drive self-sustainable economic growth
Ambitious and optimistic, From Aid to Trade confronts the inadequacies of current foreign aid strategies and offers a clear means of economic and personal growth for individuals seeking a positive future for Haiti and other developing countries.
Notes and Highlights:
- Many financial resources of NGOs (Nongovermental Organizations) are used to bring in donated or subsidized imported goods, which are then distributed to the community of people they serve. This results in huge market distortions in Haiti. When donated or subsidized goods are distributed below market value, NGOs simply kill the incentives for the private business sector to invest to meet these needs.
- Haiti, long regarded as a humanitarian project in the US’ backyard, suffers from a power dynamic that reinforces an American savior complex while ignoring the concrete efforts Haitians are making to raise themselves out of poverty. Haiti’s real problem is not the absence of an economic framework. Rather, it is the continued disregard of the one structure in the country capable of bringing about real, lasting, and sustainable growth: Haiti’s existing market-based system.
- NGO’s have replaced the balanced transitions that should sustain Haiti’s market economy with unbalanced transactions and donations. NGO’s can realign to the growing market-based economy to ensure that private business become the means to generate resources and thereby facilitate transactions, not NGO distribution of resources to meet local needs.
- If NGO’s don’t contract with business, but instead flood the market with similar or substitute products, businesses may never have the opportunity to innovate and compete.
- In 1994, when President Clinton reduced the import tariff on rice from the US from 35% to 3%, US rice imports to Haiti skyrocketed from 87,000 tons in 1994 to 200,000 tons in 2000. At the time, President Clinton argued that the tariff reduction would help Haiti develop its industrial opportunities by importing food from the US instead of growing it in the Haitian agricultural sector, which was not mechanized and relied on human labor alone.Meanwhile, local production of rice in Haiti decreased from 110,000 tons in 1985 to 80,000 in 1995 (just a year following the tariff reduction. And ninety-three thousand farming families, representing 20% of the population, lost their share of the market due to the cheap imports of US rice, and thousands of supplemental agricultural workers, local traders, and millers lost their jobs. Now 80% of all rice consumed in Haiti is imported.
- 4 Methods for Supporting Business Growth:
- Buy Locally: increase transactions by procuring what is needed locally. It is not Aid — it is partnership and trade. No “I’ll do it for you” but “Let me understand what you’re doing and walk beside you.”
- Create Platforms for Connecting: Facilitate communication between the aid sector and the private business sector by creating platforms for connecting.
- Advocate for Policy Change: Identify government policies that need to be addressed, the advocate for those changes. The value of creating jobs in Haiti should outweigh shorter-term considerations of price or an influx of items.
- Invest in a Viable Business Opportunity: Pursue viable business opportunities, establishing and promoting ethical, sustainable for-profit enterprises that meet demand profitably and create jobs. Haitian businesses succeed when they: First, exceed customer expectations. Second, they meet the need of their employees. Third, the compete and adapt to the local market. And fourth, they meet social needs.
- The Negative Impact of Alimentary Aid:
In the wake of the 2010 earthquake, many aid organizations rushed to Haiti to provide hunger relief. But once the immediate crises was over, many failed to make the transition from aid to trade and development. As a result, not only did many children become dependent on aid to survive but many of their parent also fell into poverty and dependency. Yes, NGOs were feeding people. But they were also unwittingly feeding into the ongoing prevalence of poverty.
Organizations like Feed My Starving Children (FMSC) who has brought in 47,019,096 meals to Haiti since the earthquake in 2010 (as of 2016) have been very generous toward Haiti which should be applauded, but it’s important to look deeper into the effects and outcomes of these kinds of initiatives.
All of the food used in these food packs is purchased outside of Haiti then shipped into the US to feed thousands of children in Haiti. The children surviving on the donated meals today will most certainly need a job in the next few years. In the short term, this programs helps many Haitian children survive, but is also undermines their futures by putting competitive pressure on Haiti’s producers instead of sustaining them.
The application of foreign aid has consequences, for better or worse. Ultimately, if Haitian farmers had greater access to market opportunities, instead of being related by nonprofit distributors, they might have enough purchasing power to provide their children with the meals they’re currently getting elsewhere.
When NGO’s provide imported food to vulnerable orphans, they help them. When NGO’s provide locally purchased food to vulnerable orphans, they help not only the orphans but also the local farmers, vendors, and transporters.
- While foreign aid may be well-intentioned, we must examine the economic, social, and political motives of donor countries to understand why well-intentioned policies can have such disastrous effects.
- The answer is not for NGO’s to quit. Rather, to embrace and strengthen Haiti’s economy by partnering with the private sector. Although Haiti’s fragile economy has been damaged by wrong-headed approaches, there still remain tremendous opportunities for NGO’s to redeem themselves through partnering with business and realigning with Haiti’s market-based economy.
As the economy becomes more sustainable, the public and private sector should take the place of those organizations in meeting the population’s needs, and responsible nongovernmental organizations will be freed to help in other areas of the world.
- Haitians must own Haiti’s development.
- Economies cannot break even or progress when resource distributors—the government and NGO’s—have greater purchasing power than resource generators, and do not use that power in a way that aligns with the economy. Resources will run out if they are just distributed by NGOs and not created by local businesses. A real engagement with Haiti as a market-based system will empower its enterprises and entrepreneurs to play a lead role in the nations economic future.
- A few ways to advocate for Haiti’s sustainable development and for the well-being of it’s people:
- Advocate on behalf of Haiti’s “orphans”. An estimated 80% of “orphaned” children in Haiti have at least one living parent, but these parents simply can’t provide for their families because they are unemployed or underemployed. With unemployment hovering around a staggering 40%—not even including the underemployed or those seeking jobs in the formal sector—many parents are unable to ensure their children’s livelihoods. Jobs can radically change the lives of Haitian families.
- Advocate for the local business sector. The dynamic of the local farmer who can’t compete with the alimentary-aid programs that distribute donated or subsidized imports occurs over and over again. These dynamics undermine the many entrepreneurs’ livelihoods and various industries in Haiti’s business sector. Advocate that NGO’s commit to local procurement from Haitian businesses, even if they might still distribute those good for free to those in need.
- Advocate for trade as an essential element for economic growth and poverty reduction—and seek after trade policies that strengthen the Haitian economy and it’s opportunities in the global market.
- Advocate for sustainable policies and procedures. Aid dumping undermines local purchasing, and did so in 2010. Most NGOs in Haiti pay no taxes on imports. They also face no restrictions on the quantities they distribute. Because of these policies, many nonprofits flooded Haiti’s economy with assistance but prevented local businesses from satisfying those same needs, those disrupting their essential client base.
- Advocate for sustainability. Advocating can be as simple as communicating your concerns to the organizations and charities you respect. Write a latter to the organization that sponsors the child you sponsor. Encourage them to purchase locally, and share the issue through your social media network. Don’t cancel your support, but challenge NGOs to realign the support you’re providing with the local market-based economy.
- Haiti’s economic resources have yet to be replenished through donation-based aid. Realigning aid to spur transactions is key to the economic survival and health of industry in the developing world.