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"I see multiple colonial governors. We are held captive by the donor community. [But] only Africans can develop Africa. I don't know of any country in the world where a bunch of foreigners came and developed the country."
—Herman Chinery-Hesse, one of the leading businessmen in Ghana.

Ugandan youngsters display free backpacks that USAID gave to them. Passing out free goods creates warm feelings and happy photographs... and advertising for USAID. But Ugandans have for centuries been capable of carrying things for themselves without help from USAID. Why does the agency spend its budget trying to suggest they can no longer do so?

"Free" sounds generous — until you look carefully

"It's all free!" That provides much of the karma in karma colonialism. But is it free — or is it sugar-coated poison?

NGOs like giving things away. It entrenches their position.

Giving away free goods or services is central to the aid industry approach. It is so central, in fact, that much of our critique doesn't apply if organizations attach a meaningful price — even if it's lower than a market price — for what they offer.(1) That's not ideal but depending on other factors, they may well be part of the solution, not the problem.

INGOs don't like to institute such fees. For staff and donors alike, giving things away feels pure and virtuous. INGO prefer free for several other significant reasons.

They feel wanted. They look wanted. People will take practically anything that's free, even if they don't want it at all. If you offer something for free, neither you nor donors need ever to face the unpleasant truth that maybe nobody wants it.

INGO can give away free things forever — in this district, then another, then a third, then eventually back to the first one.

Free is simpler. When you receive money you need bookkeeping systems. You need security systems for the money. You need to weigh cost versus income. You need to treat your customers with respect and be alert to their needs.

Why "free" is poison

For much the same reasons, when INGO hand out free goods and services, they are a poison for the economy.

Free but worthless goods make a problem look unsolvable. Somewhere, someone is paying for all those free goods and for the apparatus to pass them out. On some level, they appear to solve a problem. When they don't solve it, donors and recipients conclude that the problem is intractable, rather than that the free item was the wrong solution.(2)

"Free" effectively means no choice. Ideally, people would weigh the costs and benefits of what is offered free, against what they could get by paying. In reality, they don't. When an INGO comes from a rich country, offering something free, it's natural for recipients to think, "Their country is more developed. They must know what's best here, too." Someone selling similar goods that are more useful, but which have a price tag, won't have a chance.

A country that lives on giveaways becomes weaker.

Infrastructures don't develop. A strong economy needs bookkeepers, security systems, ways to transfer payments. It needs distribution systems, in which those whipping boys, "the middlemen", earn money by providing the valuable service of connecting products and consumers. It needs workers and business leaders with an awareness of the customer. A country without those mechanisms and skills will remain dependent. INGO, with freebies, make it harder for this infrastructure to develop.

Santa Claus wants to keep his job. Giving free things to grateful recipients is easier than making the ledgers balance. And it's a lot more fun. But it's not a useful skill in a country that's trying to develop. Moreover, people who acquire a taste for being Santa Claus will resist switching to a job that requires new training and more work, while providing less fun. They'll try to persuade donors that Santa Claus is still needed. Forever.

Quality is not rewarded. In the "free" atmosphere, quality doesn't have an opportunity to develop. It is squashed by free goods, because consumers take what is free, rather than deciding what is best. William Easterly sums it up in The Tyranny of Experts: "Freedom to choose is a powerful engine in rewarding the world’s best problem-solvers in each area, while getting rid of the inept problem-solvers." In a giveaway economy, INGO don't compete to produce the best quality because that doesn't bring them more income. Their customer is the donor. They compete for donor attention and approval.

Decision-making skills don't develop. In the recipient country, people don't develop the skill or experience to decide "what's best for us?" Someone else in another country already made that decision. Governments on all levels — village, province, national government — have less opportunity to develop an infrastructure to make difficult decisions about what's best for them.

Governments get addicted. Instead of decision-making skill, government officials develop a different ability. They understand that INGO need permission for their activities, so that the donor money will keep flowing. Allotting those permissions is a lucrative business; officials quickly learn how to collect per-diem expenses, rents, cars and iPads "so we can do our job better", and much more. (See Bribes.)

To raise funds for their giveaways, NGOs paint a false picture of helplessness.

