Economics 101

Who Has the Power? Lessons from ‘Poverty, Inc.’

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I recently watched a compelling documentary film called Poverty, Inc. by Michael Matheson Miller. Poverty, Inc. challenges the current institutional mechanisms of today’s foreign aid and development system.

The central problem the filmmakers focus on is who has the power to effect change and bring restoration and flourishing to developing nations.

What the film finds is that those who have the power are not utilizing that power to create real impact. Instead, the poor in developing countries are left more hurt than helped.

The call to help the poor should not be seen through the lens of paternalism and power, but through partnership and humility.

How the West Engages with the Rest: Outdated Model of Development

Since its origin in the wake of World War II, little has changed within the model of international development and foreign aid.

The purpose in creating international organizations such as the World Bank and the International Monetary Fund was to restore and rebuild a broken Europe. However, these organizations continued long after Europe was rebuilt, and the same model has been used ever since.

In this model, western governments transfer funds to a developing country’s government in order to provide for development needs.

This is how the west engages with the rest, but the consequences of this model have been harmful to developing nations in many regions such as Africa.

In an interview with Spiegel, Kenyan economics expert James Shikwati states, 

Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa’s problems.

When nations become dependent on others to provide for their long-term development needs, it hinders their God-given potential to innovate and grow economically.

Through this model, the West is not empowering nations; it’s enslaving them to the foreign aid machine.

The People Who Stand to Lose from Change Have All the Power

Why are we still operating under this model?

Poverty, Inc. provides a provoking quote from philosopher Niccolò Machiavelli:

The reason there will be no change is because the people who stand to lose from change have all the power, and the people that stand to gain from change have none of the power.

Often it is the western lending countries who are benefiting most from foreign aid to developing countries: our products get sold, our contractors get paid, our NGO’s stay in business.

There will always be winners and losers in the economy, but when one player has all the power (in this case the U.S. or other western countries), that player is able to manipulate economic interactions that favor their interests.

An example of this is the United States flooding the Haitian market with cheap subsidized rice. In the documentary, anthropologist Timothy Schwartz, author of Travesty in Haiti, explains that,

We [the U.S.] in the 80’s convinced Haiti to reduce trade tariffs to 3 percent, which meant that U.S. rice was coming in (but was already subsidized at levels of 35—100 percent) so the Haitian rice producer had to compete with subsidized U.S. rice produced by agroindustry.

While this has been very beneficial to the U.S. rice market, it has destroyed local Haitian rice production.

Yes, Haiti may have more rice for today, but the long-term economic impacts could be devastating for Haiti.

Stewardship and Helping the Poor

As Christians seeking to better understand stewardship and helping the poor, we have to be able to understand the cost and benefits of our actions.

A paternalistic approach does not open the doors for developing nations to use their comparative advantage, but rather stifles growth through creating dependency.

Instead, there are opportunities to partner with the poor through our development efforts. I’ll speak more to these opportunities in subsequent posts.

Partnership will provide a deeper understanding of the local challenges as well as empower those in need to overcome adversity.

Humility is needed to approach this discussion and recognize the faults of our past to realize more prosperous potentials for the future of development.

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