Foreign Aid Fraud: What You Need to Know About the Global Poverty Industry

“Having a heart for the poor isn’t hard we all have that, but having a mind for the poor, that’s a challenge”. – Michael Fairbanks

Last year, we featured an article about child slavery in Africa. An article that exposed the working conditions of minors in the cocoa fields, and as to be expected the public response was filled with genuine heartfelt concern for these people whom suffer in some of the most brutal conditions on earth. However, one comment from a reader set my sights in a whole new direction and thus, this article is coming to light.

As they say no good deed goes unpunished and after extensive research its seems that “foreign aid” has become one of the greatest exploitations of the poor of the last half of a century. A lucrative scheme, promoted by celebrities and driven by social entrepreneurs that downright robs the poor and lines the pockets of the global elite. In this article we will explore, expose and shed light on why poverty will never cease given the current model of a “charitable donation”.

For many of you who have viewed the film Poverty, Inc. streaming on Netflix, you will already understand what I am talking about. But for those of you who are caught in the guilt ridden trap of feeling so privileged that you feel the need to give back, this article is for you.

In fact, your kind heart makes you easy prey, having your compassion for others unknowingly twisted and turned against you, all the while oblivious to the damage you are causing. Don’t feel discouraged, I myself fell into the same trap not more than a few years ago and this is why I am choosing to bring this article to your attention.

It has been 50 years since Africa first began to receive foreign aid, and each year it receives an estimated $50 billion in funding. This assistance has been implemented using the same platform for success, as the Marshall Plan, that stimulated Europe’s recovery post WWII. Since then, Africa as well as many other countries including Haiti and Ethiopia receiving aid face the same issues as they once did with no real stimulation to the economy or growth.

Over the past 60 years at least $1 trillion of development-related aid has been transferred from rich countries to Africa. Yet real per-capita income today is lower than it was in the 1970s, and more than 50% of the population — over 350 million people — live on less than a dollar a day, a figure that has nearly doubled in two decades. Dambisa Moyo, Wall Street Journal

By now you might be thinking how is this possible? You may argue that corrupt government officials in Africa are siphoning the donations and you would be correct in your thought. However, this is only a small fraction of the problem at hand and many other countries are experiencing the same troubles.

Paternalism, as depicted in the film has caused adverse and negative effects on the local economies of developing countries. When we see increased global starvation, a primary cause is due to a flooding of the local markets with free goods, which causes the improper distribution and eventual closure of local competitive farmers hoping to sell their goods on the market. Quite simply, you cannot compete with free and many farmers are put out of business when inconsistent dumping of surplus goods arrive in their neighbourhood.

“We thought we were helping” former President Bill Clinton admits in an interview on the film, “when we made this devils bargain on rice”. In 2009, Bill Clinton was appointed as the United Nations Special Envoy to Haiti, in hopes to “help jumpstart social, economic recovery efforts”. (source) In doing so, the envoy pledged to restore President Aristide and build back the infrastructure development in the country. Unfortunately, as Clinton admits, the surplus of imported rice flooded the Haitian market driving local farmers down from the hilltops into unemployment and further poverty.

Yet, surplus food donations are only a fraction of the problem with poverty in developing nations. As we know, economic growth lies heavily upon the working middle class and sadly in these countries complicated laws, lack of bargaining power and a disconnected people to mainstream markets in order to produce and distribute their goods and services on a global level, have caused these nations to become “helpless and dependant” relying solely the hand that feeds them.

“What the companies in the rich countries do is they lobby their governments and say they need to have protection from competitors from poor countries, so they block them out. First with tariffs and import duties and then ask their government for subsidy so they can produce more. Then they produce a surplus and guess what they do? The surplus goes and is dumped into poor countries. What we end up doing is destroying the local market and destroy the companies that we first blocked out of our market”. -Andrea Widmer, Co-Founder Seven Fund, Poverty, Inc.

And it only gets worse, according to the film mega companies in the United States and other world leaders then bid on infrastructure, manufacturing and technological projects in these countries and if there is a chance they will not receive the contract, they then lobby their government to subsidize the project to grant its approval, robbing local competitors of the work for their people. So who stands to profit here?

As the film notes 60% or 167 million of USA’s private contract dollars went to a single Washington DC firm and another 83% went to other DC companies, while .02% went to local Haitian companies following the earthquake of 2010. To put it simply, for profit companies are collaborating with U.S Aid to gain contracts through subsidy.

So what about all of those orphanages, those are o.k to donate to right? Think again.

According to the Haitian government, it is estimated that at least 80% of children in orphanages have at least one living parent and in Africa there are 48.3 million orphans south of the Sahara desert with only one-quarter of whom have lost their parents to AIDS. This means that due to lack of employment and suitable housing many mothers and fathers are forced to bring their children to orphanages to ensure their children’s basic needs are met.

When we donate to orphanages instead of helping to stimulate economic growth we are merely fueling the existing fire. In order to bring about change, we need to change the system of how we give. If only those parents had a way to make a living, their world would be a whole lot different.

“The system is broken” Timothy Schwartz illustrated in his book on the subject, Travesty in Haiti. Correction Mr. Schwartz, the system isn’t broken it was built this way.

Watch the film, visit the website, spread the word

by LJ Vanier,

This article is offered under a creative commons license. It’s o.k to republish so long as all links remain intact and an attribution bio is included to and LJ Vanier.

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