INGO paint a false picture. In their quest for a rationale to give out free things, INGO exaggerate the poverty and helplessness of the areas where they work. The media help. Sometimes blatantly, by running stories planted by INGO; other times, just by being themselves, because "news" by definition is about things out of the ordinary, and bad news tends to be more riveting than good news. (See the despairing portrait of life without a cellphone, as portrayed by Melinda Gates.)

Aid is addictive. It's easy to take the easy route; that's why obesity has become an epidemic. Individuals as well as governments get dependent on those freebies, and learn to exaggerate their helplessness. All too easily they may come to believe it. Psychological studies have repeatedly shown that if you raise or lower a person's estimation of what they can achieve, their actual performance will go up or down accordingly. An endless parade of INGO comes through, each with the implicit message, "You can't provide for your own needs, so we're here to do it for you." (See Pygmalion and Golem.)

It attracts a certain type of employees. The wrong type, in our view. World Vision came under criticism for giving away 100,000 leftover Super Bowl shirts in poor countries. But the Director of Corporate Engagement for World Vision told a reporter, "It was really cool for me personally to see kids on a soccer field in Zambia wearing Super Bowl shirts.... What it does is fill an essential need." He doesn't explain why this makes him feel good, or what need was essential. (Did they not have shirts? Not enough shirts twice their size? Not enough XL shirts that said "Super Bowl Champions" above the name of the losing team, which is why the shirts were donated?) Nor does he question whether his feeling cool is relevant. An INGO that passes out free goods will attract staff who feel cool about doing that. They will not feel an urgency about ending dependency.

Free goods from NGOs make it harder and riskier for businesses to take root.

Free inhibits business growth. INGO with freebies add a new, unknown element of risk for social entrepreneurs, who already face enough risks. Now there's the possibility that at any time they could be put out of business by foreigners with giveaways.

The free goods rarely even go where they are most needed. Those places are harder to reach. They may be dangerous. Researchers looking at a free shoe program in Central America noted that "there are many countries such as El Salvador, which are large recipients of donated shoes and clothing, but where existing ownership of these goods is relatively common compared to developing countries with even lower income levels." Of 1492 children who got the shoes, 1490 already owned at least one pair.(3)

Free digs its feet in. It creates a class of well-connected people who, directly or indirectly, get their income from this flow of free things, and want the country's dependency to continue. This includes the local staff, suppliers, and government officials, who all have a financial incentive to exaggerate the need for the program, so that the money keeps coming.

A pay model can expand. By providing what people want, and will pay for, a market system produces the income to make more of what people want, and distribute it more widely. The rapid spread of cellphones in all parts of the world is dramatic evidence of this. Free distribution is a dead end. There will never be enough donors to give everybody all the free things they want.

* * *

The market creates problems, too. Government is needed to provide services such as roads and education; and to regulate against deceptive practices and abuses. There's room for debate about how to best balance the roles of business and government. But while free goods can be helpful in certain crises, free goods that are not urgently needed do not help development. They get in the way.

(Examples of INGO and businesses giving away things free, and how they benefit while sowing harm, are at Toms Shoes; World Vision's t-shirts; Poor education; and Free books. )

Notes and Sources

1. By "meaningful price" we do not mean a "contribution in kind." INGO, under pressure from some donors, increasingly say that "the village will pay 10% of the cost" of a new school or clinic; often unstated is that this will be a contribution in labor or materials rather than cash, and no one will check to see if the value of the contribution is anywhere close to 10%, or if it even happens at all. The INGO isn't checking, and the donor certainly is not. On a construction project, donated labor often means the village sends over a few teenagers, who may try to help, or may try to loaf, but supervising short-term untrained workers is more trouble than it's worth for the contractor, so it all quickly gets forgotten.

A meaningful price is a payment big enough that payers will make a conscious choice that this is a good way to use their money; and it's big enough that over time, it could grow to equal the market price, and thus not require charity. It is cash, except in rare circumstances where a village truly has too small an economy for this to be feasible. If the price doesn't reach this level, then what's being provided is merely a temporary fix that depends on outside help which will dry up after a while, because the donors want something new. (back)

2. Libraries in poor countries get filled with donated books that are utterly inappropriate, and usually in the wrong language. Then both local people and foreigners complain that "people here don't read!" when the problem is that what's available is entirely wrong. See our discussion of Free books. (back)

3. This was the marketing campaign by Toms Shoes: "Buy a pair of shoes, and we'll give a pair to a child in need." (back)